Non-Charitable Purpose Trusts:
The Missing Right to Forego Enforcement
Kelvin FK Low
1. INTRODUCTION
It is customary1 to begin a discussion on the viability of non-charitable purpose trusts (NCP
trusts) by referring to what came to be known as the ‘beneficiary principle’ as derived from Sir
William Grant MR’s oft-quoted passage from Morice v. Bishop of Durham:2
There can be no trust over the exercise of which this Court will not assume a
control: for an uncontrollable power of disposition would be ownership and not
trust. If there be a clear trust but for uncertain objects, the property, that is the
subject of the trust, is undisposed of and the benefit of such trust must result to
those to whom the law gives the ownership in default of disposition by the former
owner. But this doctrine does not hold good with respect to trusts for charity. Every
other trust must have a definite object. There must be somebody in whose favour
the Court can decree performance.
Although affirmed on appeal by no less than Lord Eldon LC,3 the wisdom of his Lordship’s
opinion, proffered at the turn of the nineteenth century, is beginning to appear decidedly
outdated. Many offshore jurisdictions have, particularly towards the end of the twentieth
century and the beginning of the twenty-first, enacted legislation giving effect to precisely such

Associate Professor, School of Law, Singapore Management University. The author is grateful to
participants at the inaugural Modern Studies in the Law of Trusts and Wealth Management conference
held in Singapore in July 2015, in particular Professor Matthew Conaglen, for their valuable comments
during a presentation upon which this paper. Special thanks are also due to Professor Francis Reynolds
for his assistance with the modified Latin quote from Juvenal and Assistant Professor Jack Lee for his
assistance on the public law aspect of the paper. The usual disclaimers apply.
1
Cf Paul Matthews, ‘The New Trust: Obligations without Rights?’ in A. J. Oakley (ed.), Trends in
Contemporary Trust Law (Oxford: Oxford University Press, 1996), p. 1, 2.
2
(1804) 9 Ves Jr 399, 404-405; 32 ER 656, 658.
3
Morice v. The Bishop of Durham (1805) 10 Ves Jr 522, 32 ER 947.
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trusts.4 Most onshore jurisdictions appear to have resisted enacting similar legislation despite
calls to do so. In Singapore, the failure to do so in its 2004 reforms to its trusts law led to
criticism that its reform was too conservative.5 Hong Kong, another Asian financial centre with a
common law tradition, likewise resisted6 calls to introduce NCP trusts by legislation in its 2013
reforms despite proposals to do so by professional bodies in its trust industry.7 This reticence
seems difficult to reconcile with the as yet untested but respected views of Hayton who suggests
that the faint-hearted law reformers may simply be sidestepped by the careful stroke of a pen in
the hand of a solicitor (or other draftsman).8 But can it? Does the introduction of an enforcer by
a draftsman cure the ill of a NCP trust? The controversy over whether it does is often obscured
by irrelevant considerations and the use of incongruous analogies but it is suggested that the
answer is ultimately ‘no’ because the office of an enforcer seeks to solve the problem of
enforcement but in doing so, unavoidably replicates it.
2. THE IRRELEVANCE OF THE PROPERTY/OBLIGATION DEBATE
There are suggestions by some commentators that the proprietary nature of the modern trust
played a significant role as an obstacle to the development of a private purpose trust. Thus,
Matthews suggests ‘that the solidification over time of the beneficiary’s personal right against
the trustee into an interest in the property had profound effects both here and elsewhere in the
law. Had the right remained purely personal, it might have developed into a law of obligations
rather like the civil law of contract, i.e. voluntarily assumed obligations, without the need for a
doctrine of consideration. This in turn might have assisted the development of purpose trusts.
But it did not’.9 The assumption underlying this ‘note in passing’10 seems to be that the idea of
4
Mark Pawlowski and Jo Summers, ‘Private Purpose Trusts – A Reform Proposal’ [2007] Conv 440 at
448-449.
5
Chan Sek Keong, ‘Trusts and the Rule of Law in Singapore’ (2013) 25 SAcLJ 365 at 375, referring to the
criticisms by a trust practitioner, Mr Mark Lea.
Bills Committee on Trust Law (Amendment) Bill 2013, ‘Summary of Views Submitted by
6
Organizations/Individuals on the Bill and the Administration’s Response’ (LC Paper No CB(1)869/1213(04), 2013), 1. www.legco.gov.hk/yr12-13/english/bc/bc03/papers/bc030422cb1-869-4-e.pdf
7
Joint Committee on Trust Law Reform (comprising the Hong Kong Trustees’ Association Ltd and the
Hong Kong Branch of the Society of Trust and Estate Practitioners), ‘Trust Laws for the 21st Century’ (3
April 2007) 5. http://hktrustees.com/upload/article/Trust_Laws_for_the_21st_Century.pdf
8
David J. Hayton, ‘Developing the Obligation Characteristic of the Trust’ (2001) 117 LQR 96.
9
Matthews, ‘The New Trust: Obligations without Rights?’, pp. 1-2.
10
Matthews, ‘The New Trust: Obligations without Rights?’, p. 1.
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an enforcer salvaging an otherwise invalid NCP trust is easier to contemplate if the trust were
conceived of as an obligation rather than property. This is perhaps also the reason why Hayton
premised his thesis on ‘[d]eveloping the obligation characteristic of the trust’.11 In his famous
article, Hayton downplays the necessity of equitable property to a modern understanding of the
trust through the example of a discretionary trust with an extensive fluctuating range of
beneficiaries.12 According to him, since ‘most will never receive any trust assets’, ‘it is rather
strange for [them] to be regarded as owning equitable interests in the trust property rather
than choses in action against the trustee’.13 This arguably involves a regression of sorts for the
modern conception of the trust. Hayton had previously observed, even while supporting the
offshore developments, that ‘[w]hile the essence of a trust was originally a moral obligation of
conscience, it has developed in New Zealand and England as a property receptacle providing
proprietary interests for beneficiaries rather than as a moral repository of the settlor’s wishes.
The notion of trust property not beneficially owned is abhorrent’.14 This temporal regression to
the historical origins of the trust has been criticised as having ‘the effect of degrading the trust
to contract-like agreement’15 when ‘[t]he orthodoxy is that, on top of in personam rights to
compel the trustee to administer the trust according to its term [sic] … , beneficiaries also hold
an equitable proprietary right in the trust property’.16
The problem with this criticism is that it is both unnecessary and unfounded. First, it is notable
that the common law, unlike civilian traditions, employs a slippery notion of property.17 Choses
in action, for example, are considered a form of personal property18 even though the classical
11
Hayton, ‘Developing the Obligation Characteristic of the Trust’.
12
Hayton, ‘Developing the Obligation Characteristic of the Trust’, 101-102.
13
Hayton, ‘Developing the Obligation Characteristic of the Trust’, 102.
14
David Hayton, ‘Whither Trusts in the Twenty-first Century: Part 2’ (2000) 3 PCB 163 at 170-171.
15
Matteo Ho, ‘Time to Allow Non-Charitable Purpose Trusts in Hong Kong?’ (2014) 44 HKLJ 519 at 540. Cf
Paul Matthews, ‘From Obligation to Property, and Back Again? The Future of the Non-Charitable Purpose
Trust’ in David Hayton (ed.), Extending the Boundaries of Trusts and Similar Ring-Fenced Funds (The
Hague: Kluwer Law International, 2002), pp. 203, 230.
