Freedom of testation v public policy

February 1st, 2013
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Ex Parte: BoE Trust Ltd NO and Others (SCA) (unreported case no 846/11, 28-9-2012) (Erasmus AJA)

By Mapula Sedutla

The recent BoE Trust case tested freedom of testation against public policy, the constitutional right to equality, s 7 of the Promotion of Equality and Prevention of Discrimination Act 4 of 2000 and ss 3 and 4 of the National Education Policy Act 27 of 1996, as well as the case of Minister of Education and Another v Syfrets Trust NO and Another 2006 (4) SA 205 (C).

The BoE Trust case was an appeal against the Western Cape High Court judgment of Mitchell AJ in Ex Parte: BoE Trust Ltd NO and Others 2009 (6) SA (WCC), in which an application to remove from a will the word ‘white’ (used to identify beneficiaries of a trust) was dismissed.

The appeal was also dismissed by the Supreme Court of Appeal (SCA), per Erasmus AJA (Cloete, Malan, Shongwe and Pillay JJA concurring).

Factual background

In her will, dated 14 July 2002, the testatrix made various bequests to her siblings, nephews, nieces, godchildren and retired domestic assistant, while the remainder of her estate was left in trust. The will also included a provision that a small bursary be established to assist white South African students who have completed an MSc degree in organic chemistry at one of four universities in South Africa, namely the University of Cape Town, the University of Stellenbosch, the University of the Free State and the University of Pretoria; and who were planning to complete their studies with a doctorate degree at a ‘university in Europe or in Britain’.

One of the provisos for the selection of the students was that they return to South Africa for a specified period. The will also stated that in the event that the trustees were unable to carry out the terms of the trust, the income generated by the trust may be used to annually provide equally sized donations to ten charitable organisations named in the will.

A letter written by the sister of the testatrix, annexed to the founding papers before the court, indicated that the testatrix was advised that her stipulation would possibly not be given effect to as it was discriminatory; however, the testatrix did not amend her will.

The High Court case

In order to carry out the bequest, the trustees contacted the registrars of the four universities to determine whether any of them would accept the bursary bequest on the conditions stipulated in the will. All the universities indicated that they would not participate in the selection process unless the bursary was made available to students of all races.

The trustees and the four universities considered the provisions of the trust to be contrary to public policy as they restricted beneficiaries to white students and therefore discriminated against other graduates on the ground of race, contrary to s 9(3) of the Constitution.

The trustees therefore moved for a rule nisi calling all interested parties to show cause why the word ‘white’ should not be deleted from the will. The rule nisi was granted and served on the Master of the High Court and the four universities. No opposition to the rule nisi was received and a final order was sought in the High Court.

The applicant trustees contended that the word ‘white’ should be deleted as it directly or indirectly discriminated against potential beneficiaries of the bursaries on the basis of race and therefore infringed on the right to equality contained in s 9(1) of the Constitution, and was contrary to –

  • public policy;
  • s 7 of the Promotion of Equality and Prevention of Discrimination Act;
  • the principles of ss 3 and 4 of the National Education Policy Act; and
  • the judgment in the Syfrets Trust case.

The applicants contended that the court had the power to delete the word ‘white’, relying on the following grounds, which were presented before the court in the Syfrets Trust case –

  • s 13 of the Trust Property Control Act 57 of 1988, which permits the court, in certain instances, to delete or vary provisions in a trust instrument;
  • the common law, which prohibits bequests that are illegal or immoral or contrary to public policy; and
  • direct application of the Constitution, particularly s 9.

Public policy, the Constitution and the Syfrets Trust case

The High Court noted that the right of freedom of testation is protected by s 25(1) of the Constitution, which provides: ‘No one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property’. However, it added that this right is not without restriction.

The court referred to Griesel J’s judgment in the Syfrets Trust case, in which he pointed out that freedom of testation is limited by considerations of public policy. Further, the common law recognises that conditions attached to a bequest may be void for being contrary to public policy. Griesel J found that the exclusion on the basis of race, gender and religion in the trust considered in the Syfrets Trust case was contrary to public policy in the light of s 9 of the Constitution.

In his decision in the current matter, Mitchell AJ stated that the provisions concerned were not clearly contrary to public policy and that s 9(3) of the Constitution proscribes discrimination that is unfair. The judge further stated that it is recognised that discrimination ‘designed to achieve a legitimate objective’ is not unfair, for example that based on the need to address past injustices based on race and gender.

Another factor considered in the judgment was an increasing trend among white South African graduates to emigrate, therefore depriving the country of the benefit of their skills:

‘The testatrix has thought fit to require beneficiaries of the bursary trust to return to South Africa for a period determined by the universities concerned after obtaining their doctorates. … [I]n so doing she was seeking to ameliorate this skills loss and, indeed, to promote importation of skills obtained overseas’ (at para 15).

However, Mitchell AJ did not deem it necessary to make a firm finding on this aspect.

The court also noted that Griesel J in the Syfrets Trust case had pointed out that not all clauses in wills or trusts that differentiate between classes of beneficiary are invalid. In principle, freedom of testation must include the right to benefit a particular class of persons and not others. Only where that conduct can be categorised as unfair discrimination should it be held to be contrary to public policy.

The Trust Property Control Act

In coming to its conclusion, the High Court considered s 13 of the Trust Property Control Act, which provides:

‘If a trust instrument contains any provision which brings about consequences which in the opinion of the court the founder of a trust did not contemplate or foresee and which –

(a)     hampers the achievement of the objects of the founder; or

(b)     prejudices the interests of beneficiaries; or

(c)     is in conflict with the public interest,

the court may, on application of the trustee or any person who in the opinion of the court has a sufficient interest in the trust property, delete or vary any such provision or make in respect thereof any order which such court deems just, including an order whereby particular trust property is substituted for particular other property, or an order terminating the trust.’

