¶ 1001
Overview
Scope of the chapter. A trust ordinarily exists for persons: the beneficiaries who can enforce it and whose interests the trustee must serve. Two kinds of trust depart from that pattern. A charitable trust exists for purposes that the law treats as beneficial to the public. The Attorney-General enforces it. A non-charitable purpose trust exists for a purpose that is not charitable, such as holding the shares of a company or maintaining a building, and under the general law it usually fails for want of anyone who can enforce it. Section 12 of the International Trusts Act 1984 deals with both. Subsection (1) widens the class of international trusts that the law will treat as charitable, and subsection (2) validates purpose trusts, charitable or not, settled by non-residents and enforced by a person named in the instrument. International Trusts Act 1984, § 12 (Cook Is.) (as amended by International Trusts Amendment Act 1995–96, § 8). This chapter examines the general law that section 12 modifies (see infra ¶ 1010); the non-charitable purpose trust under section 12(2) (see infra ¶ 1020); the enforcer (see infra ¶ 1030); the duration of a purpose trust and the destination of its property when the purpose ends (see infra ¶ 1040); the charitable international trust under section 12(1) (see infra ¶ 1050); charitable trusts and bodies under the general law of the Cook Islands (see infra ¶ 1060); two related statutory vehicles, the statutory purpose trust of the Trustee Companies Act 1981–82 and the purpose foundation under the Foundations Act 2012 (see infra ¶ 1070); the uses of purpose trusts in planning (see infra ¶ 1080); and drafting (see infra ¶ 1090).
What this chapter does not repeat. The definition of an international trust, the requirement of a qualifying trustee and registration are examined in chapters 5 and 6 (see supra ¶¶ 570, 580, 610, 650). The trustee's duties and powers are examined in chapter 7, the interests of beneficiaries in chapter 8, and protectors and reserved powers in chapter 9. The foundation is treated fully in chapters 18 to 20, and variation and termination in chapter 11. This chapter draws on those discussions where a purpose trust raises a different question.
Two meanings of "purpose trust." The phrase is used in two senses. In the wide sense, which section 12(2) adopts, it means any trust under which the property is held for a purpose or purposes, "whether charitable or not." International Trusts Act 1984, § 12(2) (Cook Is.). In the narrow sense used by practitioners, it means a non-charitable purpose trust, the kind that the general law would hold void. This chapter uses "purpose trust" in the narrow sense unless the context shows otherwise, and "charitable trust" for a trust that the law treats as charitable, whether under the general law or under section 12(1).
Why the Cook Islands provisions matter. The Cook Islands validated non-charitable purpose trusts by statute in 1984, in the original text of the Act, departing from the beneficiary principle that English law still applies (see infra ¶ 1010). Other offshore statutes, including those of Jersey, the Cayman Islands, Nevis and Belize, adopted more detailed regimes with express conditions on the purpose and the enforcer (see infra ¶ 1020, Table 10-2). The Cook Islands provision remains short. It validates the trust, names who may enforce it and provides for a vacancy in the office of enforcer. Most other questions are left to the trust instrument and the general law. A planner who uses a Cook Islands purpose trust must therefore supply in the deed much of what other statutes supply by law.
Terminology. In this chapter "the Act" means the International Trusts Act 1984 as amended, "enforcer" means the person named in the instrument under section 12(2) as the person appointed to enforce the trust, "the general law" means the law of trusts in force in the Cook Islands apart from the Act (see supra ch. 2), and "the 1981–82 Act" means the Trustee Companies Act 1981–82, repealed in 2014. Amounts are stated in the currency of the source.