THE LEGAL STANDING OF TRUSTS BY FATIMA BHAM
When litigating, it is always important to correctly cite the parties in the proceedings. It is important to remember that in order to litigate against an entity, it must have legal standing (locus standi). One entity that does not possess legal standing is a trust. Trusts do not have juristic personality and therefore, unless a statute confers juristic personality on a specific trust, it cannot sue or be sued.
Therefore, to litigate for or against a trust, it is the trustees in their capacity as such (and not in their private capacity) who must bring and defend actions in relation to a trust. Trustees who bring an action or application need to assert their capacity and also need to state that they were properly appointed by a given instrument (for example a trust deed) or order of court. Unless one or more of the trustees are authorised by the others, all trustees must be joined in suing and all trustees must be joined when action is instituted against a trust.
There have been instances where a trust has been incorrectly cited as a party to a matter. In such cases it is likely that the courts will allow an amendment. The court has held (in Rosner v Lydia Swanepoel Trust) that unless an application to amend a summons or a pleading in an action is done in bad faith, or would cause injustice or prejudice the other side, it should always be allowed. The reasoning for this is because in such circumstances, nothing of substance is altered and “all that the amendment does is to give linguistic effect to the legal rule that a trust lacks legal personality”.
The court (in Gross v Pentz ) has also said that the citation of a trust, which is not a legal persona, can be amended to reflect the trustees just as in the instance where the citation of a deceased estate can be amended to reflect the executor.
The argument has been made (in First National Bank of SA Ltd v Strachan Family Trust) that to allow a party to amend the citation of a trust as a party to the action would be to allow a substitution of parties, which is not allowed by the rules of court. The court disagreed with this argument. It pointed out that unlike other entities that have no legal standing; trusts exist as discrete legal institutions. The court further pointed out that if such a citation remains unchanged and unnoticed, the effect of any judgement granted in the proceedings would be no different from what it would be once the amendment is effected.
While it is important for the parties in legal proceedings to be correctly cited, it can be seen from the above that to incorrectly cite a trust instead of the trustees as parties to proceedings is not a fatal flaw. The court is quite willing to allow amendments to rectify such an error.
Fatima Bham is a candidate attorney in the Corporate Department at Bowman Gilfillan.