According to the court, this provision could not be relied on in this instance as the provision in the will was against public policy and this did not give the court the power to vary the provision. Mitchell AJ stated that for the court to intervene, the Act required it to form an opinion that the testatrix did not foresee the consequences of the provision in the will. Without this opinion, the court would not be empowered by this section to vary a provision in a will, other than striking down a severable provision or the whole bequest.

In this instance, what made the bequest impossible to implement was the response of the four universities based on their perception that the bequest was contrary to public policy.

Mitchell AJ held that the court is not at liberty to rewrite testamentary dispositions because the trustees or the beneficiaries wish it to do so. The judge recognised that freedom of testation must imply that effect must be given to the expressed wishes of the testator, except in circumstances set out in the Trust Property Control Act.

The High Court therefore held that the bequest was rendered impossible as a result of the universities’ position. The court also found that this eventuality was foreseen by the testatrix in that it was expressed in her will that if this occurred, the trust income would go to the named charity organisations.

The Supreme Court of Appeal decision

Two years after the High Court decision, the trustees applied for leave to appeal the High Court ruling. The appeal was based on the decision in Curators, Emma Smith Educational Fund v University of KwaZulu-Natal and Others 2010 (6) SA 518 (SCA).

In this matter, the testator provided for an educational trust in his will, which would benefit only white bursars. The fund was administered by the University of KwaZulu-Natal, which successfully applied to the High Court to have the racially restrictive clause removed from the will. However, the curators for potential beneficiaries of the fund unsuccessfully appealed this decision in the SCA. The SCA held: ‘[T]he constitutional imperative to remove racially restrictive clauses that conflict with public policy from the conditions of an educational trust intended to benefit prospective students in need, administered by a publicly funded educational institution such as the university, must surely take precedence over freedom of testation …’ (at para 42).

The trustees contended that if they were granted leave to appeal, ‘then in view of the decision in Emma Smith, such appeal must succeed’.

Mitchell AJ denied leave to appeal, with the reason that the Emma Smith case did not affect his judgment. He held that the testatrix had anticipated the possibility that the bursary bequest might prove impossible to carry out as she provided an alternative, whereas no alternatives ware provided in the Emma Smith case in the event the bequest was impossible to carry out.

However, the SCA granted leave to appeal the decision.

The appellant trustees set out their reason for appealing the High Court judgment as follows: ‘[I]t would be prudent and preferable to rather fulfil the primary purpose behind the creation of the trust by obtaining an order from this court that the word “white” be deleted from … the will so that the bursary bequest is acceptable to the South African universities and can be used to assist students in the manner contemplated in the will, than resorting to a disposal of the income to the charitable organisations’ (at para 12).

The court noted that, while commendable, the appellants’ attitude in this regard was not decisive. Instead, the court had to decide whether it should allow a deletion of a word in the will based on the Emma Smith case. In doing so, the court considered the Emma Smith case and held that it was distinguishable from the instant matter because its trust provided for the single purpose that the funds in the trust be dedicated for the promotion and encouragement of education. No alternatives were provided in the event that the bequest was impossible to carry out. The court noted at para 25: ‘In the instant case no bursaries were ever paid; they could not be, because of the universities’ stance. The giving of the bursaries as [the testatrix] had intended had become impossible as a result of the universities’ stance. Must the alternative provided in the will be given effect to? Does [the testatrix’s] right to dispose of her assets as she saw fit, whether we agree with her exercise of that right or not, require a court to see at least whether there is a way in which to interpret her will so as that it does not offend public policy?’

The court examined s 25 of the Constitution, and held that recognition must be given to freedom of testation and failure to do so flies ‘in the face of the founding constitutional principle of human dignity’.

The right to dignity allows people the peace of mind of knowing that their last wishes would be respected after they have passed away, the court held. However, the court noted that freedom of testation and the rights underlying it are not absolute and a balance needs to be struck between the freedom of testation and its limitations.

The court noted it was required to ascertain the wishes of the testatrix and whether any rule of law prevented it from giving effect to those wishes. The court considered the meaning of the word ‘impossibility’ contained in the will to determine the testatrix’s wishes. Since the testatrix was informed that it may be impossible to carry out the bursary bequest, it is with this impossibility in mind that she included the word ‘impossible’ and stipulated an alternative, the court held.

However, the appellants insisted that this should not be the case and argued that a distinction should be drawn between different types of impossibility. The appellants argued that what the testatrix meant was that her alternative arrangement would only be initiated in the event of an ‘objective impossibility’ (eg if the MSc in organic chemistry would never be offered by South African universities).

However, the court did not accept this. It held that the primary function of a court in interpreting a will is to ascertain the intention of the testator and that in this instance it was clear that the testatrix intended that should it be impossible, for whatever reason, to give effect to the provisions of the bursary bequest, the money should be donated to the named charitable organisations.

‘The testatrix clearly set out a general scheme in which she provided for foreseen eventualities.’

The court, per Erasmus AJA, thus held: ‘[T]he fact that the universities would not participate as a result of the racially exclusiveness of the bequest is an impossibility in respect of the bursary bequest. The result must be that effect has to be given to the wishes of the testatrix so that the bequest to the named charitable organisations is enforced.’

Mapula Sedutla, mapula@derebus.org.za

This article was first published in De Rebus in 2013 (Jan/Feb) DR 54.