IN THE HIGH COURT OF SOUTH AFRICA 
(WESTERN CAPE HIGH COURT, CAPE TOWN)

In the matter between:-

and

AND

In the matter between:-

and

BINNS-WARD J:

[1] Two separately instituted applications came before me for hearing together. The applicants in both applications were the trustees of the Monument Trust.

[2] In the first application the applicants seek the following orders by way of substantive relief arising out of the execution of a deed of contract the object of which was the purchase and sale of a business and the fixed property from which the business operated:

1.	That the Sales (sic) Agreement ('Option to Purchase') dated 4 July 2008 annexed to First Applicant's founding affidavit herein and marked 'MTV be rectified by substituting the name 'Clarke Bosman Trust' on page 1 thereof with the name 'Hydraberg Property Trust'.
2.	That the Respondents be ordered to take all necessary steps so as to effect the transfer of [the fixed property] to the Applicant (sic) within 7 days of the Court Order.

[5] The fixed property that was the subject of the deed of contract was, as at the date of the signature of the deed, in July 2008, registered in the names of Clarke and his wife. Mr and Mrs Clarke owned the property jointly in undivided shares. In terms of a deed of alienation executed by the parties thereto on 30 June 2005, Mr and Mrs Clarke had bound themselves, as sellers, to sell the property at a price of R400 000 to the Hydraberg Property Trust ('the Trust'). The property had, however, not yet been transferred to the Trust when the contract in issue in the current case was concluded.
[6] It is common ground that when the contract currently in issue was concluded the trustees of the Trust were Clarke and Bosman. It is a matter of dispute whether one Johan Gerhard Slabbert was also a trustee at the time. The beneficiaries of the Trust are Clarke and Bosman and their respective spouses and descendants, as well as any trust created 'mainly' for the benefit of any of the aforementioned. It is apparent from the provisions of the trust deed that the positions of Clarke and Bosman as trustees are entrenched for as long as they might wish to hold office as such, whereas the third trustee (described in the trust instrument as 'an independent trustee') may be dismissed if the majority of the other trustees so decide. Should either Clarke or Bosman cease to be a trustee, they and those of their respective family members who are beneficiaries are empowered to replace them. (Quite how - i.e. by what procedure - each of the respective groups of family beneficiaries is to effect the nomination of the replacement is not evident from the trust deed.)

[7] The deed of contract currently in issue purported on its face to have been concluded between Hydraberg Hydraulics CC and 'the Clarke Bosman Trust' of the one part, as seller, and Johannes Marthinus Van der Merwe 'or his nominee/s' of the other part, as purchaser. It is evident from the facts that are common cause that Hydraberg Hydraulics CC was the intending seller of the business and the Trust the intending seller of the fixed property, but the Trust and the close corporation acted jointly in the sale of both business and land. The deed of contract recorded that Clarke and Bosman purported to represent both the close corporation and the seller-trust in concluding the contract, and each of them warranted that he was duly authorised by the corporation and such trust to do so. It is common cause that the transaction was intended to be an indivisible one; this notwithstanding the express allocation of part of the purchase price as being in respect of the business and the balance in respect of the fixed property. Thus it is the position of all the parties that the sale of the business and the fixed property go together and that a failure of one leg results in a failure of the whole contract.

[10] In the applicants' replying affidavit it was averred in response that rectification was not required, but that 'a notice of intention to amend the notice of motion [would] nevertheless, insofar and if this [might] be necessary, be filed in due course to provide for the rectification of the name of the seller trust'. A notice of intention to amend was not filed. Instead, application was made from the bar at the commencement of the hearing to amend the notice of motion by introducing a prayer for the appropriate rectification of the deed.

[11] The respondents' counsel was somewhat equivocal in his attitude to the application to amend the notice of motion. He certainly did not consent to it. In my view there was no cogent basis to oppose the amendment sought. It was foreshadowed in the papers and, as mentioned, the mistake regarding the description of the Trust is essentially conceded in the respondents' answering papers. The application for the amendment of the notice of motion will accordingly be granted.

