Evolution of Trust Law in Malta

undefined
 
Dr. Tonio Fenech
tfenech@fff-legal.com
www.fff-legal.com
 
Civil law system, but with the benefit of over 150 years of British rule,
juridically speaking
 
Malta has therefore experienced dove-tailing common law and civil law
concepts for over a hundred years, something that the EU 
wa
s still trying to
get right
…until Brexit happened;
 
The concept was adopted in steps 
between 
1988 
and
 2004
;
 
After 2004 
the concept of trust has be
come
 fully integrated into our
domestic law
;
 
The trust can now be seen as falling within the general category of
relationships where fiduciary obligations are owed, and has a particular
statute regulating the relevant relationships;
 
Latest amendments to the Trusts Statute were in 2017, but the civil code
provisions of Fiduciary obligations were last amended in 2018
 
www.fff-legal.com
 
Concept adopted for limited purposes, and in a
clearly ring-fenced manner by the Offshore
Trusts Act 1988: completely offshore
 
Very closely and openly modelled on the Jersey
Act 1984, to provide for certainty
 
As experience started consolidating, the
Recognition of Foreign Trusts Act 1994 allowed
for the the local recognition of f
o
reign trusts,
while maintaining the onshore-offshore divide
 
www.fff-legal.com
 
With the enactment of the Act XIII of 2004, a number of laws were
amended, and the Civil Code was also fundamentally amended, in order
to fully integrate the concept
 
The legislator 
clear
ly 
concluded
 that the traditional view that the
concept is completely alien to the Civil law was too simplistic, and ought
to be discarded
;
 
In fact the equivalent of the English concept of trust can be found in the
Early Roman Law concept of “fiducia”
 being an agreement  
“appended to
a conveyance of property, involving a direction or trust as to what was to be
done with it (Buckland).”
 
Although recognized as a concept, it eventually disappeared by the time
of the Justinian codification of Roman law
 
www.fff-legal.com
 
Ganado:
 
“The English concept of Trust is itself a derivation of the Roman
Law concept of 
fiducia
, being an agreement  “appended to a
conveyance of property, involving a direction or trust as to what
was to be done with it (Buckland).”
 
Institute recognized, but never listed as a nominate contract.
Some considered it a “pactum”, which could only occur as an
append
a
ge to a conveyance, and need not be reduced to writing
 
By the time of Justinian, the concept seems to have disappeared,
but its “subtle effects are very evident in the Civil Code to this very
day.”
 
 
www.fff-legal.com
 
“The unfortunate thing about the Codes is that because of
their very brilliance and nature, being guidelines within a
framework, they necessarily result in some subsequent
rigidity in thought....if one is told how to do certain things
to achieve certain ends then one follows the pattern. The
risk is that one then assumes that anything outside the
pattern is not possible.”
 
The Code Napoleon, influenced by the French Revolution,
sought to prohibit entails to destroy the illiquidity of land,
and concentration of property in the hands of the nobility.
 
Many civilian lawyers came to assume that ALL trusts are
entails, and therefore contrary to public policy
 
www.fff-legal.com
 
Title IIIA in Part 
II
 of Book Second of the Civil Code , entitled “Of Trusts &
their effects” has 10 Articles: Art. 958
L
 – 958
U;
 
Art. 958
L
(1): “
Property under trusts shall be regulated by the special
 
law
on trusts and to the extent applicable, the rules of this Code
 
relating to
trusts.
 
Title XXIIIA of the Code is entitled “Of Trusts and Obligations” has 5
articles, dealing with the effect of trusts on marriage and annuities, as
well as security trusts;
 
 The Trusts & Trustees Act (originally enacted as the Offshore Trusts Act in
1988 but substantially amended on various occasions since then), is
Chapter 331 of the Laws of Malta.
 
