¶ 701
Overview
Scope of the chapter. Every international trust has at least one trustee that is a licensed Cook Islands trustee company, an international company or a registered foreign company, and in practice the trustee of almost every international trust is one of the licensed trustee companies in Rarotonga. This chapter examines that trustee: who may hold the office (see infra ¶ 710); how a trustee is appointed and the trust property vested in it (see infra ¶ 720); the layered sources of the law that governs it (see infra ¶ 730); its standard of care and its duties of loyalty and impartiality (see infra ¶ 740); its powers of investment, delegation and title-holding, and the statutory offices of custodian trustee and advisor (see infra ¶ 750); its duties to keep records, to keep the trust's affairs private and to seek the Court's directions (see infra ¶ 760); its liability, the clauses that limit it and the Court's power to relieve it (see infra ¶ 770); its position when a foreign court or a creditor presses it to act (see infra ¶ 780); and its retirement, removal and replacement (see infra ¶ 790).
What this chapter does not repeat. The licensing, supervision and regulation of trustee companies are examined in chapter 4, including the provisions of Part 11 of the Trustee Companies Act 2014 that apply to a trustee company when it acts as trustee: its capacity, its status as sole trustee, its liability when acting with co-trustees, releases by beneficiaries, its right to resign when a trust is deregistered and its compelled resignation when an application contained false information (see supra ¶¶ 430, 440, 460). Registration under the International Trusts Act 1984 is examined in chapter 5, the creation of the trust in chapter 6, the interests of beneficiaries in chapter 8, protectors, reserved powers and duress provisions in chapter 9, and migration and change of trustee on a change of governing law in chapter 11. This chapter refers to those discussions where they bear on the office of trustee.
The three layers of trustee law. The law governing a trustee of an international trust comes from three sources. The first is the general law of trusts in force in the Cook Islands, which the International Trusts Act keeps in force for international trusts except where the Act is inconsistent with it. International Trusts Act 1984, § 3 (Cook Is.) (as amended 1995–96). That general law includes the equitable principles received from England and the Trustee Act 1956 of New Zealand as it applies in the Cook Islands. The second is Part IIIA of the International Trusts Act, inserted in 1996, which states a statutory standard of care and gives trustees of international trusts specific powers and protections. The third is the Trustee Companies Act 2014, which regulates the trustee company itself and adds rules on its capacity and liability. Where the International Trusts Act conflicts with the Trustee Act 1956, the International Trusts Act prevails. International Trusts Amendment Act 1995–96, § 28(2) (Cook Is.).
Why the trustee matters to the planner. The protections of the International Trusts Act operate through the trustee. The trustee holds the assets, signs the registration filings, keeps the records, answers the creditor's claim in the High Court and decides whether to act on an instruction from a settlor who is under a foreign court order. A well-drafted deed with an unsuitable trustee protects little. The planner who selects the trustee company, drafts its powers and fixes the terms on which it can be removed is shaping the part of the structure on which the rest depends.
¶ 701.05 Terminology. In this chapter "trustee" means a trustee of an international trust unless the context indicates otherwise, "trustee company" means a company licensed under the Trustee Companies Act 2014, "the Act" means the International Trusts Act 1984 as amended, and "the Trustee Act" means the Trustee Act 1956 of New Zealand as it applies in the Cook Islands. Amounts are stated in the currency of the source.