In the celebrated case of Morton H. Meinhard v Walter J. Salmon et al, 249 N.Y. 458 (1928), Hon. Justice Benjamin N. Cardozo famously opined that “A trustee is held to something stricter than the morals of the marketplace. Not honesty alone, but the punctilio of an honour the most sensitive, is then the standard of behaviour.” Although made nearly a century ago, it remains one of the most authoritative judicial pronouncements on the fiduciary nature of trusteeship. It underscores the principle that trustees are entrusted with property for the benefit of others (not for their own benefits) and must therefore discharge their duties with the highest standards of loyalty, accountability and good faith.
Recently, trusts have become increasingly significant in Tanzania as effective legal structures for preserving family wealth, facilitating succession planning and ensuring continuity in property administration. Unlike informal family arrangements, a properly constituted Trust establishes a legal framework within which trustees administer trust property for the benefit of designated beneficiaries in accordance with the Settlor’s intention. The success of trusts depends not merely on their incorporation but also on the certainty with which the trustees’ obligations are defined. While many Trusts are established with noble intentions, disputes frequently arise where trustees’ responsibilities are left to assumptions, oral understandings or informal family arrangements instead of being expressly incorporated into the Trust Deed. Consequently, beneficiaries may find themselves unable to enforce obligations they genuinely believe exist, while trustees are equally exposed to disputes arising from uncertain governance structures.
The above controversy was a real practical challenge exposed by the High Court of the United Republic of Tanzania (Hon. Simfukwe, J) in The Registered Trustees of Alli Mberesero Foundation v Wilfred Benedict Mberesero & George Benedict Mberesero, Civil Case No. 01 of 2022, where the Court was called upon, among others, to determine whether family members managing properties belonging to a family foundation were under legal obligation to account for the profits allegedly generated from those properties. The Plaintiff contended that the Defendants had breached a management trust by failing to render accounts and remit profits to the Foundation. However, after examining the documentary and oral testimony the Court found that the alleged obligations had not been legally established. In its Judgement delivered on 25 November 2024, the Court at page 30 and 31, paras. 4 and 1 respectively held thus: –
“…it is clear that there was no lease or contractual relationship between the plaintiff and the defendants that would require the defendants to account for the properties under their supervision. Furthermore, there is no arrangement or evidence indicating that the alleged properties were placed under the 1st Defendants’ supervision, let alone requiring him to render a true account of the profits.”
This decision presents an important lesson for individuals, families and organizations establishing Trusts in Tanzania. It demonstrates that courts cannot enforce obligations founded upon assumptions or informal arrangements; rather, trustees’ duties must be clearly documented through legally enforceable instruments capable of creating certainty in the administration of trust property. It is imperative to note that even the law under section 3 of the Trusts Incorporation Act [Cap. 318 R.E 2023] states that an application for the incorporation of a Trust must be accompanied by the trust instrument or declaration of trust defining the trusts on which the property is held. This requirement is not merely procedural but rather a reflection of the legislature’s recognition that every Trust should be governed by a properly drafted instrument clearly defining the legal relationship between the Trust, its Trustees and its Beneficiaries.
The High Court’s decision in the Registered Trustees of Alli Mberesero Foundation v Wilfred Benedict Mberesero & Another (Supra) was more than a determination of a family dispute. It serves as a practical reminder that the effectiveness of any Trust depends on the certainty of its governance framework. In this case, while the Plaintiff sought to establish that the Defendants were obliged to account for the management of the trust properties, the Court ultimately found that those obligations had not been reduced to legally enforceable terms. Therefore, below are the key take away from the decision: –
First, a properly drafted trust instrument should clearly define the trustees’ obligations. One of the principal issues before the Court was whether the Defendants were legally required to account for the income generated from the properties under their management. The Plaintiff maintained that such obligations arose from family arrangements and the establishment of the Foundation. However, the Court rejected that contention after finding no evidence establishing an enforceable obligation requiring the Defendants to account. The Court held at page 30 para 4 thus: –
“…it is clear that there was no lease or contractual relationship between the plaintiff and the defendants that would require the defendants to account for the properties under their supervision.”
