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IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO: 2017/27131

In the matter between:

GILLIAN CLAIRE McNAIR                                                                               APPLICANT

and

CROSSMAN, GERALD SYDNEY                                                     FIRST RESPONDENT

FLETCHER, WARREN JOHN                                                      SECOND RESPONDENT

 

J U D G M E N T

 

MUDAU, J:

[1] This is an application in which the applicant seeks the removal of the first and second respondents as co-trustees of the McNair Family Trust (“the Trust”) and that other persons be appointed for a variety of reasons. The application for removal is resisted by both respondents.

[2] The second respondent has taken the point in limine firstly that the founding affidavit does not comply with regulation 4(2) of the regulations governing the administering of an oath or affirmation promulgated in terms of the Justices of the Peace and Commissioners of Oaths Act 16 of 1963. [1] It is alleged that ex facie the founding affidavit, the Commissioner of Oaths has not printed his full name and business address below his signature. The second respondent contend that, the document filed by the applicant is not an affidavit, does not constitute admissible evidence and falls to be struck-out. The first respondent has opposed the application on his own grounds, but has also aligned himself with the grounds of opposition proffered by the second respondent and makes common cause with all that the second respondent says including the point in limine.

[3] The applicant deposed to her affidavit before Captain Magocobe, whose signature and initials appear under the provision made for the Commissioner of Oaths to sign, and did so at the Honeydew South African Police Station, Client Services Centre, on 20 July 2017as evidenced by the Honeydew police stamp. That, in my judgment, is sufficient for purposes of identifying the eligibility of the Commissioner of Oaths. There is no suggestion by the respondents that a captain in the police force does not qualify as a Commissioner of Oaths. The attack on the statement of the applicant is accordingly without basis and falls to be dismissed.

[4] The second respondent contends for a misjoinder in his second point in limine. According to him, the applicant failed to cite him in his capacity as a trustee. The applicant has instead cited him in his personal capacity. However, the dispute between the parties to this application is a personal one.  The respondents are not being called upon to defend the trust; they are being called upon to defend themselves.  The order sought by the applicant against the trustees for their removal will be an order against them in their personal capacities rather than in their official capacities.

[5] A clear distinction has to be drawn between the position of a trustee, cited in his personal capacity, and a trustee cited in his official capacity (See:  The Master v Deedat & Others[2]). An application for the removal of a trustee is a claim against a trustee in his personal capacity, in much the same way as is a beneficiary’s claim against a trustee for damages for breach of trust (see Rampersadh v Pillay[3]; Chetty v Tamil Protective Association[4]).

[6] Equally, the second point in limine is without basis. In any event this point was not pursued by the respondents in argument before this court. Accordingly, the second point in limine also falls to be dismissed.

[7] In this matter, it is common cause, that: The McNair Family Trust, which was established as an inter vivos trust; is duly registered under registration no. IT14417/2006 with the Registrar of Trusts. The applicant, the first respondent and the second respondent are the authorised trustees of the trust. Initially the trust was operated by the applicant’s late husband (Steven), the applicant and the first respondent as the co-trustees of the trust.

[8] In terms of Steven’s last will and testament, Steven wished that upon his death, his position as trustee of the trust would be offered to the second respondent. The beneficiaries in the trust are the applicant, her son Teven, and her daughter Brogan. The trust assets comprise a share portfolio managed by Ashburton Investments worth approximately R2 800 000, 00 and a 75% shareholding in the company Top Spin Investments 101 (Pty) Ltd (“Top Spin”), a property-owning company. The directors of Top Spin are the applicant and the first respondent. The shareholders of Top Spin are the trust and the first respondent. The first respondent owns 25% of the issued shares in Top Spin and the Trust the other 75%.

[9] The applicant, the first respondent and the late Steven’s brother, David McNair (“David”) were co-directors and co-shareholders in a company, which formerly traded as Applied Pneumatics SA (Pty) Ltd (“Applied”), now in liquidation by order of this Court on 2 June 2017.The first respondent is a 25% shareholder in Applied, the deceased estate of the applicant’s late husband owns 51% shares (the applicant is the beneficial owner of these shares by reason of the deceased’s Will) and the applicant’s brother-in-law, David Michael McNair (“David”), owns the remaining 24% shares in Applied.[5].  The applicant asserts that, she and the first respondent have had a fallout, no longer speak, and the acrimony between them has spilled over to the family unit and has resulted in deep unhappiness within the family.