16
Ho, ‘Time to Allow Non-Charitable Purpose Trusts in Hong Kong?’, 523. Cf Matthews, ‘From Obligation
to Property, and Back Again?’, p. 229.
17
For example, contrast the views of Peter Birks, ‘Before We Begin: Five Keys to Land Law’ in Susan
Bright and John Dewar (eds.), Land Law: Themes and Perspectives (Oxford: Oxford University Press,
1998), p. 457, with those of Jim Harris, ‘Property – Rights in Rem or Wealth?’ in Peter Birks and Arianna
Pretto (eds.), Themes in Comparative Law: In Honour of Bernard Rudden (Oxford: Oxford University
Press,2002), p. 51. See also Paul Matthews, ‘From Obligation to Property, and Back Again?’, pp. 210-211.
18
Michael Bridge, Personal Property Law, 4th edn (Oxford: Oxford University Press, 2015), p. 15.
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chose in action is a contractual right, a right that is indisputably an obligation (in personam)
rather than property in the strict sense (in rem). It is trite law that such contractual rights are
sufficiently proprietary to form the subject matter of a trust.19 However, some take objection to
a reference to obligations as property properly so-called. 20 While others defend the reference to
obligations as property, whether on the basis that property ought to refer to wealth21 or
exclusive rights to a resource,22 it is clear that property in the trust context does not refer to in
rem rights in the strict sense.23 Nor does Hayton wholly denude the trust of all proprietary
characteristics in his thesis. As he explains, ‘[s]ufficient proprietary aspects therefore arise in
relation to non-charitable purpose trusts to justify their existence as enforceable trusts where
an enforcer is expressly appointed in the English or foreign trust instrument’,24 referring here to
the right to trace in equity. He is simply making the incontrovertible point that many
beneficiaries of discretionary trusts will never derive any benefits from the subject matter of the
trust,25 whether capital or income, incidents one normally associates with an owner of
property.26
However, and more significantly, his proposed solution to the issue of enforcement is fatally
flawed, at least as a simple drafting device by anyone other than the Parliamentary draftsman.27
Whilst the problem with NCP trusts may perhaps not inaccurately be described as one of
enforcement, such a description of the problem obfuscates the differences between a beneficial
19
Lord Strathcona Steamship Co. Ltd v. Dominion Coal Co. Ltd [1926] AC 108 at 124 (Lord Shaw): ‘The
scope of the trusts recognised in equity is unlimited. There can be a trust of a chattel, or of a right or
obligation under an ordinary legal contract, just as much as a trust of land.’ [Emphasis added]
20
Birks, ‘Before We Begin: Five Keys to Land Law’, p. 457. See also Simon Douglas and Ben McFarlane,
‘Defining Property Rights’ in James Penner and Henry Smith, Philosophical Foundations of Property Law
(Oxford: Oxford University Press, 2013), p. 219.
21
Harris, ‘Property – Rights in Rem or Wealth?’, p. 51.
22
Kelvin F.K. Low and Jolene Lin, ‘Carbon Credits as EU Like It: Property, Immunity, TRagiCO2medy?’
(2015) 27 Journal of Environmental Law 377 at 388-389.
23
Lionel Smith, ‘Trust and Patrimony’ (2008) 38 Revue générale de droit 379; Ben McFarlane and Robert
Stevens, ‘The Nature of Equitable Property’ (2010) 4 Journal of Equity 1.
24
Hayton, ‘Developing the Obligation Characteristic of the Trust’, 102.
25
Cf Matthews, ‘From Obligation to Property, and Back Again?’, pp. 211-212.
26
A.M. Honoré, ‘Ownership’ in A.G. Guest (ed.), Oxford Essays in Jurisprudence (Oxford: Oxford University
Press, 1961), pp. 107, 117-119.
27
This is arguably not an issue if the solution is legislatively authorised, at least within the jurisdiction
itself though this problem may possibly give rise to problems of recognition by other jurisdictions. See
below, ‘10. Private International Law’.
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owner and an enforcer. As Matthews observed, using language typically associated with
property without so labelling a beneficiary’s right, ‘[h]owever we label the right-holder’s
interest, we know that its content strips away from the legal owner – and from many, if not most,
third party acquirers, too – the rights of beneficial enjoyment of that property. In the case of an
NCP trust, the same must logically be true of the “enforcer’s” rights: the trustee of such a trust
loses the rights of beneficial enjoyment of the property that he owns. But, unlike the beneficiary
of a conventional trust, the enforcer does not become entitled to those rights’.28 It is notable that
in his classic essay on ‘Ownership’, Honore describes the right to the capital, one of his incidents
of ownership, as ‘consist[ing] in the power to alienate the thing and the liberty to consume, waste
or destroy the whole or part of it’.29 [Emphasis added] Matthews asserts that this state of affairs
is untenable, at least as a matter of English law, in that it entails creating a ‘beneficial property
“vacuum”’.30 In truth, the vice is more serious and the matter may be differently put, without
utilising any of the vocabulary associated with property. As the Roman poet Juvenal astutely
observed, ‘Quis custodiet ipsos custodes?’ 31 Often translated today as ‘Who watches the
watchmen?’,32 it may at first glance appear as if both the beneficiary and an enforcer serve the
same purpose of ‘watching’ the trustee ‘watchmen’. There is, however, an important difference
between the two. A beneficiary, being the beneficial holder of the right,33 is under no obligation
himself to enforce the same. He is entirely free to forego enforcement for good, bad or no
reasons. A right holder properly so-called, whatever the nature of his right (in rem, in personam
or otherwise), may by definition, ordinarily waive it. If not, then he holds the right subject to a
duty. An enforcer, Matthews rightly notes, is not such a beneficial holder. He is an office holder
and some offshore jurisdictions even explicitly conceive of his office as a fiduciary one.34 But
herein lies the problem. Like a trustee, the office is the repository of both rights and duties. Like
28
Matthews, ‘From Obligation to Property, and Back Again?’, p. 229.
29
Honoré, ‘Ownership’, p. 118.
30
Matthews, ‘From Obligation to Property, and Back Again?’, p. 230.
31
Decimus Junius Juvenalis, Satires, VI, 347, quoted as the epigraph in John Tower (Chairman), Report of
the President’s Special Review Board (26 February 1987), B1.
32
Most famously in Alan Moore, Dave Gibbons and John Higgins, Watchmen (DC Comics, 1986-1987).
33
It is irrelevant for present purposes whether the right is properly described as proprietary or personal.
34
See, eg, s. 101(2) of the Cayman Islands’ Trusts Law (2011 Revision). See also s. 16(5) Belize Trusts Act
(Cap. 202, 2000 Rev. Ed.) though in Belize the office holder is called a protector rather than an enforcer. Cf
s. 84A(17) of the British Virgin Islands Trustee Act (Cap. 303), which provides: ‘An enforcer of a trust
appointed in accordance with the provisions of this section shall have both the power and the duty of
enforcing it.’ [Emphasis added]
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a trustee, his rights are burdened by duties parasitic upon those very rights.35 A trustee under
an ordinary trust holds the rights to the subject-matter of the trust subject to duties, both
fiduciary and non-fiduciary, to a beneficiary or beneficiaries. There, the inquiry ends, neatly.
