Can trustees rely on the ‘majority rule’ to make decisions?

Often trustees rely on the majority decision in trust instruments to make decisions. This is often done to deliberately exclude one or more trustees from decision making. The Courts have, however, in many cases, confirmed the ‘Joint Action Rule’, whereby trustees are required to act jointly in dealing with trust assets.
It is a fundamental rule of trust law that, in the absence of contrary provisions in the trust instrument, the trustees must act jointly if the trust’s estate is to be bound by their acts, and a unanimous vote will be required in matters of substance. The rule derives itself from the nature of the trustees’ joint ownership of the trust assets in ownership trusts. Since co-owners must act jointly, trustees must also act jointly (Coetzee v Peet Smith Trust case of 2003 and Nieuwoudt v Vrystaat Mielies case of 2004).
Co-trustees are required to act jointly concerning trust administration at all times. When dealing with third parties, even if the trust instrument stipulates that a decision can be made by the majority of trustees, all trustees are required to be involved in the decision and have to sign each resolution (Land and Agricultural Bank of South Africa v Parker case of 2005).
The following was held in the Parker case - “It is a fundamental rule of trust law, which this Court recently restated in Nieuwoudt and Another NNO v Vrystaat Mielies (Edms) Bpk, that in the absence of contrary provision in the trust deed the trustees must act jointly if the trust estate is to be bound by their acts. The rule derives from the nature of the trustees’ joint ownership of the trust property. Since co-owners must act jointly, trustees must also act jointly. Professor Tony Honoré’s authoritative historical exposition has shown that the joint action requirement was already being enforced as early as 1848. It has thus formed the basis of trust law in this country for well over a century and half.” It is not the majority vote but the resolution (signed by all trustees) that binds a trust. A trust operates on resolutions and not on votes. Bearing in mind that a trust operates using resolutions (Steyn v Blockpave case of 2011), all trustees must be notified of a decision to be considered by the trustees. The Court emphasised that a trust functions through its appointed trustees and that its lack of legal personality requires that all trustees act together for and on behalf of the trust.
As long as the trust instrument allows for it, decisions of trustees can be made by majority decision, as long as the necessary quorum (all trustees) was present at the meeting and all trustees were invited to and given an opportunity to participate in the meeting. The judge held in the van der Merwe NO and Others v Hydraberg Hydraulics CC and Others, van der Merwe NO and Others v Bosman and Others case of 2010 that the terms of the trust instrument that provide for the trustees to make decisions by a majority vote at a quorate meeting do not provide an exception to the rule that all the trustees must act jointly – they merely provide that a majority decision will bind the minority or absent trustees. The minority is, however, obliged to act jointly with the other trustees in executing the resolution adopted by the majority.
Even if a trust instrument allows for the majority of trustees to form a quorum for a trustees’ meeting – or allows for the majority decision of trustees – such majority may perfectly take a valid internal decision by acting together on the internal front. It will not, however, be a valid resolution that externally binds a trust unless it is signed by all trustees, including absent trustees in whose absence it was taken, as well as disagreeing trustees.
In the le Grange v the Louis and Andre le Grange Family Trust case of 2017, the judge excellently summarised 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.”  Trustees have to present a united front, irrespective of internal disagreement, in the form of a duly signed resolution by all the trustees. The judge also confirmed that the minority trustees must subject themselves to the democratic vote of the majority and co-sign the resolution taken by the majority trustees. 
Trustees should therefore be mindful to deliberately exclude certain trustees from trust decisions, as those decisions may be rendered invalid.