2. Trusts

A. Introduction

A trust exists where a person holds or is vested with, or is deemed to hold or have vested, property of which that person is not the owner in the individual’s own right, with a fiduciary obligation to hold, use, deal or dispose of it for the benefit of any person, whether or not yet ascertained or in existence and/or for any purpose, including a charitable purpose, which is not for the benefit only of the trustee.

B. Most Frequently Used Trusts

The Trusts Act provides a flexible regulatory framework that allows the settlor to determine the type of trust required, be it discretionary or fixed. This Act also specifically provides for protective or spendthrift trusts.

All purpose trusts must have an enforcer whose duty it is to enforce the trust in accordance with its terms and purposes. The enforcer cannot act as trustee for the same purpose trust.

There is no requirement for the trust deed to be filed with any governmental body. Nonetheless, it is advisable to register the trust at the office of the Registrar General in order to get a ‘date certaine’ that will be evidence of the existence of the trust on the date of registration.

A charitable purpose trust is one with an exclusive purpose or object, such as relief of poverty, advancement of education, advancement of religion, protection of the environment, advancement of human rights and fundamental freedoms, or any other purpose beneficial to the public in general.

A non-charitable purpose trust is valid and enforceable provided that the purpose for which the trust is created is specific, reasonable and capable of fulfilment, and is not immoral, unlawful or contrary to public policy.

The Financial Service Commission (FSC) has issued a circular relating to private trust companies. High-net-worth individuals may now set up a private trust company (PTC) holding either a Category 1 global business licence (GBL1) (tax resident) or a Category 2 global business licence (GBL2) (tax exempt) to act as a trustee in respect of their own assets that would be settled in one or more trusts. The PTC must provide its private trust business services solely to connected persons and must not solicit trust business from, or provide trust business services to, the public. The PTC must appoint a duly licensed management company to carry out its trust administration services in relation to any express trust to which it is a trustee. The PTC should at all times maintain a minimum paid up capital of USD5,000.

C. Proper Law Of A Trust

Mauritius is not a party to the Hague Convention on the Law Applicable to Trusts and on their Recognition, 1 July 1985. The proper law of a trust, as inspired by this Convention, is:

  • the law expressed by terms of the trust or intended by the settlor to be the proper law
  • where no such law is expressed or intended, the law with which the trust has its closest connection at the time of its creation, or
  • where the law expressed by the terms of the trust or intended by the settlor to be the proper law, or the law with which the trust has its closest connection at the time of its creation, does not provide for trusts or the category of trusts involved, the proper law of the trust will be the law of Mauritius.

A foreign trust whose proper law is a law other than the law of Mauritius is governed by, and interpreted in accordance with, that proper law. A foreign trust is not, however, enforceable in Mauritius to the extent that it purports to do anything which under the law of Mauritius is an offence, that it confers or imposes any right or function, the exercise or discharge of which under the law of Mauritius is an offence, that it is immoral or contrary to public policy, or that it purports to apply directly to immovable property situated in Mauritius.

D. Creation Of A Trust

I. Validly Constituted Trusts

A trust may be created by disposition of property inter vivos or by will, or by holding property on trust. Only an instrument in writing can create a trust other than a unit trust, constructive or resulting trust, or any trust arising by operation of law or by judicial decision.

A trust is not valid or enforceable where it purports to do anything contrary to the law of Mauritius, or it purports to confer any right or power or impose any obligation, the exercise of which or the carrying out of which is contrary to the laws of Mauritius, or it has no identifiable or ascertainable beneficiary, or where the court declares that it was established by duress, fraud, mistake, influence, misrepresentation, or in breach of fiduciary duty, or it is immoral, or the settlor had no legal capacity to create such a trust.

Ii. Duration And Termination Of A Trust

The maximum duration of a trust other than a purpose trust is 99 years from the date of its coming into existence. A charitable trust may be of perpetual duration. Generally a purpose trust, whether charitable or not, may be of perpetual duration. A trust may be terminated by unanimous agreement among all beneficiaries or by court order or by the trustees, in accordance with the terms of the trust deed.

Iii. Beneficiaries

Any person, whether natural or corporate, entitled to benefit under a trust, or in whose favour a power to distribute trust property may be exercised, may be a beneficiary. A beneficiary must be identifiable by name, or be ascertainable.

