The duty to account – a trustee’s duty towards the trust

March 1st, 2024

Mohle NO and Others v RLN and Another (MM) (unreported case no A43/2023, 9-1-2024) (Ratshibvumo ADJP)

The Mpumalanga Division of the High Court, Mbombela recently dismissed an appeal by the trustees of a trust who refused to fully account to the beneficiaries of the trust in Mohle. The court in this matter reiterated the role of trustees and their duty to fully account to the beneficiaries of a trust through financial statements and all vouchers that make up the financial statements. The trustees cannot also choose who to account to when time comes for them to show how they have dealt with the assets of the trust, which they were entrusted with. The case also emphasised the fiduciary duty of the trustees, as well as how the principle of agency applies to the relationship between the beneficiaries and the trustees of the trust.

The appeal stemmed from a request by the first respondent, acting in her representative capacity on behalf of her minor child who is the capital beneficiary of the trust, as the executrix of her husband’s estate, and in her personal capacity as the income beneficiary of the trust, in the court a quo for the trustees to furnish her with the financial statements of the trust for the year ending in 2019. An order was granted to that effect by agreement with the trustees in January 2021. However, on scrutinising the financial statements, the first respondent found that there was a loan amount made in favour of her deceased husband and her minor child, different to what she knew (para 2). She then requested supporting documents making up the amount in the financial statements to which the trustees refused to provide. The court a quo ordered that the trustees were to furnish the respondent with ‘any and all supporting documents in respect of all loan accounts on behalf of and against the … trust for the year ended … [in] 2020, including but not limited to all ledgers, journals and explanatory notes’ (para 3).

The trustees appealed the order of the court a quo on the basis that the order was unenforceable because the description of the documents to be delivered was broad, wide, and vague. The appellants also argued that they run the risk of being in contempt of court as they were incapable of complying with the order of the court a quo (para 4). Additionally, the appellants also challenged the first respondent’s locus standi. The respondents opposed the appeal citing the judgment in Doyle v Board of Executors 1999 (2) SA 805 (C) and argued that the duty to account and give detailed statements arises from the fiduciary responsibilities of the trustees towards the beneficiaries of the trust. The respondents cemented the argument by referencing that the appellants already acknowledged this duty and rebutted their own argument of lack of locus standi by agreeing to furnish them with the financial statements in 2021 already. Furthermore, this act of furnishing the financial statements also entitled them to access the supporting documents requested thereto (para 6).

In dealing with the appeal, the court highlighted the similarities between the current matter and Doyle where the plaintiff’s mother created a trust making the plaintiff the income beneficiary and appointed the defendant as a trustee. The trustees were entitled to realise all trust assets and reinvest proceeds, however they deemed fit. However, on the death of the plaintiff’s mother, the plaintiff brought an action averring that the defendant owed him a duty to account fully for what they had done as trustee since their appointment (para 8). The defendant opposed the claim on the basis that it was the income beneficiary, the plaintiff’s mother, and not the plaintiff who was entitled to any account of the administration of the trust prior to her death and that this right ceased on her death. The court in Doyle dismissed this and held that the right to account by a trustee is both a right and a remedy likening it to the duty of good faith owed by an agent to their principal. It is, therefore, the agent’s duty to account to their principal for all that they know and have done in the execution of their mandate and with their principal’s property (para 15).

The court in this appeal by utilising the rationale of agency as reiterated in the Doyle judgment, therefore, confirmed the role of the trustee in terms of s 9 of the Trust Property Control Act 57 of 1988, which provides that ‘a trustee shall in the performance of his duties and the exercise of his powers act with the care, diligence and skill which can reasonably be expected of a person who manages the affairs of another’. This section also affirms the court’s emphasis that the appellant’s attempt to avoid accounting to the respondents is to fail, as the fiduciary relationship between the trustees and beneficiaries placed a duty and responsibility on them to account (para 16), a duty inherent in the role of a trustee.

The court also agreed with the court a quo that the respondent had locus standi to bring the application as she came with dual capacity as the executrix of her husband’s estate and the representative of her minor child who is a beneficiary of the trust (para 17). Finally, the court dealt with the argument by the appellant’s that the request of the respondents for documents to be delivered was broad, wide, and vague to which the court stated that it was quite clear that all the respondents needed were all the documents used to calculate the amount of loans reflected in the financial statements (para 19). It is for these reasons highlighted above that the court dismissed the appeal with costs.

Tshiamo Mogotshane BA Law LLB (UP) is a candidate legal practitioner at Mashau-Naledzani Attorneys in Johannesburg.

This article was first published in De Rebus in 2024 (March) DR 39.