Chapter 3: Creation of Trust A. Formal Conditions (i) Requirement of Writing: Section 6(1) TA For a trust to be valid, it has to be in writing.

Section 6 (1) (b) is clear about that. (1) Notwithstanding Article 931 of the Code, a trust other than a unit trust, a constructive or a resulting trust or any trust arising by operation of law or by judicial decision (a) may be created by a disposition of property inter vivos or by will, or by holding property on trust; and (b) shall be of no effect unless created by an instrument in writing. Previously, under the Offshore Trusts Act 1992, it was possible to create a trust by an oral declaration. (ii) Content of Trust Instrument: Section 6(2) TA

The TA is also very specific regarding the content of the trust instrument, i.e. what is it that the trust instrument needs to contain for it to be fully constituted and valid. Section 6 (2) provides as follows: (2) An instrument creating a trust shall be void unless it states (a) the name of the trustee; (b) the intention of the settlor to create a trust, or the declaration of the trustee that he holds property on trust; (c) the object of the trust, the beneficiaries or class of beneficiaries, as the case may be; (d) the property transferred or held on trust; and (e) the duration of the trust.

(iii)

3 Certainties: Intention to create a trust, object and subject-matter

For a trust to be completely constituted (effect: binding on trustees and beneficiaries can enforce) the three certainties have to be fulfilled. Certainty of the settlors intention to create a trust: His / her intention must be clear and evident. We must be able to see that there is an intention to create a trust expressed in the trust instrument. The words used must be directive. Compare for example I hereby direct my trustees with ambiguous words like I hope or I wish or I heartily beseech.

Re Adams and Kensington Vestry (1884): On the importance of using directive words: Jones v. Lock (1865): Richard v. Delbridge (1874): Paul v. Constance (1977): Certainty of object / beneficiaries or class thereof:

Re Endacott (1960): Morice v. Bishop of Durham (1804): the Complete List test IRC v. Broadway Cottages Trust (1955): McPhail v. Doulton reversing IRC v. Broadway Cottages Trust (1955) There are situations where words which are difficult to understand are used. Example: for my relations is vague. The court construed this to mean spouse and children. Certainty of subject-matter:

Certainty must be in respect to the total subject-matter and in respect to the individual share of each beneficiary, where applicable. Hence a trust will fail if this requirement is not met. For example: all my property is certain and precise. Contrast this with 10 m for my wife to enjoy and whatever she does not want she will hold on trust for the children in equal shares. The latter will not hold as it is uncertain. Palmer v. Simmonds (1854): Sprange v. Barnard (1789): Hunter v. Moss (1994): (shares) In some situations, the court will try to save a trust where it finds that it is possible. For example: Re Golays Will Trusts (1965): Certainty in respect to individual shares - Boyce v. Boyce (1849): B. Substantive Conditions

(i)

Parties

to

Trust:

Settlor

(Sections

2,

8);

Trustee;

Objects/Beneficiaries (Sections 2, 14, 15(b)) Settlor: Section 2 defines the settlor as follows: a person who provides trust property or makes a testamentary disposition on trust or to a trust. Section 8 furthermore specifies on the legal rules pertaining to the settlor. It is generally provided that: (1) (2) Subject to the other provisions of this section, any person who has the A settlor may also be a trustee, a beneficiary, a protector or an enforcer, legal capacity to contract may create a trust. but shall not be the sole beneficiary of a trust of which he is a settlor. More specifically a non-citizen can also be a settlor of a trust. Section 8 (3) provides that: (3) A settlor, who is a non-citizen and who transfers or disposes of assets to a trust, shall be deemed to have had the capacity to do so, where at the time of the transfer or disposal, he is of full age and of sound mind under (a) (b) (c) the laws of Mauritius; or the laws of his domicile or of his nationality; or the proper law of the transfer or disposition.

