Can someone else temporarily stand in for you as a trustee?
August 2nd, 2019 15:05
Trustees are the guardians of the trust assets and have a duty to manage these assets in the best interests of the beneficiaries, as outlined in the trust deed. The Trust Property Control Act clearly stipulates the duties of trustees - section 9(1) of the Act states that a trustee shall, in the performance of his/her duties and exercise of his/her powers, act with the care, diligence and skill which can reasonably be expected of a person who manages the affairs of another person. A trustee’s active participation in trust matters is therefore expected at all times.
Similar to companies, a number of trust deeds allow the use of an alternate trustee in the event that an appointed trustee cannot attend a meeting or is temporarily absent and cannot participate in the trust’s affairs. Even if the trust deed allows for the appointment of a temporary alternate trustee to serve in the place of another trustee, such alternate trustee’s actions may be null and void for the following reasons:
- Section 6 of the Trust Property Control Act requires a person to be duly appointed by the Master of the High Court, before he/she can act as a trustee of the trust.
- The Act does also not make provision for the appointment of an alternate trustee.
- The common law requires all trust decisions to be made by duly appointed trustees of the trust, and no one else, not even an alternate trustee.
- There is no room in South African law for a ‘silent’ or ‘sleeping trustee’ – the trustee who appoints the alternate.
- A trustee cannot empower an alternate trustee to act on his/her behalf to exercise a general discretion and decision-making which vests in such trustee. The alternate trustee can therefore not decide as he/she wishes. A stipulation in the trust deed allowing an alternate trustee to vote as he/she ‘may deem fit’, results in an abdication of a trustee’s powers, which is not allowed. If an alternate trustee is allowed to exercise his/her independent judgement and form a personal view at a trustees meeting, he/she would be allowed to act similar to an appointed trustee of the trust, without being duly appointed as trustee, as required in terms of Section 6 of the Trust Property Control Act (Hoosen v Deedat case of 1999).
There is therefore a real risk that, even if a trust deed allows for the appointment of an alternate trustee, a decision taken by trustees of that trust, including such an alternate trustee, would be invalid and of no force and effect.
A possible solution for a trustee who cannot attend a meeting, is the use of a proxy. A proxy is a written authorisation from an absent trustee that confers a limited power of attorney on another person (the proxy) to vote on behalf of, and in accordance with the directions of, the trustee. A proxy allows a person, who is duly authorised, to represent a trustee at a meeting, only if it is specifically allowed in the trust deed. Such a proxy can merely act as the messenger of the trustee who he/she represents, and convey the thoughts and/or votes of the trustee who granted the proxy.
All trustees have a fiduciary duty to the beneficiaries of the trust, and may not act in a way that violates this duty or is outside the parameters of the trust deed. All trustees must act jointly in respect of trust matters, as they share a common fiduciary obligation towards the fulfilment of the objects of the trust (Hoosen v Deedat case of 1999).
~ Written by Phia van der Spuy ~