Kohlberg v Burnett and Others (422/84) [1986] ZASCA 32; [1986] 2 All SA 283 (A) (26 March 1986)

IN THE SUPREME COURT OF SOUTH AFRICA

(APPELLATE DIVISION) In the matter between:

PETER CARL KOHLBERG Appellant

andHAROLD MOULSDALE BURNETT, NO 1st RespondentJOHN DAVID ENRAGHT-MOONY 2nd RespondentJOAN HILDEGARDE ENHAGHT-MOONY 3rd RespondentLORIMER ERIC LEACH in his capacity ascurator-ad-litern 4th RespondentALICE MARY KOHLBERG 5th Respondent

SANDRA JOAN SHILLINGTON 6th RespondentJOHN PETER ENRAGHT-MOONY 7th RespondentPATRICIA ANNE ENRAGHT-MOONY 8th Respondent

Coram : RABIE, CJ , BOTHA, VAN HEERDEN, JACOBS, JJA et

GALGUT, AJA.2Heard: Delivered:

27 February ,1986

JUDGMENT

RABIE, CJ:

This appeal is concerned with the question of

the validity of that part of clause 3 of the will of the

late Herbert Kohlberg in which he bequeathed the residue

of his estate to two trusts which he had created about

a year before his death. The Eastern Cape Division

(per Kannemeyer, J., with whose judgment Mullins, J.,

agreed) held, in an application brought by one of the

executors of the will (the first respondent in the

appeal/.......3appeal) that the relevant part of the clause (to which

I shall refer as "the clause", or "clause 3") was valid

The Court dismissed the counter-application by the present

appellant ( who is also an executor of the will) in which

he sought an order declaring that the clause was invalid

and that the residue of the estate fell to be dealt with

according to the laws of intestate succession. The

judgment of the Court a quo has been reported: see

Burnett N 0 v. Kohlberg and Others, 1984(2) S.A.

137.

The aforesaid Herbert Kohlberg (hereinafter

referred to as "the deceased") died on 25 August 1979

He was a widower. He left two children, viz. the appellan-

and Joan Hildegarde Enraqht-Moony, the third respondent

in the appeal. In his will the deceased, after making

certain/......

4

certain bequests, went on to provide as follows in

clause 3 thereof with regard to the residue of his estate:

"... I leave and bequeath the rest, residue and remainder of my Estate and Effects whether movable or immovable and of whatsoever nature and kind and wheresoever situate whether in possession, reversion, remainder or expectance, nothing excepted:

(a) As to THIRTY-FIVE per centum (35%) to THE KOHLBERG KOHLBERG TRUST to be administrated, dealt with and distributed as part of the capital and according to the conditions of that Trust; and (b) As to SIXTY-FIVE per centum (65%) to THE KOHLBERG MOONY TRUST to be administrated, dealt with and

distributed as part of the capital and

the according to/conditions of that Trust.

Three executors were appointed in the will, viz.the first respondent, John David Enraght-Moony (the secondrespondent) and the appellant. The second respondent is

the/

5

the husband of the third respondent.

The two trusts mentioned in clause 3 of the will

are family trusts which the deceased created by means of

notarial deeds of donation and trust on 3 August 1978, i.e.,

on the same day on which he executed his will, but shortly

before he signed the will.

In clause 1 of the deed by which the Kohlberg

Kohlberg Trust was established it is recorded that the

deceased donated to the trustees of the trust the sum of

R3 500-00, to be held by them as the trust fund for the

purposes of the trust, and that this trust fund was to

be deemed to include such other assets as the deceased

might thereafter transfer to the trustees. A similar

statement/........

6

statement appears in clause of the deed relating to

the Kohlberg Moony Trust, save that the amount of the

donation is said to have been R6 500-00.

Clause 15 of the Kohlberg Kohlberg Trust deed

provides how the trustees are to deal with the capital of

the trust fund after the deceased's death. The clause

is quoted at p. 138 E- p. 139B of the report of the

judgment of the Court a quo and need not be repeated.

It is sufficient to say that it appears therefrom that

the main intention of the deceased in creating the trust

was to benefit, after his death, his son (the appellant)

and the members of the latter's family. Clause 15 of

the Kohlberg Moony Trust contains provisions similar to

those/........

