Scenario 1: I created a family trust as the founder and we are three trustees. We want to buy a property in the trust but have not received the Letters of Authority from the Master. Can we conclude an offer to purchase on behalf of the trust?

Most importantly – trustees are not allowed to act before the Master of the High Court has issued a Letter of Authority authorising the trustees in terms of section 6 of the Trust Property Control Act to act as trustees and to bind the trust. Any acts or agreements concluded by trustees before being authorised by the Master will be invalid. This will be the case with a new trust being created or where the trust is already in place but a new trustee is being appointed. 

Furthermore, it is important to keep in mind that, unlike in the case of a company, one cannot act "on behalf of a trust that is being created". The Law of Agency is applicable and one cannot act as an agent of a non-existing principal. Therefore it is important to insure that the trust is already registered and the trustees authorised by the Master if a property is to be bought in the name of a trust.

Scenario 2: The trust (mentioned in scenario 1 above) is created and the Letter of Authority has been issued by the Master authorising the three trustees, A, B and C, to act as such. Is it necessary for all three trustees to sign the transfer documentation or can one trustee, say A sign the documentation on behalf of the other trustees?

The trustees can authorise one of them to sign all documentation on their behalf provided the trustees have a resolution in writing, signed by all the trustees, authorising A to sign on their behalf and provided further that this resolution was in place before the conclusion of the sale agreement. The trustees cannot authorise one of them retrospectively.

Scenario 3: We are three trustees and trustee A has instituted legal proceedings (on behalf of the trust) against a third party. Trustee A did not obtain a resolution in which he is authorised to act on behalf of the other trustees. Can the other trustees ratify A's decision to institute legal proceedings?

Yes, the trustees can ratify the decision of one of them retrospectively to institute legal proceedings provided they are properly authorised by the Master at the time the legal proceedings were instituted. 
If the trust deed requires a minimum of three trustees but only two of them were authorised by the Master at the time the legal proceedings were instituted, the trustees will not have locus standi to institute the legal proceedings.

Scenario 4: We are three trustees and the trust deed stipulates that all decisions can be taken by way of a majority vote. Does this mean that two of the three trustees can take decisions without the knowledge or approval of the third trustee?

Absolutely not. There is an obligation of the trustees to act jointly unless the trust deed stipulate otherwise. In this case where two is a majority it does not mean that the third trustee can be ignored. All the trustees must be informed of trustee meetings and decisions to be taken. A trustee is allowed to have a dissenting vote but such trustee will still have to sign the resolution indicating the decision taken even though he might have been outvoted. Acting jointly means that the trustees must participate in the decisions on behalf of the trust. In the case of Le Grange v The Louis And Andre Le Grange Family Trust the judge explained the obligation of acting jointly as follows:

"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 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. 

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."

Whether you are a trustee of a trust or are dealing with a trust, always make sure that the Letters of Authority and the necessary trustee resolutions are in place to avoid unnecessary litigation. 

* The content of this newsletter is merely informative and does not constitute legal advice. Please consult with one of our attorneys who specialises in Trust Law.