Is a decision of a majority of trustees valid if it is taken at a quorate meeting after all trustees received proper notice of the meeting and if the Deed provides for a majority decision to prevail? Or is a further, written resolution signed by every single one of the trustees required to validate the resolution adopted at the meeting?

The SCA says that the latter is required.

On Friday 26 May 2023, the SCA handed down judgment in Shepstone & Wylie v Abraham Johannes de Witt N.O and others [2023] ZASCA 74, in which the SCA declared invalid a suretyship which had been approved by a majority of the trustees taken at a quorate meeting after all trustees received proper notice of the meeting and where the Deed provided for a meeting to proceed if a majority of trustees were present.  One of the trustees was unavailable to attend the meeting. 

The SCA stated:

• “Even when the trust deed provides for a majority decision, the resolutions must be signed by all the trustees”;
• “A majority of the trustees may take a valid internal decision, but a valid resolution that binds a trust externally must be signed by all trustees, including the absent or the dissenting trustee”;
• “In the case where the majority decision prevails, all trustees are still required to sign the resolution.”
• “… even if the Trust instrument stipulates that the decision can be made by the majority of trustees, all trustees are required to participate in the decision making and each has to sign the resolution;
• “A majority decision prevails only where there has been participation by all trustees where the trust deed expressly provides for it. In this case, on every possible interpretation of what happened on 25 March 2013, there is no room to conclude that Mr Volker participated in the decision-making. It is a misnomer for the appellant to infer participation in the meeting only on the basis that Mr Volker received reasonable notice thereof.” 

In our reading of all the case law cited by the SCA in this decision, there is no mention of a requirement for all the trustees to SIGN a resolution where a decision has already been properly made at a meeting of a majority trustees after having given proper notice to all trustees.  The case law requires that after such a decision has been taken by the majority trustees, the minority are then bound to act jointly with the majority trustees in EXECUTING the resolution adopted.  This means that all of the trustees must present a united front to the outside world by taking joint ACTION in implementing the resolution adopted. 

While the word “execute” means “signature” in certain contexts, it is not used in that manner in the prior case law cited by the SCA.

We must add that this does not apply to instances where the contract under consideration is a sale of immoveable property.  This is because section 2(1) of the Alienation of Land Act requires that no sale of land shall be valid unless contained in a deed of sale signed by the parties ot by their agents action on their written authority.  Therefore any resolution of trustees authorizing one of them or a third party as their agents to sign a sale of land must be signed by all the trustees.  The cases of Van der Merwe N.O v Hydraberg Hydraulics CC and Thorpe v Trittenwein are instructive here.  The Le Grange case clearly states that “Van der Merwe was a dispute about an immoveable property transaction. Its insistence on a resolution to communicate the decision of the trust must be seen in that context. I do not read Van der Merwe to be inflexible about the form by which decisions of trust are communicated publicly unless as in the case of a property transaction a resolution of the trust is prescribed by law.”

The SCA stated that “there is no room to conclude that Mr Volker PARTICIPATED in the decision-making. It is a misnomer for the appellant to infer participation in the meeting only on the basis that Mr Volker received reasonable notice thereof.”  Our reading of the case law cited by the SCA in this decision clearly states that as joint participation in all trustees-decision making is required by trustees as the joint owners of the trust property, all the trustees must always be invited to participate in all meetings.  The High Court case of Le Grange v Louis and Andre le Grange Family Trust held that participation may then be exercised in 1 of 3 ways: 1) to vote in favour; 2) to vote against or 3) to abstain from voting or attending this meeting.  The absent trustee in this case had been duly notified of the date and agenda for the meeting, had acknowledged the notice and had declined to attend on the basis that he was unavailable.  In our view, this constitutes participation as described in the Le Grange case. 

We disagree with the decision of the SCA in this case which we believe is based on an incorrect understanding of the word “execute” in prior case law.  This view may have been bolstered by the view of a prominent commentator on trust matters who has published several articles stating that a resolution adopted by a majority of trustees “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”.  Again, this commentator transposed the word “sign” in place of the word “execute” in all statements made in the case law requiring the minority to act jointly in executing or implementing the resolution adopted.

This SCA judgment would need to be successfully appealed to the Constitutional Court to avoid invalidating all trust decisions and agreements taken on a majority basis without a subsequent written resolution being signed by all trustees .  

For more information on trust matters, contact Erika Holmes at holmes@wylie.co.za.