[10] According to the applicant, she laid criminal charges against David at the Honeydew Police Station ‘for a catalogue of shenanigans which David got up to while he operated Applied’. David in turn, on the first and second respondents’ versions, laid criminal charges against the applicant. The applicant took over the running of Applied in and during the year 2015. Although the first respondent and David retained their directorships and shareholdings in Applied, they played no part in the day-to-day operation and running of the company from that year onwards. The applicant complains that while the first respondent was a sitting director of Applied he turned “a blind eye to David’s shenanigans”.

[11] Applied was leasing premises from Top Spin, and after the applicant had taken over the business in June 2015, Applied fell into arrears with regard to its rental payments to Topspin, in the amount of R297 415, 00. Initially the applicant and David contributed towards the arrear rental owed by Applied to Topspin; David however refused the applicant permission to utilise funds in the account of Applied to pay the arrear rental debt. According to the Applicant, despite the financial ability of Applied to pay this debt to Topspin, the applicant was obliged in her personal capacity, to pay the debt. It is however common cause that the applicant voluntarily assumed personal liability and agreed to pay the arrear rentals.

[12] According to the Applicant, the first respondent and David subsequently launched an application to wind up Applied against the respondents’ better judgment and without her authority out of this Court under Case No. 31881/16. The applicant and her son Teven, launched an application to intervene in the application to wind up Applied. Leave to intervene was granted. The first respondent and David did not pursue the application for the winding up of Applied; in a subsequent urgent application, the applicant sought relief against the first respondent and David who opposed the application and the application led to the demise of Applied, which was placed under a final winding up order.

[13] The Applicant further asserts that, During March 2011, the first respondent requested Alchemy Financial Services Inc (“AFSI”), a company of which the second respondent is a director, to attend to the monthly bookkeeping services for Topspin and to take over and operate the Topspin bank account. AFSI is the accounting officer of the trust. According to the Applicant, the second Respondent acting on behalf of AFSI has failed to write up its annual financial statements.  She alleges further that the first respondent is a qualified accountant and to get there with the second respondent, a professional auditor, they have failed to render any returns, off to conduct professional services for the Trust.

[14] The Applicant alleges that on 22 March 2017, the first and second Respondents produced a resolution on behalf of the trust, to request funding to cover the engagement of AFSI, in order to prepare outstanding annual financial statements for the trust. The resolution establishes the fact that the second respondent representing AFSI, was remiss in producing the financials despite the fact that she had paid approximately R14 000,00, in advance to do the work, which he failed to do in respect of the period commencing 2011 to 2015.

[15] The first and second respondents sought to sell a Port Elizabeth property owned by Topspin without the applicant’s knowledge. Later however she ‘reluctantly’ agreed to the sale. David attended a Topspin shareholders meeting despite the fact that he never became a Topspin shareholder. The first and second respondents according to the applicant,  held a meeting of the trustees of the trust, on 24 March 2016, in the absence of the applicant who had informed them prior to the meeting being held of her unavailability during which decisions were which compromised the applicant. The second respondent engaged a firm of attorneys after the meeting to demand an Applied arrear rental debt from the applicant in her personal capacity, failing payment instructions being to immediately proceed with legal action for the recovery of the amount.

[16] The applicant states that David wrongfully and unlawfully interfered in a distribution agreement which Applied enjoyed with an overseas supplier for over 20 years thereby causing the overseas supplier to cancel the distribution agreement with Applied after advising it of the fact that Applied was going to be liquidated .The applicant also alleges that the first respondent and David successfully secreted the distributorship agreement away from Applied while the applicant was seeking to make it a success and which ultimately brought its ruination. The second respondent was requested by the applicant to prepare a letter to be sent to one Peter Bouwer so that the applicant could maintain the distributorship agreement within Applied, but when the second respondent produced such letter, he incorporated an allegation which was not true at that point in time, to the effect that criminal charges had been laid by David against the applicant.

[17] It is trite that t the common law, a trustee can be removed if he is endangering the Trust property or its administration or under section 20(1) of the Trust Property Control Act 57 of 1988, if it is in the interests of the Trust and the beneficiaries that the trustee be so removed.[6] In Volkwyn N.O. v Clarke and Damant [7] Murray J put it as follows:

‘. . . [I]t is a matter not only of delicacy (as expressed in Letterstedt’s case [Letterstedt’s v Broers [8]) but of seriousness to interfere with the management of the estate of a deceased person by removing from the control thereof persons who, in reliance upon their ability and character, the deceased has deliberately selected to carry out his wishes. Even if the . . . administrator has acted incorrectly in his duties, and has not observed the strict requirements of the law, something more is required before his removal is warranted. Both the statute and the case cited indicates that the sufficiency of the cause for removal is to be tested by a consideration of the interests of the estate. . .’[9]

Mere conflict between a trustee and beneficiaries, or a trustee and other trustees, was insufficient for removal. The overriding question is always whether or not the conduct of the trustee imperils the trust property or its proper administration. Accordingly, mere friction or enmity between the trustee and the beneficiaries will not in itself be adequate reason for the removal of the trustees.

