¶ 1001
Overview
Scope of the chapter. This chapter examines the two kinds of Nevis international trust that exist for purposes instead of persons: the trust for a charitable purpose and the trust for a non-charitable purpose. The Nevis International Exempt Trust Ordinance, Cap. 7.03(N) (rev. ed. 2017) ("NIETO"), admits both. Its definition of a trust includes property held "for any valid charitable or non-charitable purpose which is not for the benefit only of the trustee," and property held for persons and purposes together. NIETO § 59(b)–(c). Section 7 defines charitable purposes. Section 8 permits a trust for a non-charitable purpose on three conditions, the most important of which is the appointment of a protector capable of enforcing it. Sections 13, 14 and 25 govern what happens when a purpose is fulfilled, fails or proves partly unlawful. Id. §§ 7, 8, 13, 14, 25.
Where the chapter sits. Chapter 5 describes the Ordinance as a whole and the conditions for registration as an international trust (see supra ch. 5). Chapter 6 treats the creation of a trust, including the certainty of purposes in statutory form (see supra ¶ 650.09). Chapter 9 treats the protector, whose office is mandatory for a non-charitable purpose trust (see supra ¶ 910.05). This chapter draws those threads together for trusts that have no beneficiary, or that have purposes alongside beneficiaries. Chapter 11 treats variation and termination generally, and chapters 18 to 20 treat the multiform foundation, which is the main alternative to a purpose trust for holding property that no one is meant to own (see infra chs. 11, 18–20).
Why purpose trusts matter in practice. The English casebooks fill their chapters on purpose trusts with horses, hounds, tombs and masses. Those cases explain the law but say little about the modern use of the device. In offshore practice a non-charitable purpose trust is used to hold property that no person is intended to own beneficially: the shares of a private trust company, so that the company acting as trustee of a family's trusts is owned by none of the family; the shares of a special purpose company in a financing, so that the company is "orphaned" from the group that sponsors it; or the shares of a family company, held so that the company is kept together across generations. Charitable trusts are used for philanthropy in the ordinary way and, in combination with private trusts, for structures that provide for a family and for charity from the same fund. Each of these uses depends on three things: a purpose the law will accept, a person with standing and a duty to enforce it, and a clear answer to what happens to the property when the purpose is spent.
The Nevis position in summary. Nevis follows the pattern adopted in Belize and several other jurisdictions that legislated in the 1990s. A non-charitable purpose must be "specific, reasonable and capable of fulfillment," must not be "immoral, unlawful or contrary to the public policy of Saint Christopher and Nevis," and the trust terms must "provide for the appointment of a protector who is capable of enforcing the trust and for the appointment of a successor to the protector." NIETO § 8(1)(a)–(c). If there is no protector, the Minister may appoint one. Id. § 8(2). The protector's fiduciary duty runs "to the purpose for which the trust is created." Id. § 10(8). Charitable purposes are defined in six heads, including the protection of the environment and the advancement of human rights, and need not be carried out or felt in Nevis. Id. § 7. A charitable trust may have more than four trustees, is deemed always capable of performance, and on failure is applied cy-près by the Court instead of resulting to the settlor. Id. §§ 13(2), 14, 25(1)(c), 36(4). Like every international trust, a purpose trust may last indefinitely. Id. § 5(2).
Terminology. The Ordinance uses "protector" for the person who enforces a non-charitable purpose trust. Other statutes use "enforcer" for the same function, and the Cayman statute uses "enforcer" for the person with standing to enforce a special trust (see infra ¶ 1080). In this chapter "enforcing protector" means the protector of a non-charitable purpose trust in its role under section 8(1)(c). "Purpose trust" without more means a trust for a non-charitable purpose. "Charitable trust" means a trust for a purpose that is charitable under section 7.
Plan of the chapter. Paragraphs 1010 and 1020 set out the general law: the beneficiary principle and its exceptions, and the cases in which a purpose trust is upheld because it benefits persons. Paragraph 1030 examines section 8. Paragraph 1040 examines enforcement by the protector, the Minister and the Court. Paragraph 1050 examines the commercial and family uses of the purpose trust. Paragraphs 1060 and 1070 treat charitable trusts and the rules on failure, cy-près and variation. Paragraph 1080 compares the Nevis purpose trust with mixed trusts, with the special trusts of other jurisdictions and with the multiform foundation. Paragraph 1090 closes with model provisions and a drafting checklist.