It is often the case that contracts entered into by trustees on behalf of a trust are regarded as being void.

Cameron JA in Land and Agricultural Bank of South Africa v Parker and Others 2005 (2) SA 77 (SCA) stated that, “It is a fundamental rule of law… that in the absence of contrary provision in the trust deed the trustees must act jointly if the trust estate is to be bound by their acts.”  Quite often a resolution authorising the entering into of a contract and one or more trustee(s) to act on behalf of the trust, was not prior to the conclusion of the relevant contract, properly passed in accordance with the provisions of the relevant trust deed.  

Section 6(1) of the Trust Property Control Act (“Act”) states that, “any person whose appointment as trustee in terms of a trust instrument, section 7 or a court order comes into force after commencement of this Act, shall act in that capacity only if authorised thereto in writing by the Master.”

In Simplex Proprietary Limited v van der Merwe and Others NNO 1996 (1) SA 111 (W), the court was required to interpret the meaning of section 6 of the Act.  The court held that this section was not only for the benefit of the beneficiaries, but that providing written proof to outsiders of the incumbency of the office of trustees was at large, also in the interest of the general public. 

In this case there had been an application to remove the respondents from a property which had been purchased by trustees who had not had the authority from the Master to perform such act. This was a very expensive mistake, as the value of the property had increased considerably since the agreement had been signed, but because the trustees had acted without the required written authority, the sale was held to be null and void.  The application was subsequently granted and the property remained the property of the sellers.  Not even an attempt on behalf of the trustees to try and ratify the agreement once the Master’s written authority had been obtained could validate the trustees’ action, as a trust is not able in law to ratify the conclusion of an agreement.  To this extent, the court held that “there can be no ratification of an agreement which a statutory prohibition has rendered ab initio void in the sense that it is to be regarded as never having been concluded”.

In Watt v Sea Plant Products Bpk and Others [1998] 4 All SA 109 (C), section 6 of the Act was interpreted to mean that a trustee could not, prior to written authorisation from the Master, acquire rights for, or contractually incur liabilities on behalf of, a trust.  It should be noted that it is therefore highly problematic for a person to act ‘as a trustee’ on behalf of a ‘trust to be formed’. 

In summary of the above, any act by any person acting with no authority from the Master has no legal consequences. If you are a trustee wishing to bind a trust, you must first ensure that you have the written authority of the Master. On the other hand, if you are acting on behalf of a trust yet to be formed, you must always remember that under no circumstances can you enter into agreements on behalf of the trust as ‘a trustee’.