[18] The respondents contend that none of the complaints by the applicant satisfies the above-mentioned prerequisites for the removal of a trustee. The respondents assert that the true reason for the applicant’s unhappiness with the respondents has its origins in an impasse between her and David in Applied that has unjustifiably spilled over to the Trust and Top Spin. The applicant blames David and the respondents for what had transpired in and with Applied causing her alleged financial loss.

[19] According to the second respondent,  significantly, Applied continued to struggle operationally and continued to make trading losses but principally maintained its solvency through funds totaling the amount of R6 539 829,00 obtained from key man policies which were paid into Applied’s bank account shortly after Steven’s death. The second respondent asserts that  although the applicant complained from time to time about the manner in which important decisions were taken, she acquiesced thereto, for instance in finally conceding to the liquidation of Applied and accepting the sale of the property in Port Elizabeth.  The second respondent further asserts that, the net result of the application was that the parties, which of course included the applicant, agreed to the winding up of Applied. The applicant on the one hand purports to explain that Applied was liquid and capable of paying the rental, yet she agreed to the liquidation of Applied.

[20] According to the respondents, there was and remains a rift between the applicant and David due to the manner in which Applied was managed. To this end, accusations of theft, mismanagement, misappropriation of funds and unauthorised withdrawals from Applied’s bank account have been levied by both the applicant and David against each other and criminal charges have been laid.^[10] The impasse between the applicant and David led to civil litigation between the three directors of Applied, which ultimately culminated in the consensual winding-up of Applied.[11] 

[21] The second respondent asserts with regard to the allegations referred to for example in para 14 above that, the R14 000,00 referred to was for services that were actually rendered and related to provisional tax submissions and secretarial administration from 2011 to 2017.  Any funds that the Trust may need would come from the Ashburton Investment, as the Trust has no other direct financial cash resources.

[22] The Respondents contend that the issues between the parties in Applied have nothing to do with the proper administration of the Trust. Friction, hostility, or enmity between the trustee and the beneficiary will not in itself be adequate reason for the removal of the trustee from office, nor will mere conflict amongst trustees be sufficient reason for the removal of a trustee at the suit of another.[12] A trustee will be removed from office when continuance in office will prevent the Trust being properly administered or will be detrimental to the welfare of the beneficiaries.[13]

[23] The respondents submitted that the applicant has not seriously contended in her papers that the administration of the Trust is jeopardised or that the respondents have not been performing their duties as co-trustees in the administration of the Trust to the benefit beneficiaries or that the beneficiaries have been prejudiced, the applicant does not dispute that the Trust beneficiaries have received distributions totaling R4 956 693,[14]. The applicant according to the first respondent does not dispute that Top Spin (the Trust being the majority shareholder of Top Spin) is trading successfully.[15] 

[24] According to the first respondent, the applicant forgets that the first respondent was appointed as trustee, together with her, long before acquiring shareholding in Top Spin.  The first respondent is a 25% shareholder in Top Spin.  There is thus simply no reason why the first respondent would want to cause harm to Top Spin, and thus imperil the Trust’s 75% shareholding in Top Spin.

[25] According to the first respondent, it is important to note that there is no evidence showing that the applicant had any issues with the respondents as co-trustees of the Trust since August 2010 (the time that Steven passed) until the beginning of 2016.  The first respondent contended that,

“this is significant because the complaints only started when David refused to release Applied’s funds in the Stanlib account and the applicant volunteered to be liable for the arrear rental owing to Top Spin.  The acrimony reached its peak when Applied was liquidated.  That was the final straw for the applicant.  The papers show her misplaced anger towards the respondents: for allegedly siding with David during the Applied debacle;”

[26] The first respondent asserts that the applicant and David were appointed as directors of applied on 3 August 2010 shortly before Steven passed away. In early 2015, Teven who was in the employment of Applied accused David of improper financial gain from Applied. David invited Teven to prove the allegations or to resign. Since Teven could not prove the allegations, he resigned. As a consequence, the relationship between the applicant and David soured. According to the first respondent, the financial records of Applied showed that the applicant had enriched herself in the amount of R1 668 277.62 with no right or entitlement to these funds. In addition that, a total amount of R1 500-000-00 was through cheque withdrawals signed by the applicant and one Shirley Maxwell taken from the bank account of Applied without authorization which prompted David to lay criminal charges as alluded to above.

