FILTERS:

Endorsement of testamentary trusts

18 January 2007

1. According to Registrars' Conference Resolutions 1/1974 and 51/1994 ("the Resolutions"), an endorsement made against a title deed, specifically in terms of section 40 (1) (b) of the Administration of Estates Act, 1965 (Act No. 66 of 1965), as amended, ("the AEA") does not constitute a transfer by endorsement. The Resolutions are in direct conflict with the Holness decision referred to in paragraph 3 below and frustrate, in particular, paragraph (a) of the definition of "trust" in section 1 of the Trust Property Control Act, 1988 (Act No. 57 of 1988), as amended, ("the TPCA ").

2. The relevant provisions of section 40 (1) (b) of the AEA read as follows:

"(1) If a trustee has been appointed to administer any property of a deceased under a will ………………………….., the executor shall - (b) cause the terms of the will, or a reference thereto, in so far as they relate to the administration, to be endorsed against the title deeds of such of the property as is immovable, and against any mortgage or notarial bond forming part of the property, and deliver the title deeds and any such bond to the trustee."

3. In Holness and Another, N N O v Pietermaritzburg City Council 1975 (2) SA 713 (N), in his consideration of the effect of a similar endorsement in terms of section 61 (1) of the Administration of Estates Act 24 of 1913 upon the dominium, Shearer J stated at 718-719 that: "Mr Shaw, for the respondent, contended that it did not have the effect of transferring the dominium to the administrators and referred to the judgement of CURLEWIS, J.A., in , 1928 A.D. 425 at p. 427, a matter in which the Registrar of Deeds contended that where the ownership of trust property is bequeathed to trustees, registered transfer and not the procedure of endorsement is appropriate. This contention was not upheld by the Natal Provincial Division (1928 N. P. D. 214) and the appeal against that decision failed." The learned Judge disagreed with Curlewis J.A.'s obiter dictum that: "The Registrar of Deeds erred in thinking that an endorsement could in certain cases transfer the ownership". Shearer J stated, further: "In the present case the will contemplates the transfer of ownership. This transfer from the executor to the administrators can only be effected by the endorsement, or by operation of law, in which case the endorsement registers the rights of ownership thus transferred. I must, therefore, respectfully disagree with the dictum referred to." Shearer J stated, further: "Once the endorsement was made, therefore, the executor was functus officio in relation to lot 199 to the same extent as if he had transferred the property to a legatee …………………….."

4. There are other grounds on which the correctness of the Resolutions is doubtful:

4.1 Since the property may not be registered as a transfer by the executor from the deceased estate as provided for in section 39 (1) of the AEA, it is submitted that it (the property) must be registered as a transfer by endorsement by the executor from the deceased estate in terms of section 40 (1) (b) of the AEA. There must be a transfer!

4.2 A transfer, to a legatee, which includes a trustee in his/her official capacity, is contemplated in, and is exempt from transfer duty under, section 9 (1) (e) (i) of the Transfer Duty Act, 1949 (Act No. 40 of 1949), as amended, ("the TDA").

4.3 A transfer of trust property in pursuance of a will, to the persons entitled thereto in terms of the will, is contemplated in, and exempt from transfer duty under, section 9 (4) (b) of the TDA.

4.4 A trustee, in the circumstances referred to in paragraph 4.3 above, would not be able to transfer the property unless he/she had previously taken transfer thereof.

4.5 Transfer by endorsement is impliedly recognised by section 11 (1) (b) of the TPCA, which provides that: "Subject to ……….section 40 of the Administration of Estates Act, 1965 (Act 66 of 1965), and the provisions of the trust instrument concerned, a trustee shall - (b) if applicable, register trust property or keep it registered in such manner as to make it clear from the registration that it is trust property". Further, it is clear from section 11 (3) of the TPCA that "registration" means registration in a deeds registry where the property is situated.

4.6 If the legislature did not regard the registration of trust property in the name of a trustee in his/her official capacity as a transfer, registration of such property would not have been exempted from transfer duty in terms of section 9 (4) (d) and/or 9 (4) (a) of the TDA.

4.7 In Kropman And Others N N O v Nysschen, 1999 (2) SA 567 (T), it was held that a bond had been ceded by endorsement in terms of section 40 (1) (b) of the AEA. MacArthur J stated at 578: "By endorsing a bond in this manner the executor is divested of his right to deal with the property and thereafter the trustees have the power to deal with it in accordance with the provisions of the will. See Meyezowitz (op cit at para 13.23)".

5.1 It is implied in Resolution 1/1974 that, if an endorsement in terms of section 40 (1) of the AEA constitutes a transfer, the provisions of section 56 1) of the DRA would come into play. I do not agree because, in my view, a transfer by endorsement in terms of section 40 (1) of the AEA is "any other circumstance …. in any other law specially provided" contemplated in section 56 (1) (c) of the DRA refer to section 41 of AEA, which pertinent also.

5.2 According to Resolution 55/1987, the terms of the will are endorsed against the mortgage bond registered over the property of the deceased (in other words, a mortgage bond in which the deceased was the mortgagor) in terms of section 40 of the AEA. This is not so. As is evident from paragraph 4.7 above also, section 40 (1) (b) of the AEA requires endorsement of a mortgage bond "forming part of the property" of the deceased (in other words, a mortgage bond in which the deceased was the mortgagee).

Thabo Nqhome

17 January 2007

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