Obligations in general under the Civil Code now include “Fiduciary
Obligations”, ie Art. 1124A 
to J. The most recent amendments here were
in 2018, which has widened the legislative treatment from 2 to 10 Articles
 
www.fff-legal.com
undefined
 
Dr. Tonio Fenech
tfenech@fff-legal.com
www.fff-legal.com
 
The 2018 amendments to the provisions of fiduciary obligations
seem to have the objective of completing the project started in
2004;
 
In 2004, the objective seems to have been that of having trusts
properly allocated to the general class of relationships that create
fiduciary obligations;
 
In 2018, more detailed provisions and stipulations were introduced
for this general category, including specific remedies, but the
approach remained clear:
 
The Civil Code provisions were a general platform over which specific
types of fiduciary obligation could be regulated through a specific
title in the Code or more specialized legislation, such as the case of
trusts.
 
www.fff-legal.com
 
  In order to complete the project, some rules
were required in order to ensure clarity as to
which set of rules applied, and when.
 
Therefore, of the 10 Articles which now
regulate fiduciary obligations in general, it
would seem important to start with the last
Article, entitled “Applicability of the
provisions of this Title”
 
www.fff-legal.com
 
a.
  “When a fiduciary relationship is governed by particular rules,
whether because of the source and type of the obligations or
because of any special law, such particular rules shall apply to the
context and these provisions shall apply as necessary to support
the interpretation of the said rules;”
 
b.
It shall be presumed that the provisions of the Title are
consistent with particular rules, but the particular rules prevail
where inconsistent;
 
c.
The provisions of the Title apply to all fiduciary obligations, even
those existing before 2018, but there is no retrospective
application where this denies or restricts vested rights or creates
a new liability;
 
www.fff-legal.com
 
d.
  where a fiduciary obligation is vitiated
(becoming unenforceable due to the “falsity of
illegality of the cause”) by a breach or
attempted breach of law by the parties or any
one of them, either party can render this
enforceable by complying with the relevant law
thus rendering the cause legal;
 
The court can in such cases give interim orders to
ensure compliance or to prevent further abuse.
 
www.fff-legal.com
 
Fiduciary obligations arise in virtue of law, contract,
 
quasi-contract,
unilateral declarations including wills
, trusts, assumption of office or
behaviour whenever
 
a person (the ''fiduciary‘’) –
 
owes a duty to protect the interests of another person 
and it shall be presumed
that such an obligation where a fiduciary acts in or occupies a position of trust is
in favour of another person
;
 or
Has registered in his name
, holds, exercises control or powers of disposition
over
 
property for the benefit of other persons, including
 
when he is vested
with ownership of such property for
 
such purpose; or
receives information from another person subject to a
 
duty of confidentiality
and such person is aware or
 
ought, in the circumstances, reasonably to have
been
 
aware, that the use of such information is intended to
 
be restricted.
 
A 
delegate of a 
fiduciary
, is also deemed a fiduciary if he was
 aware, or
should, from the circumstances, 
have been 
 aware, of the
 
fiduciary
nature of the relationship
.
 
www.fff-legal.com
 
Fiduciary obligations arise from behaviour when
a person –
without being entitled, appropriates or makes use of
property or information belonging to another,
whether
 
for his benefit or otherwise; or
being a third party, acts, being aware, or where he
reasonably ought to be aware from the
circumstances,
 
of the breach of fiduciary obligations
by a fiduciary,
 
and receives or otherwise acquires
property or makes
 
other gains from or through the
acts of the fiduciary
 
www.fff-legal.com
 
 
 
