STEP

Title Research

Racially discriminatory clauses

  • Author : Harry Joffe
  • Date : April 2011
ABOUT THE AUTHOR: Harry Joffe TEP is Head of Legal Services at Discovery life

The issue of racially discriminatory clauses in a trust deed was once again raised in the ex parte application of BOE Trust Limited N.O., Ilmary Keddy N.O. and Frederick Gordon Brownell N.O. [in their capacities as co-trustees of the Jean Pierre De Villiers Trust (MT5208/2006)] before the Cape High Court.

The applicants requested an order amending the terms of the trust. The trust was created by a will of the late Daphne de Villiers, an applied chemist holding doctorates in chemistry from the Universities of Oxford and Pretoria. The clause in question read as follows:

‘The remaining income shall be applied by my trustees for the provision of small bursaries to assist White South African students who have completed an MSc degree in Organic Chemistry at a South African University and are planning to complete their studies with a doctorate degree at a University in Europe or in Britain.

The selection of these students, and the size and duration of the bursaries shall, after discussions between them, be the joint responsibility of the four Organic Chemistry Professors of the Universities of Cape Town, Stellenbosch, Bloemfontein and Pretoria in consultation with Syfrets Trust Limited. The only provisos in the selection of suitable candidates are that, in addition to a competence in Organic Chemistry, such students must exhibit both the desire and the ability to benefit culturally from a period spent at such a university and that they must return to South Africa for a period to be stipulated by the Professors listed.’

The relief sought was the deletion of the word ‘White’ because it was discriminatory against potential beneficiaries of the bursaries contemplated in the will on the basis of race or colour. This was therefore, inter alia, contrary to:

  • public policy and/or public interest; and/or
  • infringed the right to equality embodied in section 9(1) of the Constitution of the Republic of South Africa 108 of 1996 (‘the Constitution’);
  • the principles delivered in the judgement in the case of Minister of Education and another v Syfrets Trust NO and another 2006 (4) SA 205 (C).

The applicants had written to the registrars of all four universities and were told that these institutions would not participate in the selection process unless the bursaries were to be made available to students of all races.

It was suggested by the applicants that the court had the power to effect the deletion of the word ‘White’ on any one or more of the following grounds:

  • Section 13 of the Trust Property Control Act 57 of 1988, which permits the Court, in certain instances, to delete or vary provisions in a trust instrument;
  • the common law, which prohibits bequests that are illegal or immoral or contrary to public policy; and
  • direct application of the Constitution, more particularly the equality and anti-discriminatory provisions of section 9.

It was also suggested by the applicants that this case contained the same issues as raised in the Syfrets Trust case (see above).

The court held that:

  • The principle of freedom of testation formed part of the Roman and Roman-Dutch law, had been received into the South African law and, in some respects, was taken further than in other Western legal systems.
  • As with any other right to property the freedom of testation is not without restriction. An example is The Maintenance of Surviving Spouses Act, where a claim for maintenance by such spouse effectively restricts the freedom of a testator to disinherit his or her spouse.
  • The right to freedom of testation is further limited, as Griesel J pointed out in his judgment in the Syfrets Trust case, by considerations of public policy. The common law has long recognised that conditions attached to a bequest may be void as being contrary to public policy.

The court went on to say that public policy is not a static concept. Conduct considered in the past to accord with public policy may no longer do so, and vice versa. In particular, since 1994, public policy has been shaped by the values incorporated into the Constitutions of 1993 and 1996.

Interestingly, the court held it was not satisfied that the provisions concerned in this case were clearly contrary to public policy. Section 9(3) of the Constitution prohibits discrimination that is unfair. It is recognised that discrimination designed to achieve a legitimate objective is not unfair. Such legitimate objectives are, for example, the need to redress past injustices based on gender and race.

The court went on to say that during the post-constitutional years there had been much anecdotal evidence about the increasing trend among white graduates to emigrate upon completion of their education, thereby depriving the country of the benefit of their skills. The testatrix had thought fit to require beneficiaries of the bursary trust to return to South Africa for a period determined by the universities, and it seemed that she was seeking to ameliorate this skills loss and, indeed, to promote importation of skills obtained overseas.

The court went on to say that only where that conduct can be categorised as unfair discrimination should it be held contrary to public policy. However, the court concluded this discussion by saying that, for reasons that would become apparent, it did not need to make a firm finding on this question.

