The impossibility defence

The principle

The point of civil contempt is to compel, not to punish. Because it exists to force compliance, the sanctions keep running until the person complies or is discharged on some other basis. That reasoning breaks down when compliance is truly impossible, since no degree of pressure can force a result the person is incapable of delivering. The impossibility defence flows directly from this: if a settlor is genuinely unable to return the assets, ongoing sanctions accomplish nothing coercive.

Federal courts do recognise it as a genuine defence. Yet it is also the argument that came up short in almost every offshore trust case on record, and the underlying reasons recur consistently enough to support firm conclusions.

Why it usually fails

Impossibility you created yourself provides no defence. The courts are unanimous that no one may lean on an inability of their own making. A settlor who shifted assets offshore precisely to be able to claim later that they are out of reach has not shown impossibility at all. What they have shown is the very intent that casts doubt on the entire structure.

In FTC v Affordable Media, the Andersons kept their protector powers even after losing their co-trustee positions. Those powers amounted to a retained path back to compliance. The impossibility failed as genuine because they had preserved a means, however roundabout, of reaching compliance. Similarly, in Lawrence v Goldberg, Lawrence held onto the power to name a fresh trustee capable of reinstating his excluded-person status. That was a two-step chain, yet the court traced it through and arrived at the identical outcome.

The impossibility must be complete. Closing off the most direct path to compliance does not suffice. Should any series of steps open to the settlor be capable of yielding the result the court demanded, the defence collapses. The test is not whether you can get at the assets directly, but whether some route exists at all, no matter how circuitous, and courts have shown themselves ready to trace chains of two or more steps until they locate one.

What supports the defence

Three elements have to be authentic, not simply written into the deed on paper.

A licensed trustee acting independently. Legal title rests with the trustee, who operates under Cook Islands law. When they refuse, that is their own fiduciary judgment rather than a courtesy extended to you. The Trustee Companies Act 2014 subjects the trustee to regulation and capitalisation requirements and imposes its own professional liability. A trustee that can point to a track record of independent choices, some of them contrary to what the settlor wanted, carries more weight than one whose file records nothing but agreement.

An anti-duress provision properly drafted. Instructing the trustee to ignore any directions extracted under duress. This grants the trustee the legal footing to refuse without violating its fiduciary obligations. Absent it, the trustee is caught between complying and honouring its duties to beneficiaries. With it, the refusal is sanctioned by the deed itself instead of being a one-sided break from it. See the duress clause for the full mechanism.

No retained route to compliance. This is the element that most frequently fails across the reported cases. Any power a settlor retains is a power a court can scrutinise for what it ultimately permits. The protector role, the power to appoint a trustee, bank signatory authority, and every other reserved power should all be reviewed before the trust is created, not rationalised once contempt proceedings begin. See reserved powers.

Where the defence has succeeded

Where the facts genuinely back it, the defence does succeed. Courts have accepted that a debtor was unable to force repatriation in circumstances where the trust predated any relevant dispute by a wide margin, the trustee was truly independent with a documented history of using its discretion, the settlor held no power capable of yielding compliance, and the impossibility did not stem from a structure engineered to produce it.

Such results draw far less notice than the contempt rulings, which skews how the case record appears. The failures come with dramatic facts and lengthy sentences. The wins look like nothing at all happened, which is precisely the point.

Constructing the defence before you need it

Once a repatriation order lands, every fact of consequence is already set in stone: the date the trust was settled, who holds the trusteeship, who holds the protectorship, which powers were reserved, and how the trustee has conducted itself throughout the trust's existence. None of these can be altered at the contempt stage without creating troubles worse than the contempt itself.

At that critical moment, a trustee file documenting deliberate, well-recorded decisions across the years, some of which forced the settlor to live with a refusal, counts for more than any clause in the deed. The defence takes shape at formation and is sustained through administration. There is no assembling it after a court order arrives.

What the documentary record has to demonstrate

The impossibility defence gets weighed at the contempt hearing against the entire body of evidence. The trustee's refusal letter and the deed's anti-duress provisions form the opening point, not the complete picture. A court looks at the whole history of how the trust has run: whether the trustee reached decisions on its own, whether the settlor voiced preferences the trustee then acted on, and whether any pattern over the trust's life hints that the settlor was steering events rather than simply influencing them.

A trustee whose file is clean, showing periodic decisions made independently, distribution requests weighed and at times refused or postponed, and at least the occasional correspondence revealing the trustee applying its own judgment, is constructing the impossibility defence gradually, not at the contempt hearing. By contrast, a trustee whose file shows every request signed off within forty-eight hours with no sign of independent thought is offering up a record a contempt applicant will turn against the settlor.

The upshot is that the way a trust is administered across its whole life matters just as much as the way the deed is written. Formation documents lay down the structure. The administration record shows what that structure actually looks like in practice. Both come under examination at the contempt stage, and pairing a carefully drafted deed with a poorly run trust is no real improvement on a weak deed.

How the courts have upheld the defence

Reported cases in which the impossibility defence prevailed are tougher to locate than the ones where it fell short, in part because a winning defence leaves no result to report. When a settlor makes a convincing impossibility case, escapes a contempt finding, and quietly keeps a well-built trust running, no published decision results. The scarcity of reported successful defences does not signal a pattern of failure. It signals that successful defences rarely produce reported decisions.

What the published record does establish is the range of circumstances in which courts have accepted the defence in principle. Genuine impossibility, with the trustee acting independently and the settlor keeping no practical path to compliance. Funding well ahead of any dispute, which strips away any inference of deliberate construction. No retained trustee or protector role, so no indirect route remains open. These features recur reliably across the commentary of practitioners who advised in matters where contempt was never ultimately pursued or was dropped.

The connection to ongoing administration

Each year that a properly run Cook Islands trust operates strengthens the record of genuine independent trusteeship. An annual review, distribution requests weighed against the letter of wishes alongside the trustee's own independent assessment, refreshed identity documentation, and protector consent secured periodically on suitable decisions: together these build a file far tougher for a contempt applicant to portray as retained control than a file showing five years of automatic approvals with no independent decisions on record.

Selecting a trustee with real staffing depth and a documented decision process is more than an administrative preference. It is a decision about how the impossibility evidence will look at the moment it counts.

General information, not legal advice. See contempt and repatriation and the reported cases.