Trust Basics Explained

The Trust Property Control Act provides that all trusts must be lodged and registered with the Master of the High Court.  A trustee of a trust may only act in such capacity if authorized in writing by the Master via a duly issued letter of authority.

Trustees Duties and Responsibilities

The main role of a trustee is to administer the trust and its assets in the best interest of all the beneficiaries in line with the provisions of the Trust Deed and the Trust Property Control Act.  The Trustees stand in a fiduciary relationship to the beneficiaries.

The fiduciary relationship entails that a trustee shall, in relation to the trust, the beneficiaries and the other trustees, act honestly and in good faith which includes that she or he shall exercise such powers as she or he may have to, manage or represent the trust in the interests and for the benefit of the beneficiaries as a whole.

Liability of Trustees

A trustee who has breached any duty arising from such fiduciary relationship, may be liable to the trust for any pecuniary loss suffered by the trust as a result thereof; and/or any economic benefit derived by the trustee as a result thereof.

In the event of losses or negligence they may be held liable.  Trustees face court action from beneficiaries who believe their rights have been infringed.  Trustee’s decisions are further often called into question.

Trust Selling Immovable Property

A trustee may only deal with trust property or act on behalf of the trust if such trustee is in possession of a valid letter of authority.

Section 2(1) of the Alienation of Land Act requires that a contract for the sale of immovable property must be entered into in writing by the seller and purchaser or by their agents and in the case of the use of agents, such agents must be authorized in writing.

This means that a trustees must either be authorized directly by the trust deed and act jointly if more than one trustee (i.e. all trustees sign the agreement) or the trustee acting for the trust and signing the agreement must be authorized to enter into the agreement in writing (generally by a resolution), prior to signing the agreement.

A deed of sale signed by one or more of the trustees on behalf of the trust will not be valid unless all the trustees have signed the agreement or have, before the agreement is signed, authorized in writing the relevant trustee/s to sign the agreement on their behalf.

Any contract entered into by a trustee acting without such authorization is null and void and cannot be resuscitated or ratified. Trustee resolutions, particularly those where authority or agency is afforded to a representative of the trust, must be clear and specific with sufficient detail to ensure that it is determinable to which matters the authority or agency applies.

Barter McKellar’s corporate litigation attorneys have are highly skilled, knowledgeable and experienced in dealing with trust disputes, trustees disputes, disputes in respect of the sale of immovable property by trusts. If you need assistance with a litigation matter or dispute, contact our offices today to schedule a consultation with one of our specialist litigation attorneys.