A trustee acting without letters of authority is one of the most common and most costly defects in South African trust practice. The trust deed names the person as a trustee. The other trustees treat that person as a trustee, and the bank, the estate agent and the conveyancer proceed on the same assumption. The Master of the High Court, however, has not yet issued the letters of authority for a trust that has changed its trustees. The signature goes onto the offer to purchase, the suretyship or the summons anyway.
Section 6(1) of the Trust Property Control Act 57 of 1988 draws a hard line at exactly that point. This article explains what the section requires, what it means for a contract, a sale or a court case concluded before the Master has authorised the trustee, and what trustees and third parties should check before anyone signs.
What section 6(1) of the Trust Property Control Act requires
Section 6(1) provides that any person whose appointment as trustee in terms of a trust instrument, section 7 or a court order comes into force after the commencement of the Act shall act in that capacity only if authorised thereto in writing by the Master.
Two words carry the weight. The first is “only”. The section does not describe good practice. It describes the sole basis on which a person may act as a trustee. The second is “writing”. The written authorisation issued by the Master is the letters of authority, and it is the document a third party relies on to satisfy itself that the person signing may bind the trust. The Act reinforces this in its definition section, which describes a trustee as a person who acts as trustee by virtue of an authorisation under section 6.
Several related provisions sit around section 6(1) authorisation:
- Section 4(1) requires the trust instrument to be lodged with the Master before the trustee assumes control of the trust property, and section 4(2) requires amendments to be lodged as well.
- Section 6(1A) disqualifies certain persons from being authorised, including an unrehabilitated insolvent, a person declared delinquent by a court, and a person removed from an office of trust on grounds of misconduct involving dishonesty.
- Section 6(2) provides that the Master does not grant authority unless security has been furnished or the trustee has been exempted from furnishing it. Pending security, the Master may authorise the trustee in writing to perform specified acts.
- Section 20(3) requires a trustee who is removed or who resigns to return the written authority to the Master without delay.
The Act is administered by the Master of the High Court, which falls under the Department of Justice and Constitutional Development. The full text of the Act is available on SAFLII.
Appointed is not authorised: three separate authority questions
Most authority disputes arise because three distinct questions are collapsed into one. They should be asked separately, and in this order.
Is this person a trustee at all in terms of the trust deed? The trust instrument identifies who the trustees are and how they are appointed or replaced. A person who does not qualify under the deed does not become a trustee because the family, the accountant or the bank treats them as one.
Has the Master authorised that person in writing? The deed indicates the trustees. The Master authorises them by issuing the letters of authority, and that document is what proves authorisation to any third party.
Have the trustees passed a valid resolution authorising this particular act? Authorisation to act as a trustee is not the same as authority to conclude a specific transaction. Trustee resolution requirements are set by the trust deed, and a resolution should be taken at a properly convened meeting and reduced to writing. A trust that cannot produce a written resolution for the transaction in question has a gap in its paperwork, even where the letters of authority are in order.
The deed, the letters of authority and the resolutions should be in the trustees’ possession at all times, not assembled after a counterparty asks for them. A trustee acting without letters of authority in hand is, in practice, a trustee who cannot prove authority to anyone who asks.
Before your next transaction, have the authority position checked. Vermeulen Attorneys conducts trust deed and authority reviews for trustees, purchasers, sellers and financiers. Contact our trusts litigation team to arrange a review.
Trustee acting without letters of authority: what the courts have held about ratification
The consequences differ according to what was done and which statute governs the act. Two decisions of the Supreme Court of Appeal frame the position.
In Thorpe and Others v Trittenwein and Another 2007 (2) SA 172 (SCA), the court dealt with a sale of land where the trustee had not been authorised by the Master, and held that the agreement could not be saved by ratification after the event. Where immovable property is involved, a contract signed by an unauthorised trustee is the least forgiving category of all, because the formalities attaching to a sale of land operate alongside section 6(1) rather than instead of it.
In Lupacchini NO and Another v Minister of Safety and Security (16/2010) [2010] ZASCA 108, the court dealt with litigation rather than contract. Court proceedings by unauthorised trustees were held to be a nullity. The defect is one an opposing party can raise, and it is often raised only after considerable costs have been incurred.
Two cautions must be stated plainly. The first is that “everything a trustee acting without letters of authority does is void” is not a safe universal rule. Whether an act is void or voidable depends on the merits and on the type of transaction. The second is that delay in the issue of the letters of authority is not always fatal. Where the authorisation is merely delayed, the position may be capable of being cured, and authorisation can in certain circumstances be obtained after the fact. Whether that is available depends on the facts, on the nature of the act, and on what has happened in the interim.
Nothing in this analysis suggests dishonesty. Section 6(1) is concerned with capacity to act, not with the honesty of the person acting.
Acting jointly and the quorum trap in the trust deed
A second defect frequently travels with the first. Trustees must act jointly unless the trust deed provides otherwise, and where the deed prescribes a minimum number of trustees, that minimum must be maintained. The Supreme Court of Appeal addressed the point in Land and Agricultural Bank of South Africa v Parker 2005 (2) SA 77 (SCA).
Where a deed requires three trustees and only two are authorised, third parties may simply refuse to contract with the trust. The shortfall can affect the quorum and paralyse the trust in its decision-making until the position is corrected.
Where it goes wrong in practice
Three scenarios account for most of the difficulty.
A trustee dies or resigns. The remaining trustees continue to run the trust and sign as they always have. The amended letters of authority have not been issued, and the trust may also have dropped below the minimum number of trustees the deed requires. This is often the point at which trust litigation after the founder’s death begins.
A new trustee is appointed and signs immediately. The deed appointment is done and the paperwork has gone to the Master. The new trustee signs while the file sits in the queue.