[12] Whether any point will be served by granting the rectification depends, of course, on the determination of the legal validity, alternatively, the enforceability of the deed of contract. And it is to those questions that I now turn.

[13] The deed establishing the Trust provides that there 'shall at all times be a minimum of 3 (Three) trustees, provided that if there are less than 3 (Three) trustees as a result of the termination of the office of a co-trustee, the remaining trustee(s) shall be authorised to exercise all the powers of the trustees for the maintenance and administration of the trust fund until such time as another trustee has been appointed'. It is not in dispute that Mr Slabbert, who had been appointed as the third trustee upon the establishment of the Trust, was not informed or consulted by Clarke and Bosman in regard to the conclusion of the contract. If Slabbert was indeed still one of the trustees at the time, the omission to involve him in the decision to conclude the agreement would ordinarily have fatal consequences for the validity of the agreement.

[15] The following provisions of the Hydraberg Property Trust instrument of entrustment appear to me to be pertinent in respect of the issue of capacity that arises in the current matter:
5.2.	The trustees may meet together for the despatch of business, adjourn and otherwise regulate their meetings as they see fit. Any trustee shall at any time be entitled to summon a meeting of the trustees. The quorum necessary for the purpose of this trust shall be the majority of the trustees, provided that a trustee appointed in terms of 4.3 [being Bosman and Clarke or a trustee appointed in their place to represent the interests of the two family groups of beneficiaries] shall at all times form part of such majority.
5.3	In the absence of provisions to the contrary, the decisions of the majority of the trustees present at a meeting shall prevail.
5.4	…......
5.5 	A written resolution signed by all the trustees has the same implication as a valid resolution passed at a meeting of trustees. The aforesaid resolution can be contained in more than one document signed by the trustees.
5.6	…......
5.7	Every trustee who was not present at a meeting of trustees, must be notified in writing within 7 (Seven) days from the date of the meeting, by the trustees who were present at such meeting, of all decisions taken at such meeting. Any trustee who has not been notified, is hereby indemnified by every other trustee who was present at the meeting against any claims or losses of whatsoever nature which may arise as a result of any action taken in execution of such decision.
[16] It is evident from these provisions that unanimity amongst the trustees is not required in order for decisions to be made effectively in respect of transactions concerning the administration of the trust and the dealing with its assets in terms of the powers conferred on the trustees in terms of clause 6 of the trust deed. It is sufficient if the relevant decision enjoys the support of a majority. A majority decision is competent only if adopted by a majority of thetrustees present at a quorate meeting of trustees. Whether such a 'meeting' would need to be one at which the trustees attending were physically present together, or whether the 'meeting' could be held in some alternative form, is a question which it is not necessary to decide. It is evident, however, that in order to qualify as 'a meeting', all the trustees in office would have to receive notice thereof so as to be able to participate in it if they so wished. Slabbert did not receive any such notice and was therefore not afforded an opportunity to participate in the decision by the Trust to sell the fixed property. The terms of the trust instrument which provide for the trustees to make decisions by a majority vote at a quorate meeting do not provide an exception to the rule that all the trustees must act jointly; they merely provide that, subject to the indemnity in clause 5.7, a majority decision will bind the dissenting or absent trustees. The minority is obliged to act jointly with the other trustees in executing the resolution adopted by the majority.