 
General duty to act with utmost good faith
and honestly, in all cases
 
 
 
www.fff-legal.com
 
Other duties, alterable by instrument in writing or express provision of
law:
t
o exercise the diligence of a 
bonus pater familias 
in
 
the performance of his
fiduciary
 obligations;
to avoid any conflict of interest 
or conflict of trust or fiduciary obligations;
not to receive undisclosed or unauthorised profit from
 
his position or
functions 
nor permit any other person from doing so, nor enter into any
transaction related to the property, directly or indirectly, unless authorized to do
so by the instrument creating the fiduciary obligation or permitted by a person or
authority empowered to approve such dealings
;
t
o act impartially when the fiduciary duties are owed
 
to more than one
person;
to keep 
any 
property acquired or held as a
 
fiduciary segregated from his
personal property and
 
that of other 
beneficiaries
, 
and to affect a change in the
registration of any relevant property, as may be required for such purpose
;
t
o maintain suitable records in writing of the interest
 
of the person to whom
fiduciary obligations are
 
owed;
to render account in relation to the property subject to
 
fiduciary obligations;
 
 
www.fff-legal.com
 
Other duties capable of alteration:
to return on demand 
(or upon termination of the fiduciary obligation) 
any
property held to the person lawfully entitled thereto or as
 
instructed by him or
as otherwise required by
 
applicable law.
To keep the affairs of the beneficiary confidential
To carry out the designated purpose, where property has been entrusted to him
 
Confidential information can be disclosed to the beneficiary in accordance
with and subject to any restrictions contained in the written instrument, if
any, giving rise to the fiduciary obligation.
 
A declaration by a fiduciary that he is acting in such a capacity is not a
breach of such duty.
 
In addition to other remedies at law, the fiduciary must return any
property together with any benefits derived, directly or indirectly,
including property into which  the original property will have been
converted - Art. 1124A(5)
&(6)
 
www.fff-legal.com
 
1124A7-10 were all added in 2018
 
A competent court may make an order or declaration in favour of
beneficiary, including
:
 
Order the transfer, restitution or delivery of any property, or change in registration
to another fiduciary;
Terminate powers of disposition of property;
Order the provision of adequate security;
Establish a trust, including its terms;
Rescind any transfer or other transaction or declaring the same null and void;
Impose damages on the fiduciary
 
Above powers available in any proceedings by any beneficiary or other
person whom the court considers entitled under the relevant fiduciary
obligation.
 
Third party acquiring under onerous title shall not be prejudiced,
provided he was not aware that he was dealing with a fiduciary
 
 
 
www.fff-legal.com
 
Fiduciary duties may, in particular cases, be considered implicitly waived
in certain circumstances, such as:
 
Method of engagement of fiduciary, in particular where he has multiple
purposes, functions or offices or where he is granted contemporaneous
entitlement;
Scope, purposes and contexts of the fiduciary obligations imposed;
Delivery of property to a beneficiary’s creditor by way of security or for a
purpose which is distinct from that of the beneficiary;
Manner of acceptance or assumption or undertaking of the fiduciary
obligation
 
Where there is a waiver (implicit or express), the fiduciary may apply for
directions from the competent court on how to act in the circumstances
 
The court shall give due regard to the intentions of the person
establishing or imposing the fiduciary obligations and to the interests of
both the fiduciary and the beneficiary
 
 
www.fff-legal.com
 
The marginal note previously read “Ownership by a
fiduciary”. The section was relatively short and provided
for three basic principles:
 
Where ownership of property is vested in the fiduciary, third
parties may act in relation to such person as though he were the
absolute owner thereof;
 
Property held by fiduciary is not subject to claims or rights of
action of his personal creditors, nor his spouse or heirs at law;
 
Third parties in good faith can rely on declarations made by
 the
fiduciary re his authority, and need not enquire about this, or
obtain consent from the beneficiaries or anyone else
 
www.fff-legal.com
 
 
Post 2018 amendments, the section is longer and more
complicated;
 
The marginal note now reads “dealings with third parties aware of
fiduciary obligations”
 
Where they are aware that fiduciary is vested with ownership, has
registered in his name, holds, exercises control or powers of
disposition over property as fiduciary, third parties in good faith
can deal with the fiduciary as if he is absolute owner;
 