(see Figure 1)
Figure 1
T
B
Making the trustee owe obligations to another office-holder (such as an enforcer) resolves
nothing.36 If that office-holder owes similar obligations to the trustee, as a joint trustee would,
there would simply be a hopelessly circular loop of rights and duties.37 (see Figure 2)
Figure 2
T
E
If that office-holder does not owe obligations to the trustee, then it simply replicates the
problem of who would hold the trustee to account for the new office of enforcer without
proposing a further solution.38 (see Figure 3)
35
Cf Smith, ‘Trust and Patrimony’, McFarlane and Stevens, ‘The Nature of Equitable Property’.
36
It should be observed here that the interposition of the Attorney-General in a charitable trust is
somewhat different as the Attorney-General’s office is not a private one but a public one. See below, ‘4.
Charitable Trusts’.
37
See, eg, s. 100(5) of the Cayman Islands’ Trusts Law (2011 Revision), ss. 84 and 84A of the British
Virgin Islands Trustee Act (Cap. 303).
38
See, eg, s. 101(2) of the Cayman Islands’ Trusts Law (2011 Revision). See also s. 16(5) Belize Trusts Act
(Cap. 202, 2000 Rev. Ed.) though in Belize the office holder is called a protector rather than an enforcer. Cf
s. 84A(17) of the British Virgin Islands Trustee Act (Cap. 303), which provides: ‘An enforcer of a trust
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Figure 3
T
E
?
In place of asking, ‘Who watches the (trustee) watchman?’, we would then have to ask, ‘Who
watches the (enforcer) watchman who watches the (trustee) watchman?’ Quid custodiet
custodem custodum? As a matter of orthodox trust law, this gap will likely be filled by the settlor
via a resulting trust. If that is the case, then all that will be achieved by Hayton’s drafting
exercise would be a trust in favour of the enforcer with a sub-trust in favour of the settlor, with
a power on the part of the trustee to apply the trust property to the authorised purpose
(without the settlor’s consent) or such other purposes as permitted by the settlor as ultimate
beneficiary. This result, though, will likely carry undesirable fiscal implications for a settlor. If it
is thought that the solution is to simply specify in the trust deed that the enforcer owes no
duties whatsoever, such a ‘solution’ would carry the not insignificant risk that the law would
simply regard the enforcer as a beneficiary in the traditional sense, thus transferring the
undesirable fiscal implications from settlor to enforcer. After all, ‘[t]he manufacture of a fivepronged implement for manual digging results in a fork even if the manufacturer, unfamiliar
with the English language, insists that he intended to make and has made a spade’.39 The
enforcer in such circumstances resembles a beneficiary under a trust whereby the trustee has
been conferred a power to use the trust property to further a particular purpose, albeit with
somewhat differently aligned (arguably misaligned) incentives.40 So understood, the problem is
not one of ‘ownerless property’41 but a more fundamental one that persists regardless of how
one regards the institution of the trust – property, obligation or something sui generis. It is the
presence of a duty without a corresponding right.
In a different part of his paper, Matthews describes the problem slightly differently, arguing that
an action for the breach of trust requires the claimant in the action to possess a vested interest
because ‘breach of trust is about damage to a vested interest’.42 [Emphasis in original] This
appointed in accordance with the provisions of this section shall have both the power and the duty of
enforcing it.’ [Emphasis added]
39
Street v. Mountford [1985] 1 AC 809 at 819 (Lord Templeman).
40
See below, ‘8. The Uses of NCP Trusts’.
41
Matthews, ‘From Obligation to Property, and Back Again?’, p. 228.
42
Matthews, ‘From Obligation to Property, and Back Again?’, pp. 224-227.
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argument has been rejected as circular.43 It is said that whilst the irreducible core of trusteeship
requires accountability, ‘this simply raises the question as to who should hold the reins; it does
not provide the answer’.44 The simpler retort would have been to point to the subtrust. Equity
undoubtedly recognises the subtrust and an intermediate subtrustee, despite not possessing
any beneficial interest in the subject matter of the trust, is presumably entitled to sue his
immediate superior trustee for breach of trust. Indeed, it is probably true that he is obliged to at
least consider bringing an action should the circumstances suggest there has been a possibility
of breach. The key is indeed the right/duty relationship,45 but not as Matthews conceives of it.
The problem is not the misalignment of right and interest but the conferral of a right burdened
by a duty without identifying the corresponding right to that duty. Duties can only be owed to
persons, even fictional persons such as companies. They cannot, however, be owed to abstract
purposes. It is here also convenient to likewise dismiss Parkinson’s objection that because
enforcers lack the proper incentives to enforce the trustees’ obligations, even an obligational
view of the trust cannot sustain NCP trusts simply through their appointment. It is not true that
‘[e]quity protects the trust by means of tension. … That is, the enforcer must have interests to
protect, not necessarily in a proprietary sense, but in the sense that he or she is interested in the
fulfilment of the trustees’ obligations’.46 There is nothing in the case law to suggest that a trust
would fail simply because its beneficiaries showed no interest in enforcing it. Beneficiaries are
perfectly entitled to waive breaches of trust even if this would result in the failure of the settlors’
wishes. As unburdened rightholders, beneficiaries are perfectly free to decide not to enforce
their rights. Indeed, the consent of a beneficiary is the classic defence for a trustee to an action
for breach of trust.47
3. THE INSIGNIFICANCE OF SAUNDERS v. VAUTIER
It has been suggested that the rule in Saunders v. Vautier,48 which allows absolutely entitled
beneficiaries who are sui juris to terminate a trust and require a conveyance of the trust
property even contrary to the settlor’s wishes, reflects ‘a fundamental rule of English private
43
James Goodwin, ‘Purpose Trusts: Doctrine and Policy’ (2013) 24 KLJ 102 at 104.
44
Goodwin, ‘Purpose Trusts: Doctrine and Policy’, 104.
45
Matthews, ‘From Obligation to Property, and Back Again?’, p. 241.
46
Patrick Parkinson, ‘Reconceptualising the Express Trust’ (2002) 61 CLJ 657 at 680.
47
Re Pauling’s Settlement Trusts [2962] 1 WLR 86; Holder v. Holder [1968] Ch 353; Re Freeston’s Charity
[1978] 1 WLR 741.
48
(1841) 4 Beav 1158; 41 ER 482.
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trust law … that the trust must be for the benefit of persons rather than for purposes’.49 The rule
is incapable of application in the context of purpose trusts since a purpose or purposes cannot
band together to terminate the trust. Accordingly, they undermine a fundamental feature of
trust law and ought not to be considered trusts properly so-called. The problem with this
criticism of NCP trusts is that it also necessarily calls into question developments in other
(onshore) common law jurisdictions which have varied or abandoned the rule, whether
legislatively or judicially. In America, the leading case is Claflin v. Claflin,50 approved by the
Supreme Court in Shelton v. King,51 which takes the view that the settlor’s wishes may only be
overridden when they are contrary to the law or public policy. In Canada, Alberta and Manitoba
have departed from the rule in Saunders v. Vautier by way of legislation in 197352 and 1983.53
Although neither province goes as far as to prioritise the wishes of the settlor, as is the case in
America, they do substantially cut down the scope of the rule. Furthermore, the Canadian
Supreme Court in Buschau v. Rogers Communications Inc54 has ruled that the rule has no
application in the context of statutorily regulated pension trusts. While the dilution of the rule
has been described pejoratively as ‘propertylite’55 and risks being regarded as a process of
‘[c]ontractualisation of trusts’,56 it seems clear that the absence of the rule in itself cannot be
considered anathema to the trust as an institution.57 It may be that the abolition of the rule in
Saunders v. Vautier combined with a tinkering of the perpetuities rules may take things too far.58
However, if so, that is a conclusion based on policy, not principle. It is not unprincipled, in the
sense of being self-contradictory or incongruous, to either do away with the principle of
Saunders v. Vautier or the perpetuities rules or even both, although that may not leave the law in
a desirable state as a matter of policy. This seems clear so far as the perpetuities rules is
concerned. According to the editors of Megarry & Wade, ‘It has commonly been the ambition of
landowners to dictate to posterity how their land is to devolve in the future, and so fetter the
powers of alienation of those to whom they may give it. It has always been the purpose of the
49
Paul Matthews, ‘The Comparative Importance of the Rule in Saunders v. Vautier’ (2006) 122 LQR 266 at
274.
