In South African trust law, mandates are an essential mechanism that allow individuals, companies, or trusts to appoint an agent to act on their behalf. These instructions (commonly given to attorneys, financial advisors, or service providers) are particularly valuable when it is inconvenient or impractical for trustees or beneficiaries to act directly. For example, appointing a lawyer to represent a client in court proceedings is a straightforward form of a mandate.
But what happens when a mandate is validly issued, and then circumstances change in a way that undermines the trust’s legal capacity? The Western Cape High Court decision in Trustees of the Rae Family Trust v Ledger and Others [2020] JOL 48873 (WCC) (the “Rae Case”) provides a critical precedent.
Background: The Rae Family Trust Dispute
The case arose from litigation involving Bisplex (Pty) Ltd and the Rae Family Trust. Bisplex challenged the authority of the Rae Trust’s attorneys under Rule 7(1) of the Uniform Rules of Court, which allows a party to question whether another party’s legal representatives are properly authorised.
The challenge followed the death of one trustee of the Rae Trust. This event reduced the number of trustees below the minimum required by the trust deed. While the mandate to appoint attorneys had been valid when all trustees were alive and properly constituted, Bisplex argued that the death of a trustee invalidated that mandate.
The Legal Question: Does the Mandate Survive?
The court had to consider whether the Rae Trust’s attorneys still had authority to act once the number of trustees fell below the minimum required.
The trust deed specified that at least two trustees had to hold office at all times. With only one trustee remaining, Bisplex argued that the trust had lost its capacity to act. The Rae Trust’s attorneys countered that the original mandate should remain effective until the legal services were completed, unless expressly revoked.
Court’s Reasoning and Decision
The High Court sided with Bisplex, holding that the mandate automatically lapsed. The reasoning was as follows:
- A clause in a trust deed requiring a minimum number of trustees is capacity-defining. If the requirement is not met, the trust simply cannot act.
- Even though the attorneys had originally been validly appointed, their authority could only continue if the trust itself retained capacity. That capacity was lost the moment the number of trustees dropped below the threshold.
- To hold otherwise would create an untenable position: a trust with fewer than the required trustees would be unable to revoke or amend a mandate, leaving its affairs in legal limbo.
Thus, when the Rae Trust was left with only one trustee, the mandate to its attorneys automatically came to an end.
Key Takeaways for Trustees and Practitioners
The Rae Case has far-reaching implications for trusts, their administrators, and third parties relying on mandates:
- Trust deeds are binding – Where a deed prescribes a minimum number of trustees, that condition must be maintained at all times.
- Mandates are not insulated – Even a validly executed mandate will lapse if the trust loses capacity due to an insufficient number of trustees.
- Applies beyond death – The principle is not limited to the death of a trustee. It also applies in cases of resignation or removal, whenever the trustee numbers drop below the required minimum.
- Practical governance tip – Before processing a resignation or accepting the passing of a trustee, ensure that replacements are appointed swiftly to avoid interruptions in the trust’s ability to act.
Why the Rae Case Matters
This ruling serves as a cautionary tale for trusts and their advisors. Attorneys, accountants, and business partners dealing with trusts must verify that the trust remains properly constituted at all times, especially when litigation or significant transactions are involved.
Failure to maintain the required trustee numbers can invalidate mandates, stall legal proceedings, and expose trusts to unnecessary risk. For trustees, careful succession planning and proactive appointments are essential to avoid falling foul of the Rae principle.
Conclusion
The Rae Family Trust judgment makes clear that a trust’s capacity is inseparable from the requirements in its deed. A mandate given by a validly constituted board of trustees will cease to exist the moment trustee numbers fall below the prescribed minimum.
For those involved in trust administration, this case highlights the importance of constant compliance with the trust deed’s structural requirements. In practice, this means that trustees and their advisors must ensure continuity, avoid gaps in appointments, and recognise that even the most carefully granted mandates are vulnerable to lapsing if the trust loses its legal capacity.
