Liability of trustees in terms of negligent acts
30 August 2021 | A Stoltz
Trusts in South Africa are primarily governed by trust law, known as the Trust Property Control Act No. 57 of 1988 (hereinafter referred to as “TPCA”). In terms of the TPCA, trustees` duties are subject to the requirements and provisions stipulated in the TPCA as well as the trust deed of the specific trust in question. Furthermore, the law governing trustees and trusts in general has been elaborated upon in our Courts trough the development of the South African common law.
Quite similar to a director of a company, a trustee holds a fiduciary duty and obligation to act with the highest degree of care, diligence and skill, which could reasonably be expected of a person whom attends to the management of another’s affairs. It could be stated that trustees may be held to a higher standard in opposition to directors of companies, as trustees act with and on behalf of the trust and its assets, as the actions of the trustees must always be subject to the best interest of the beneficiaries of the trust.
Based on the degree of care, diligence and skill expected of trustees, as mentioned herein above, it is a natural by- product that trustees may be held personally liable for negligent acts. The personal liability of trustees is more grievous than that of a director, as a company may indemnify a director of personal liability, in the contrary, any attempt of a trustee to be exempted from liability is void, even if explicitly stated in the trust deed. Should a provision or clause in a trust deed exists, that attempts to indemnify a trustee of personal liability due to his negligence, said provision or clause may be invalidated by a competent court, which may result in the entire trust instrument being declared invalid, in return creating the consequence of the trust to cease to exists entirely.
On the instance that trustees are accused of negligence, the accusing party must proof that the trustees did not act with the required care, diligence and skill, as more fully elaborated upon herein above. “Skill” would include more than the mere action of acting bona fide. Trustees may be subject to negligence not only if they invest in high-risk investments, but also if they invest too conservatively, as same could result in the trust`s capital not posing growth. The court, adjudicating upon such a dispute, would enquire and investigate as to what any other person whom takes care of another person’s affairs would have done under the same circumstances.
In the case of the Country Cloud at paragraph 22, Judge Khampepe held:
‘… the wrongfulness enquiry focuses on— “the [harm-causing] conduct and goes to whether the policy and legal convictions of the community, constitutionally understood, regard it as acceptable. It is based on the duty not to cause harm – indeed to respect rights – and questions the reasonableness of imposing liability.”
Therefore, trustees must ensure to act with the highest degree of care, diligence and skill in regard to their daily actions in terms of the trusts` assets, as a mere omission to act in the interest of the trust may be subject to an act of negligence. It would furthermore be advisable to any trust and / or trustee to ensure that a co-trustee appointed to the position of trustee, act professionally with the assets and investment management of the trust, which is to be managed to the benefit of the beneficiaries at all relevant times, failure to act as such may open Pandora`s box in terms of the liability of fellow trustees.
 COUNTRY CLOUD TRADING CC V MEC, DEPARTMENT OF INFRASTRUCTURE DEVELOPMENT, GAUTENG (CCT 185/13) [2014 ZACC 28; 2015 (1) SA 1 (CC); 2014 (12) BCLR 1397 (CC) (3 OCTOBER 2014)