50
149 Mass 19, 20 NE 454 (1889).
51
229 US 90, 33 S Ct 686 (1913).
52
See now s. 42 of the Alberta Trustee Act (Cap. T8, 2000 Rev. Ed.).
53
See now s. 59 of the Manitoba Trustee Act (CCSM c. T160).
54
[2006] 1 SCR 973; 269 DLR (4th) 1.
55
Matthews, ‘The Comparative Importance of the Rule in Saunders v. Vautier’, 291.
56
Matthews, ‘The Comparative Importance of the Rule in Saunders v. Vautier’, 293.
57
Matthews, ‘The Comparative Importance of the Rule in Saunders v. Vautier’, 293-4.
58
Matthews, ‘The Comparative Importance of the Rule in Saunders v. Vautier’, 294.
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courts, as a matter of public policy, to confine such settlements within narrow limits and to
frustrate them when they attempt to reach too far into the future.’59 [Emphasis added]
Nor is it obvious that the recognition of property rights requires the law to take the strict
position that the current owner ought to be able to freely ignore conditions imposed on his
acquisition of the same in the fashion that the rule in Saunders v. Vautier permits. It is possible
to impose conditions upon transfers which have the practical effect of constraining the current
owner’s rights to enjoy the property whether by way of the creation of a determinable interest
or a grant upon a condition at law without using the trust. It is true that the determining event
or condition need not be concerned with the use of the property – the classic example is
marriage – but neither is there any rule that prevents a grantor from specifying an event or
condition related to its use provided it does not conflict with public policy. There is no
equivalent rule to that in Saunders v. Vautier permitting grantees to override the grantor’s
wishes in such situations. It is suggested that the rules permitting ‘property’ owners, loosely socalled, to do so are better conceived of as premised on policy. First, it is difficult to conceive of
the rule in pure property terms (in the sense of in rem rights) when one considers that
contractual (in personam) rights can be held on trust. Secondly, and perhaps more importantly,
as explained above, even if one were to reconceptualise the trust in purely contractual terms, an
enforcer does not solve the problem of ensuring mandatory compliance to the terms of the
trust.60 It is no more sensible to conceive of contracting with a contract enforcer than it is to
conceive of settling property in trust on a purpose trust to be enforced by a trust enforcer. The
solution belongs to the school of kicking the can down the road, whether we regard a trust as
proprietary or contractual. The enforcer can sue (in personam) the trustee/contract
counterparty but since the office conceives not merely a right but also a duty of enforcement, we
would have to ask who can sue (in personam) the enforcer? Quid custodiet custodem custodum?
4. CHARITABLE TRUSTS
The obvious retort to a case against NCP trusts is that, since it only purports to prohibit trusts
which purposes are non-charitable, it necessarily involves a concession that there cannot be any
conceptual problems with purpose trusts per se. If charitable purpose trusts are valid, what is
the objection to purpose trusts which are not charitable? Proponents of NCP trusts suggest that
59
Charles Harpum et al, Megarry & Wade: The Law of Real Property, 8th edn (London: Sweet & Maxwell,
2012), p. 317.
60
See above, ‘2. The Irrelevance of the Property/Obligation Debate’.
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the difference is simply ‘because [charitable purpose trusts] are enforceable by the Crown as
parens patriae acting through the Attorney-General or the Charity Commissioners’.61 NCP trusts,
unlike their charitable counterparts, lack a ready-made enforcer that need not be explicitly
provided for. This, in turn, leads to the obvious (and obviously intended to be rhetorical)
question, ‘What, however, if the settlor in his trust deed expressly confers locus standi on an
enforcer interested in the furtherance of the settlor’s specific non-charitable purpose trust?’62
Charities, it is true, derived from the ecclesiastical jurisdiction but came to be ‘hijacked’ by
equity and ‘squeezed … into the pre-existing framework of the trust’.63 However, even
protestors against the NCP trust accept that an objection purely on jurisdictional origins is
unsatisfactory.64 While some have argued that the beneficiaries of a charitable trust are the
public at large, which could explain why a public official, such as the Attorney-General, acts as
enforcer,65 this explanation has not proven wholly convincing, at least not if we are to regard the
public as beneficiaries in the private law sense of the word.66 It is better to regard charitable
trusts as ‘[i]n one sense … a matter of public, rather than private, law’.67 But what does this
mean exactly? It has been suggested that it means that, charitable trusts, with their requirement
of public benefit, justify the dilution of the requirement that an action for the breach of trust
requires the claimant in the action to possess a vested interest.68 However, if as we have
demonstrated, this is not the true objection to NCP trusts, how then do we reconcile an
objection to NCP trusts whilst accommodating charitable trusts? If the true objection is that an
enforcer, properly so-called, cannot freely refuse to enforce the trust, then how is the difference
to be explained? Matthews is correct to draw attention to the public law dimension of charitable
trusts. The reason why charitable purpose trusts is able to solve the conundrum of the absence
of an enforcer to enforce the enforcer’s duty posed above (Figure 3) is that it replaces the
61
Hayton, ‘Developing the Obligation Characteristic of the Trust’, 97.
62
Hayton, ‘Developing the Obligation Characteristic of the Trust’, 99.
63
Matthews, ‘The New Trust: Obligations without Rights?’, p. 2. See also Gareth Jones, History of the Law
of Charity, 1532-1827 (Cambridge: Cambridge University Press, 1969), Chapter 1.
64
Matthews, ‘The New Trust: Obligations without Rights?’, p. 3.
65
F.W. Maitland, Equity, 2nd edn (Cambridge: Cambridge University Press, 1936), p. 51; Roger Cotterrell,
‘Power, Property and the Law of Trusts: A Partial Agenda for Critical Legal Scholarship’ (1987) 14 J Law &
Soc 77 at 88.
66
Matthews, ‘From Obligation to Property, and Back Again?’, p. 231.
67
Matthews, ‘From Obligation to Property, and Back Again?’, p. 231. Cf Harold Greville Hanbury, ‘Equity in
Public Law’, in Essays in Equity (Oxford: Clarendon Press, 1934), p. 93.
68
Matthews, ‘From Obligation to Property, and Back Again?’, p. 231.
