ALL ABOUT TRUSTS:
Trustees are guardians of trust assets and have a duty to manage these assets in the best interests of the beneficiaries, as outlined in the trust deed.
The Trust Property Control Act stipulates the duties of trustees - section 9(1) of the act states that a trustee shall, in the performance of his/her duties and exercise of his/her powers, act with the care, diligence and skill reasonably expected of one managing the affairs of another.
A trustee’s active participation in trust matters is expected at all times.
Similar to companies, a number of trust deeds allow the use of an alternate trustee if an appointed trustee cannot attend a meeting or is temporarily absent and cannot participate in the trust's affairs.
Even if the trust deed allows for the appointment of a temporary alternate trustee to serve in the place of another trustee, such alternate trustee’s actions may be null and void for the following reasons:
Section 6 of the Trust Property Control Act requires a person to be duly appointed by the Master of the High Court, before he/she can act as a trustee of the trust. The act does also not make provision for the appointment of an alternate trustee.
The law requires all trust decisions to be made by appointed trustees of the trust, and no one else, not even an alternate trustee. There is no room in South African law for a “silent” or “sleeping trustee” - the trustee who appoints the alternate.
A trustee cannot empower an alternate trustee to act on his/her behalf to exercise a general discretion and decision-making, which vests in such trustee. The alternate trustee can therefore not decide as he/she wishes. A stipulation in the trust deed allowing an alternate trustee to vote as he/she “may deem fit”, results in an abdication of a trustee’s powers, which is not allowed.
If an alternate trustee is allowed to exercise his/her independent judgement and form a personal view at a trustees’ meeting, he/she can act similar to an appointed trustee of the trust, without being duly appointed as trustee, as required in terms of section 6 of the Trust Property Control Act (Hoosen v Deedat case of 1999).
There is a real risk that, even if a trust deed allows for the appointment of an alternate trustee, a decision taken by trustees of that trust, including such an alternate trustee, would be invalid and of no force and effect.
A solution for a trustee who cannot attend a meeting is the use of a proxy. A proxy is a written authorisation from an absent trustee conferring limited power of attorney on another person (the proxy) to vote on behalf of, and in accordance with the directions of the trustee.
A proxy allows for a duly authorised person to represent a trustee at a meeting, only if it is allowed in the trust deed. Such a proxy can act as the messenger of the trustee who he/she represents, to convey the thoughts and/or votes of the trustee who granted the proxy.
All trustees have a fiduciary duty to the beneficiaries of the trust, and may not act in a way that violates this duty or is outside the parameters of the trust deed. All trustees must act jointly in respect of trust matters, as they share a common fiduciary obligation towards the fulfilment of the objects of the trust (Hoosen v Deedat case of 1999).
Phia van der Spuy is a registered fiduciary practitioner of South Africa, master tax practitioner, trust and estate practitioner, and founder of Trusteeze, a professional trust practitioner.
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