Is a resolution signed by the majority of trustees valid?

A trust is a legal entity which is created to hold assets for the benefit of certain persons or entities. A trust is not a juristic person capable of suing and being sued in its own name, although the trustees can, on behalf of the trust, bring and defend legal actions. The Trust Property Control Act 57 of 1988 forms the framework within which trusts operate and all decisions and actions by the trustees must be made with reference to the Trust Property Control Act and the Trust Deed.

The interpretation of the Trust Deed and general principles of law relating to trusts were considered by the Supreme Court of Appeals (SCA) in the case of Shepstone and Wylie Attorneys v Abraham Johannes De Witt N O and others (1270/2021) [2023] ZASCA. This case dealt with a suretyship in favour of Shepstone and Wylie Attorneys (“S&W”), for the obligations of a trustee and beneficiary.

A trustees meeting of the three duly appointed trustees had been called but only two trustees attended the meeting and signed the resolution authorising the signature of the suretyship in favour of S&W. The Trust Deed contained a provision stipulating that a meeting attended by two trustees constituted a quorum. The Trust Deed however also contained a clause stipulating that the trustees were authorised, provided that they unanimously agreed, to conduct business on behalf of and for the benefit of the trust.

S&W subsequently sought judgment against the trust and relied on the Deed of Suretyship to claim the payment of all amounts that were due. The trust opposed the application on various grounds including that the Deed of Suretyship was invalid.

The matter was taken to the High Court where it was contended that, contrary to the provisions of the Trust Deed, the trustees did not act jointly or unanimously in signing the Deed of Suretyship. In dismissing the claim by S&W, the High Court concluded that the resolution taken at the meeting to bind the trust was invalid and of no force and effect.

On appeal, the SCA in considering the matter, were of the view that the principles governing trusts are well established. Trustees are deemed to be co-owners of trust assets and must act jointly in taking decisions and resolutions for the benefit of the trust unless a specific majority clause provides otherwise. The SCA discussed the issue of internal decisions of the trustees which include those decisions relating to the use of income of the trust for the benefit of beneficiaries and external issues, which are those issues relating to the trust property in dealing with the outside world. Internally (presumably where the Trust Deed so allows) the trustees may disagree, with the majority view prevailing, whilst externally trustees cannot disagree, and resolutions must be supported by the full complement of trustees.

The court held that the trustees must act jointly if the trust is to be bound and a majority decision will not bind the trust where one of the trustees did not participate in the decision-making. Even if the Trust Deed stipulates that the decision can be made by the majority of trustees, all trustees are required to participate in the decision making and each trustee has to sign the resolution.

As a cautionary note, in dealing with trusts and more especially when dealing with external matters, care must be taken to ensure that the resolutions are passed and signed by all trustees.

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Barry Lewis - Director

Department: Conveyancing Tel: 031 536?7524

Email: [email protected]

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Leandra Moodley - Candidate Attorney

Department: Conveyancing? Tel: 031?536 7527

Email:[email protected]

The content of this document is intended only to provide a summary and general overview of matters of interest. It is not intended to be comprehensive, nor does it constitute legal or other professional advice. You should seek legal or other professional advice before acting or relying on any content.

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