[27] The second respondent asserts that the investments of the Trust, a share portfolio managed by Ashburton and its shareholding in Top Spin, the records of these investments are maintained monthly and are up to date.  The applicant at all times has been aware of these records. Further that, the preparation of the Trust’s financial statements would merely be a consolidation of these records.[16] The second respondent states that the monthly bookkeeping of Top Spin is up to date and that the up to date financial statements have been in the possession of Gillian as from 21 April 2017.[17]

[28] The second respondent asserts further that, on 22 March 2017 it was proposed in a trustee’s resolution by the respondents to request funding to cover the engagement of AFSI to prepare the outstanding financial statements for the Trust.  The resolution was approved and signed by both respondents.  However, the applicant refused to sign without any explanation being given.  As a result, the financial statements for the Trust remained outstanding.[18]

[29] As regards the allegations pertaining to the Port Elizabeth property, that the first and second respondents sought to sell the said property owned by Top Spin without the applicant’s knowledge is also according to the second respondent devoid of truth. The second respondent states[19] that the proposed sale of the Port Elizabeth property emanated from Applied not making payment of its rental to Top Spin.  The property was vacant.  The principle to sell a deserted untenanted property remains a good commercial decision based on the potential financial implications to Top Spin and indirectly to the Trust.  Second respondent refers to the minutes attached as Annexure “WF6” which were ratified by the applicant at a subsequent Top Spin shareholders’ meeting held on 25 May 2016 (Annexure “G24” to the founding affidavit).[20]  According to the second respondent, the decision to sell the Port Elizabeth property arose because the applicant did not make good on her undertaking to pay the arrear rentals owing to Top Spin by the end of February 2016 causing unnecessary financial pressure on the Trust investment.

[30] The allegations by the applicant that David attended a Top Spin shareholders’ meeting despite the fact that he never became a Top Spin shareholder is similarly according to the second respondent, untrue. The second respondent asserts that that on 12 November 2015 when the meeting was held David was considered a shareholder due to the shares, which Gerald had sold to him.

[31] According to the second applicant the reference by the applicant to a meeting being held on 24 March 2016 in her absence is also not put into context.  The second respondent states that numerous attempts were made to schedule this meeting from the 1 March 2016 onwards.[21] The purpose of the meeting was merely to facilitate the decisions of the meeting held on the 12 November 2015 at which meeting the applicant was present.  As explained in the e-mail dated the 18 March 2016 attached as Annexure “G18” to the founding affidavit (page 122) the meeting was held to ensure or to try and facilitate the monthly cash flow required to maintain the financial obligations of Top Spin prior to the end of March 2016 which were in distress due to the Applied arrear rentals which had still not been paid even though the applicant stated that she would take responsibility for the payment at the end of February 2016.[22] The arrear rental owed by Applied created a financial implication for Top Spin and indirectly for its shareholders of which one is the Trust.[23] The meeting of the 24 March 2016 was according to the second respondent, nothing more than an implementation of the decisions taken at the meeting of the 12 November 2015 subsequently ratified at the meeting of 25 May 2016. 

[32] I am inclined to agree with submissions made on behalf of the first respondent that the inference is unavoidable that this application has been brought with the motive of revenge for what had happened in and with Applied and the alleged financial losses, the applicant sustained in Applied. The applicant’s business dealings in Applied and with David and the first respondent have no bearing on the performance of the co-trustees. The applicant has not shown that the first respondent’s private interests in Top Spin conflict with those of the Trust beneficiaries.

[33] I am not persuaded to find that continuance in office by the respondents will prevent the Trust being properly administered or will be detrimental to the welfare of the beneficiaries. The applicant has in my view failed to prove that the respondents’ conduct of which she complains of imperils the Trust property or its proper administration or that the removal will otherwise be in the interests of the Trust and its beneficiaries as required by law. Neither can it be said that the versions of the respondents are in that category where each can be classified as far-fetched and untenable. The more so if one has to apply the Plascon-Evans rule that is applicable to motions.[24] Consequently, this application falls to be dismissed.

Order

[34] I make the following order:

34.1 The points in limine are dismissed with costs.

34.2 The application is dismissed with costs.

 

________________

TP MUDAU

[Judge of the High Court,

Gauteng Local Division,

Johannesburg]

 

 

Date of Hearing: 4 December 2017

Date of Judgment: 22 February 2018

APPEARANCES

For the Applicant: JK Berlowitz

Instructed by: Salant Attorneys

011 450 0724

For the 1^st Respondent: WG Pretorius

Instructed by: BJR Burt Attorneys

011 487 0123

For the 2^nd Respondent: GM Young

Instructed by: Goërtz Attorneys Inc

011 763 1592

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