A founder dies and the family disagrees about what should happen to the assets. Then some beneficiaries produce emails proving they know what he wanted to happen. Surely the court can step in and wind up the trust?
Not so fast. A recent Supreme Court of Appeal decision shows that a founder’s later wishes do not, without a formal amendment, override the terms of the trust deed.
In black and white
The trust at the centre of the dispute had been created decades earlier as a discretionary trust, holding business interests and assets worth more than R100 million. The trust deed gave the trustees wide discretion, including the sole power to decide when, if ever, to fix a "vesting date" and distribute the trust's capital.
In his final years, the founder became seriously ill and had a series of conversations with his family about what should happen to the trust after his death. He wanted the capital shared equally, without selling the businesses to achieve it. Those wishes were recorded in emails and memoranda, but the trust deed itself was never formally changed to reflect them.
After he died, the family split. Some beneficiaries wanted the trustees to fix a vesting date and distribute the assets. The majority of the trustees refused, relying on the discretion the deed gave them.
Wishes are not amendments
The dispute reached the Supreme Court of Appeal under section 13 of the Trust Property Control Act. This allows a court to vary or terminate a trust provision, but only where the provision produces consequences the founder did not foresee, and only then if it also hampers the trust's objectives, prejudices beneficiaries, or conflicts with the public interest. If the first requirement is not met, the court's power under the section is not triggered at all.
The beneficiaries argued that the founder never intended the trustees to delay distribution indefinitely, and that his later wishes showed exactly that.
The court disagreed. The founder's intention had to be determined from the trust deed, not from wishes expressed years later. The deed gave the trustees sole discretion to decide whether and when a vesting date should be fixed and did not tie the trust's end to a specific date or event. Those were the terms the founder had created and remained bound by. His later wishes did not change them, and he never took formal steps to limit the trustees' discretion or alter the deed.
No queue jumping
Because the deed gave that power to the trustees rather than the beneficiaries, none of the family members pressing for distribution had any right to insist that a vesting date be fixed. The court found nothing in the deed's structure that the founder had not foreseen or intended.
The unhappiness in the family, the court found, came from the trust's financial position and the beneficiaries' conflicting demands, not from anything the trust deed itself had done wrong. One beneficiary wanted cash, another wanted specific assets, and the trust's finances could not satisfy both. That left the trustees unable to satisfy everyone's demands, while still acting within the discretion the deed gave them.
Read the fine print
For founders, trustees, and beneficiaries alike, the lesson is to start with the trust deed. Verbal assurances and family understandings, however genuinely meant, do not amend the deed or simply displace its terms.
A trust deed left unreviewed for decades can quietly drift away from what a founder actually intends. Reviewing the deed regularly – and amending it if necessary – will greatly reduce the chances of a dispute.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.
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