Unhappy families: 10 farms, 2 brothers and no trust

Mr RG senior was a successful farmer in his lifetime. Before his death in 2007, he transferred 9 farms into trusts, on the advice of his accountant son, RG junior. A 10th farm was transferred to a testamentary trust on his death. His widow and two sons (RG junior and FG, a farmer) were trustees and/or beneficiaries of the 4 farming trusts.

FG ran operations on the farms, and RG junior kept the books. Unfortunately, his sons entered into a bitter dispute concerning the family farms, the latest chapter of which culminated in the handing down in Pretoria last week of a High Court judgment.

The brothers had previously attempted to agree upon the division of the trust property, in order for there to be a clean break between them. However they could not reach agreement on the terms of the division. The trust deeds required unanimous agreement in order for the trusts to be terminated and their assets distributed, and so their finances remained unhappily entwined.

FG and his mother approached the court last year, for a ruling removing RG junior and his business partner from office as trustees of the trusts, and appointing third parties in their stead. It appears that this ruling was sought with a view to enabling the trustees to unanimously terminate the trusts and divide the trust assets.

RG junior and his business partner opposed the application, and made a counter-application for a ruling removing FG from office as a trustee of the trusts.

A single judge of the High Court refused both applications. Both feeling aggrieved, the brothers appealed to a full bench of the same court.

The full bench took note of the allegations the parties made against each other, which included dishonesty, breach of fiduciary duties of trust and good faith, abuse of trust assets, and conflict of interest. The court noted that a court may remove a trustee from office when his or her continuation in office will prevent the trust from being properly administered or be detrimental to the welfare of beneficiaries. The power to remove a trustee had to be exercised with circumspection. The deceased had appointed certain trustees and had selected them deliberately to carry out his wishes. Neither bad faith nor even misconduct on the part of the trustee were necessary for the removal of a trustee – but the court had to consider whether there was such disharmony that the trust property or its proper administration was imperilled. Mere enmity between trustees was insufficient.

The court accepted that the relationship between the brothers had broken down. However it did not find that either brother had proven that the removal of the other brother was required as it imperilled the trust property or administration, or was in the interests of the trusts and their beneficiaries. On examination of the allegations made, some had nothing whatsoever to do with the trusts and were irrelevant. Others were simply not shown to be valid.

The brothers are, for now, left in the unpleasant position of having spent small fortunes in legal fees but being no closer to a resolution. Their story is a cautionary tale against compelling parties who do not see eye to eye, to make joint decisions about the handling of properties and money. In particular, parties drawing up wills should think carefully before leaving assets to heirs jointly.

It is also a cautionary tale against “all or nothing” thinking. Perhaps now that their respective hopes of securing the upper hand have been dashed, the brothers will be able to reach agreement on the fair division of the trust property. Courts are seldom the best places to resolve family disputes.