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enforcer’s private law duty with a public law one. Public officials owe public law duties and are
accountable through public law mechanisms. Consider the office of the Attorney-General. Where,
as is the case in Singapore, the office is constitutionally protected,69 procedures are in place for
the removal of the office holder for misbehaviour.70 Where, as is the case in England and Wales,
the office is at least partly political, the Attorney-General is directly accountable to Parliament.71
By vesting the right of enforcement in the holder of a public office, other legal means of ensuring
due performance of the duty also come into play. Thus, the office holder may be liable in
criminal law for the common law offence of misconduct in a public office.72 The office holder is
also exposed to civil liability for the tort of misfeasance in a public office.73 This is not to say that
the Attorney-General must always seek to enforce charitable trusts, merely that he is under a
public law duty to at least consider doing so. The use of public law mechanisms and public
officers (who are, of course, remunerated through the public purse) to promote the
performance of charitable purpose trusts are justifiable because such trusts produce a public
benefit. They also do not involve any dilution of trust principles but rather solve the riddle of
the neverending chain of duties by replacing the final private law duty with a public law one. It
is in this sense that a charitable trust straddles both private and public law.
5. TRUSTS OF IMPERFECT OBLIGATIONS
Not many proponents of NCP trusts rely on the category of cases sometimes described as trusts
of imperfect obligations in support of their agenda.74 This is understandable because, not only
have such trusts been acknowledged to be ‘anomalous’ and ‘not to be extended’,75 the
69
Art. 35(4) of the Constitution of the Republic of Singapore (Cap. Const.).
70
Art. 35(6) of the Constitution of the Republic of Singapore (Cap. Const.). What constitutes
‘misbehaviour’ has never been tested in Singapore but see FA Trindade, ‘The Removal of the Malaysian
Judges’ (1990) 106 LQR 51, discussing a similar provision with respect to judges in the very similar
Malaysian Constitution.
71
Green Paper on The Governance of Britain: A Consultation on the Role of the Attorney General (Cm 7192,
2007) 2. See also Sir Elwyn Jones, ‘The Office of Attorney-General’ (1969) 27 CLJ 43; John Ll J. Edwards,
The Attorney General, Politics and the Public Interest (London: Sweet & Maxwell, 1984).
72
See generally, Colin Nicholls QC et al, Corruption and Misuse of Public Office, 2nd edn (Oxford: Oxford
University Press, 2011), Chap. 6.
73
See generally, Erika Chamberlain, Misfeasance in a Public Office (Canada: Thomson Reuters, 2016).
74
This argument is conspicuously absent from Hayton, ‘Developing the Obligation Characteristic of the
Trust’. Contra Pawlowski and Summers, ‘Private Purpose Trusts – A Reform Proposal’, 442-443.
75
Re Endacott [1960] 1 Ch 232 at 245, 246.
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enforcement of such ‘trusts’ demonstrates that they are trusts in name only. ‘[T]he “trust” is in
reality nothing more than a power.’76 Such trusts are enforced by way of a ‘Petingall’ order.77
The ‘trustee’ under such a trust must undertake to the court that they will carry out the
purpose(s), and the persons who would take should the trust fail are given leave to apply to
court if the ‘trustee’ misapplies the ‘trust’ property. As Penner astutely observes, ‘the
“enforcement” of these “trusts” is essentially identical to the enforcement of powers of
appointment’.78 Accordingly, ‘the purported testamentary purpose trust is not being given effect
to; it is rather recharacterised as a trust for the benefit of the party otherwise entitled, where
the trustees have a power to spend the fund on the specified purpose’.79 It is for this reason that
they came to be known as trusts of imperfect obligations and they do not represent a concession
to the beneficiary principle at all. ‘The true concession consists in the courts having created
limited exceptions to the principle that they will not treat words purporting to create a trust as
in fact creating a power.’80
6. QUISTCLOSE TRUSTS
Insofar as Quistclose trusts81 used to be analysed in part as involving a trust (a primary trust in
Lord Wilberforce’s classical analysis) giving effect to a purpose, proponents of NCP trusts have
also rallied these cases to their cause.82 However, since Lord Millett re-analysed such trusts in
Twinsectra v. Yardley,83 following his own criticism of its reasoning on the basis of its noncompliance with the beneficiary principle,84 it seems clear that Quistclose trusts stand far apart
from NCP trusts. It is notable that Lord Millett’s analysis of Quistclose trusts bears a close
resemblance to that for trusts of imperfect obligations. The beneficiary of the trust is the lender
from the outset and the borrower merely has a power to apply the loan money towards the
permitted purpose. The ‘trust’ in the Quistclose trust turns out to be a power whereas the true
76
Matthews, ‘The New Trust: Obligations without Rights?’, p. 8.
77
Named after the order made in Pettingall v. Petingall (1842) 11 LJ Ch 176.
78
J.E. Penner, The Law of Trusts, 9th edn (Oxford: Oxford University Press, 2014), p. 250.
79
Ben McFarlane and Charles Mitchell, Hayton and Mitchell: Text, Cases and Materials on the Law of Trusts
and Equitable Remedies, 14th edn (London: Sweet & Maxwell, 2015), pp. 171-172.
80
McFarlane and Mitchell, Hayton and Mitchell, p. 172. Cf IRC v. Broadway Cottages Trust [1955] 1 Ch 20
at 36.
81
Barclays Bank Ltd v. Quistclose Investments Ltd [1970] AC 567.
82
Pawlowski and Summers, ‘Private Purpose Trusts – A Reform Proposal’, 445.
83
[2002] 2 AC 164.
84
P. J. Millett QC, ‘The Quistclose Trust: Who Can Enforce It?’ (1985) 101 LQR 269.
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trust remains mostly out of sight until the power ceased to be exercisable even though it is
present from the outset.
7. BENEFICIAL TRUSTS COUPLED WITH A MOTIVE
If the idea of a private enforcer-backed NCP trust had been more conceptually sound and less
prestidigitatory, and had the purported analogies with other purpose trusts held more true, the
decision of Re Denley’s Trust Deed85 might perhaps more credibly be regarded as the beachhead
upon which the beneficiary principle may be assaulted. However, stripped of supporting
authorities and with its conceptual flaw exposed, a single decision of a judge of first instance,
especially one as ambiguous as Re Denley’s Trust Deed, naked and alone, hardly seems the solid
foundation upon which to build a controversial idea. In that case, Goff J famously remarked:86
I think there may be a purpose or object trust, the carrying out of which would
benefit an individual or individuals, where that benefit is so indirect or intangible or
which is otherwise so framed as not to give those persons any locus standi to apply
to the court to enforce the trust, in which case the beneficiary principle would, as it
seems to me, apply to invalidate the trust, quite apart from any question of
uncertainty or perpetuity. Such cases can be considered if and when they arise. The
present is not, in my judgment, of that character, and it will be seen that clause 2 (d)
of the trust deed expressly states that, subject to any rules and regulations made by
the trustees, the employees of the company shall be entitled to the use and
enjoyment of the land. Apart from this possible exception, in my judgment the
beneficiary principle … is confined to purpose or object trusts which are abstract or
impersonal. The objection is not that the trust is for a purpose or object per se, but
that there is no beneficiary or cestui que trust. … Where, then, the trust, though
expressed as a purpose, is directly or indirectly for the benefit of an individual or
individuals, it seems to me that it is in general outside the mischief of the
beneficiary principle.
It has been observed that ‘it is not clear whether Goff J intended the word [“beneficiaries”] in its
genuine technical sense, or meant simply people who would benefit in fact from the execution of
85
[1969] 1 Ch 373.