Whether or not the trust instrument provides for the trustee's resignation, the trustee may resign by notice in writing to the Master and the ascertained beneficiaries who have legal capacity, or to the tutors or curators of the beneficiaries of the trust under tutorship or curatorship,
[18] Slabbert did not resign as trustee in the manner permitted in terms of s 21 of the Trust Property Control Act, or in the manner permitted in terms of the trust instrument - that is by no notice in writing to his co-trustees. The applicants' counsel therefore relied on two other provisions of the trust deed to contend that Slabbert's appointment as a trustee had been terminated. These provisions were sub-clauses 4.6.2 and 4.6.5, which read as follows:

4.6     The office of a trustee shall immediately be terminated and vacated:

4.6.2   if he is for any reason unable to perform the duties of a trustee; or
4.6.5 if there are more than 2 (Two) trustees and the majority of such trustees discharge him; provided that it shall not be competent for the other trustees to discharge a trustee appointed in terms of clause 4.3 as trustee.
also subsequently confirmed to the attorney that 'he was not aware that he, perhaps technically, was still a trustee....[h]e also stated that he was in any event unable to perform the duties of trustee...due to a breach of trust and confidence between [Clarke and Bosman] and himself. He confirmed that he resigned office as trustee of [Clarke's and Bosman's] trusts and as their public accountant at least a year before the Hydraberg transaction. He was not aware that his name was still reflected on any of their documents as responsible official. He had handed over all documentation to [Clarke and Bosman].' All of this was confirmed by Slabbert in a confirmatory affidavit deposed to on 22 October 2009. Counsel stressed that this evidence was not disputed and argued that it was evident that Clarke and Bosman had thereafter 'kept Slabbert out of the loop' by excluding him as a decision-maker in regard to the trust. (I pause to remark that it clear from what I have described earlier that when Slabbert said that he had resigned, he did not mean that he had complied with the formalities necessary to competently resign.)

[20] As I understand the averments of Clarke and Bosman in the 'supplementary affidavit' introduced after the delivery of the applicants' replying affidavits, they do not quibble that they did not involve Slabbert in the relevant decision-making. They sought to explain that their omission arose out of ignorance. They put in a written notice from Slabbert, dated 18 January 

[21] Much as I would have liked to, because of my perception of the equities of this case, I am regretfully unable to uphold the applicants' counsel contentions relying on clauses 4.6.2 or 4.6.5 of the trust instrument.

[22] Clause 4.6.2 must, in conformity with trite principle, be construed with regard to its context, including the evident object of the trust instrument read as a whole. If this is done it becomes evident that the relevant inability must be one that in a relatively absolute sense incapacitates the affected trustee from discharging his/her functions. The temporary incapacity of a trustee, say through illness, or being uncontactable while away on a holiday, might render him or her unable for a while to perform the duties of a trustee, but it was clearly not the founder's intention that such relative inability should result in the automatic and immediate termination of the trustee's appointment. That much is apparent from the provisions of clause 4.7 of the trust deed which permits a trustee who is going to be temporarily absent or temporarily unable to act as trustee to appoint an alternative. Clause 4.6.2 would, for example, operate if the inability arose from a permanent or long-term cognitive disability, or arguably even emigration to a place which rendered it impractical for the affected trustee to attend meetings of trustees (although in the latter example one would ordinarily expect the trustee to resign).
[23] Because sub-clause 4.6.2 is widely worded, its operation is essentially a matter of practicality and common sense; which means that its construction might give rise to grey areas. But there is no doubt, in my view, that it does not apply to a situation in which a trustee chooses not to resign in the manner permitted either in terms of the statute or of the trust instrument, but instead purports to 'informally' resign and his/her co-trustees as a consequence, in breach of the trust instrument, exclude him/her from notice of their meetings as if s/he had resigned. To apply the sub-clause in the manner contended for by the applicants' counsel in the factual context of the current case would be incongruent with and inimical to the rest of the trust instrument; and also with the common law and the statute.

[24] Clause 4.6.5, properly construed, would require a meeting of trustees, of which notice would have to be given to the trustee whom it was intended to discharge. I do not consider that a discharge of a trustee could competently occur in terms of this provision simply as a consequence of a tacit acceptance by the remaining trustees of an oral or tacit indication by one of the trustees of an unwillingness to continue in office. The act of discharging requires an antecedent decision to that effect. As I have already remarked, such a decision would, by reason of the provisions of the trust instrument, require notice to all the trustees to participate in a meeting at which such decision might be taken, alternatively, a round robin resolution signed by all the trustees, including the one being discharged thereby.

