Unlike a company, a trust is not a legal person.
Therefore a Trust can not enter into any agreement, as a trust does not have legal capacity. The assets and liabilities of a trust vest in the trustees and it is they who administer these based on the powers given to them in terms of the trust deed.
In terms of the Trust Property Control Act, a Trustee can only act as Trustee of a trust if such person/s are authorized to act as such by the Master of the High Court in terms of a Letter of Authority.
Secondly, as the trust does not have the legal capacity to enter into agreements, the trustees enter into any agreement as trustees of the trust, not as agents, based on the powers received in terms of the trust deed. As the trust deed empowers the trustees, any action taken by the trustees outside the scope of their powers is null and void. For example, if the trust deed does not make provision to rent immovable property to third parties, they are not authorized to do so. Also, the UNANIMOUS RESOLUTION of the trustees can not even cure such a situation, if they DO NOT have the POWER in terms of the trust deed to enter into a particular agreement such an agreement will be void with or without the unanimous agreement of trustees.
It is thus vitally important to ascertain not only the identity of trustees and authority to act but also the limit to their powers in terms of the trust deed.
Thirdly, as noted in Land and Agricultural Bank of SA v Parker and Others if the number of trustees falls below the minimum prescribed number of trustees in the trust deed, the remaining trustee will not be able to bind the trust as the trust will lack the capacity to act until the minimum number of trustees have been restored.
Fourthly, the basic rule in our law is that unless a trust deed specifically provides otherwise, trustees must always act jointly when dealing with third parties. One should thus tread carefully when dealing with an “authorized trustee” to firstly confirm that the trust deed allows for a trustee to be authorized to act on behalf of the other trustees and that that “authorization” is in fact in the form of a written resolution signed by all trustees.
Also as confirm by our Supreme Court in the case of Thorpe and Others v Trittenwein and Another 2007 (2) SA 172 (SCA), a contract that is void cannot be rectified by ratification. In other words, a void agreement can not post-fact be approved by the remaining trustees thereby resurrecting the void agreement.
In conclusion, as summarised in Standard Bank v Johannes Gerhardus Swanepoel NO [2015) ZASCA 71: “A trust is a legal entity although it does not have legal personality. Because a trust does not have legal personality it requires the authorization of the trustees, as required by the trust deed, to be bound by a contract. However, this does not mean the trust cannot be party to a contract. It merely expects that all trustees act together to bind a trust, unless the trust deed allows one trustee to do so in terms of a resolution signed by the other trustees.”
So When Contracting as a Trust or With a Trust:
Ensure that those who are representing themselves as trustees are in fact Authorised to act as trustees of the trust
Ensure that the “joint action rule” is adhered to, co-trustees must always act jointly, unless specifically provided for in the trust deed. If a trustee is Authorised to act on behalf of other trustees, such authorization must be in writing
Ensure the minimum number of trustees as stipulated by the trust deed is in place
Ensure that the trustees are in fact empowered by the trust deed to enter into such an agreement.
Do not assume that rules that apply to a company also apply to a trust, for example, the ability to rectify by ratification and Turquand Rule.
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