86
[1969] 1 Ch 373 at 382-384.
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the trust’.87 [Emphasis in original] Nor is it clear from his decision if these ‘beneficiaries’ can
combine to terminate the trust by invoking the rule in Saunders v. Vautier.88 If they may
theoretically do so, it would be difficult to distinguish a Re Denley type ‘purpose’ trust from an
ordinary trust for beneficiaries. It would, in effect, be properly regarded as a species of an
ordinary trust whereby the expressed purpose served to indicate the settlor’s motive rather
than limit the beneficiary’s interest.89 Even if they did not, it is still unclear whether the case
represents an exception to the beneficiary principle or if it is more accurately regarded as an
exception to the rule in Saunders v. Vautier.90 Nor has the inherent ambiguity in Goff J’s reasons
been interpreted in subsequent cases favourably to those disposed towards of NCP trusts.
Indeed, Re Denley’s Trust Deed was described thus by Vinelott J in Re Grant’s Will Trusts: 91
That case on a proper analysis, in my judgment, falls altogether outside the
categories of gifts to unincorporated association and purpose trusts. I can see no
distinction in principle between a trust to permit a class defined by reference to
employment to use and enjoy land in accordance with rules to be made at the
discretion of trustees on the one hand, and, on the other hand, a trust to distribute
income at the discretion of trustees amongst a class, defined by reference to, for
example, relationship to the settlor. In both cases the benefit to be taken by any
member of the class is at the discretion of the trustees, but any member of the class
can apply to the court to compel the trustees to administer the trust in accordance
with its terms.
In Re Lipinski’s Will Trusts, Oliver J, in the course of upholding a gift, concluded that ‘it seems to
me that whether one treats the gift as a "purpose" trust or as an absolute gift with a superadded
direction or, on the analogy of In re Turkington … as a gift where the trustees and the
beneficiaries are the same persons, all roads lead to the same conclusion’.92 Furthermore, in
light of the current thesis, it is pertinent to note that Oliver J remarked immediately prior to so
concluding: ‘The beneficiaries, the members of the association for the time being, are the persons
who could enforce the purpose and they must, as it seems to me, be entitled not to enforce it or,
87
Penner, The Law of Trusts, p. 248.
88
Penner, The Law of Trusts, p. 248. See also McFarlane and Mitchell, Hayton and Mitchell, p. 176.
89
See, eg, Re Andrew’s Trust [1905] 2 Ch 48; Re Osoba [1979] 2 All ER 393; Re Bowes [1896] 1 Ch 507. Cf
Re Abbott [1900] 2 Ch 326.
90
McFarlane and Mitchell, Hayton and Mitchell, p. 176.
91
[1980] 1 WLR 360 at 370-371.
92
[1976] 1 Ch 235 at 250.
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indeed, to vary it.’93 [Emphasis added] As Penner observed, ‘both Vinelott J’s and Oliver J’s
interpretations appear to be killing Re Denley with kindness. While they are happy to agree that
the Re Denley trust was valid, in doing so they effectively gut the decision, at least in so far as it
expanded the scope of valid purpose trusts’.94
8. THE USES OF NCP TRUSTS
In his paper ‘Non-Charitable Purpose Trusts in Common Law Canada’, Waters makes an
impassioned plea for their recognition through an introduction setting out all the laudable
purposes that a settlor might wish to provide for:95
Imagine a lawyer asked by an intending testator to draft a trust to further a purpose
that does not fall within the confining definition of charity. And there is quite a
variety in the number of things that the will-maker may wish to do. For example, it
may be to assist an amateur drama group whose members change from time to
time, to maintain his or her showcase house garden until the property title is
transferred into the devisee’s name, to finance the renovation of a ‘tired’ clubhouse
building, or to preserve a privately owned vintage automobile and its original
fittings. Heritage houses in private hands, wallpapered and sometimes furnished in
period, can attract the same devotion. The writer recalls a testator who, as a book
lover, rued the passing of small secondhand bookshops in his community and
wished to create a trust to make loans on a discretionary basis to assist small local
booksellers. Another wished to fund research among local enthusiasts in the
cultivation of bonsai trees, a lifelong interest of the testator. And then there was the
testator who wanted his trustees to maintain his golf clubs in top class condition,
and to make them available at discretion for use by promising young players who
could not afford the very best clubs. More frequently the trust is to finance the
retention and care in present and future family hands of an art, photograph, objets
d’art, stamp or coin collection. The contents of a wine cellar may be similarly
treasured. The intended trust property, to be maintained in correct temperature
and humidity settings, may be a large family bible, of considerable antiquity, with
brass fittings, brought long ago from a New England state or ‘the old country’. As for
93
[1976] 1 Ch 235 at 250.
94
Penner, The Law of Trusts, p. 250.
95
Donovan Waters QC, ‘Non-Charitable Purpose Trusts in Common Law Canada’ (2008) Estates, Trusts &
Pensions Journal 16 at 16-17.
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dispositions to take effect during the client’s lifetime, the instruction may be to
prepare an inter vivos trust to provide with a given fund for the upkeep of a
community meeting facility, or the furtherance of a street project (eg, early parental
death and a young family in need), with which in either case the client has been
keenly involved.
The scenarios described provoke sentiment and is calculated to engender feelings of remorse in
the reader at the hardheadedness of the law. Waters concedes that these purposes may be
achieved by other means but considers these ‘often cumbersome’.96 But is that true? We really
need only consider the use of a power rather than a trust, which as Waters concedes, is entirely
permissible.97 However, to Waters, a ‘[p]ower is a poor substitute for a trust’.98 ‘The trustee is
not in a position to take the property for himself, as could a donee. But here there is a problem.
The only person with an interest in the property would be the gift-over donee, and dutiful
exercise of the power is not likely to be a concern of such a donee.’99 Yet is it true that this
problem is better solved by a purpose trust with an appointed enforcer? If the trustee is reliable,
the gift-over donee’s (or enforcer’s) supervisory role is entirely superfluous. If the trustee is not
reliable, it is arguable that the presence of an enforcer would more likely encourage compliance
on the part of the trustee. But this presupposes that the enforcer is more reliable than the
trustee. If that is the case, why would the settlor not appoint the enforcer as the trustee in the
first place? Surely, it is more sensible to have the more reliable person serve as trustee rather
than enforcer. Alternatively, why not appoint them both trustees?
The truth is that, regardless of whichever device is chosen (power or enforcer-backed purpose
trust), it is simply practically impossible to ensure that the purpose of the settlor will be carried
out. If a power is chosen to give effect to the purpose, the settlor must trust in either the holder
of the power or a gift-over donee to carry it into effect. Neither is obliged to do so. If an enforcerbacked NCP trust is chosen to give effect to the purpose, then he must trust in either the trustee
or the enforcer to carry it into effect. Even if we truly believe that the trustee is obliged to do so,
it would be naïve to believe that the enforcer is similarly obliged without identifying who he
owes this duty to. Quid custodiet custodem custodum? And if the enforcer does not enforce, then
the trustee’s duty is not truly mandatory. Indeed, it is arguable that the incentives are better
aligned in the case of the power as compared to the enforcer backed NCP trust. The holder of a
96
Waters QC, ‘Non-Charitable Purpose Trusts in Common Law Canada’, 17.
97
Waters QC, ‘Non-Charitable Purpose Trusts in Common Law Canada’, 25.
