{"id":896,"date":"2019-02-27T06:16:49","date_gmt":"2019-02-27T06:16:49","guid":{"rendered":"https:\/\/dotnewsconnect.co.za\/law\/?p=896"},"modified":"2019-02-27T06:16:59","modified_gmt":"2019-02-27T06:16:59","slug":"trustees-at-war-the-removal-remedy-and-its-limits","status":"publish","type":"post","link":"https:\/\/dotnewsconnect.co.za\/law\/2019\/trustees-at-war-the-removal-remedy-and-its-limits\/","title":{"rendered":"Trustees at War: The Removal Remedy and Its Limits"},"content":{"rendered":"\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>\u201cAnimosity and difference of opinion are not sufficient to have a trustee removed from office and\/or for the majority of trustees to unilaterally force another to vacate his\/her office\u2026\u201d (Extract from judgment below)<\/p><\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">When family infighting impacts a family trust, an early casualty is often the relationship between the appointed trustees and beneficiaries, and\/or between the trustees themselves.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And if that results in irreconcilable differences and conflict between the trustees, the only answer may be for one or more of the trustees to be replaced. First prize of course will always be to achieve this with a voluntary resignation \u2013 but what happens if a trustee refuses to resign? Can the majority forcibly remove him\/her?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A recent High Court decision dealt with just that question.<\/p>\n\n\n\n<h6 class=\"wp-block-heading\">3 professionals v the beneficiary\u2019s mother<br><\/h6>\n\n\n\n<ul class=\"wp-block-list\"><li>A \u201cvaluable property\u201d in Knysna is owned by a trust created for the benefit of a couple\u2019s daughter (11 years old at the time, now 30). There are four trustees appointed by the Master of the High Court (\u201cthe Master\u201d) issuing \u201cletters of authority\u201d to two auditors and an attorney (\u201cthe professionals\u201d), and to the beneficiary\u2019s mother. The father farms the property through a company and a close corporation. Although no family feud is specifically mentioned in the judgment, it seems clear that the father is in one camp, and the mother and daughter in the other.<\/li><li>The trust deed contained this clause &#8211; \u201cThe office of a TRUSTEE shall be vacated if \u2026. the majority of TRUSTEES request a TRUSTEE to resign.\u201d<\/li><li>The trustees fell out in a dispute over the father\u2019s loan account, with the professionals proposing that the trust should pay the father interest on his loan, and the mother objecting on the basis that payment of interest had never been agreed to.<\/li><li>This was discussed in a telephonic trustees\u2019 meeting, and resulted in the professionals writing to the mother to say she was removed as trustee for three reasons \u2013 \u201c1) all items discussed were either rejected or opposed; 2) she made false allegations against the applicants and 3) she admitted that she did not have sufficient knowledge to fulfil her duties as trustee\u201d. The Master then pointed out to the professionals that they could not resolve to remove the mother, only to\u00a0request\u00a0her to resign. They did so in a second letter to the mother.\u00a0<\/li><li>The mother refused to resign and the professionals asked the High Court to order that the mother \u201chas lost her office as trustee\u201d. Their attitude was that they were acting in terms of the trust deed, no reasons for the decision had to be given, and the Master had no option but to issue new letters of authority.\u00a0\u00a0<\/li><li>The clause itself might seem pretty clear, the professionals clearly believed that they were acting entirely within their mandate and they presumably commenced their litigation with high hopes of success. But it was not to be\u2026<\/li><li>The Court, for the reasons we discuss below, held for the mother, who accordingly remains a trustee.\u00a0<\/li><\/ul>\n\n\n\n<h6 class=\"wp-block-heading\">Ambiguity, showing good cause, and ubuntu<\/h6>\n\n\n\n<p class=\"wp-block-paragraph\">The Court\u2019s reasons for its decision contain some important principles that anyone involved in a trust would do well to take note of (with some thoughts on how to deal with each issue in brackets) \u2013<br><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>The trust\u2019s removal clause, held the Court, was ambiguous when it provided that a\u00a0<strong><em>request<\/em><\/strong>\u00a0(involving a choice) for resignation\u00a0<strong><em>shall<\/em><\/strong>\u00a0(peremptory \u2013 no choice) lead to vacation of office. The clause, said the Court, \u201cmust be interpreted to read that there must be good cause for such a request and that the trustee shall vacate his\/her office only in the event of an acceptance of the request\u201d. (<em>Make sure the trust deed is clear and unambiguous<\/em>).<\/li><li>Secondly, an implied term should be read into the clause requiring good cause to be shown \u2013 to allow trustees to remove another without producing reasons \u201cwould be against public policy and the principles of\u00a0<em>ubuntu<\/em>, reasonableness and fairness\u201d. (<em>Make sure you can show fairness and good cause for decisions<\/em>).<\/li><li>Thirdly, the professionals had failed to prove any justification for their action. They could not rely on the clause without giving reasons for their decision and proving that they took their decision \u201cbased on the discretion of a good person acting reasonably\u201d. (<em>Make sure you can justify your actions as reasonable<\/em>).<\/li><li>Fourthly, the resolution to request the mother\u2019s resignation \u201cshould have been taken on a properly constituted trustees\u2019 meeting and upon proper notice of their intention\u201d. Instead, they took decisions \u201csecretly and without notifying [the mother] in advance.\u00a0 They also \u201cfailed to give proper notice in compliance with the provisions of the Trust Act.\u201d (<em>Comply with all procedural formalities<\/em>).<\/li><li>Finally, said the Court, there was no deadlock between the trustees \u2013 \u201cDecisions in the interests of the trust and trust beneficiary can be taken by the majority of trustees during a properly convened meeting on condition that sufficient notice of all matters to be considered is given.\u00a0 It is not necessary to remove the first respondent in order to conduct the business of the trust in a lawful manner.\u201d (<em>Be sure that removal is actually necessary<\/em>).<\/li><\/ul>\n\n\n","protected":false},"excerpt":{"rendered":"<p>\u201cAnimosity and difference of opinion are not sufficient to have a trustee removed from office and\/or for the majority of trustees to unilaterally force another to vacate his\/her office\u2026\u201d (Extract from judgment below) When family infighting impacts a family trust, an early casualty is often the relationship between the appointed trustees and beneficiaries, and\/or between [&hellip;]<\/p>\n","protected":false},"author":101014,"featured_media":897,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"off","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[22],"tags":[],"class_list":["post-896","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-trusts"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.0 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Trustees at War: The Removal Remedy and Its Limits &#8226; 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