Abstract:
Trusts have been popular since their inception in medieval England.¹ In New Zealand alone, “commentators have estimated that the number of trusts may range up to 400,000”.² Through the “development from century to century of the trust idea”,³ trusts have evolved from their first iteration, known then as the ‘use’,⁴ to become a “more flexible obligation”.⁵ In more recent times, new types of trusts have emerged that redefine the trust concept and modify “aspects of the traditional model”.⁶ A number of new types of trusts and other “significant developments in trust law” can be attributed to offshore jurisdictions.⁷ One such development is the offshore validation of non-charitable purpose trusts. Non-charitable purpose trusts are not currently permitted under New Zealand trust law. This research paper explores non-charitable purpose trusts and then proposes a legislative framework for the inclusion of these trusts in New Zealand.
First, this paper outlines the traditional model of a trust and discusses how purpose trusts (including non-charitable purpose trusts) differ. This includes the general rule that they are invalid and the exceptions to the general rule. Second, it considers the main conceptual challenge to non-charitable purpose trusts, the beneficiary principle, and how this can be overcome, before introducing the other validity considerations that arise from the lack of a beneficiary. Third, it discusses how offshore jurisdictions have legislated to permit non-charitable purpose trusts, including the new role of the trust enforcer. Finally, this paper proposes a legislative framework for non-charitable purpose trusts in New Zealand and discusses the wider implications of this.
¹ James P Webb “An ever-reducing core? Challenging the legal validity of offshore trusts” (2015) 21 Trusts & Trustees 476 at 477.
² Law Commission Review of Trust Law in New Zealand: Introductory Issues Paper (NZLC IP19, 2010) at [1.13] (footnotes omitted).
³ FW Maitland Equity (2nd ed, Cambridge University Press, Cambridge, 1936).
⁴ Webb, above n 1, at 477.
⁵ David Hayton “Developing the obligation characteristic of the trust” (2001) 117 LQR 96 at 96.
⁶ Adam Hofri-Winogradow “The Stripping of the Trust: A Study in Legal Evolution” (2015) 65 UTLJ 1 at 3.
⁷ Rose-Marie Belle Antoine “The offshore trust: a catalyst for development” (2007) 14 Journal of Financial Crime 264.