98
Waters QC, ‘Non-Charitable Purpose Trusts in Common Law Canada’, 25.
99
Waters QC, ‘Non-Charitable Purpose Trusts in Common Law Canada’, 25.
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power (if he is not the gift-over donee) will not benefit directly from non-exercise of the same
whereas the trustee of an enforcer backed NCP trust can hope to benefit from non-performance
of his duties in the event that the enforcer likewise fails to act. Although the gift-over donee is
not incentivised to positively seek the power-holder’s proper exercise of such power, he is
incentivised to supervise the holder against exceeding his power; on the other hand, there are
no inherent incentives in the office of enforcer for the enforcer to supervise the trustee.
Carefully considered, it is evident that the purpose trust is not a clearly more practically
effective device for achieving a settlor’s purposes as compared to the power. Given that it offers
little to no practical benefits as compared to, and is in fact arguably less effective than, existing
orthodox devices, why then should the law turn a blind eye to its obvious conceptual flaw?
Furthermore, studies of the offshore jurisdictions permitting NCP trusts show that the demand
for NCP trusts does not stem from such quixotic if eccentric wishes.100 NCP trusts are used to
provide further insulation for so-called asset protection trusts by having the shares of the
private trust company that holds the trust assets themselves held by an offshore trust company
on purpose trusts.101 NCP trusts are also used to structure transactions so that they are ‘off
balance sheet’.102 Complex debt securitisation of the variety that led to the global financial crisis
have made use of NCP trusts.103 In all of these uses, the fulfilment of a purpose is secondary if
not altogether beside the point. The true objective is to make beneficial ownership, loosely socalled, disappear. If ‘[t]he greatest trick the Devil ever pulled was convincing the world he didn't
exist’,104 this may well be a close second, though it is perhaps more accurate to describe the
subterfuge as one of making an office holder (enforcer) appear as a right holder properly socalled.
9. TAX AVOIDANCE/EVASION
Following from their most common use case, it is difficult to ignore the policy elephant in the
room: is there a problem in terms of public policy with purpose trusts with the sole purpose of
100
Matthews, ‘The New Trust: Obligations without Rights?’, p. 19.
101
Matthews, ‘The New Trust: Obligations without Rights?’, pp. 19-20.
102
Matthews, ‘The New Trust: Obligations without Rights?’, p. 20.
103
Matthews, ‘The New Trust: Obligations without Rights?’, p. 22.
104
Kevin Spacey (Actor) as Roger ‘Verbal’ Kint in Bryan Singer (Director), The Usual Suspects (Polygram
Filmed Entertainment et al, 1995), paraphrasing Charles Baudelaire, Petits Poëmes en Prose (Le Spleen de
Paris) (Paris: Louis Conard, 1926), Chap. XXIX: ‘Le Joueur Généreux’: ‘la plus belle des ruses du diable est de
vous persuader qu’il n’existe pas!’ (at 104).
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putting assets beyond the reach of creditors and the Revenue? Provided a particular species of
trust is useful and conceptually sound, the fact that it is open to abuse in the form of tax
avoidance is neither here nor there. The recent inheritance by the 7th Duke of Westminster of
an estate worth more than £9b whilst avoiding inheritance tax through the device of a
discretionary trust has not led to widespread academic condemnation of such trusts.105 Nor do
calls for reform come in the form of calls for abolition.106 If a useful legal device, trust or
otherwise, is open to abuse as a mechanism to avoid tax liabilities, then it is suggested that it is
the tax laws that require reform. At least that ought to be the case if the legal device otherwise
serves a useful function. If not, one risks throwing the baby out with the bathwater. The NCP
trust is another matter altogether. The problem is not so much that it is open to abuse, or even
that it is primarily so used. Tax and other loopholes can be closed. The problem is that it offers
no countervailing advantage whatsoever to existing, conceptually sound, legal devices.
Everything (apart from the fiscal dodge107) that can be achieved using an NCP trust can be
equally (or even arguably more) effectively achieved using the device of a power. Critics who
suggest that a trust is mandatory whereas a power is permissive and hence a trust is somehow
superior fail to explain how, if we cannot trust the trustee or power-holder, we ought to simply
trust the enforcer?
10. PRIVATE INTERNATIONAL LAW
In any jurisdiction that operates on the basis of Parliamentary sovereignty, the conceptual
nonsense that many of the offshore NCP trust legislations entail will not pose a barrier to their
enforcement as a matter of domestic law. The problem, of course, is that much of the trust
properties supposedly governed by such trusts are not situated in these jurisdictions at all. This
raises questions of recognition as a matter of private international law. This has proven itself a
controversial issue. On the one hand, Hayton practically assumes that English courts would be
105
David Brown et al (11 August 2016), ‘Taxman loses billions as duke leaves family fortune to estate’,
The Times. Cf Tony Molloy QC, ‘High Net Worth trusts in the 21st Century: Confiscatory Taxes and Duties?’
in this volume.
106
Richard Murphy (12 August 2016), ‘Trusts keep wealth in the hands of the few. It’s time to stop this tax
abuse’, The Guardian; Juliette Garside (11 August 2016), ‘Duke’s £9bn inheritance prompts call for tax
overhaul’, The Guardian.
107
To borrow the words of Harman LJ, referring to the discretionary trust, in Re Londonderry’s Settlement,
Peat v. Walsh [1965] Ch 918 at 927.
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bound to give effect to such trusts. 108 Indeed, some proponents encouraging onshore
jurisdictions to develop NCP trusts do so premised on this fait accompli. ‘Is there any use in
rejecting purpose trusts when offshore jurisdictions develop their trust law apace as a product
to be sold? There may be little sense in unilaterally abjuring purpose trusts if they will exist and
flourish elsewhere.’109 On the other hand, Matthews vehemently objects to their recognition.110
In this respect, two different regimes of recognition need to be considered. Jurisdictions that are
not signatories to the Convention on the Law Applicable to Trusts and on their Recognition,
such as Singapore, would have to resort to common law principles of private international law
to determine if such NCP trusts were to be recognised as trusts. This would entail a preliminary
issue of characterisation before the appropriate choice of law rule can be applied. Owing to the
conceptual problems exposed above, it is suggested that NCP trusts face two hurdles in terms of
recognition in such jurisdictions. First, it is strongly arguable that such trusts are not in fact
trusts since they are in fact distinguishable from both the orthodox private beneficiary trust and
the charitable purpose trust. This is because the means of their mandatory enforcement by way
of a fictional character resembles neither that by a beneficiary properly so-called nor a public
office-holder subject to public law mechanisms of control. Secondly, as a matter of forum public
policy, there would be a strong case against the enforcement of such trusts, even if they are to
be characterised as trusts to begin with, since they involve the conceptual poppycock idea that
an office-holder can owe duties to no one or the absurd conception of a circularity of duties
between office-holders. This must especially be so if the trust property is within the jurisdiction
where the trust is sought to be enforced and the NCP trust is used purely to evade its revenue
laws. Jurisdictions which have ratified the Convention are arguably in a more difficult position,
which may explain Hayton’s sanguine attitude to the recognition of foreign NCP trusts in
England. Such trusts, after all, ‘would appear to fall within the description contained in Article 2,
Hague Convention, since they are a legal relationship created “when assets have been placed
under the control of a trustee for the benefit of a beneficiary or for a specified purpose”’.111
108
Hayton, ‘Developing the Obligation Characteristic of the Trust’. For a more considered view, see
Anthony Duckworth, ‘STAR WARS: The Colony Strikes Back’ (1998) 12 TLI 16; Anthony Duckworth,
‘STAR WARS: Smiting the Bull’ (1999) 13 TLI 158.
