SCA invalidates trustee appointments over trust deed breach

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This is exactly what happened in the case of Glencore Operations SA (Pty) Limited and Others v Master of the High Court, North West and Others. The dispute was between trustees of the Bakwena-ba-Mogopa Trust, with the main issue being whether certain trustees had been lawfully appointed.

Trust set up

Back in 2009, Glencore Operations South Africa (Pty) Limited (Glencore) and the Bakwena-ba Mogopa community entered into various agreements, which included that the community acquired a 52% share in the Rhovan Mining right. This entitled the community to a 26% participation interest in the resources of the Rhovan Mine.

A trust was set up and officially registered on 4 August that year. The objective of the trust was set out in the trust deed and it was as follows: “(a) to enter into the suite of agreement (sic) that will entitle it to participate in the Pooling and Sharing Venture constituted in terms of the Notarial Pooling and Sharing Agreement; (b) to accept donations from the community in terms of the Deed of Donation; (c) that the trustees should strive to attain the object and purpose for which the trust was established and (d) that the trust is exclusively and unconditionally a special purpose vehicle which will be utilised only for the aforementioned objects and purpose.”

According to the trust deed, the Kgosi, as the traditional leader, was meant to be the designated founder and first trustee of the trust. It also stated that he or his successor should continue to hold the position of trustee and founder for the duration of the trust.

Two additional independent trustees to be appointed

The trust deed also outlined the process for appointing additional trustees within eight months of the trust’s registration. It specified that the Kgosi, with the approval of the Traditional Council, was to appoint two independent trustees, one being an attorney and the other an accountant.

Additionally, the Traditional Council was responsible for appointing two more trustees, while the Council of Headmen was to appoint one trustee. Lastly, each of the three wards was to appoint a trustee of their own. However, since the trust was established, no trustees had been appointed due to the ongoing internal conflict.

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The majority of the trustees were identified for appointment by a particular faction of the Traditional Council. It’s important to highlight that this appointment did not have the endorsement of the Kgosi or other community members, as required by the trust deed’s provisions on how trustees should be appointed. This raised serious questions about the validity of their appointment, as it did not follow the process outlined in the deed.

In 2018, the Master of the High Court officially removed the Kgosi from his fiduciary role as trustee and authorised the remaining trustees to continue acting as trustees. This led to a dispute over whether the trustees had been lawfully appointed.

On one side of the matter was Glencore and two other applicants, of which one was the Kgosi (the applicants) and on the other side was the trustees whose appointment came into question (the respondents).

Removal of founder challenged

The applicants challenged the Master’s decision, arguing that the appointment of the respondents was illegal and invalid, and that the Master’s authorisation was invalid. The High Court had dismissed the applicants’ application, which sought to declare that the trustees were not validly appointed.

Additionally, the court rejected the applicants’ request to review and set aside the decision by the Master to authorise the appointment of the respondents as trustees. The court also approved the counter application to amend the trust deed in line with the respondents’ answering papers.

Moreover, it ordered that Glencore was to cooperate with the respondents in carrying out their duties as appointed trustees and to provide all relevant trust-related documents.

The appellants were dissatisfied and decided to challenge the High Court’s decision. They were granted leave to appeal by the High Court to appeal its judgment in the Supreme Court of Appeal (SCA), which the respondents then opposed.

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Supreme Court of Appeal

The fact that the trust deed’s provisions were not implemented properly is what gave rise to the dispute and that is how it came before the High Court. The failure to appoint trustees in accordance with the trust deed led to governance issues, which ultimately resulted in the Kgosi being removed as a trustee.

The court focused on section 6(1) of the Trust Property Control Act, which states that:

“Any person whose appointment as trustee in terms of a trust instrument, section 7 or a court order comes into force after the commencement of this Act, shall act in that capacity only if authorized thereto in writing by the Master.”

The court emphasised that the Master can only authorise appointments in terms of the aforementioned legal provisions and in this case the appointment was not made in accordance with the trust deed.

Section 6(1) does not grant the Master the authority to authorise a trustee to act outside of the conditions set out in the trust deed. As a result, the Master had no power to authorise the respondents' appointment, and their appointment was deemed invalid.

This court highlighted that, according to the trust deed, the Traditional Council was only authorised to appoint two trustees, not six. As a result, the Council of Headmen and the three wards were not involved in appointing trustees.

Most importantly, the Kgosi and his successors, who were meant to be represented throughout the duration of the trust, were also excluded from the process. This misalignment with the trust deed’s provisions further called into question the legitimacy of the trustee appointments.

The court ruled that the Master had acted beyond his authority and that the authorisation of the respondents' appointments was irregular. As a result, it declared their appointment invalid.

Cannot act outside of trust deed

This judgment emphasises the importance of the clearly defined powers of the Master and the need to adhere strictly to the provisions of the trust deed and section 6(1). It is particularly significant given that the trust in this case was created for the benefit of the community.

The Master cannot exceed his authority or misinterpret the law to favour a particular group of trustees. Had this appeal been unsuccessful, it could have led to significant controversy, especially concerning the role and authority of the Kgosi as a community leader.

This case highlights that neither the Master nor the trustees have the authority to act beyond what is set out in the trust deed. It reinforces the importance of adhering to its provisions and operating within its defined scope.