Mandates are a useful tool for a person (including companies and trusts) to engage an agent to perform a service for them when it is impractical, inconvenient or difficult to perform the service themselves. A person authorising an attorney to represent them during court proceedings is an example. In the case of a trust that has given a mandate to an agent, what is the position when the mandate was approved with the required number of trustees, but before completion of the mandate the number of trustees falls below the minimum required by the trust deed. In such a scenario, the court in Trustees of the Rae Family Trust v Ledger and others [2020] JOL 48873 (WCC) (the Rae Case) found that the mandate lapses.
The Rae Case concerned an application by Bisplex (Pty) Ltd (Bisplex) disputing the authority of the attorneys of the Rae Family Trust (Rae Trust) to act on its behalf during related and pending court proceedings. The application was brought under rule 7(1) of the Uniform Rules of Court, which allows a party in proceedings to dispute the authority of an attorney acting for another party.
The application was brought following the death of one of the trustees of the Rae Trust, which resulted in the number of trustees falling below the minimum required by the trust deed of the Rae Trust (the Trust Deed). While the mandate given to the attorneys of the Rae Trust was originally approved by all the trustees when there was a sufficient number of trustees, the death of one trustee prompted Bisplex to dispute the continued validity of the mandate and argued that it had lapsed because the Rae Trust no longer had the minimum number of trustees required by the Trust Deed.
Accordingly, the question the court had to consider was whether the mandate given to the Rae Trust's attorneys had terminated on the death of the one trustee.In agreeing with Bisplex's position and granting the application, the court reasoned that a provision in a trust deed requiring a specified minimum number of trustees to hold office is a capacity-defining condition. Such a provision lays down a prerequisite that must be met before the trust can be bound. When fewer than the minimum number of trustees required by the Trust Deed hold office, the trust suffers from an incapacity that prevents action on its behalf.
In the case of the Rae Trust, the Trust Deed required a minimum of two trustees at all times to hold office. On the passing of one of the trustees, the Rae Trust suffered from incapacity as only one trustee remained. While at the outset there may have been a mandate that gave the attorneys of the Rae Trust the authority to act on its behalf, for such a mandate to remain valid, the trustees needed to have the continued authority to act on behalf of the Rae Trust. That authority fell away when the number of trustees dropped below the minimum required by the Trust Deed. Accordingly, on the death of one of the trustees of the Rae Trust, resulting in the number of trustees falling below the minimum required, the mandate issued to the attorneys of the Rae Trust lapsed.
In further support of the position, the court considered the inverse position, namely, that the mandate would subsist after the death of one trustee (thereby reducing the number of trustees below the minimum prescribed by the Trust Deed) until the completion of the services to be rendered, unless terminated by the Rae Trust. The court found this position untenable as it would mean that for as long as the number of trustees was fewer than the minimum prescribed by the Trust Deed, the remaining trustee would have no power to withdraw the mandate that was given when the trustees were properly constituted and had the capacity to grant it.
The Rae Case demonstrates a critical requirement in binding trusts: where a trust deed sets out a minimum number of trustees required to hold office, that minimum must be maintained for the trustees to continue to engage in conduct binding the trust. During the administration of a trust, trustees should take cognisance of this requirement. Additionally, before the resignation of a trustee is processed, trustees must ensure that a sufficient number of them remains so that the trustees may continue to act. The consequences flowing from the Rae Case will apply not only on the death of a trustee, but also on their resignation.
