Deed of suretyship signed by majority of trustees in absence of authority from the trust deed is invalid and unenforceable.

Nwabisa Sihlahla

The Supreme Court of Appeal (“SCA”) in the case of Shepstone & Wylie Attorneys v Abraham Johannes De Witt N.O and Others (1270/2021) [2023] ZASCA 74 dismissed a claim to hold a Trust liable in terms of a deed of suretyship. The deed of suretyship was signed in favour of the Appellant for the personal indebtedness of one of the Trustees in respect of legal fees incurred in a divorce action.

The trust deed required a written resolution to be signed by all trustees for the trust to be bound although the trust deed provided that the business of the trust may be dealt with at a meeting of the trustees which required a quorum of two trustees.

In this case, the decision was taken by two trustees who signed the deed of suretyship in favour of the Appellant in the absence of one of the Trustees. This was contrary to the provisions of the trust deed and the court concluded that the trust could not be bound by a majority resolution passed at such meeting.

In arriving at this conclusion, the court referred to the general principles governing trusts which provides:

“It is trite that for purposes of administration of a trust, trustees are deemed to be the co-owners of immovable property and other assets. Equally trite, is the principle that trustees must act jointly in taking decisions and resolutions for the benefit of the Trust and beneficiaries thereof, unless a specific majority clause provides otherwise. In line with their fiduciary duties, trustees must be legally authorised to act through competent resolutions”.

It therefore follows that where a trust deed expressly provides the Trustees to act jointly for a trust to be bound, a majority decision will not bind the Trust where one of the trustees did not participate in the decision-making. 

Important things to look for in a Trust:

  • Minimum number of trustees;
  • Powers of Trustees;
  • Meetings of Trustees;
  • Execution of documents;
  • Capacity to contract;
  • Number of trustees required to act jointly; and 
  • All other requirements and formalities.