Offers to purchase and the authority to act

By Shiniade Kenworthy

In terms of the case, Thorpe vs Trittenwein [2006] SCA 30 (RSA), the need to obtain all trustees authority (or majority if required by the deed) to enter into an offer to purchase was highlighted. In referencing section 2 (1) of the Alienation of Land Act 68 of 1981, the courts held that the agent acting on behalf of the entity (in this case a trust) was required to have the necessary authority to do so in writing.

Section 2(1) of the said act states that "no alienation of lands after the commencement of this section shall, subject to the provisions of Section 28, be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority"

The courts held that you are to refer to the Deed itself to determine the requisite authority and then to have that authority reproduced in writing. What is even more important is that the court held that the requisite authority could further not be ratified. The courts argued that because the trustee did not act with the necessary authority, the agreement of sale was void ab initio (from inception). It follows therefore that a transaction void ab initio (i.e defective from inception) cannot be ratified.

The administrative implications of this case is that when entering into any transaction relating to the alienation of land you as trustee must have the necessary authority to do so. Reference must be made to your deed in determining the requisite authority. Given that most property trusts are established with only two trustees, namely yourself and the independent trustee it is imperative that ALL trustees give the requisite authority. The implication of this, therefore, is that on the signing of any Offer to Purchase, the independent trustee must be informed in order that it may draft and sign a resolution authorizing you to enter into the Offer to Purchase. A generic property resolution cannot serve your purpose in this regard as this is a clear indication to the courts that you are acting independently of your independent trustee and therefore separation between yourself and the trust is lost and the courts are able to attack same.

In summary therefore, we advise that whenever you enter into an offer to Purchase obtain a resolution from all trustees authorizing you to enter into the particular transaction and ensure that the resolution is signed at the time of entering into the transaction.