[25] The applicants' counsel argued that in the event that I should arrive at the conclusion that Slabbert remained in office as a trustee, the agreement should, on the application of the Turquand rule, nevertheless be held to bind the trustees. I turn now to consider that argument.

[30] For the same reason it would also not avail the applicants to rely on an allegation of ostensible authority by Clarke and Bosman to represent the Trust. As soon as the role of the actors is brought within the ambit of agency, the formality requirements of the Alienation of Land Act, which require an agent's authorisation to be in writing, become applicable. The existence of any such written authorisation is nowhere suggested in the evidence.

concept. In Parker's case, supra, the Supreme Court of Appeal observed that '[T]he great virtue of the trust form is its flexibility, and the great advantage of trusts their relative lack of formality in creation and operation: "the trust is an all-purpose institution, more flexible and wide-ranging than any of the others".  It is the separation of enjoyment and control that has made this traditionally greater leeway possible. The courts and legislature have countenanced the trust's relatively autonomous development and administration because the structural features of "the ordinary case of trust" tend to ensure propriety and rigour and accountability in its administration.'

[34] Cameron JA, however, discerned that since the mid-1980's there had been a noticeable change brought about by the formation of many business trusts 'in which functional separation between control and enjoyment is entirely lacking. This is particularly so in the case of family trusts - those designed to secure the interests and protect the property of a group of family members, usually identified in the trust deed by name or by descent or by degree of kinship to the founder.' I doubt that anyone with a modicum of commercial law experience would doubt the pertinence of this insight concerning what Harms JA in Nieuwoudt disparagingly described as a 'newer type of trust'. Cameron JA proceeded 'The core idea of the trust is debased in such cases because the trust form is employed not to separate beneficial 

[35] The Hydraberg Property Trust bears the unwholesome hallmarks of the 'newer type' of business trust. These are reflected not only in its structure, but also in the manner in which its affairs have demonstrably been conducted. Although the trust instrument makes provision for the mandatory appointment of a third so-called 'independent' trustee, that trustee holds office only at the pleasure of Clarke and Bosman, or should the latter have resigned or forfeited their office (for example, as a consequence of having been sequestrated), at the pleasure of the substitute trustees appointed by their respective family member beneficiaries. The independent trustee's position can in any event never prevail against that of Clarke and Bosman, who if they vote together will always constitute a majority. In theory the trust could operate with a real functional separation between control and benefit were additional independent trustees to be appointed thereby overriding the otherwise controlling majority of the entrenched initially appointed beneficiary trustees or their successors. Having regard to the provisions of the trust instrument considered as a whole, it is no cause for surprise to find that no additional trustees have been appointed during the five years of the Trust's existence. Instead, as is all too likely to happen with such a trust structure, the beneficiary trustees have sidelined the independent trustee; and, when he ceased to fulfil his essential role in the control of the Trust's affairs, they blithely proceeded without him, indifferent to the trust instrument's requirement that there be a minimum of three effectively functioning trustees and oblivious of their obligation, should this requirement fail for any reason, to ensure the appointment of an additional or replacement trustee.

