Land and Agricultural Bank of South Africa v Parker and Others (2005)
The judgment in Land and Agricultural Bank of South Africa v Parker and Others 2005 (2) SA 77 (SCA) is one of the most significant modern authorities in South African Trust Law.
It clarified core principles relating to the administration of Trusts, underscored the importance of joint decision-making by Trustees, and warned of the dangers posed by informality — particularly in the context of family-run Trusts.
Delivered by Cameron JA (as he then was), the judgment remains highly relevant in legal practice today; frequently cited in disputes involving Trusteeship, fiduciary breaches, and the enforceability of Trust-related transactions.
This article unpacks the factual background, legal issues, judicial reasoning, and enduring legacy of the Parker case, offering a detailed analysis for both legal practitioners and fiduciary officers.
The dispute in Parker arose from a loan transaction between the Land and Agricultural Bank of South Africa (the Bank) and a Trust known as the Parker Trust. The Bank sought to enforce a mortgage bond registered over a property, the farm Middelbult, which had been signed by Mr J Parker in his capacity as Trustee.
At the time, the Parker Trust had three Trustees: Mr Parker himself and his two sons. However, critically, the mortgage bond had been executed by Mr Parker alone, without the knowledge, consent, or active participation of the other Trustees.
There was no formal resolution authorising him to act on behalf of the Trust, nor any document evidencing joint Trustee decision-making.
The Bank, having accepted Mr Parker’s authority at face value, proceeded on the assumption that the transaction was valid and binding upon the Trust. When the Trust failed to meet its repayment obligations, the Bank instituted action to enforce the mortgage bond and recover the loan amount.
The Trust resisted enforcement on the basis that Mr Parker’s unilateral actions were invalid, as he had not been authorised to act alone. The case thus turned on the formal requirements for valid Trustee action and the extent to which a third party — in this case, a commercial lender — could rely on what appeared to be the authority of a single Trustee.
The Supreme Court of Appeal (SCA) delivered a unanimous judgment, with Cameron JA writing for the Court. It ruled in favour of the Trust, holding that the mortgage bond was unenforceable.
The Court found that Mr Parker had acted without authority and that the Bank had failed to ensure that the transaction was validly concluded.
The SCA seized the opportunity to reaffirm and clarify foundational doctrines of Trust law, which it did under several key headings:
The matter presented several pivotal legal issues, many of which strike at the core of fiduciary governance and transactional certainty in Trust Law:
• Can a single Trustee bind a Trust where multiple Trustees are appointed, and no authorisation has been given by the others?
• What are the legal consequences when Trustees fail to act collectively as required by the Trust Deed and the common law?
• May third parties rely on the ostensible or apparent authority of a Trustee when entering into transactions with a Trust?
• What fiduciary standards are Trustees held to, particularly in the context of family-run or inter vivos Trusts?
• How do courts evaluate the distinction between Trust property and personal control in cases where one Trustee effectively dominates the administration of the Trust?
The Court reiterated that Trustees must act jointly when exercising their powers, unless the Trust instrument expressly provides otherwise. In the absence of such a provision, decisions affecting the Trust — especially those involving the alienation or encumbrance of Trust property — must be made through joint resolution and action.
This principle arises from the legal nature of a Trust: ownership of Trust property vests not in a single individual but in the collective body of Trustees. The powers conferred by the Trust Deed are likewise conferred upon the body of Trustees as a unit. As such, unilateral action by one Trustee is not only procedurally defective but legally ineffective.
In Parker, the Trust deed did not authorise Mr Parker to act alone. The failure to convene the other Trustees, pass a resolution, or record a decision meant that the mortgage bond was executed ultra vires and had no legal force.
A key point of contention was whether or not Mr Parker’s actions could be ratified by the doctrine of ostensible or apparent authority, familiar from company and agency law. The Bank argued that it had dealt with Mr Parker on the assumption that he had the requisite authority, and that it should not be penalised for doing so in good faith.
The Court firmly rejected this argument. It held that Trusts are not corporations and do not enjoy separate legal personality (with limited statutory exceptions). Accordingly, corporate doctrines such as ostensible authority or the Turquand rule do not apply in the Trust context. Trustees cannot bind the Trust unless they have actual authority, derived either directly from the Trust deed or from a valid resolution.
The SCA stated that third parties bear the risk when dealing with Trustees. They are obliged to verify that all formalities have been complied with and that the Trustees are acting within the scope of their powers. A failure to perform this due diligence means that any resultant risk falls on the third party — not on the Trust.
A particularly resonant part of the judgment was the Court’s critique of how many family-run Trusts are administered in practice. Cameron JA noted a troubling trend: Trusts were being created ostensibly for estate planning or asset protection, but were then run informally, often with a single dominant Trustee (usually the founder or patriarch) treating the Trust assets as their own.