109
Goodwin, ‘Purpose Trusts: Doctrine and Policy’, 109.
110
Paul Matthews, ‘Shooting STAR: The New Special Trusts Regime from the Cayman Islands’ (1997) 11
TLI 67; Paul Matthews, ‘STAR: Big Bang or Red Dwarf?’ (1998) 12 TLI 98; Paul Matthews, ‘Paul Matthews
Writes …’ (1999) 13 TLI 168; Matthews, ‘From Obligation to Property, and Back Again?’, pp. 236-241.
111
Jonathan Harris, The Hague Trusts Convention: Scope, Application and Preliminary Issues (Oxford: Hart
Publishing, 2002), pp. 395-396, citing Duckworth, ‘STAR WARS: The Colony Strikes Back’, 22.
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Furthermore, it is said, ‘it would hardly do for an English court to reach for the public policy
doctrine [under Article 18] in the face of a trust with different characteristics to the English
trust, when it simultaneously expects contract non-trust states to recognise an institution not
known in its legal system’.112 [Emphasis in original] It has thus been suggested by Harris that
‘[o]n balance, … [NCP] trusts should be recognized in the English courts and Article 18 should
not be invoked’.113
It is submitted that the case for enforcement is only superficially attractive and only because the
fatal flaw to NCP trusts appears to have thus far been overlooked. As Matthews notes, the
‘reference to trusts for purposes was apparently intended really only to deal with charitable and
public trusts’.114 [Emphasis in original] Whilst it is arguable that this does not mean that the
definition cannot be extended beyond such trusts to cover NCP trusts, a strong case can
certainly be made that other purpose trusts must employ enforcement mechanisms that are at
least comparable to that for such trusts in order to fall within the purview of the Convention. It
is doubtful that any of the offshore NCP trust regimes will be able to satisfy such a requirement.
Furthermore, while Matthews’ objection to the recognition of NCP trusts may appear somewhat
parochial, once the conceptual shortcomings of the NCP trusts have been exposed, it can be seen
that their non-recognition has nothing to do with their different characteristics unless different
here means absurd. Since it has been suggested that a comparable regime to charitable trusts
may well rescue offshore NCP trusts from non-recognition, something will need to be said of
those jurisdictions, such as the Bahamas115 and Bermuda,116 which employ the Attorney-General
as a ‘long-stop enforcement mechanism’.117 The problem with such NCP trusts is that, unless
there is evidence that the duties are intended to be seriously acted upon, it is difficult to avoid
the conclusion that the long-stop enforcement mechanism is little more than a sham. In respect
of the Bahamas, the Attorney-General’s role has been so described:118
112
Harris, The Hague Trusts Convention, p. 396.
113
Harris, The Hague Trusts Convention, p. 396.
114
Matthews, ‘From Obligation to Property, and Back Again?’, p. 239. See Alfred E. Von Overbeck,
Explanatory Report on the 1985 Hague Trusts Convention (1985) [39]
115
Section 6(4), Bahamas Purpose Trusts Act 2004
116
Section 12B(1) Bermuda Trusts (Special Provisions) Act 1989.
117
Goodwin, ‘Purpose Trusts: Doctrine and Policy’, 107.
118
Adam Doyle and Matthew Carn, ‘Purpose Trusts’ in David Hayton (ed.), The International Trust, 3rd
edn (Bristol: Jordan Publishing Ltd, 2011), pp. 213, 273.
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[T]he Attorney-General’s standing to intervene and take action depends, in the first
instance, on the absence or failure to act of an authorised applicant. As in the case of
an authorised applicant, the Attorney-General is merely empowered to act and is
under no obligation to do so. Moreover, there is no mechanism whereby any need to
take action in relation to a purpose trust, or the absence or failure to act of an
authorised applicant, will ever come to the attention of the Attorney-General. The
enforcement mechanism is, therefore, far from watertight.
As to Bermuda, the same authors remark:119
As an enforcement mechanism, this provision seems rather feeble … The court
cannot act unless, and until, some authorised person makes an application to it.
However, there may not be any such person. … It is not at all clear how, in such a
case, the Attorney-General (any more than the court) will have notice of any breach
of trust or of the need to make an application to the court in respect of any matter
connected with the enforcement of the trust. … It is also rather bizarre to find a
trustee of a purpose trust listed as one of the persons who may apply to the court
for enforcement of the trust: if he is a sole trustee, he is hardly likely to bring
proceedings against himself; and if he is one of several trustees complaining against
his co-trustees, he would presumably have a right to bring proceedings in any event.
Contrast these poorly drafted and vaguely daft provisions with no evidence of resources
dedicated to their enforcement with the position for orthodox charitable trusts. In most
common law jurisdictions that employ the device of the trust (at least in part) for the
furtherance of charitable purposes, the law does not simply confer locus standi upon the
Attorney-General and then rest all hopes of enforcement upon a Hail Mary prayer. In Singapore,
the Charities Act 120 provides for the registration and regulation of charities by the
Commissioner of Charities and the Charities Council. In England, charitable trusts are required
to be registered121 and are regulated by the Charity Commission.122 It is by no means suggested
that charitable trusts are being perfectly enforced. However, they are at least seriously enforced.
The same can hardly be said of most if not all offshore NCP trusts with public office holder long119
Doyle and Carn, ‘Purpose Trusts’, pp. 286-287.
120
(Cap. 37, 2007 Rev. Ed.).
121
Hubert Picarda QC, The Law and Practice Relating to Charities, 4th edn (West Sussex: Bloomsbury
Professional, 2010), Chap. 47.
122
Picarda QC, The Law and Practice Relating to Charities, Chap. 46.
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stop enforcement mechanisms. The veil of modesty thus far fabricated for these NCP trust
schemes is sheer to the point of being utterly transparent.
11. CONCLUSION
It turns out that that which has been christened the beneficiary principle merely reflects the
simple and incontrovertible idea that a right holder, properly so-called, must have the
unfettered right to forego enforcement. This is true of any private law legal concept regardless
of the scope of its enforceability – in personam, in rem or taking on some sui generis form.123 If a
right holder does not have the complete freedom to forego enforcement, then his right is
burdened by duties and he is in reality an office holder. These duties themselves must correlate
to another right. It is possible to avoid this private law conception of rights and duties by
conferring the right on a public office holder, thereby using a public law mechanism of
supervision as a backstop to an otherwise private law concept. Common law jurisdictions
employ this mechanism with charitable trusts through the office of the Attorney-General, but if
it is intended to use similar means to legitimise NCP trusts, then this public law dimension must
be serious and substantive, not a charade, honoured only through halfway incoherent lip
service. On hindsight, therefore, the decisions of Singapore and Hong Kong, two of Asia’s
common law financial centres, to forego reform in the form of introducing NCP trusts by
legislation, demonstrate cunning instinct rather than conservative timidity. It also turns out that
Sir William Grant MR’s advice at the turn of the nineteenth century is not outdated after all.
Good sense, after all, is timeless.
123
Cf Smith, ‘Trust and Patrimony’; McFarlane and Stevens, ‘The Nature of Equitable Property’.
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