Page 32 - Nexia SAB&T Trust Guide 2024

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. 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. An indemnity clause in the trust
deed which exempts trustees from liability for breach of trust 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. In addition, the Amendment
Act provides that where trustees fail to comply with the disclosure requirements
introduced by it, they will commit a criminal offence punishable by up to five
years’ imprisonment, or a R10million fine, or both.
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. 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.
A co-trustee who was not involved with a breach of trust may nevertheless be
liable for any wrongful action of another trustee if the “innocent” trustee’s
ignorance and /or inactivity is causally connected to the damage incurred.

30