7

those of clause 15 of the Kohlberg Kohlberg Trust, save

that they relate to the Kohlberg Moony Trust and the

beneficiaries thereunder, being the deceased's aforesaid

daughter (the third respondent) and the members of her

family.

In his counter-application in the Court a quo

the appellant said the following with regard to his contention that clause 3 of the will was invalid:'

"(i) The purported bequests to the Trusts purport

to' incorporate the terms and conditions of the Trust into the Will of the deceased;

(ii) The Deeds of Donation and Trust .... are not

part of the deceased's Will and, moreover, have not been duly executed by the deceased in accordance with the provisions of the Wills Act, 1953;

(iii) Both the Trusts were established inter vivos.

The/............

8

The bequests to the Trusts have the effect of incorporating by reference the terms and conditions of the Trust Deeds into the Will

which, in law, is neither permissible nor valid;

(iv) It is submitted that a bequest to a Trust is valid only if the Will itself contains the terms and conditions of the said Trust but not otherwise. As the terms and conditions of the Trusts are not so reflected in the Will of the deceased, the purported dispositions to the Trust are invalid, of no force and effect and have no legal efficacy."

And also:

"It is not my contention ... that every bequest

to a Trust or Trustee has no legal efficacy.

I do, however, submit that where the Testator

intends that the Trustees are not to take beneficially

themselves, the terms and conditions of the Trust

have to be set out in the Will or, if incorporated

by reference, be executed in the manner required

by the Wills Act, No. 7 of 1953. Failing this,

the bequest to the Trust is of no legal force."

It/..........

9

It appears that it was argued on behalf of the

appellant in the Court below that a trust, not being a

legal persona, cannot receive benefits under a wi11, and

that clause 3 of the deceased' s will should, for !:hat

reason, be held to be invalid. The Court, after discussing

the argument at some length, rejected it and held (at p

142 E-F of the report) that "although a trust as such

cannot strictly be a beneficiary under a will, a bequest

can be made to the trustee qua trustee for the benefit of

an existing trust ....". The aforesaid argument was not

advanced on appellant's behalf in this Court, and it is

accordingly not necessary to deal with it. I would merely

say that in my opinion counsel was correct in not pursuing it

The/........... 10

The argument that was presented to us may be

summed up as follows: (a) the bequest in clause 3 of the

deceased's will is a bequest to the beneficiaries under

the two trusts mentioned in the clause; (b) the identity

of those beneficiaries appears from clause 15 of each of

the two trust deeds; (c) the terms of the trust deeds do

not, however, form part of the will, since a testator

cannot incorporate the terms of a document in his will

merely by referring to that document in the will (Moses v

Abinacler, 1951(4) S.A. 537(A)); (d) the will consequently

fails to identify the beneficiaries of the bequest; and

(e) the residue of the estate therefore falls to be dealt

with as on intestacy. I should perhaps add at this point

that counsel did not contend - rightly so, in my view -

that/..........

11

that the words which follow upon l;he names of the trusts

in paragraphs (a) and (b) of clause 3 of the will are

indicative of an intention to incorporate in the will the

terms of clause 15 of each of the two trust deeds.

The validity of the aforesaid argument depends

on the validity of the submission made in (a). Counsel

for the appellant referred to this submission as the crux

of the appeal. The short but crucial question is, therefore,

whether counsel is correct in contending that the bequest

of the residue of the estate was a bequest to the

beneficiaries under the two trusts, and not to the

trusts, or to the trustees, as representing the trust s

If this contention is correct, it would follow that the

deceased/.......

12

deceased Tailed to indicate in his will to whom he intended

to bequeath the residue of his estate and that he should.

therefore, be held to have died intestate in so far as

the residue of his estate is concerned.

If ,a trust can receive benefits under a will,

I have difficulty in understanding the contention that the

deceased did not in clause 3 of his will declare who

the were to be/beneficiaries in respect of the residue of

his estate. It is clear from the language used in the

clause that the deceased bequeathed the remainder of his

estate to the two trusts mentioned therein. It is true,

of course, that a trust, not being a legal persona, cannot,

as a trust, acquire or hold property, but this fact docs

not/.............13not bring about that the two trusts were not properly

appointed as beneficiaries in clause 3 of the will. The

trustees of the two trusts are in law entitled to act

on behalf of the trusts and to hold, in their capacities

as trustees, property for the purposes of the trusts.