A third party acquiring property under an onerous title is not
affected by fiduciary obligations “to which the property is subject,
unless otherwise agreed upon”;
 
www.fff-legal.com
 
The situation is different where a third party acquires
in terms of Art. 1124B(1) under gratuitous title, and:
 the fiduciary will have acted in breach of a fiduciary
obligation; or
The third party acquired “to the detriment of a
beneficiary”
Here, he will be subject to the same fiduciary
obligations, as from when he becomes aware or he
reasonably ought to have become aware of the
breach of fiduciary obligation
 The obligation is however limited to the extent of
the breach or unauthorized gain, unless the Court
provides otherwise pursuant to any of the remedies
in Art. 1124A
 
www.fff-legal.com
 
 
TP in good faith is entitled to rely on fiduciary’s
declaration regarding his authority, and need not:
enquire into terms and conditi0ons of fiduciary’s
authority, except where transaction is gratuitous;
Obtain the consent of the beneficiary of the fiduciary
obligations
 
TP is entitled to enquire about the purposes of the
fiduciary obligation, including the obligation “of not
exceeding the value raised by the transaction”, or
otherwise relating to the property subject to the
transaction or the applicability of the funds in
question.
 
www.fff-legal.com
 
The following declarations by a fiduciary are not
a breach of confidentiality:
That his authority exists, the date the relevant
instrument was executed and that the authority has
not been revoked;
That he is authorised to carry out the transactions
being entered into;
The identity and address of the fiduciary!
 
But any certificate containing a statement which
he knows or ought to know is false shall be guilty
of an offence liable to punishment of
imprisonment up to 2 years or a fine (multa)
 
www.fff-legal.com
 
Where a TP has been informed, is aware or should reasonably be
aware that a fiduciary is acting in such capacity, the fiduciary is not
personally liable for the obligations entered into, other than those
entered into in the exercise of his obligations.
 
Where TP is unaware of the fiduciary obligations, the fiduciary is
personally liable for the obligations entered into, subject to any
terms stipulated or applicable law.
 
Fiduciary has a right of recourse against the beneficiary where
contemplated by law, by way of indemnity, unless he has acted in
breach of his duties
 
Fiduciary is presumed to have all powers required to perform
fiduciary obligations towards beneficiaries or purposes
 
www.fff-legal.com
 
Property held by a fiduciary (even in ownership), “shall constitute a
distinct and separate patrimony, consisting of all relative rights
and obligations with respect thereto”
 
Fiduciary ownership is integral as far as third parties are
concerned, but modified by the Code as well as any special laws
that may be applicable, as far as the beneficiary (and/or purpose) is
concerned.
 
Where property is held but not in ownership, the provisions of this
Code and any other special law governing the relationship shall
apply in accordance with the terms established by the parties (but
can be modified in terms of the law for the protection of the
beneficiary or the “achievement of the obligation”
 
www.fff-legal.com
 
Any beneficiary can enforce fiduciary obligations on the basis of
the provisions of this Title;
 
The demand may be made together with any other action
available at law as part of a general action or by an additional
application to the Court, at any time of the proceedings until the
award of a final judgement by the competent court or the Court of
Appeal;
 
Action can be exercised by any person or body granted due
authority in the instrument creating the obligation, where this is
for a purpose, and in the absence of a beneficiary;
 
Where undertaken by a public benefit organization, the AG can
also utilize the remedy
 
www.fff-legal.com
 
No prescription where action is brought:
For fraud or dishonesty to which fiduciary was party,
or had knowledge thereof;
For recovery of property from the fiduciary where this
has been converted to his use, or for benefits or gains
received as a result of breach of duty;
 
A fiduciary cannot acquire property as a result of
time bar, even if in good faith;
 
