Haitas Konstantinos vs. Froneman and Others - (06 Jan 2021)

A trustee has a fiduciary duty to act with due care and diligence in administering property on behalf of another

Trusts and Societies

The appeal has its genesis in an urgent application in the High Court, launched by the Appellant. The main relief sought was the removal of Mr. Froneman and Ms. Haitas as trustees, and for the Master to urgently appoint two more trustees, one of whom should be an independent trustee. This Court was urged, in the alternative, to appoint two additional independent trustees to break any deadlock that might arise in the running of the Trust. The Appellant also sought to declare the appointment of Mr. Froneman and Ms. Haitas as directors of the trust companies void ab initio. Further, ancillary relief was sought that the trustees produce the financial statements of the Trust and all the trust companies; that they meet urgently with the Appellant regarding trust matters and that he be permitted to have legal representation at such meeting. The high Court dismissed the application. It held that, although the trustees did not function optimally in all respects, there was no necessity to remove them and no reason to believe that they would be guilty of any future misconduct or would endanger the assets of the Trust.

The primary issue for determination is whether the conduct of the two trustees justifies their removal in terms of Section 20(1) of the Trust Property Control Act, 1988.

The general principle is that, a court will exercise its common law jurisdiction to remove a trustee, if the continuance in office of the trustee will be detrimental to the beneficiary or will prevent the trust from being properly administered. A trustee has a fiduciary duty to act with due care and diligence in administering property on behalf of another.

As regards the proposal that other independent trustees be appointed to break the deadlock, the issue is whether there is a deadlock to break. The Appellant and his mother disapprove of the manner in which the Trust is being run but this does not mean that it is rendered dysfunctional. Even if one were to accept that this Court has the power to appoint further trustees, there is insufficient reason to do so. The Appellant has elected not to attend meetings of trustees presumably because of the enmity with his co-trustees. The other trustees are his aunt and his father’s trusted financial advisor who, whatever their shortcomings, have the Trust’s interests at heart. The Appellant would be well advised to attend these meetings, and take legal advice thereafter, if he so wishes. Until he participates in the governance of the Trust, it is premature to claim that there is a deadlock requiring the appointment of an independent trustee. In any event, the Appellant is at liberty to approach the Master under Section 7(2) of the Act to appoint further trustees, if warranted.

Further, irrespective of whether the common law or Section 20(1) of the Act is utilised, the Courts have emphasised that when a deceased person deliberately elects specific persons to carry out his or her wishes, a Court should be slow to interfere. The conduct of the trustees, although leaving much to be desired in the way they handled certain matters, does not justify the primary relief sought against them - their removal. No reason to differ from the high court. Appeal dismissed.

Tags : MISCONDUCT TRUSTEES REMOVAL