The appellants were four trustees of the Bakubung-Ba-Ratheo Economic Development Trust, established in 2006 with a R10 million donation from Wesizwe Platinum Limited to advance the socio-economic development of the Bakubung-Ba-Ratheo community. The Trust opened a bank account with Standard Bank. The Trust deed authorized banking transactions to be conducted by one authorised person, and a 2007 resolution appointed Nyasa Tengawarima and Choice Franscina Tshetlhe as authorised signatories. On 21 July 2011, these two signatories instructed the Bank to transfer R5.5 million from the Trust's account to the Bakubung Economic Development Unit. The Bank approved and effected the transfer on 26 July 2011. On 17 October 2011, trustee Jabulani Gumbi informed the Bank that the transfer was made without proper authorization and requested that further transfers be stopped. The Bank advised that a written request signed by all trustees was required. On 24 October 2011, before such instruction was received, the Bank received another instruction from the same two authorised signatories to transfer R4 million, which was effected on 28 October 2011. Only on 6 December 2011 did the Trust provide a resolution removing the two signatories. The trustees sued the Bank for recovery of R9.5 million.
The appeal was dismissed with costs.
A bank is not liable for transferring funds from a trust account when acting on instructions from authorised signatories properly appointed by the trust, even where one trustee objects, unless and until the bank receives a written instruction signed by all trustees revoking the authority of those signatories or stopping the transfers. A bank is entitled to continue relying on existing authorised signatories until formally notified otherwise by all trustees acting jointly. In the absence of contrary provision in the trust deed, trustees must act jointly if the trust estate is to be bound by their acts. A bank does not act negligently by insisting on joint action by all trustees before varying the mandate given to it by the trust through properly appointed signatories.
The court made observations about the nature of trusts in South African law, reiterating that a trust is not a legal person but a legal relationship of a special kind, a legal institution sui generis. The court noted that it is only through trustees, as specified in the trust instrument, that a trust can act, and who the trustees are, their number, how they are appointed, and the circumstances under which they have power to bind the trust estate are matters defined in the trust deed, which is the trust's constitutive charter. The court also observed that the fundamental rule requiring trustees to act jointly derives from the nature of trustees' joint ownership of trust property and has been enforced in South African law since 1848, forming the basis of trust law for over a century and a half.
This case is significant for clarifying the duties and liabilities of banks when dealing with trust accounts in South African law. It establishes that banks are entitled to rely on properly appointed authorised signatories to a trust account and are not required to investigate the internal decision-making processes of the trust or consult the trust deed before every transaction. The case reinforces that where a bank is alerted to potential irregularities, it acts appropriately by requiring formal written instructions from all trustees before making changes to account signatories or stopping transactions. The judgment protects banks from liability where they follow proper banking procedures and act on valid instructions from authorised signatories, unless and until those authorizations are formally revoked by all trustees acting jointly. It also emphasizes the fundamental principle that trustees must act jointly to bind the trust estate, and that delays in providing proper joint instructions can result in the trust bearing responsibility for unauthorized transactions. This case provides important guidance on the balance between a bank's duty to its customer (the trust) and its entitlement to rely on mandates properly given to it.