"It is trite law" , it was said by Steyn, C.J. in Commissioner

for Inland Revenue v. MacNeillies Estate, 1961(3) S.A.

833 at p. 840 G-H, "that the assets and liabilities in a

trust vest in the trustee.." In these circumstances it

cannot, in my opinion, be said that the deceased failed to

appoint beneficiaries in respect of the remainder of his

estate in clause 3 of his will. Counsel submitted, how-

ever, that the "actual beneficiaries" are not the trusts

or the trustees of the trusts qua trustees, but the

beneficiarics/.......

14

beneficiaries under the trust deeds, and that, since their

identity is not revealed in the will but has to be 'sought

in the trust deeds, it must be held that clause 3 of the

will does not contain a valid disposition of the residue of

the deceased's estate. It is true that the beneficiaries

under the trusts are the only persons who actually benefit

by the bequest, since the trustees hold the trust funds

only in their representative capacities and not for their

own benefit. This does not mean, however, that the

beneficiaries under the two trusts are to be regarded as the

beneficiaries whom the deceased sought to appoint as his

beneficiaries in clause 3 of his will, but whose identity

he left to be determined by reference to the trust deeds.

The deceased did not appoint them as beneficiaries in his

will/.....

15

will. Their rights to receive benefits are not derived

from the deceased's will, but from the terms of" the trust

deeds.

In the light of the aforegoing I consider that

counsel's argument cannot succeed and that the appeal

should be dismissed.

There remains the question of costs. In the

Court a quo the Court ordered that the appellant's costs

in respect of both the application and the counter-application

were to be paid out of the deceased's estate as between

attorney and estate, such costs to include the costs of

two counsel. Counsel for the appellant submitted that, in the

event/............

16event of the appeal being dismissed, the Court should order that the appellant's costs of appeal should be paid out of the deceased's estate. Such an order, it was submitted, would be justified on the following grounds: "(a) Although the appellant has a personal interest in the outcome of the appeal, the relief sought by him also relates to his position as an executor in the estate of the deceased; (b) the litigation was brought about by the deceased; (c) notwithstanding the finding of the Court a quo, the matter is res nova; (d) the appellant had acted on the advice of senior counsel." (Quotation from counsel's heads of argument.) I find myself quite unable to agree with counsel's submission. One may accept thatthe appellant was, by reason of his position as executor

justified/...... .

17

justified in seeking the decision of the Court on the

question whether clause 3 of the deceased's estate was

valid or whether the residue of the estate was to devolve

as on intestacy. A full Court of the Eastern Cape

Division gave its decision on that question, and it would

have been reasonable for the appellant, as executor, to

have accepted that decision. He was the only one of all

the parties to the application proceedings who did not

accept the Court's judgment, and in the circumstances it

can hardly be said that his decision to go' on appeal was

taken in the interests of the estate or of anyone (except

himself) who had an interest in the estate. His real

reason for deciding to go on appeal admits of little doubt.

He has a personal interest in the matter. He and the third

respondent/..... 18

respondent (who was prepared to accept the validity of

clause 3 of the will) are the deceased's only children, and

an order that the residue of the deceased's estate should

be dealt with as on intestacy would be to his financial

advantage. Now that he has lost his appeal, it would be

inequitable to order, as we were asked to do, that his

costs of appeal should come out of the estate of the

deceased. Fairness demands, in my opinion, that he

should be ordered to pay the costs of the appeal

It is ordered as follows;

(l) The appeal is dismissed with costs, including

the costs of the curator ad litem and the costs

of/......

19

of the application for leave to appeal. Only

such costs as cannot be recovered from the

appellant may be paid out of the estate of the

late Herbert Kohlberg.

(2)Should the appellant fail to sign the first and

final liquidation and distribution account in

the aforesaid estate as drawn by the first

respondent within 21 days of the date of this

judgment, the deputy sheriff of Port Elizabeth

is authorised to sign it on his behalf.

P J RABIE CHIEF JUSTICEBOTHA, JA. VAN HEERDEN, JA. JACOBS, JA. GALGUT. AJA.

Concur.