Trust Property Control Act

Section 13 of the Trust Property Control Act 57 of 1988 empowers the court to vary the terms of a trust in certain circumstances. The section reads as follows:

‘13. Power of court to vary trust provisions

If a trust instrument contains any provision which brings about consequences which in the opinion of the court the founder of a trust did not contemplate or foresee and which

ahampers the achievement of the objects of the founder; orbprejudices the interests of beneficiaries; orcis in conflict with the public interest, the court may, on application of the trustee or any person who in the opinion of the court has a sufficient interest in the trust property, delete or vary any such provision or make in respect thereof any order which such court deems just, including an order whereby particular trust property is substituted for particular other property, or an order terminating the trust.’

The court confirmed that the act gave it extensive powers not only to delete but also to vary provisions in a trust instrument (including a testamentary trust), to order the termination of the trust or to grant any other order which it deemed just.

It went on to say that in matters that cannot be dealt with in terms of the Act, its powers in dealing with a provision in a will or trust instrument that is contrary to public policy are more limited. The offending provision may be struck out, if it is severable from the rest of the disposition, failing which the whole of the disposition must be set aside. ‘In this respect the situation is, in my opinion, analogous to that pertaining to contracts containing clauses contrary to public policy. A finding that a provision in a will or trust instrument is contrary to public policy does not, per se, give the court the power to vary the provision as it thinks appropriate.’

The court felt that, in order to enable it to intervene, the Act required it to form an opinion that the provision has brought about consequences that the founder of the trust did not contemplate or foresee. In the absence of the formation of such an opinion, the court was not empowered by the section to interfere with the directions of the founder other than by striking down a severable provision or the whole bequest.

The court said that, clearly, a shift in public policy between the time that the trust was founded and the time when a court was called upon to consider the question might be a factor leading to the formulation of the requisite opinion – in the Syfrets Ltd matter it was clear that the deceased did not foresee, when he wrote his will in the 1920s, that the constitutional changes 70 years later would render his bursary bequest contrary to public policy.

The court contrasted that case with the present one, saying the same could not be said of the testatrix in this case, as her will was executed in 2002, eight years into the new constitutional dispensation. The court stressed, further, that the applicants did not attempt to make out any case that circumstances unforeseen by the testatrix have had any effect on the implementation of the bursary bequest, in order to justify interference by it under the power conferred by Section 13 of the Act. What had rendered the bursary bequest impossible to implement was in fact the attitude taken by those who responded to the trustees’ enquiry on behalf of the four universities, based on their perception that the bursary bequest was contrary to public policy.

The court concluded the case by saying that the testatrix, however, did contemplate that the bursary bequest might become impossible to carry out. She provided for this eventuality by having a whole group of charities listed as beneficiaries and stating as follows:

‘In the event that it should become impossible for my trustee to carry out the terms of the trust, I direct that the income generated by the trust be used annually to provide donations equal in size to each of the [following] charitable organisations’.

The trustees had tried to avoid this by saying that ‘it would be prudent and preferable rather to fulfil the primary purpose behind the creation of the trust’ by effecting the amendment sought.

The court rejected this as follows: ‘In my opinion, this is quite impermissible. The court is not at large to rewrite testamentary dispositions (or other trust instruments) simply because the trustees (or, for that matter, the beneficiaries) wish this to be done. Recognition of the right to freedom of testation must imply that effect must be given to the expressed wishes of the testator, except in the circumstances set out in the Trust Property Control Act, if it is possible to establish the jurisdictional fact to which I referred in paragraph 19 above.

‘In particular, neither the Act nor the common law permits the court to authorise the trustees to refrain from implementing any instructions given by the founder for the disposition of the trust assets upon failure of a particular provision (or the trust as a whole)’.

The court therefore dismissed the application.

Comment

It is interesting here that the court seemed to want to reopen the whole issue of when a clause is discriminatory, although that discussion was clearly obiter. It seems the crux of this case was the fact that the original object of the trust was impossible to carry out, and that the testatrix had expressly provided for that possibility with an alternative beneficiary. The court therefore felt it did not have the power to amend the original clause (which may or may not have been contrary to public policy). The writer very much doubts whether the Supreme Court of Appeal would uphold this judgement, as racially discriminatory clauses generally do not ‘pass constitutional muster’.

In conclusion, this is one more case now in a line of cases from South Africa discussing the issue of discriminatory clauses in trust deeds. Given South Africa’s history, there is no doubt that there will be many more cases and the debate has been joined!


Advert

Article Search

Browse jurisdictions by clicking on the map regions below

© 2011 Society of Trust & Estate Practitioners