REPUBLIC OF SOUTH AFRICA

THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

Case number:
325/2002
Reportable

In the matter between:

WILLIAM JAMES NIEUWOUDT NO        FIRST APPELLANT
TALITHA CECILIA
NIEUWOUDT NO

SECOND APPELLANT

and

VRYSTAAT MIELIES (EDMS) BEPERK           RESPONDENT

CORAM:
HARMS, FARLAM, BRAND, CLOETE JJA et VAN
HEERDEN AJA

HEARD:
14 NOVEMBER 2003

DELIVERED: 28 NOVEMBER 2003

SUMMARY:
Trusts and trustees – whether Turquand rule applicable.
________________________________________________________

JUDGMENT
________________________________________________________

FARLAM JA

[1] This is an appeal against a judgment of Van Coppenhagen J, sitting
in the Orange Free State Provincial Division, in terms of which it was
found that an agreement concluded between a close corporation and the
appellants, in their capacities as trustees of a family business trust, was
valid and enforceable and that the close corporation’s rights had been
ceded to the respondent. The judgment of the court a quo has been
reported: see Vrystaat Mielies (Edms) Bpk v Nieuwoudt en ’n Ander NNO
2003(2) SA 262 (O).
[2] The agreement in question, which was concluded on 9 May 2001,
was for the sale of 900 tons of yellow maize at R785-00 per ton, delivery
to be effected during the period from 1 June 2002 to 31 July 2002. The
deed of sale described the seller as ‘JJ Boerdery Trust (James
Nieuwoudt)’ (James Nieuwoudt being the name by which the first
appellant is known) and was signed by the first appellant above the word
‘Verkoper’. The agreement was thereafter ceded on 25 January 2002 to
the respondent.
[3] As appears from the dates of the contract and the date on which the
maize  was to be delivered, the contract was an advance contract, what
was described in the papers as a ‘vooruit-kontrak’, concluded before the
maize to be sold was planted and produced. By March 2002, when the
respondent launched the application which terminated in the order now
on appeal, the price of maize, which had earlier risen as high as R1 640-

00 per ton, was R1 239-00 per ton, which may explain the stance taken by
the appellants in this matter.
[4] On 20 February 2002 the respondent sent to the appellants by
facsimile transmission a letter to which was attached a confirmation of
the contract in which the appellants were requested to confirm in writing
that they would respect the contract. In a letter sent to the respondent by
the appellant’s attorneys, it was stated that the trust did not intend
implementing any deliveries because of the nullity of the alleged contract.
No reason was given for the assertion that the contract was a nullity.
[5] This reason was only forthcoming after the respondent had
launched the present proceedings. In his opposing affidavit the first
appellant annexed a copy of the trust deed of the family trust as well as a
copy of the letter of authority issued by the Master of the High Court at
Kimberley authorising the appellants to act as trustees of the trust. He
pointed out that in terms of the trust deed, where there were only two
trustees (as is the case), all decisions of trustees had to be unanimous.
This provision of the trust deed notwithstanding, he did not have the
second appellant’s authorisation or approval to act on her behalf in
signing the contract in question. He also said that, in so far as the contract
stated that it contained the details of an agreement which had been
telephonically or orally concluded between the close corporation and the
trust, the second appellant had also not participated in the conclusion of

any telephonic or oral agreement with the close corporation. He
concluded this paragraph of his affidavit by stating that he had been
advised that in view of the facts which I have summarized no binding
agreement came into existence between the close corporation and the
trust.
[6] Although there was nothing in the trust deed which prevented the
trustees from delegating certain functions to one of their number or even
to an outsider (cf Coetzee v Peet Smith Trust en Andere 2003 (5) SA 674
(T) at 680 I-J), the first appellant did not deal expressly in his affidavit
with the question as to whether powers of management over the trust
business had been delegated to him so as to enable the day to day
business of the trust to be carried on. Nor did he state whether he told his
co-trustee, the second appellant, of the contract he had signed as seller -
although, as he stated elsewhere in his affidavit, it was never the intention
that he should contract in his personal capacity - nor, if he did tell her,
whether she had by words or conduct expressed agreement with what he
had done or denied his authority to conclude the agreement.
[7] The second appellant contented herself with filing an affidavit
confirming those parts of the first appellant’s affidavit that applied to her.
[8] In reply the respondent sought to answer the defence raised by the
appellants by saying that the representative of the close corporation (one
Fourie) had at no stage been informed by the appellants that there were

