Malone Trust v Secretary for Inland Revenue

• Jurisdiction: South Africa
• Judge: Trollip JA, Muller JA, Corbett JA, De Villiers JA and Miller JA
• Judgment Date: 25 March 1977
• Hearing Date: 21 February 1977
• Court: Appellate Division

Trollip, J.A.:

In my view this appeal succeeds.

The relevant facts according to the stated case can be summarized as follows:

1.

In 1917 Mrs. J. F. Malone acquired a piece of land ("the property") about 25 morgen in extent, described as Farm No. 186, Beacon Bay, East London. It is situated on the eastern side of the Nahoon River. She and her family resided there for many years. They were not well off. The property was unsuitable for farming and was never so used. From time to

Trollip JA

time small portions of it were sold to provide them with maintenance. When she died in 1933 her husband inherited it and continued residing there. On his death in 1948 his son, Joseph Martin Malone ("the deceased"), inherited it and he, too, continued residing there. He was uneducated and made a living A from selling wild flowers picked on the property. In 1952 he, being hard up, sold about 10 morgen of it on which the purchaser subsequently established a township.

2.

On 19 November 1959 the deceased, then 50 years old, married Esther Catherina Lottering, aged 18 years, in community of property. Three children were born of the marriage. The wife B proved to be financially irresponsible. His savings were rapidly dissipated. The property was mortgaged to provide them with money. He also had to take employment, first as a lorry driver and then as a railway worker.

3.

On 3 March 1962 the deceased and his wife executed a joint will in which he bequeathed their joint estate to their C children subject to the usufruct thereof in her favour. His attorney, Mr. Orsmond, was appointed executor and administrator of their joint estate.

4.

Sometime later, on the advice of Mr. Orsmond, the deceased agreed to a scheme for the establishment of a township upon the property (then about only 11 morgen in area) with a view to D realizing it to the best advantage.

5.

In consequence of that decision Mr. Orsmond took all the necessary steps to carry out the scheme. He even underwrote the payment of all the expenses that were thereby incurred. The township was to comprise roads, an open space, a public place, a church site, and 36 erven. On 17 October 1967 preliminary E official approval of its establishment was given. It was to be known as Beacon Bay Township Extension No. 1.

6.

Thereafter, early in 1968, the deceased, while probably under the influence of liquor, purported to sell the property for R20 000. Mr. Orsmond, however, had the transaction set aside on the ground that it was invalid as having been F concluded on a Sunday in contravention of the law. By then, too, the deceased's health had started to deteriorate, his wife had spent all their funds, she was borrowing money from Mr. Orsmond in order to maintain their home, and she had formed an association with a younger man.

7.

Consequently, about June 1968, after the deceased had been admitted to hospital, Mr. Orsmond advised him to form a trust G in order to protect the interests of their minor children against any further dissipation of the deceased's assets. The latter virtually comprised only the property upon which the township was then being established and laid out. The deceased agreed.

8.

Accordingly, on 14 June 1968, the deceased established and H registered the J. M. Malone Trust ("the trust") in terms of a notarial deed. His wife was duly joined as a party since the trust also affected her interest in the joint estate between herself and the deceased. Mr. Orsmond was appointed and assumed duty as the trustee thereof. The trust is the appellant in the present litigation. The relevant parts of the trust deed read as follows:

"And whereas application was made to establish a township on the said land, and whereas approval has been received to the establishment of Beacon Bay Township Extension No. 1.

Trollip JA

And whereas the erven on the township are shortly to be submitted for sale after certain roads have been tarred, gutters provided, and water laid in the township.

And whereas after payment of the purchase price has been made and such endowments due to local authorities have been paid, mortgage bonds on the land have been discharged, agent's commission and other liabilities due by the appearer paid, it A is the appearer's wish that the proceeds from such sales shall be donated to a trust to be known as the J. M. Malone Trust, the conditions, governing the trust and its administration, being as follows:

1.

Name:

The name of the trust shall be the J. M. Malone Trust.

2.

Objects:

The objects for which the trust is established shall be:

(a)

B to purchase immovable property and take transfer of such properties or land into the name of the trust and to sell such properties or land when the trustee considers it necessary or desirable to do so.

(b)

to give and donate to the Bishop of Port Elizabeth of the Diocese of Port Elizabeth of the Roman Catholic Church, his successors-in-office or assigns, erf 78, Beacon Bay Township Extension No. 1, measuring: 36,096 square feet.

(c)

C to sell either during the lifetime of the appearer or after his death all the remaining erven in the township known as Beacon Bay Township...