Recent Maltese Case Law on Trusts & Fiduciaries Obligations

Romina Vassallo | Published on 07 May 2014

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On 24th February 2014 STEP Malta organised a seminar entitled "Recent Maltese Case Law on Trusts & Fiduciaries Obligations" at Le Meridien Phoenicia Hotel in Valletta. Dr. Jean-Philippe Chetcuti STEP Malta Chairman, opened the event by introducing the main speaker, who graciously accepted our invitation to speak at this year's seminar. 

During his session, Dr Ganado observed that although fiduciary obligations have existed since Roman times, they have yet to acquire more recognition and awareness as to their purpose. Fiduciary obligations are commonly created when family members entrust others to administer property and exercise rights on behalf or for the benefit of another individual. Dr Ganado called into question divergent approaches taken by our Courts in recent cases, evidencing the persistent popular misconception that trusts are instruments of fraud and abuse. Among other recent cases, the importance Carmen Xuereb v. Anton Micallef (PA 12/12/2013) which clarifies the application in time of the 2004 amendments to the law of fiduciary obligations, was discussed. The Court here held that since Article 1124A of the Civil Code only came into force in 2005, then this could not apply to the defendant, because he was engaged by the plaintiff in 2003.

In the first part of the presentation, nullity cases arising in strict civil law and their application to concepts of fiduciary obligations, were discussed. Where an act is declared null by the Courts, such act becomes null ab initio, rendering the state of affair as though such act had never existed. Unfortunately, it is often several years between when the case is instituted and when the Court ultimately hands down judgement and orders a retransfer of assets. In this context, a breach of fiduciary duties action is to be viewed as a superior cause of action, albeit having the same results. A review of the judgement of Bettina Vossberg pro et noe v. Equinox International Ltd et (CoA 9/11/2012) was then done, which case sought to annul a settlement of property into a trust due to prejudice suffered by a spouse and her children who were not receiving maintenance from the husband, through the institution of the actio pauliana. The court here found for the plaintiff, holding that the settlement of property into the trust was intended to harm her interests.

The contentious issue of what constitutes an illicit causa of an obligation was discussed in the second part. This may arise in a trusts context when Maltese fiduciaries acquire and hold immoveable property for the benefit of non-resident persons who fail to obtain the necessary AIP permits.  In Dr Carmelo Galea noe v. Anthony Farrugia (CoM, 6/12/2013), a non-resident acquired a field to extend the area he already owned, on which his house, lawfully acquired with an AIP permit was built. He used a Maltese nominee to circumvent the AIP law which at the time allowed only one property to each non-resident. When the foreigner passed away and upon being sued by his heirs, the Maltese nominee claimed that this property was his own and that he merely allowed the foreigner to use it gratuitously. It was pointed out that in this case, the heirs failed to obtain an order against the fiduciary to transfer the property to them.

In the third part of the talk, cases arising from matrimonial property issues, in which the Courts are likely to seek to mete out justice by finding that a person owning property is in fact the prestanome, or fiduciary, for his spouse or partner, were presented. A 2013 case with far-reaching implications in this regard is David Mifsud et v. Peter Axisa et (PA 28/2/2013), where the Court gave precedence to the innocent third party, and dismissed claims of an immoral causa on the ground that values in today’s society are changing.

The seminar was concluded with a call for more awareness among the judiciary as well as legal professionals of the changing practical contexts of fiduciary obligations, and for harsher remedies and more publicity because trusts today lie at the roots of social interaction.

The event came to a close with an address by STEP Malta Chairman Dr Jean Philippe Chetcuti inviting members and their colleagues to register in the STEP Malta Conference 2014, taking place at the Hilton, St Julian’s on the 6th and 7th March. As one of the fastest growing Financial Services Centres within the EU, this Malta conference will provide delegates with the tools to navigate through these challenging environments. This two-day conference featured 21 national and international leading speakers to reflect the variety of topics within our industry including a keynote address from Hon. Prof. Edward Scicluna, Malta's Minister for Finance.  Practitioners local or foreign, practising in Malta in the areas of estate and succession planning are encouraged to participate actively as well as join as members of STEP’s Malta branch. 

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