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Veneer of a trust can be pierced in 'exceptional' cases

Publish date: 23 November 2012
Issue Number: 3170
Diary: Legalbrief Today
Category: General

'If the facts of a particular case show the use or abuse of a trust by a trustee, to use the trust as his or her alter ego, the veneer of a trust can be pierced and the trustee held personally liable for the debts of the trust.'

This observation, by Kate Scott-Shaw, of Norton Rose, in an analysis on the Legalbrief Today site, follows the South Gauteng High Court judgment in the case of Rees & Others v Harris & Others. In that case, the court held that in appropriate circumstances, the veneer of a trust can be pierced in the same way as the corporate veil of a company. Scott-Shaw notes that in this particular case, the court found that there was nothing to suggest, on a balance of probabilities, that the assets of the trust were in fact the assets of Rees in his personal capacity. Scott-Shaw adds the court held that piercing of the veil is an exceptional act. 'The separate legal personality of a corporate entity is to be recognised and upheld, except in the most unusual circumstances. The circumstances where a court will disregard the distinction between a corporate entity and those who control it depend on a close analysis of the facts of each case, considerations of policy and judicial judgment. There must at the very least be some misuse or abuse of the distinction between the entity and those who control it, giving them an unfair advantage.' Full analysis on the Legalbrief Today site Rees & Others v Harris & Others