Non-Charitable Purpose Trusts: The Missing Right to Forego Enforcement

Abstract

Over the last two to three decades, there has been growing interest, particularly from offshore jurisdictions, in the recognition of non-charitable purpose trusts. These “innovations” have even led some to suggest that the same result can be achieved onshore by the draftsman’s pen in the face of Parliamentary timorousness. This chapter sets out why both developments are ultimately wrong. It explains the proper basis of the “beneficiary principle” in terms other than “property”, as encompassing not simply the right of enforcement but also the right to forego enforcement. It also demonstrates that non-charitable purpose trusts are not truly mandatory, contrary to suggestions otherwise. Enforcers, lacking the unfettered right to forego enforcement, necessarily owe duties but in the absence of a corresponding right holder, these duties are untenable. Charitable purpose trusts avoid this problem by imposing a public law duty on the enforcer rather than a private law one. Whilst some offshore jurisdictions have sought to mimic such a duty by appointing a long-stop office holder as ultimate enforcer, they do not survive close scrutiny. Accordingly, where the trust assets are held on such non-charitable purpose trusts in onshore jurisdictions, such trusts will fail