Any act of a fiduciary in bad faith is sufficient for
an action not to be barred by prescription
 
 
www.fff-legal.com
 
Otherwise, an action by a beneficiary for breach
of any other fiduciary obligation referred to in
Art. 1124A(4) lapses after 5 years, from the date
(whichever earlier):
of delivery of a written account of fiduciary activity
to the beneficiary;
On which the beneficiary first had knowledge of the
occurrence of the breach of fiduciary duty;
 
If the written account is itself dishonest, then
the latter date shall count with reference to
such account
 
 
www.fff-legal.com
 
 
To perform obligations agreed in writing,
provided in the relevant instrument giving rise to
fiduciary obligation, or as may arise at law;
Pay remuneration and expenses to fiduciary as
may be established under the relative
instrument, or as may be reasonable
Fiduciary may reimburse himself or pay out of
the property expenses properly incurred, and
inform beneficiary
 
 
www.fff-legal.com
 
 
Beneficiary must at all times act in good faith
towards the fiduciary
 
Subject to the terms of the instrument, and
to the extent of the property (unless agreed
otherwise), the beneficiary shall indemnify
the fiduciary for any liabilities incurred,
except  to the extent fiduciary is guilty of
negligence, willful misconduct or fraud.
 
www.fff-legal.com
 
Long and detailed provisions regulating this
important aspect of holding property subject
to fiduciary obligations.
 
These are deemed beyond the scope of these
lectures, but remain an important area that
requires careful study
 
www.fff-legal.com
undefined
 
Dr. Tonio Fenech
tfenech@fff-legal.com
www.fff-legal.com
 
Mandate relationships in general now fall
squarely within the ambit of fiduciary
relationships
A mandatory for an undisclosed beneficiary
(a so-called “nominee”) also specifically
regulated
Art. 127 of the Companies Act deals with
company shares held in trust and
nomineeship
 
www.fff-legal.com
 
Deposit:
 acceptance of custody of a thing
gratuitiously to be returned on demand. Title does not
pass, and depositary can force depositor to take thing
back. Contract terminates on death of depositor;
Fideicommissa:
 
A transfers title of thing to B, subject
to duty to pass it on to C when A dies. Clearly
distinguishable from trust;
Community of acquests: 
a form of reciprocal trust,
produced ipso jure as a normal effect of marriage. In
certain cases, however, creditors can access
paraphernal assets when community of acquests is
insufficient
 
www.fff-legal.com
 
Inheritance with the benefit of inventory: 
an heir
accepts estate without being liable
 
fo
r
 debts
attaching to it (etc). Separation of estates, and heir
can even retain rights if claim against estate, but heir
can renounce to estate;
Foundation:
 
in some limited senses, this is 
a form of
corporate trust, but settlor can have much more
influence. New juridical entity, with administrators its
officers
Directorship: 
the Companies Act is not specific about
this (see Art. 136A generally), but it is generally held
under English law that Directors owe fiduciary duties;
 
www.fff-legal.com
 
Art. 127 of the Companies Act:
“Unless otherwise provided in its articles, a company formed and
registered in Malta shall not recognise any nominee relationship or
trust in respect of any security issued by it, and the company shall not
recognise, even when having notice thereof, any interest or other
right in such security, but shall only recognise the registered holder
thereof.”
The Article accepts situations where shares are held by a
“trustee”, and provides some definitions:
"beneficial owner" means the person beneficially entitled to the
shares under a trust or a fiduciary agreement;
"trustee" shall mean a person who may act as a trustee in accordance
with the Trusts and Trustees Act and shall include any fiduciary holding
shares on behalf of another person.
 
 
www.fff-legal.com
 
 
Mizzi et vs Fenech et, decided on 29
th
September 2016, by Mr. Justice Joseph
Zammit McKeon in the First Hall, Civil
Court;
 
