In the recent matter of Smith v ABSA Bank Limited, the court noted that “(T)his case yet again demonstrates the need to be careful when dealing with a trust.” In this instance, judgment that was obtained against a surety was successfully overturned after the surety showed that the loan agreement between the trust and the bank had not been signed by two trustees, as required in the trust’s founding documents. This rendered the loan invalid and the suretyship followed the same fate, it being “a trite principle of law that a surety’s obligation is an accessory obligation, and for there to be a valid suretyship there has to be a valid principal obligation between the debtor and the creditor.”
Many property practitioners deal with trusts on a daily basis, whether as purchasers, sellers, borrowers or grantors of rights. It is important to remain vigilant of the special requirements pertaining to dealings with and by trusts, to avoid invalidity.
Contact STBB should you require assistance.