The Master’s office is slow. Turnaround varies by office. Some issue within a few weeks. Others take months. The commercial pressure to proceed is real, and it is precisely what produces a trustee acting without letters of authority.
Our position is direct: no transaction should be processed until the paperwork has been lodged and the letters of authority have been received. A trust that cannot wait should be dealing with the delay through the Master, rather than signing around it.
Do not attempt to solve the problem by re-dating documents. Backdating a resolution is a serious risk in its own right, and it converts an authority problem into something considerably worse.
What a third party should demand before contracting with a trust
If you are selling to, buying from, lending to or contracting with a trust, ask for the following before signature:
- The trust deed and all amendments. The deed sets out who the trustees are, how many there must be, and how they must act.
- The letters of authority for a trust in their current form. Check the names against the people signing, check the date, and check that the document reflects the trustees as they are now rather than as they were when the trust was formed.
- A signed trustee resolution for this specific transaction. Trustee resolution requirements are set by the deed, and a general resolution is not a substitute for one authorising the transaction in front of you.
- Proof of the trust bank account and the trust’s SARS compliance.
Warning signs are worth taking seriously. An old-dated letter of authority, a trust whose trustees have changed since the deed was signed, a resolution dated after the contract, and a trust where every transaction runs through a single trustee all justify a closer look before signature.
Contracting with a trust in the next few weeks? A short pre-signature authority review is far cheaper than litigating the validity of the agreement afterwards. Speak to Vermeulen Attorneys before you sign.
What to do if the transaction has already happened
Where the act has already been performed, the position must be diagnosed first. Three questions drive the analysis: what exactly was done, when the section 6(1) authorisation was or will be issued, and what has changed in the interim. Depending on those answers, the practical routes are usually one of the following:
- Obtain the authorisation and conclude the transaction properly. Where authorisation can be obtained after the event, it should be obtained, and the transaction concluded afresh with a fresh resolution and fresh signatures. The interim risks are real. A counterparty may have withdrawn, a better offer may have arrived, the price may have moved, and third parties may have acquired rights.
- Accept the defect and pursue restitution or damages. Where the act cannot be rescued, an innocent counterparty may have claims arising from performance already rendered, and may have a claim against the person who purported to act as trustee.
- Litigate to enforce or to set aside. Where proceedings are already running, the authority point may be raised by either side, and the timing of that objection matters.
Urgency is fact-dependent. An impending transfer, a bond about to be registered, a running prescription period or a pending court date will amplify it.
Do not re-sign or “tidy up” a resolution without advice. The correct sequence matters, and the wrong correction can make the position harder to defend.
Common misconceptions about trustee authority
“A trust works like a company.” It does not. A trust acts through trustees who must be authorised in writing by the Master, and the deed governs how they act together.
“The founder can sign while the trust is being formed.” A trust whose trustees have not been authorised has no trustee who can bind it.
“The other trustees agreed verbally.” Where the deed or the law requires a written resolution, an oral consensus does not meet the requirement.
“This is the same as trustee misconduct.” It is not. Removal is a remedy directed at how a trustee behaves. Section 6(1) asks whether the person was in a position to act at all. It is also distinct from piercing the trust veil in South Africa, which asks whether a validly created trust is being abused in substance.
“Using the trust account for personal expenses is a bookkeeping issue.” Treating the trust as a personal account is a clear sign of poor administration, and it commonly surfaces alongside authority defects.
When to involve attorneys
Get advice before signature where a trustee has recently died, resigned or been appointed; where the letters of authority are older than the current trustee composition; where the deed’s minimum number of trustees may not be met; or where immovable property, a bond or a suretyship is involved.
Get advice immediately where a trustee acting without letters of authority has already signed, where transfer or registration is pending, or where an opponent has raised the authority point in litigation. A trust is cited through its duly authorised trustees, which is why authority questions arise directly when joining a trust to litigation is contemplated. Where the difficulty runs wider than one transaction, our article on trust disputes in South Africa sets out the broader picture.
Frequently Asked Questions
Can a trustee sign a contract before the Master issues the letters of authority?
Section 6(1) provides that a person may act in the capacity of trustee only if authorised in writing by the Master. A trustee acting without letters of authority creates a defect in the trust’s capacity to act, and the consequences depend on what was signed.
Is a contract signed by an unauthorised trustee always void?
No. Whether the act is void or voidable depends on the merits and on the type of transaction. The Supreme Court of Appeal has held that a sale of land in that position cannot be cured by ratification, but that holding is not a universal rule covering every category of act.
Can the other trustees ratify what a trustee acting without letters of authority did?
Ratification is not a general solution. Where a sale of land is concerned, the Supreme Court of Appeal has held that later ratification does not cure the defect. Where the authorisation was merely delayed, authorisation may in certain circumstances be obtained after the event. Advice on the specific facts is required before anything is signed again.
Are court proceedings by unauthorised trustees valid?
The Supreme Court of Appeal has held that proceedings instituted by unauthorised trustees are a nullity. The point can be raised by an opposing party, sometimes only after substantial costs have been incurred.
How long does the Master take to issue letters of authority?
It depends on the office. Some issue within a few weeks, others take months. Trustees should plan transactions around that reality rather than signing while the application is pending.
Speak to Vermeulen Attorneys
Authority defects are diagnosable and, in many cases, manageable if they are identified early. They become expensive when they surface after transfer, after registration or after litigation has been launched.
Vermeulen Attorneys advises trustees, beneficiaries, purchasers, sellers and financiers on trust authority and trust disputes. To arrange a trust deed and authority review before your next transaction or court step, contact our team.
You may also download our Trusts Litigation Guide for a fuller overview of trust disputes and how they are resolved.
This article is general information about South African law and is not legal advice on any specific matter.
