Costa NO v Arvum Exports (Pty) Limited

The late Mr Alberto Costa was a farmer who ran a large farming enterprise in the Western Cape. He was a trustee of the Klein Botrivier Trust (KB trust) alongside his widow Mrs Zelda Costa and Mr Daniel Coetzee. In 2009, Mr Costa entered into two agreements with the Fruit Group (respondents): a Production Loan Agreement (PLA) and a Supply and Marketing Agreement (SMA), purporting to act on behalf of the KB trust. The PLA involved the Fruit Group advancing R733,354 to facilitate planting on the farm Botterkloof, while the SMA committed the trust to supply fruit to the Fruit Group for ten years. Mr Costa was murdered in February 2011. After his death, the other trustees discovered the agreements and disputed Mr Costa's authority to conclude them. The central issue was whether a resolution dated 8 March 2007, signed by all three trustees, which authorized "Alberto Costa in his capacity as trustee of the Klein Botrivier trust to sign the necessary documentation" gave him authority to enter into the PLA and SMA. Both agreements were signed in July 2009, approximately two years after the resolution. The Fruit Group also claimed plant breeders' rights in respect of a plum variety called "Flavor Fall" which had been planted on the farm.

• Whether a trust resolution authorizing a trustee 'to sign the necessary documentation' constitutes actual authority to conclude business agreements on behalf of the trust
• Whether the trustee had ostensible authority to enter into the agreements
• Whether the requirements for establishing ostensible authority were satisfied
• Whether the trust abused the trust form so as to make the trustees personally liable
• Whether the KB trust infringed plant breeders' rights under the Plant Breeders' Rights Act 15 of 1976 by growing and selling Flavor Fall plums

The appeal was upheld with costs of two counsel. The order of the full court was set aside and replaced with: (1) The appeal is upheld with costs of two counsel; (2) The application brought by Arvum Exports (Pty) Ltd, Unlimited Fruit (Pty) Ltd and Arvum Finance (Pty) Ltd is dismissed with costs of two counsel where so employed.

A trust resolution authorizing a trustee to "sign the necessary documentation" must be interpreted in its proper context, and where that context is the acquisition of property, the resolution does not authorize the trustee to conclude separate business agreements. Ostensible authority can only arise where the principal (other trustees) makes a representation of authority, not where the agent (individual trustee) makes such representation. The Plant Breeders' Rights Act 15 of 1976 prohibits propagation (reproduction) of protected plant varieties, not the growing and commercial sale of fruit from legitimately acquired trees of that variety.

The court noted that while it is permissible for trustees to authorize one of their number to act on their behalf (citing Nieuwoudt & another NNO v Vrystaat Mielies (Edms) Bpk 2004 (3) SA 486 (SCA)), it is a question of fact whether they have done so in any particular case. The court also noted but did not decide the principle suggested in Van der Merwe NO & others v Hydraberg Hydraulics CC & others 2010 (5) SA 555 (WCC) that where a trustee conducts the affairs of a trust ignoring the distinction between personal and trustee capacity, the trustee might be personally liable. The court stated that even if this principle is generally recognized in South African law (which did not need to be determined), it would only make Mr Costa personally liable, which was impossible as he had died.

This case establishes important principles in South African trust law regarding the scope and interpretation of trustee authority. It clarifies that general resolutions authorizing a trustee to "sign documentation" will be interpreted narrowly in their factual and temporal context, and will not be construed as blanket authority to enter into substantial business agreements. The judgment reinforces the principle that ostensible authority can only arise from representations made by the principal (the other trustees), not from the agent's (the individual trustee's) own assertions of authority. This provides important protection for trust beneficiaries against unauthorized actions by individual trustees. The case also provides guidance on the interpretation of the Plant Breeders' Rights Act, clarifying that the Act protects against propagation (breeding/reproduction) of plant varieties, not the commercial exploitation of fruit produced from legitimately acquired trees. The judgment emphasizes the importance of proper corporate governance in trusts and the need for clear, specific authorization for trustees to enter into significant commercial transactions.