Requirements for and interpretation of a trust deed

Patrick Bracher, Norton Rose Fulbright

The appellants in the Supreme Court of Appeal challenged the validity of a trust deed and the appointment of the trustee. The settlor of the trust appointed a trustee to administer the trust after his death, using the words “the office of the trustee shall descend on the first trustee and thereafter to the eldest male issue of the first trustee, if any”. The validity of a trust depends on the surrounding evidence and the trust deed will be read in the context of the evidence and interpreted to give meaning and effect to the deed. The document alleged to be a trust deed serves as evidence of the creation of the trust along with other relevant evidence.

The court found that the phrase “office of trustee” ordinarily refers to the position of trusteeship and the rights and obligations conferred by law on the occupant of that office. In its ordinary meaning it refers to a specific office occupied in relation to a specific trust. On the wording, particularly the use of the word ‘descend’ on the settlor’s death the first trustee was named as trustee and validly appointed on that basis. The first trustee had accepted his office as trustee and received the Master’s acceptance of his appointment.

The evidence as a whole overwhelmingly established that a trust was in fact constituted by the deed of trust and that ownership and control of the trust property passed into the hands of the nominated first trustee during the lifetime of the settlor. The trust was validly established and the first trustee had been appointed on the basis of being named trustee elsewhere in the deed.

A suggestion that the deed could be amended without the amendment being effected by the trustees acting as trustees was rejected. That would give rise to absurdity. It would mean that a trustee could enter into an agreement with other persons, who were not required to act in a fiduciary capacity, to amend a deed of trust. That would offend the essential principles upon which a trustee assumes obligations imposed by the trust. The variation of the trust deed could only be effected by named trustees acting in their capacity as trustees. Where a trust deed is silent as to the appointment of additional trustees, the Master may appoint any person to act as trustee of the trust in terms of section 7 of the Trust Property Control Act 1988.

Trusts are difficult vehicles and often badly administered and the duties, roles and powers of the named trustees, and even the existence of the trust, are often overlooked.  The fiduciary and statutory obligations of trustees are onerous and trusts should not be lightly established nor trusteeships lightly accepted.

Estate late Hafiz and Others v Hafiz and Others (804/2022) [2023] ZASCA 114 (27 July 2023)

First published by: Financial Institutions Legal Snapshot