Page 31 - Nexia SAB&T Trust Guide 2022

LIABILITY OF TRUSTEES

Although a trustee may not act in the capacity of trustee until he has received
Letters of Authority from the Master of the High Court, he is still liable for any
unlawful act committed in the handling of trust affairs prior to the issue of the
letters.
Once a trustee has accepted the position and is authorised to act, the trustee
must act at all times in the best interests of the trust’s beneficiaries and fulfill all
duties in terms of the trust deed and the law. A trustee may not be negligent when
performing his duties. In addition, if a trustees’ actions (alone or with other trustees)
contravene either the provisions of the Trust Property Control Act or the trust deed,
he and/or they could find themselves personally liable for losses suffered by the
trust.
A trust itself cannot be sued as it is not recognised as a legal person in South Africa
(unless a piece of legislation defines it as such). It is the trustees in their official
capacity who can be sued.
An indemnity clause in the trust deed which exempts trustees from liability for
breach of trust is void and does not exempt a trustee from actions involving
ordinary or gross negligence or intentional wrongdoing. In effect, this means that the
personal liability of trustees is more onerous than that of a director of a company
in South Africa, as a company may indemnify a director against personal liability.
Criminal liability may be imposed on a trustee who commits a crime in the course
of the trust administration e.g. theft or fraud.
Trustees are jointly and severally liable for damages, and beneficiaries or third
parties (e.g. creditors) who have suffered a loss as a result of breach of trust are
entitled to bring a damages claim against the trustees.
Trustees can also be sued for damages by beneficiaries if they act negligently (even
if they act in good faith) and/or if they intentionally act wrongfully. Trustees are
required to act with the highest degree of care, diligence and skill in regard to their
administration of the trust assets – and a mere omission to act in the interests of
the trust (e.g. failure to invest or investing too conservatively resulting in the trust’s
capital not growing) may be viewed as an act of negligence by the court.

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