B J V Durandt v Fedsure General Insurance Ltd

The appellant (Durandt) and Johannes Janse van Rensburg were appointed joint provisional trustees in the insolvent joint estate of Mr D J and Mrs M A C Spies on 20 May 1994. Each trustee executed separate 'Undertaking and Bond of Security' documents, binding himself to administer the estate properly and pay up to R220,000 to the Master for loss or damage caused by failure to perform functions properly or maladministration. The respondent (Fedsure) bound itself as surety for the trustees for amounts up to R220,000 and R30,000. The trustees arranged between themselves that Van Rensburg would handle day-to-day administration, subject to the appellant's consent when dealing with assets. Van Rensburg notified the appellant about the sale of immovable property for R220,000 and obtained his written consent. However, Van Rensburg transferred the property using a power of attorney bearing the forged signature of the appellant and decamped with the purchase price. The Master called on Fedsure to honour its guarantee and Fedsure paid R243,045.52. Fedsure then claimed this amount from both trustees jointly and severally. The action proceeded against the appellant alone as Van Rensburg could not be located.

• Whether one of two joint trustees in insolvency should be held liable for a shortfall in the estate solely attributable to the wrongful acts or omissions of the other trustee
• The proper interpretation of the undertaking and bond of security furnished to the Master by the trustees
• Whether the common law rule rendering co-trustees jointly and severally liable for acts of each other survived the Insolvency Act provisions
• Whether section 56(4) of the Insolvency Act rendered the innocent trustee liable for the acts of the defaulting co-trustee
• Whether the surety (respondent) could recover from the innocent trustee amounts paid to the Master

The appeal succeeded with costs. The order of the Cape High Court was set aside and replaced with an order dismissing the plaintiff's (respondent's) claim with costs.

Where a trustee in insolvency signs a separate undertaking and bond of security to the Master, liability is to be determined by proper interpretation of that undertaking. Where the document is ambiguous due to the use of plural forms inappropriate to a single signatory, such forms should be deleted in interpreting the document. An undertaking by a trustee that, when properly interpreted, limits liability to loss or damage caused by that trustee's own failure to perform functions properly or maladministration on his part, does not render that trustee liable for losses caused solely by the wrongful acts of a co-trustee. The Master's right to recover losses from trustees is derived from the undertaking given, and where no principal debt exists under that undertaking, a surety cannot recover from the trustee amounts paid to the Master. The Insolvency Act does not automatically impose joint and several liability on co-trustees for individual wrongful acts; section 56(4) requires joint action and imposes joint and several liability for acts performed jointly.

Heher JA expressed doubt as to whether the common law rule which rendered each co-trustee jointly and severally liable for every act performed in the administration of the estate (even where innocent of that act) survived the coming into operation of the Insolvency Act, but found it unnecessary to decide this question. The Court noted it was unnecessary to consider the common law liability of different classes of co-trustees. Conradie JA in dissent made extensive observations about the practical and commercial context of joint trustee appointments, including: (1) the Master's standard requirements for joint and several liability embodied in Form 312(E); (2) the practical difficulties in apportioning blame between trustees where there has been maladministration; (3) the cost implications of separate insurance for each trustee; and (4) the professional context in which experienced trustees operate. Comrie AJA, while concurring with the majority, noted that many of the matters raised in the dissent were not canvassed in evidence and therefore should not be decided on appeal without a suitable enquiry into the facts by the trial court.

This case is significant in South African insolvency law as it establishes principles for interpreting undertakings and bonds of security given by joint trustees to the Master. It clarifies that liability of a trustee is determined primarily by the terms of the undertaking given to the Master, not automatically by common law principles of joint and several liability. The case demonstrates the importance of proper interpretation of standard form documents in insolvency administration and limits the liability of innocent trustees for wrongful acts of co-trustees where the undertaking does not clearly impose such joint and several liability. It also addresses the relationship between statutory provisions (section 56(4) of the Insolvency Act) and common law principles regarding trustees' liability.