Iv. Trustees

A trustee must be either a person of full age who has the legal capacity to contract, or a body corporate permitted under statute to act as trustee. A trustee cannot hold a beneficial interest under the trust except where s/he is not the sole trustee of the trust or the sole beneficiary under the trust.

The number of trustees of a trust cannot exceed four. Every trust must at any one time have at least one qualified trustee that is authorised by the FSC to provide trusteeship services.

Trustees have a general duty in the exercise of their functions to observe the utmost good faith and to act with due diligence, with care and prudence and to the best of their ability and skill.

Subject to the terms of the trust or a court order, trustees are entitled to remuneration for services. In addition, they may be reimbursed out of trust property for all expenses and liabilities properly incurred by them in connection with the trust.

The terms of a trust may provide for appointment of a custodian trustee and of a managing trustee. The custodian trustee has the sole function of holding trust property, investing funds and disposing of assets as the managing trustee may direct. The managing trustee manages trust property without being vested with it. The custodian trustee is not liable for acting on direction given by the managing trustee except where the custodian trustee has reason to believe that the direction so given is in contravention of any law, rule or regulation, is contrary to the terms of the trust, is contrary to sound commercial practice, or is otherwise objectionable.

A trustee who commits or concurs in a breach of trust is liable for any loss or depreciation in the value of trust property resulting from the breach, and any profit that would have accrued to the trust had there been no breach. Where two or more trustees commit a breach of trust they are liable jointly and severally.

Trustees are not liable for breach of trust committed by another person prior to appointment or for a breach of trust committed by a co-trustee unless they become or ought to become aware of the breach, and they actively conceal the breach, or fail within a reasonable time to take proper steps to protect or restore the trust property or to prevent the breach.

Beneficiaries may relieve a trustee of liability to them for a breach of trust or indemnify a trustee against a liability for a breach of trust, unless the beneficiary is a minor or a person under legal disability, does not have full knowledge of all material facts, or is improperly induced by the trustee to do so.

The court may relieve a trustee wholly or partly of liability for a breach of trust where it appears to the court that the trustee has acted honestly and reasonably and ought fairly to be excused for the breach of trust or for omitting to obtain the directions of the court in the matter in which the breach arose.

Terms of the trust may exonerate trustees from liability for breach of trust. Nonetheless, the terms of the trust may not relieve trustees of liability for a breach of trust arising from their own fraud, wilful misconduct, or gross negligence. Where so required by the terms of the trust, a trustee who resigns or is removed may require reasonable security for liability (existing, future, contingent or otherwise) before surrendering the trust property.

Where in any transaction or matter affecting a trust, trustees inform a third party that they are acting as trustee, a claim by the third party in respect of the transaction or matter extends only to the trust property. If trustees fail to inform the third party that they are acting as trustee, or the third party is otherwise unaware that they are acting as trustee, the trustees are personally liable to that other party in respect of the transaction or matter, but the trustees have right of recourse to the trust property by way of indemnity against such personal liability unless they acted in breach of trust.

Trust property that has been charged or dealt with in breach of trust or fiduciary duty, or the property into which it has been converted, may be followed and recovered unless:

  • it is no longer identifiable
  • it is in the hands of a bona fide purchaser for value without notice of the breach of trust, or of any other defect in the title
  • it has been charged in favour of a person who bona fide acquired the rights therein for value and without notice of the breach of trust or any other defect in the title, or
  • a person, other than the trustee, derived title through a bona fide purchaser or charge holder for value without notice of the breach of trust or defect.

A trustee or any other person who derives profit from a breach of trust or obtains property as a result of such a breach is deemed to be a trustee of the profit or property for the beneficiary of the trust. Without prejudice to any other remedy provided by law, such a beneficiary may apply to the court to trace and recover the property. Nonetheless, a person is not liable for breach of trust where it is established that the profit or property was obtained in good faith.

V. Protectors Any Person Of Full Age And Of Sound Mind, Or Any Corporation, Any Firm, Partnership Or Group Of Persons, Whether Incorporated Or Unincorporated, May Be Appointed As Protector. The Settlor, A Trustee Or A Beneficiary Of A Trust May Also Be The Protector.