The Court described this as a “masking of personal control under the guise of Trusteeship.” It warned that such informality undermines the legal nature of the Trust, threatens the separation between Trust and personal assets, and increases the potential for abuse or fraud.
The judgment sounded a clear alarm: Trustees must understand and perform their fiduciary functions actively. Passive Trustees who rubber-stamp the decisions of a dominant Trustee fail in their duties and may be held accountable.
The SCA took the opportunity to reassert the strict fiduciary obligations that attach to Trusteeship under South African law. These duties are not merely moral or discretionary — they are legal standards enforceable by beneficiaries, co-Trustees, and the courts.
Among the duties highlighted were:
– The duty to act with care, diligence and skill, particularly where Trustees hold themselves out as competent fiduciaries;
– The duty to act jointly, ensuring that decisions are informed, considered, and agreed upon;
– The duty to avoid conflicts of interest and act in good faith;
– The duty to comply with the Trust Deed and the Trust Property Control Act 57 of 1988, including section 9, which provides for Trustee control over Trust property and proper record-keeping.
Mr Parker’s unilateral execution of the mortgage bond, in violation of these duties, amounted to a breach of fiduciary standards and invalidated the transaction.
Perhaps one of the most practically significant aspects of the judgment is the guidance it offers to third parties dealing with Trusts — including banks, service providers, and creditors.
The Court stated unequivocally that third parties:
– Must verify the authority of Trustees through appropriate documentation, such as Trustee resolutions or explicit clauses in the Trust Deed;
– Should not assume that a Trustee acting alone has authority — even where the individual appears to be in control or has previously represented the Trust;
– Bear the risk of defective or unauthorised transactions where proper due diligence is not conducted.
The implication is clear: dealing with a Trust requires a higher level of procedural scrutiny than dealing with a company or natural person.
Nearly two decades after its delivery, Parker remains a foundational authority. Its influence permeates several areas of modern Trust law and continues to shape both litigation and fiduciary practice.
In the wake of Parker, courts and regulators have adopted a more sceptical approach to the structure and operation of family-run Trusts. The South African Revenue Service (SARS), in particular, has intensified its efforts to “look through” the Trust form where necessary to assess whether Trustees are complying with their fiduciary responsibilities or merely using the Trust as a personal vehicle.
Recent case law confirms that where Trusts are found to be operating informally or as extensions of an individual’s estate, their separate legal treatment may be disregarded for tax or enforcement purposes.
The principles in Parker have been applied in numerous cases involving Trustee misconduct or disputes among beneficiaries. Courts regularly cite the decision when considering applications to remove Trustees under section 20 of the Trust Property Control Act — especially where there is evidence of failure to act jointly or with proper authority.
Parker is also often relied upon when evaluating the validity of high-value transactions involving Trust property, such as the sale of immovable property, investment decisions, or dealings with creditors.
The judgment has contributed to the rise of professional Trusteeship and a more rigorous approach to Trust governance. Law firms, financial institutions, and fiduciary service providers now emphasise:
– Proper record-keeping,
– Written Trustee resolutions,
– Documented consent from all Trustees,
– Regular Trustee meetings and accountability structures.
In light of the Parker ruling, certain best practices are not just advisable — they are essential to ensure Trust compliance and legal enforceability:
– Ensure that all decisions are taken jointly and formally recorded.
– Convene regular Trustee meetings to consider and document decisions.
– Educate all Trustees (particularly non-professional ones) on their duties and obligations.
– Avoid treating the Trust as an extension of personal affairs.
– Engage at least one independent Trustee, particularly in family Trusts, to ensure objectivity.
– Request and examine Trustee resolutions authorising transactions.
– Review the Trust deed to confirm authority and procedural requirements.
– Avoid reliance on informal assurances or past practices by individual Trustees.
– Conduct due diligence equivalent to (or more thorough than) that undertaken with companies or close corporations.
Land and Agricultural Bank of South Africa v Parker and Others is more than a technical judgment on Trustee authority — it is a landmark affirmation of the rule of law in Trust governance. It reminds us that Trusts are governed by formalities and fiduciary standards that cannot be set aside for convenience or informality.
The case underscores the risks posed by lax administration and the importance of acting within one’s authority. For Trustees, it is a call to vigilance and independence. For third parties, it is a directive to engage with Trusts in a considered and legally sound manner.
The legacy of Parker continues to be felt — and rightly so. In an era where the Trust form is frequently used for both legitimate and dubious ends, the principles laid down by the SCA provide a clear and enduring guide.
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