[36] The first signs of interest in the importance of compliance with the trust instrument arose in the context of Clarke and Bosman's resort to its provisions in seeking to escape the contractual obligations they were happy to assume on the Trust's behalf; this only several months after they had accepted payment of the major portion of the purchase price and put the purchaser's nominees in possession of the business and the fixed property. Slabbert's formal resignation as 'independent trustee' was procured only three months after the applicants' replying affidavits were delivered. A presumably functioning third trustee was appointed only with effect from 12 February 2010. On Slabbert's evidence this would have been at least two and a half years since he had ceased to function as the originally appointed third trustee. Almost comically, what, judged by its content, would appear to have been the first resolution of the newly constituted board of trustees unanimously determined in writing, amongst other matters, that it be recorded that the Hydraberg Property Trust was not a party to the agreement of sale of the fixed property in July 2008 and had not given Clarke or Bosman authority in writing to enter into the agreement. I describe the resolution as comical - tragic-comical might be a more fitting adjective - because it was tantamount to a formal confession by Clarke and Bosman of their dishonesty in executing the deed of contract; it cynically ignored the palpable abuse of the trust form inwhich those in control of the Trust's affairs during the relevant period had engaged; and it was subscribed to by the newly appointed so-called independent trustee without any evident concern by him about the aforementioned attributes. The trustees also resolved to institute proceedings for the eviction of the purported purchaser or the persons occupying the fixed property under him, but curiously, appear to have given no consideration to the funding of the R6 million that will have to be tendered to sustain any such claim, or the recoupment of any damages from Clarke and Bosman for having put the Trust in the prejudiced position of having to institute proceedings for the recovery of its property. This, in my view, provides yet further indication, of the persisting conduct of the Trust's affairs as if they were the proprietary affairs of Clarke and Bosman personally.

trust function means all too often that this duty will be violated. The facts in the current matter confirm the wisdom of both these observations.

[38] The abuse of the trust form is something that should not lightly be countenanced by the courts in cases in which the veneer of a trust is used to protect the trustees against fraud and dishonesty and to raise unscrupulous defences against bona fide third parties seeking to enforce the performance of contractual obligations purportedly entered into by such trustees ostensibly in that capacity. In Parker, Cameron JA ventured the following observations in this connection: 'The courts will themselves in appropriate cases ensure that the trust form is not abused. The courts have the power and the duty to evolve the law of trusts by adapting the trust idea to the principles of our law (Braun v Blann and Botha NNO and another). This power may have to be invoked to ensure that trusts function in accordance with principles of business efficacy, sound commercial accountability and the reasonable expectations of outsiders who deal with them.'; and 'Where trustees of a family trust, including the founder, act in breach of the duties imposed by the trust deed, and purport on their sole authority to enter into contracts binding the trust, that may provide evidence that the trust form is a veneer that in justice should be pierced in the interests of creditors.' A decision to disregard the veneer would, like one to pierce the corporate veil, be a decision 

[39] The facts of the current matter afford a classic example of an abuse of the trust form flowing directly from the conduct by Clarke and Bosman in respect of the ownership of the fixed property with no distinction between their responsibilities as trustees and their expectations as beneficiaries. They treat the property as their own, and invoke the existence of the trust only when it suits them. There has not been any suggestion that in acting as they did at the time Clarke and Bosman prejudiced the rights of the beneficiaries of the Trust. On the contrary, the evidence is that the third (independent) trustee would have consented to the transaction, had his input been sought. It is apparent that the only reason that non-compliance with the requirements of the trust instrument is being raised at this late stage is because it apparently no longer suits the personal interests of Clarke and Bosman for effect to be given to the contract they purported to enter into. In principle I consider that it would be unconscionable to allow them to get away with such behaviour.

[40] I should mention that the respondents counsel sought to explain the respondents' behaviour by saying that it was due to their dissatisfaction at being visited with an unexpected liability in respect of VAT on the sale of the fixed property. It was claimed that the attorney, Theron, who had negotiated the agreement on behalf of Van der Merwe had given them to understand that there would be no such liability. I find this difficult to accept in the face of an express provision (in clause 7.2) of the agreement that should the Receiver of Revenue regard the sale of the property as a taxable supply, the purchaser would not be liable to pay the value added tax. Clarke and Bosman moreover took the draft agreement to their own attorneys for consideration before they signed it. They certainly did not express this complaint in the correspondence in which, through their attorneys of record, they first contended that the contract was void.

