¶ 801
Overview
Scope of the chapter. This chapter examines the persons for whose benefit a Nevis international trust is held and the interests they take. It asks who may be a beneficiary under the Nevis International Exempt Trust Ordinance, Cap. 7.03(N) (rev. ed. 2017) ("NIETO"); what a beneficiary owns, or does not own, under a fixed and a discretionary trust; how far a beneficiary's own creditors can reach that interest; how protective and spendthrift trusts work under section 6; what a beneficiary may learn about the trust; when beneficiaries may bring the trust to an end; how a deed may add, exclude and condition beneficiaries; and how the Ordinance answers claims by spouses, heirs and foreign courts against a beneficiary's interest. It closes with the beneficiary's remedies and a drafting checklist.
Where the chapter sits. Chapter 5 describes the Ordinance as a whole and the definition of an international trust (see supra ch. 5). Chapter 6 examines the creation of a trust, the three certainties and the settlor's retained powers (see supra ch. 6). Chapter 7 examines the trustee's duties, including the duty to account and the court's supervision of disclosure under Schmidt v. Rosewood Trust Ltd. (see supra ¶ 750.08). Chapter 9 examines the protector, whose powers over distributions bear directly on the beneficiaries (see infra ch. 9). The settlor's creditors, as distinct from a beneficiary's creditors, are the subject of Part V (see infra chs. 21–25). This chapter refers to those chapters where they carry the fuller treatment.
The statutory scheme in outline. The Ordinance deals with beneficiaries in several places. Section 2 defines "beneficiary" and "interest" and requires, as a condition of international-trust status, that the beneficiaries be "at all times non-resident." NIETO § 2. Section 34 provides how a beneficiary is identified, permits a deed to add and exclude beneficiaries and to impose conditions, and lists the entities that may be beneficiaries. Id. § 34. Section 35 permits a disclaimer. Id. § 35. Section 6 authorises protective and spendthrift trusts and supplies a statutory protective trust. Id. § 6. Sections 9, 11 and 12, inserted by Ordinance No. 2 of 2015, deal with the creditors of a beneficiary who holds a discretionary interest, a general power of appointment or, in the settlor's case, a power of revocation. Id. §§ 9, 11, 12. Section 40 allows the deed to "expand, restrict, eliminate, or otherwise vary the rights and interests of beneficiaries," including the right to be informed. Id. § 40(1). Section 63 applies the Confidential Relationships Act, Cap. 21.02, to every registered trust. Id. § 63(1).
The two themes of the chapter. Two themes run through the material. The first is the gap between a beneficiary's position under the general law of trusts, inherited from England (see supra ch. 2), and the position under the Ordinance. The general law gives a beneficiary under a fixed trust a proprietary interest that may be assigned, charged and reached by creditors. It gives the objects of a discretionary trust a right to be considered and to hold the trustee to account. The Ordinance leaves those rules in place where the deed adopts them, but it allows the deed to narrow them and, for discretionary interests, it states in terms that the interest is "a mere expectancy." NIETO § 9(2). The second theme is that the Ordinance protects the beneficiary's interest against outsiders while giving the settlor and the trustee wide freedom to shape it. A beneficiary's protection against a creditor or a foreign court is strong; a beneficiary's protection against the terms of the deed is limited to what the deed itself provides and to the trustee's irreducible duties.
Terminology. This chapter uses "beneficiary" in the statutory sense, which includes the object of a discretionary trust or power (see infra ¶ 810.02). A "fixed interest" is an interest that the beneficiary is entitled to receive without any further decision by the trustee, such as a life interest in income or a vested share of capital. A "discretionary interest" is the position of a beneficiary whose entitlement depends on the trustee's discretion, as section 9(10)(a) defines it. A "protective trust" is a trust under which a fixed interest ends on a determining event and a discretionary trust takes its place. A "spendthrift provision" is a restriction on the beneficiary's power to alienate the interest and on creditors' power to reach it. The Ordinance uses "protective or spendthrift trust" as a single expression. NIETO § 6(1)(c).
No Nevis authority. No reported Nevis decision construing sections 6, 9, 11, 12, 34, 35 or 40 has been found. The analysis below therefore rests on the text of the Ordinance, read with the English and Commonwealth authority that the Nevis courts apply under the reception rules described in chapter 2 (see supra ch. 2), and with the Privy Council's decisions on appeal from other offshore jurisdictions. Where the chapter states a reading of the Ordinance that no court has tested, it says so.