Potgieter NO and Another v Shell South Africa (Pty) Ltd

The Hendrik Potgieter Trust was created in 1994 with Hendrik Potgieter and his wife as trustees and their children as beneficiaries. One beneficiary, Hendrik Jakobus Potgieter (known as Dirkie), became the sole member of a close corporation, Dirkies Vervoer BK. In March 1999 the then trustees resolved to bind the trust as surety and co-principal debtor in favour of Shell South Africa (Pty) Ltd for the obligations of Dirkies Vervoer. Dirkies Vervoer was later liquidated, and Shell sued the trust for payment under the suretyship. The new trustees (the appellants) defended the claim on the basis that the former trustees lacked authority under the trust deed to conclude the suretyship.

The appeal was dismissed with costs, including the costs of two counsel.

The case is important for South African trust law as it confirms a contextual and purposive approach to the interpretation of trust deeds. It clarifies that trustees’ powers must be assessed holistically and that commercial realities, such as the use of close corporations, will be accommodated unless expressly excluded. The judgment also provides guidance on when a transaction is regarded as being for the benefit of a trust beneficiary.