These findings reinforce the importance of careful trust structuring. Trustees’ obligations should never be left to implication. Where trustees are expected to render accounts, remit profits, preserve trust property, seek approval before dealing with trust assets or periodically report to beneficiaries, the Trust Instrument should be structured to cover such obligations. Courts can only enforce obligations that are clearly created through legally recognized instruments. As section 3 of the Trustees’ Incorporation Act requires the trust instrument to define trusts upon which trust is held, such an instrument should clearly indicate trustees’ fiduciary duties, reporting obligations, management and powers and accountability mechanisms, failure of which may render intended obligations incapable of judicial enforcement.
Second, informal family arrangements cannot substitute a properly structured trust. The Plaintiff further relied on the minutes of the 3rd family meeting to establish that the Defendants had accepted responsibility for managing the family properties on behalf of the Foundation. However, after examining the document the Court at page 31 para 2 lines 6, 7, and, 8 had this to say: –
“…I find no statement categorically indicating that the properties were entrusted to the Defendants with a requirement to render a true account thereof.”
The above finding demonstrates that family meeting minutes and resolutions may record the intentions of family members, but they do not necessarily create a legally enforceable fiduciary obligation. This again reminds us that during the structuring of trusts, every material obligation intended to bind the trustees should be incorporated in the trust instrument rather than being left to informal arrangements or subsequent interpretation.
Third, certainty in drafting a trust instrument is the cornerstone of effective trust administration. While considering the agreement relied upon by the Plaintiff the Court observed that certain provisions were uncertain and, therefore, incapable of creating enforceable obligations. The Court referred to section 29 of the Law of Contract Act [Cap. 345 R.E 2019 now R.E 2023] at page 33 para 2 and reiterated that “An agreement, the meaning of which is not certain, or capable of being made certain, is void.“
Although the above observation was made in relation to the agreement before the Court, the principle is equally applicable to trust structuring. Certainty being a legal requirement is also an essential safeguard against future disputes; thus, terms and obligations in the trust instruments should never be left to interpretation. When the obligations of trustees are expressed clearly, both trustees and beneficiaries understand the scope of their respective rights and responsibilities, thereby promoting the effective administration of trust property.
Lastly, the incorporation of a Trust does not cure a poorly structured trust; the foundation in question had already been incorporated under the law; however, such incorporation did not assist the plaintiff because the alleged obligations sought to be enforced were not properly established through legally enforceable documentation. Sections 9 and 10 of the Trustees’ Incorporation Act (supra) clarify that upon incorporation, a trust becomes a corporate body with perpetual succession capable of holding and dealing with property in its corporate name. While incorporation confers legal personality to a trust, it does not prescribe how trust property should be administered or what obligations trustees owe to beneficiaries. These matters remain dependent on the instrument of trust and the legal framework governing the trust. This again reminds us that proper structuring and certainty will prevent disputes concerning the administration of trust property.
Therefore, the effectiveness of any trust ultimately depends on the certainty and clarity with which it is structured. A well drafted trust instrument that comprehensively defines the trustees’ duties, powers and accountability mechanisms provides a sound legal foundation for effective trust administration, protects the interests of beneficiaries and minimizes the likelihood of future disputes. It is imperative that individuals, families and organizations establishing trusts in Tanzania accord careful attention to the structuring of the trust from the outset, recognizing that legal certainty is not merely a matter of good drafting but the cornerstone of sound governance, transparency and the trust’s long-term success.
Authored by:
Kelvin Nyagawa
Advocate – Victory Attorneys & Consultants
Victory Attorneys & Consultants is a leading full-service law firm advising businesses, investors, and institutions on commercial transactions, contract structuring, intellectual property protection, regulatory compliance, and dispute resolution. We help clients navigate complex legal frameworks while safeguarding their commercial interests and supporting long-term business success.
This article is not intended to offer legal advice but rather aims to provide general information on the subject matter discussed. It does not constitute and should not be relied upon as legal advice. Victory Attorneys & Consultants explicitly disclaims any responsibility for any loss that may occur if this article is relied upon without first seeking professional legal advice from our legal experts. Individuals should consult qualified professionals for tailored legal guidance related to their specific circumstances.
