Le Grange v Le Grange

JurisdictionSouth Africa
JudgeD Pillay J
Judgment Date07 February 2017
Docket Number7021/2016
CourtKwaZulu-Natal Division, Pietermaritzburg
Hearing Date31 January 2017
Citation2017 JDR 0205 (KZP)

D Pillay J:

[1]

The applicants Louis Le Grange and Beulah Le Grange seek an order against the first respondent, The Louis and Andre Le Grange Family Trust to pay them the sum of R15 000 per month for their living costs, interests and ancillary relief. Francois Le Grange, Jacqueline Le Grange and Hendrik Mentz are the second, third and fourth respondents cited in their capacities as trustees of the first respondent. The Master is the fifth respondent. The first to fourth respondents oppose the application. They counter-applied for a declarator that a variation agreement concluded by the first to third respondents varied the settlement agreement concluded under case number 1305/11 in November 2011. At the outset the applicants challenge the first to

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fourth respondents' standing to oppose the application and to launch the counter-application.

[2]

The first respondent has three trustees. Two of them, the second and third respondents, resolved at a meeting of trustees held on 26 July 2016 to oppose the application, to launch a counter-application for a declarator and to authorise the third respondent to instruct attorneys and counsel and to sign all documentation necessary for the litigation. The fourth respondent abstained from voting and signing the resolution.

[3]

By notice in terms of rule 7(1) of the Supreme Court Rules the applicants challenged the authority of the attorneys Tatham Wilkes Incorporated to act for the first to fourth respondents. The latter replied to the rule 7(1) notice on 7 September 2016 by delivering a special power of attorney dated 31 August 2016, which drew on the mandate from the resolution of 26 July 2016, and which was signed by the second and third respondents.

[4]

Out of caution the first to fourth respondents delivered a further reply to the rule 7(1) notice on 12 January 2017. They attached the extracts of minutes of a meeting held at Dundee on 11 January 2017 by the second and third respondents and the resolution they took at that meeting. The extract records that the resolution purportedly taken on 26 July 2016 was in fact taken on 22 July and the respondents cannot account for how the error in the date occurred. Nothing turns on this error as the date is immaterial. Furthermore, neither the substance of the resolution nor the abstention of the fourth respondent from voting is in dispute.

[5]

The extract further records that on 9 January 2017 the fourth respondent was invited to ratify steps taken by the second and third respondents pursuant to the resolution of 22 July 2016. Although the fourth respondent was not available to meet to discuss the resolution he indicated that he would nevertheless abstain from voting on matters concerning this case. The second and third respondents proceeded to meet in the absence of

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the fourth respondent. They resolved to ratify the steps that they and their counsel and attorneys took to give effect to the resolution of 22 July 2016.

[6]

Against this factual background the applicants persist that neither first respondent nor its attorneys have the authority to act in these proceedings. The bases of the applicants' objection to standing are:

a.

The fourth respondent was not notified at all or timeously of meetings, agendas and resolutions.

b.

No properly constituted meetings were held to adopt the resolutions.

c.

The fourth respondent abstained and did not vote for the resolutions.

d.

A majority vote is not a decision of the first respondent unless it is supported by a resolution.

e.

All trustees must sign the resolutions of the first respondent to signal externally their obligation to act jointly as custodial owners of the first respondent's property.

In the circumstances the resolutions signed by the second and third respondents only without having convened a meeting of the trustees is invalid.

The first to fourth respondents rely on specific clauses of the Trust Deed. Clause 5.2 allows for a minimum of two and a maximum of five trustees. Clause 8.2 requires resolutions to be supported by majority vote. Clause 9 prescribes the usual powers of the trustees, in particular the power to institute and defend legal actions. Clause 24.1(b) provides for the formalities of recording resolutions passed at meetings as prescribed in s 204 of the Companies Act 61 of 1973, the subsequent amendment of which the respondents submit is s 73 of the Companies Act 71 of 2008. Notwithstanding these formalities, clause 24.2 recognises that a 'written resolution signed by all the trustees has the same legal implication as a resolution passed at a meeting of trustees.' Clause 24.4 typically enables the trustees to authorise one or more of their number to sign all documents for transacting the business of the trust. Additionally,

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'[a]ny resolution certified by a trustee to be a true extract from the minutes of a resolution passed by all the trustees shall in all respect have the same legal force as a resolution signed by all the trustees.'

[7]

The point of departure between the parties is not what the principles relevant to standing of the respondents are but how they apply to the facts in this case. I deal first with the general principles as applied in other cases before turning to their application in this case.

[8]

In Land and Agricultural Bank of South Africa v Parker and others 2005 (2) SA 77 (SCA) the Supreme Court of Appeal reaffirmed two principles of the common law pertaining to trusts:

'The first is that a trust does not have legal personality. The second is that, in the absence of authorisation in the trust deed, trustees must act jointly.' [1]

Both principles rest on 'the trust deed, which is the trust's constitutive charter. Outside its provisions the trust estate cannot be bound'. [2]

[9]

Parker also emphasises that 'the trustees must act jointly if the trust estate is to be bound by their acts,' 'in the absence of contrary provisions in the trust deed', [3] and 'unless authorised otherwise'. [4] The reason for this rule arises from the nature of the trustees' joint ownership of the trust property. Co-owners must act jointly; trustees manage trust assets in a representative capacity must also act jointly. [5]

[10]

Acting jointly means that the trustees must participate in the decisions taken on behalf of the trust. Participation usually involves meetings or consultations amongst trustees, negotiating or mediating contested decisions

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and ultimately in the absence of consensus or resolution contested issues are determined by a vote. Trustees may participate in a vote in three ways: vote for or against a motion or abstain from voting altogether. All three forms of participation in the decision-making are self-conscious and deliberative actions.

[11]

Participation is elicited after proper notice to the trustees. A trustee who has no knowledge of decisions taken or to be taken on behalf of a trust and consequently does not vote in any decision, cannot be said to have participated in decision-making on behalf of that trust. Consequently even if the majority of trustees arrive at a decision but without the participation of all the trustees, unless the trust deed authorises otherwise, the ensuing decision albeit a decision of the majority is not a decision on behalf of the trust. [6] The decision purportedly taken by two of the three trustees required in terms of the trust deed in Land and Agricultural Bank of South Africa v Parker and Others was invalid for this reason. The third trustee had not been consulted or invited to participate in any process in which 'the majority will was exercised'. [7]

[12]

Just as in Parker one of the three trustees in Van der Merwe had not been notified or given any opportunity to participate in the decision of the trust to sell fixed property. [8] Even though the trust deed which provided that majority decisions would bind the dissenting or absent trustees it could not avoid the application of the rule that the 'minority is obliged to act jointly with the other trustees in executing the resolution adopted by the majority'. [9] This was said in the context of a dispute concerning the transfer of immovable property.

[13]

The obligation to act jointly does not imply that the minority has to agree with the majority or that votes have to be unanimous for any decision to be binding on the trust. Van der Merwe confirms that

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'unanimity amongst the trustees is not required in order for...

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