¶ 2201
Overview
The subject of the chapter. A creditor who wants to reach property held in a Cook Islands international trust must do more than prove that the settlor owes it money and moved assets offshore. The International Trusts Act 1984 attaches conditions to the creditor's access to the court itself. Some conditions govern where and when the action may be brought. Others govern what the creditor must swear, and to what standard, before the court may make any order. Others again confine the relief the court may give and exclude the remedies that the general law would otherwise supply. This chapter examines those conditions. The substantive test that a creditor must meet on the merits, proof beyond reasonable doubt of principal intent to defraud, insolvency or lack of other property, and the limitation rules of section 13B(3)–(4), is examined in chapter 21 (see supra ch. 21). The refusal to recognize foreign judgments is examined in chapter 23 (see infra ch. 23), and the procedure for injunctions, freezing orders and disclosure in chapter 24 (see infra ch. 24).
The provisions. The conditions on suit are found mainly in section 13K, headed "Commencement of proceedings," which was inserted by the International Trusts Amendment Act 1991 and substantially rewritten by the International Trusts Amendment Act 1995–96 and the International Trusts Amendment Act 1999. International Trusts Amendment Act 1991, § 5 (Cook Is.); International Trusts Amendment Act 1995–96, § 17 (Cook Is.); International Trusts Amendment Act 1999, § 6 (Cook Is.). Section 13K is supported by section 13A, which preserves an international trust in the settlor's bankruptcy, insolvency or liquidation, and by the parts of section 13B that make that section the creditor's only remedy, exclude constructive trusts and punitive damages, and require a creditor relying on a foreign judgment to exhaust its other remedies first. International Trusts Act 1984, §§ 13A, 13B(9)–(16) (Cook Is.). The International Trusts Amendment Act 1991 also provides that "the enactment titled, 13 Elizabeth I Ch 5 (1572)," the Statute of Elizabeth, has no application to a settlement upon or disposition to an international trust. International Trusts Amendment Act 1991, § 6.
No consolidated text. No official consolidation of the International Trusts Act incorporating all eight amending Acts has been published. The text of each section examined in this chapter has been reconstructed from the Act as passed in 1984 and from the amending Acts of 1985, 1989 (No. 23), 1989 (No. 31), 1991, 1995–96, 1999, 2004 and 2013, read in the copies published by the Financial Supervisory Commission (see supra ¶ 530). Where a judgment of the Cook Islands courts quotes a section as it stood at a given date, the quotation has been checked against the reconstruction. In A v. B, for example, the High Court set out section 13K(1) as amended in 1995–96, and its text matches the reconstruction. A v. B, [2002] CKHC 6, [2004] 4 ITELR 877 (Cook Is. High Ct. Apr. 4, 2002).
Why the conditions matter. The conditions on suit do not change what a creditor must prove at trial. They change whether it can get to trial, how much it must commit before it gets there, and what it can obtain while it waits. A creditor whose action is commenced one day outside the two-year period of section 13K(1) has no action, whatever the strength of its evidence of fraud. A creditor who cannot satisfy the High Court beyond reasonable doubt, on its own affidavit, that its claim is in time and capable of meeting section 13B, cannot obtain a freezing order, an order for inspection of property or any other interim relief. And a creditor who succeeds at trial recovers only the property the settlor transferred, or its proceeds, and nothing from the trustee or the trust's other assets (see supra ch. 21).
The structure of the chapter. Paragraph 2210 examines the conditions as a scheme and traces their legislative history. Paragraph 2220 takes section 13K(1) and (2), the two-year period and the requirement that proceedings be brought in the High Court, with a case discussion of the Court of Appeal's decision in Orange Grove. Paragraph 2230 examines section 13K(3) and (4), the affidavit and the threshold that must be met before any order is made. Paragraph 2240 examines the provisions that exclude remedies outside section 13B and limit the creditor's recovery. Paragraph 2250 examines bankruptcy and insolvency. Paragraph 2260 examines security for costs, privacy and the procedure of the High Court, with case discussions of Pacific Heritage Bank v. Radke and Gun Bo LLC v. Asiatrust Ltd. Paragraph 2270 examines how the conditions apply to trusts that migrate to the Cook Islands, to trusts registered before November 21, 1996, and to trusts that are deregistered. Paragraph 2280 compares Nevis, Belize and the United States, and paragraph 2290 sets out practice for creditors, trustees and planners, model provisions and a checklist.
Terminology. In this chapter, "the Act" means the International Trusts Act 1984 as amended, and a reference to a section without more is to a section of the Act. "Creditor" bears the meaning given by section 13B(12): a creditor of the settlor, including any person who alleges a cause of action against a settlor. International Trusts Act 1984, § 13B(12). "The High Court" means the High Court of the Cook Islands, which the Act calls "the Court." Amounts in this chapter are stated in the currency in which the source states them (see supra ch. 5).