two trustees or that two trustees had to sign the contract and that the
appellants had not given Fourie a copy of the trust deed. The respondent
alleged further that the fact that only one trustee signed the contract did
not provide a defence for the appellants. This was because, so it was
averred, clause 23.4 of the trust deed provided that the trustees could
empower one of their number to sign documents on their behalf, to
implement any transaction in connection with the trust’s affairs. It was
said further that the respondent would not be in the position, nor was it
expected of it, to inquire into the internal prerequisites for authority, for
example, a decision by the trustees. In this regard the respondent relied on
the so-called Turquand rule, first laid down by the Court of the Queen’s
Bench and confirmed by the Exchequer Chamber in The Royal British
Bank v Turquand (1856) 6 E & B 248(QB) and 327 (Exch. Ch.), which
has been adopted by our courts as part of our company law (see Legg and
Co v Premier Tobacco Co 1926 AD 132) and been held to apply also in
cases involving trade unions (Mine Workers’ Union v Prinsloo 1948 (3)
SA 831 (A)) and municipalities (Potchefstroomse Stadsraad v Kotze 1960
(3) SA 616 (A)).  A modern formulation of the rule, which was approved
by Lord Simonds in Morris v Kanssen [1946] AC 459 at 474, is taken
from Halsbury’s Laws of England, 2 ed, vol 5, para 698 (see now 4 ed,
reissue vol 7(1), para 980) and is in the following terms:
‘Persons contracting with a company and dealing in good faith may assume that acts

within its constitution and powers have been properly and duly performed, and are not
bound to inquire whether acts of internal management have been regular.’
The respondent contended, relying on the judgment of the Northern Cape
Division in Man Truck & Bus (SA) Ltd v Victor en Andere 2001 (2) SA
562 (NC), that the Turquand rule applies to trusts. This contention was
upheld by the learned judge in the court a quo and its correctness was
debated before us.
[9] In my view, however, whether or not the Turquand rule should be
applied to trusts, particularly business trusts - a matter on which I express
no opinion - it cannot be applied in the present case. I say this because I
am satisfied that clause 23.4 of the trust deed does not afford a foundation
for the contention advanced in this regard by the respondent.
[10] Clause 23.4 (as far as is material) reads as follows:
‘Die trustees kan een of meer van hulle magtig om alle dokumente vir amptelike
doeleindes wat vir die administrasie van die trust en ter uitvoering van enige
transaksie wat met die trust se sake verband hou, nodig is, namens die trustees te
teken’.
[11] The clause clearly on its plain language applies only to the signing
of documents for official purposes. It thus does not apply to the contract
signed by the first appellant which was not for official purposes. It
follows that no question of internal formalities, such as is dealt with by
the Turquand rule, can be regarded as having arisen whereby an outsider
who had concluded a contract with one of the trustees could assume that,

in signing the contract, the trustee concerned had been empowered, as a
matter of internal management, by his co-trustee to sign the contract.
[12] The matter does not end there, however. The parties were agreed
that the decision in this case turned on the legal question as to whether the
Turquand rule can apply to transactions concluded between a trust and a
third party. It was accepted by both sides both in the court a quo and in
the heads filed in the court that clause 23.4 would form a basis for the
application in this case of the Turquand rule if, as a matter of law, the
rule applies to trusts. (In view of what in my opinion is the correct
interpretation of this clause, it is not necessary to consider whether on the
parties’ interpretation thereof the Turquand rule would in any event have
been applicable in the circumstances of this case.) Once it was pointed
out to counsel that they and the court a quo had all proceeded on an
incorrect interpretation of clause 23.4, counsel for the respondent
requested that this Court order that the case be referred for trial in terms
of Uniform Rule 6(5)(g) with a direction that the respondent file its
declaration within fifteen days of this Court’s order.
[13] I considered whether the appeal should not be dismissed on the
ground that the first appellant did not specifically deny that he was
authorised by his co-trustee, the second appellant, to conclude the
contract on behalf of the trust. I have, however, come to the conclusion
that such a course should not be followed, particularly as the respondent’s

own counsel eventually applied for a reference to trial in terms of Rule
(6)(5)(g), as I have said.
[14] In my view the appeal must succeed with costs and the order which
is to be substituted for the order of the court a quo should provide for a
reference to trial in terms of Rule 6(5)(g), as applied for by the
respondent’s counsel.
[15] The following order is made:
1.
The appeal succeeds with costs.
2.
The order made in the court a quo is set aside and replaced by
the following order:
1. The application is referred for trial in terms of Rule 6(5)(g)
with the notice of motion to stand as a single summons and
the notice of intention to oppose as notice of intention to
defend.
2. The applicant is to deliver its declaration within 15 days and
the further proceedings will be governed by the Uniform
Rules of Court.

……………..
IG FARLAM
JUDGE OF APPEAL

CONCURRING
HARMS

JA
BRAND

JA
CLOETE

JA
VAN HEERDEN   AJA