It is understandable that legal problems may arise where the settlor is a non-citizen and the laws of Mauritius may not have anticipated the laws governing that person thus making the trust potentially subject to a premature end where Mauritian laws do not mean it to be so. So section 8 (4) is meant to address such issues: (4) Notwithstanding any enactment, where a non-citizen transfers or disposes of property on trust, the transfer or disposition shall not be set aside, avoided, or otherwise declared invalid or ineffective by virtue of any rule or law of his domicile or nationality relating to inheritance or succession or any rule or law of a similar nature, or any rule or law restricting the right of a person to dispose of his property during his lifetime so as to preserve such property for distribution at his death, or any rule or law having similar effect. This is very important for the security of the trust and for the law on trusts in Mauritius. Trustee(s): 3

The trustee constitutes another important part of the trust. It is indeed the trustee who takes care of the trust and the trust property. The duties and powers of trustees are going to be dealt with in more detail in a subsequent chapter concerning the management of trusts. For now we can look at Section 3 which defines the trust. The trustee is described as a person who holds or has vested in him, or is deemed to hold or have vested in him, property of which he is not the owner in his own right, with a fiduciary obligation to hold, use, deal or dispose of it. Object / Beneficiairies:

Section 2 defines the beneficiary as a person, whether natural or corporate, entitled to benefit under a trust, or in whose favour a power to distribute trust property may be exercised. They are in a way the object of the trust and this is, among others, an essential element for the validity of trust and is known as the certainty of object mentioned in Section 6 of the TA. (ii) Trust Property: Sections 2, 6(1)(d), 7(2), 17

Section 2 defines trust property as property held on trust. Furthermore, Section 6 (2)(d) mentions the trust property as one of the things which have to be mentioned in the trust instrument. In fact, the trust property is one of the certainties needed to constitute a trust. It is referred to the certainty of subject-matter. As seen, it is very important to know what is that which is subject to trust and which the trustees have to manage. The vesting of property is also essential for the validity of trust. Another question which is relevant here is to know which type of property can be subject to a trust. Section 7 (1) generally states that any property may be held by or vested in a trustee on trust. Subsection 2 specifies on this issue as follows: (2) Notwithstanding subsection (1), no transfer or disposal to a trust shall be valid in (a) (b) (c) property which is inalienable under the law of Mauritius; a leasehold interest the unexpired term of which is less than 18 years; any immovable property in Mauritius where the trust is a noncharitable purpose trust. respect of -

The above provision illustrates the control exercised in respect of property which may be subject to trust. It is noted in (c) that there is a restriction of immoveable property situated in Mauritius. Further restrictions can be found in Section 22, subsection 1 of which reads as follows: (1) Unless approved by the Prime Minister under the Non-Citizens (Property (a) (b) any transfer or vesting of an immovable property situated in Mauritius upon a trust of which a beneficial interest is held by a non-citizen shall be void and of no effect; the appointment of a non citizen as beneficiary of a trust the trust property of which includes immovable property situated in Mauritius, shall be void and of no effect. Restriction) Act -

(6)

The transfer or disposition on trust of property situated outside Mauritius, which

if it had taken place in Mauritius would constitute a valid transfer or disposition of the property under this Act, shall not be declared void or invalid merely by reason that it contravenes the applicable law of the transfer or disposition, or the law of the transferor's domicile or nationality. Regarding the title to the trust property obtained as a result of the transfer, Section 7 (7) provides that the trustee shall not acquire a better title to the trust property than the one which the settlor or transferor had immediately before the transfer or disposition. Nature of trustees interest: Section 32 (1) Subject to subsection (2) (a) the interest of a trustee or protector in the trust property is limited to that which is necessary for the proper performance of the trust; and (b) the trust property does not form part of the estate of the trustee or of the protector. (2) Where a trustee or a protector of a trust is also a beneficiary of the trust, subsection (1) does not apply to his interest as a beneficiary. Hence there is clear provision that the trust property does not form part of the estate of the trustee. C. Duration of Trust 5

The duration of trust is given in Section 9 as follows: (1) The duration of a trust other than a purpose trust shall not exceed ninety nine (2) (3) Notwithstanding article 900-1 of the Code or any other enactment, a The terms of a non-charitable purpose trust shall limit its duration to a

years from the date of its coming into existence, unless it is earlier terminated. charitable trust may be of perpetual duration. term not exceeding 25 years.