A Comparative Perspective on the “Joint Action Rule” in the context of Business Trusts

JurisdictionSouth Africa
AuthorMJ de Waal
Citation(2014) 25 Stell LR 343
Published date16 August 2019
Date16 August 2019
Pages343-360
343
A COMPARATIVE PERSPECTIVE ON THE
“JOINT-ACTION RULE” IN THE CONTEXT OF
BUSINESS TRUSTS
MJ de Waal
BCom LLB LLM LLD
Professor, Stellenbosch University
I du Plessis
BCom LLB LLM
Senior Lecturer, Stellenbosch University*
Before we commence our discussion of the topic, we want to acknowledge
the quality and value of David Butler’s work on the business trust. For 32
successive years, David taught a module in corporate law to commerce
students and in lat er years a signicant po rtion of that module was devote d to
the business tr ust. David’s notes on the topic became legendar y. Our Faculty’s
Department of Mercantile Law regularly received request s from former
students for copies of David’s notes on the business trust. O nly after entering
practice did they realis e the wealth of insight and knowledge captured in these
notes.
It was an enormous privilege to have worked with David Butler. His
friendship, intellect, sense of humour and, above all, the way in which he
cares for people, have always been an inspirat ion to both of us.
1 Introduction
Numerous examples in recent case law illustrate both the i mportance and
the practical relevance of the so- called “joint-action rule” in South African
tr ust l aw.1 The exact meaning of this rule, as well as the pri nciple on which
it is founded, will be addressed in the proper context below.2 By way of
introduction it would be sufcient to say that the rule implies that, outside
of provisions in the trust deed to the contrar y, co-trustees of a trust must act
jointly if they want to bind the tr ust. Already this br ief formulation can explain
why the rule has proved to be of practical signicance. Non-compliance with
the rule could (and most often would) result in the invalidity of a contract
* The part of th is article which deals w ith comparative resea rch draws on a chapter in I d u Plessis’s LLD
dissertation
1 For reported c ases, see for exa mple Van der Merwe NO v Hyd raberg Hydrau lics CC 2010 5 SA 555
(WCC); Steyn v Bloc kpave (Pty) Ltd 2011 3 SA 528 (FB); Pasco al v Wurdeman 2012 3 SA 422 (GSJ);
O’Shea NO v Van Zyl 2012 1 SA 9 0 (SCA) para 23; Lyn n NO v Coreejes 2012 1 All SA 620 (SCA) For
a discussion of an d references to qu ite a number of un reported cases, see MJ d e Waal “The Law of
Succession (I ncluding the Admi nistration of Est ates) and Trusts” (2010) Annual Sur vey of South Afric an
Law 1170 1199-1202; MJ de Waal “ The Law of Succ ession (I ncluding the Admi nistration of Est ates)
and Trusts” (2011) Annual Sur vey of South Af rican Law 1033 1066-1069; MJ de Waal “ The La w of
Succession (I ncluding the Admi nistration of Est ates) and Trusts” (2012) Annual Sur vey of South Afri can
Law 831 850-852
2 See part 3 1 below
(2014) 25 Stell LR 343
© Juta and Company (Pty) Ltd
entered into between t he trustees and an outsider, probably with detrimental
results on one or both sides.3
It has been suggested that t he joint-action rule is “generally unproblematic”
with regard to charitable trusts or tr usts where the trustees’ main f unction
is the conservation of property for b eneciaries; but that the rule has posed
“numerous challenges” with regard to trusts used to conduct business or
to undertake commercial activities (that is, business trusts).4 Of course, it
is not difcult to s ee why this is so. The nature of tr usts in a bu siness or
commercial environ ment normally dictates an active role for the trustees
in the day-to-day r unning of the pa rticular business. Strict adherence to
the joint-action rule would therefore requi re very regular meetings of (or at
least communication bet ween) the trustees. As most businesses could not be
run effectively in this way, there are practical means available to soften the
application of the rule under such circumstances. O ne possibility is that a
provision allowing a deviation from the joint-action rule can be inser ted in
a trust deed – for example by stipulating that decisions can be taken by a
majority of the trus tees.5 However, trustees often misunder stand the operation
and limitations of such a provision, and they therefore do not realise that it
would not necessarily addr ess the problem at hand adequately.6 An alternative
– and in our view more effective – approach would be to employ the normal
principles of the law of agency in this context. A t rust deed could therefore
contain a provision stipulating that the tr ustees can delegate certain de ned
duties or powers (also generally referred to as t rustee “f unctions” in this
article) to one of their co-trustees or even to an outsider.7 This trustee could
then (and bearing compliance with the principles of delegation and apposite
statutory provisions i n mind), for example, enter into valid contracts with
outsiders without the necessity of prior trustee meetings (even ones at which
a majority vote is allowed).
It is thus clear that certain mechanisms can be put into place in order to
ameliorate the problematical pract ical effects of the joint-action rule. However,
it is also clear that pitfalls remai n for trustees and other tr ust practitioners, and
that our court s still face challenges in developing trust law in this particular
area.8 It has therefore been submitt ed, rightly in our view, “that the joint-action
rule in regard to co -trusteeship will remain a focal point of future judicial
development of South African tr ust law”.9 The primary aim of this article is
to illustrate that in this process of judicial development our courts can derive
much benet from al so looking further a eld to other trust law jurisdictions.
This is because even a relatively brief compar ative exercise will show that there
3 For examples, see t he cases referred t o in n 1 above and in nn 5 and 7 bel ow
4 F du Toit “Co-Trusteeship a nd the Joint-Action Rule in South A frican Trust Law” (2013) 27 Trust Law
International 18 19
5 See, for example, La nd and Agricultu ral Bank of South Afri ca v Parker 2005 2 SA 77 (SCA) para 15; Du
Toit (2013) Trust Law In ternational 22 -23
6 See part 3 1 below
7 See, for example, Nie uwoudt v Vrysta at Mielies (Edms) Bpk 2 004 3 SA 486 (SCA) paras 6 and 23; Du Toit
(2013) Trust La w Internationa l 23-24
8 See Du Toit (2013) Trust Law Internatio nal 19
9 29
344 STELL LR 2014 2
© Juta and Company (Pty) Ltd

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