[41] If it had been legally possible, this matter would be an appropriate case, in my judgment, to have disregarded the veneer of the trust form. This might have been done in one of two ways: By holding the delinquent trustees personally liable for performance, or by directing the trust to perform as if the obligation had been properly incurred by the trustees acting in the capacity that they purported to. As the trustees of the Trust have contracted with Mr and Mrs Clarke to take transfer of the fixed property so as to be able to give effect to the contract concluded by Clarke and Boswell with Van der Merwe, it seems that the indicated course in the current matter would have been to direct that the trustees for the time being of the Trust do everything necessary to effect transfer of the fixed property to the applicants against payment by the latter of the balance of the outstanding amount of the purchase price.

[42] Unfortunately, however, the formalities applying in respect of contracts in respect of the alienation of land pose an insuperable obstacle to the course I would have wished to take. Whereas, as between the parties to the contract I might, on the basis described at some length above, have been able to disregard the veneer of the trust to overcome an unscrupulous resort by the trustees to internal formalities and conveniently assumed lack of capacity to escape contractual obligations, I am not able to ignore the trust's existence as a formally constituted legal concept when it comes to compliance with the peremptory requirements of applicable legislation. When law and equity cannot concur, it is the law that must prevail. As mentioned earlier, it was not competent for the trustees of the Trust to act other than jointly. Therefore, as also mentioned earlier, Clarke and Bosman, being only two of the three trustees in office, could bind the Trust in respect of a sale of immovable property only by acting together with their co-trustee as joint principals, alternatively, on the written authority of all of the trustees given acting jointly.

[43] The application for an order compelling the transfer of the fixed property must fail. In the circumstances no point will be served in rectifying the ineffectual deed of contract. The restraint of trade clause also fails as a consequence because it is part of the sale of the business which the parties regarded as indivisible from the sale of property. I nevertheless wish to record that had it not been for the obstacle presented by the sale of land formalities, Ishould have upheld the application for the enforcement of the restraint against Bosman and, insofar as Clarke contended that he was not bound by it, granted declaratory relief by way of alternative relief confirming that he was in fact bound by it. I would not have found that a case had been made out against the third, fourth and fifth respondents.

[44] It will be evident that this judgment could have been much shorter had I considered it appropriate to dispose of the applications only on their legal merits. I proceeded at greater length, however, so as to be able to explain my decision to depart from the general rule in litigation that costs follow the result.

[45] The formalities legislation on which the result of these applications has ultimately turned was evidently intended to promote certainty in regard to contracts in respect of the alienation of interests in land. The apparent legislative hope was that the imposition of formalities would lessen the scope for dispute and reduce the amount of litigation between parties to such contracts. Successive legislatures have persisted with the belief in that ideal despite the observations by judges and academic writers over many years that the effect of the formalities has often been to bring about greater evils than those which it was hoped thereby to avoid. These evils include the resort by the dishonest and the unscrupulous to the formalities in order to avoid obligations seriously undertaken which would otherwise be enforceable against them at common law, and a hampering of the ability of the courts todo justice. As I have sought to make clear, the current case is yet another one in which the incidence of the formalities has had this unjust effect. It would be to heap injustice upon injustice if the already unseemly result of these cases were to be compounded by an order that costs follow the result. The existence of an overriding judicial discretion in regard to costs means that it is not inevitable that costs follow the result. In the exercise of the court's discretion I have therefore decided that it would be appropriate that in both applications the parties should be left to bear their own costs, save that in case no. 22837/09, the applicants shall be liable for any costs that may have been incurred by the third, fourth and fifth respondents.

[46]   The following orders are made:
1.	The application to amend the notion of motion in case no. 12742/09 to introduce a claim for the rectification of the deed of contract is allowed and the amended notice of motion is admitted to the record.
2.	The applications in case no. 12742/09 and case no. 22837/09 are dismissed.
3.	In both the aforementioned matters the parties shall bear their own costs; save that in case no. 22837/09, the applicants shall be liable for any costs that may have been incurred by the third, fourth and fifth respondents.