Terms of the trust will generally provide the powers and functions of the protector. Unless otherwise provided in the terms of the trust, the protector has the following powers:

  • to remove a trustee and to appoint a new or additional trustee
  • to determine the law of which jurisdiction is the proper law of the trust
  • to change the forum of administration of the trust, and
  • to withhold consent from specified actions of the trustees either conditionally or unconditionally.

A person exercising any of the above powers is not, by reason only of the exercise of the power, deemed to be a trustee. Unless otherwise provided under the terms of the trust, a protector is not liable to the beneficiaries or the trustees for the bona fide exercise of his power.

Vi. Role Of Courts

The Supreme Court of Mauritius has jurisdiction to hear any matter relating to trusts in Mauritius. On application of any person having an interest in the trust, the court has wide powers to make any order in respect of the execution, administration or enforcement of a trust. A trustee can also apply to court for directions.

E. Trust Administration

I. Introduction

Trustees must execute and administer the trust, and exercise their functions in accordance with the Trusts Act and the terms of the trust, and only in the interest of the beneficiaries or in fulfilment of the purpose of the trust. As a general principle, trustees cannot use or deal with trust property for their own profit or for any purpose not connected with the trust. Subject to the terms of the trust, trustees have the duty to preserve and enhance, so far as is reasonable, the value of the trust property. Trustees are required to keep updated and accurate accounts and records of their trusteeship. In addition, trustees must keep trust property separate from their own property, and separately identifiable from any other property of which they are trustees. Where a trust has more than one beneficiary, or more than one purpose, the trustees, subject to the terms of the trust, must be impartial, and must not execute the trust for the advantage of one beneficiary at the expense of another.

Subject to their duties under the Trusts Act and to the terms of the trust, trustees have, in relation to the trust property, all the powers of a beneficial owner. Trustees have power to appropriate, accumulate, advance, or appoint trust property. Trustees may delegate any of their powers. Any desired or intended restriction of trustee powers should be included in the trust deed.

Ii. Variation Of A Trust

The court has power to approve any arrangement that varies or revokes the terms of a trust, or enlarges or modifies trustee powers of management or administration, whether or not there is another person with a beneficial interest who is capable of assenting to the arrangement.

A trust and any exercise of a power under the trust may be expressed to be capable of revocation, in whole, in part or variation. No revocation or variation can prejudice anything lawfully done by a trustee in relation to the trust before receiving notice of the revocation or variation.

F. Confidentiality And Disclosure

Except where ordered by the court, trustees must keep as confidential and may not be required to disclose to any person not legally entitled to it, or be required to produce or divulge to any authority in Mauritius or elsewhere, any information or document in their possession or under their control relating, among others, to the state and amount or any other details of the trust property and the conduct of the trust administration. Beneficiaries do not have any right to information unless the terms of the trust so provide.

In Vignaud O v Temple Corporate Services (2011) SCJ 153, the Judge refused to order the disclosure of a copy of the trust deed to a beneficiary on the ground that there were no express provision in the trust deed authorising the disclosure of information to a beneficiary.

G. Rights Of Creditors

With respect to trusts not created by a Mauritian national or a person domiciled in Mauritius, the Trusts Act provides that a trust is generally not invalidated because of the settlor’s insolvency or action against the settlor by creditors.

Nonetheless, the court may declare a trust void where it is established that the trust was made with the intent to defraud persons who were creditors of the settlor at the time when the trust property was vested in the trustee. Even so, no action shall lie against the trustee after two years from the date of the transfer or disposal of the assets to the trust.

The Trusts Act also provides that where the law of Mauritius is the proper law of a trust, the court shall not vary it, set it aside, or recognise the validity of any claim against the trust property pursuant to the law of another jurisdiction or the order of a court of another jurisdiction in respect of the claim of creditors in an insolvency.

According to the Insolvency Act 2009 a transfer made by a settlor into a trust that amounts to a voidable preference, that is, a transfer made at a time the settlor is unable to pay his debts and that gave one creditor preference over other creditors, may be set aside by the court if it is made within two years from the date at which the settlor is declared bankrupt. A transfer as a gift made by a settlor to the trust may also be set aside by the court if it is made within two years from the date the settlor becomes bankrupt.


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