This case was not appealed from, and
should therefore be considered final
 
tfenech@fff-legal.com                            www.fff-legal.com
 
“dan l-artikolu ma hu xejn ghajr l-applikazzjoni
generali tal-ligi illi fil-qadi tad-doveri tieghu,
impjegat irid iqis l-interess tal-principal tieghu u
jagixxi bid-diligenza kollha fil-qadi  ta’ dmiru, u aktar
ma hi gholja l-posizzjoni jew il-kariga, aktar jassumi
piz l-obbligu ta’ fedelta’ lealta, onesta’ u buona fede
fil-konfront tal-principal…”
 
“Huma in-natura  tal-kariga, ir-responsabilitajiet u
poteri afdati…..li jiddeterminaw u jiddelineaw il-qies
tal-fiducja riposta u mistennija”
 
www.fff-legal.com
 
The Mizzi case is not about the duties of trustees;
 
It is a contractual scenario where a committee of
professionals were given wide discretion to
evaluate assets with a duty to come to an
equitable conclusion between the parties;
 
How is this relevant for trustees in a Maltese
context?
 
tfenech@fff-legal.com                            www.fff-legal.com
 
Two brothers owned a company between them;
Incompatibility of characters and personalities led to a decision
to split the business amicably;
A valuation committee (VC) was formed to report on and decide
how to split certain assets, including immovable assets within
the business after valuation
The relevant Agreement mandated the VC to utilize specific
valuation methodologies for different assets, but otherwise
provided for valuations “in accordance with generally accepted
valuation principles and concepts and in such manner as the
Valuation Committee may at its sole discretion consider
equitable in the circumstances”.
The VC appointed architects, who established the value of two
buildings (the Building Report) as part of their mandate;
 
tfenech@fff-legal.com                            www.fff-legal.com
 
In their final report, the VC gave a value which
included a value of the Buildings, but also gave an
option to each of the brothers to ignore the Building
Report and to opt for a so-called “property disposal
mechanism”, which in essence provided for the sale of
the building concerned;
One of the brothers opted for this, but the other
eventually obtained a Court of Appeal judgment that
the mechanism was in fact ultra vires in terms of the
VC’s remit;
A dispute arose as to whether the value without
reference to the mechanism had become final, given
certain alleged mistakes made by the architect
 
tfenech@fff-legal.com                            www.fff-legal.com
 
The brother who had opted for the disposal mechanism
filed suit, requesting that the court :
1.
Declare the Building Report as defective;
2.
Order defendants to revise the Building Report;
3.
Alternatively appoint other architects for the same
purpose;
4.
Declare that the VC has yet to reach an equitable
valuation for the relevant building;
5.
Order the VC to revise the compensations payable
under the Agreement
6.
Order the VC to complete the division of assets of
the Company
 
tfenech@fff-legal.com                            www.fff-legal.com
 
The Court essentially considered the demands in two
batches:
 
Issues connected with the Building Report (the first
three demands);
 
 
And
 
The duties, if any, of the VC in the light of the removal
of the property disposal mechanism option (the last
three demands)
 
tfenech@fff-legal.com                            www.fff-legal.com
 
Given that the VC had to be driven by principles of
equity, the Court felt it had to evaluate the
Building Report, as equity will not be respected if
it contains material mistakes and the VC
continued to rely on it.
 
The Court found no material defects in the report
and rejected the first 3 demands;
 
tfenech@fff-legal.com                            www.fff-legal.com
 
 The court upheld 4
th
 and 6
th
 demands in the sense
that the valuation already made by the VC was subject
to possible review, now that the disposal mechanism
was not available.
 
The fact that a disposal mechanism was provided
indicated that the VC had some doubt about the
equitable nature of the theoretical exercise made by
the architect alone.
 
The VC can determine whether to adopt measures or
make other verifications
 
tfenech@fff-legal.com                            www.fff-legal.com
 
The court went out of its way to state that the
judgment should not influence the VC, whose sole
obligation is an equitable conclusion to their
mandate;
 
The judgment should not be interpreted as an
indication that the rejection of the first 3 demands
implies a requirement to rely on the architect
report, or the VC’s own report
 
tfenech@fff-legal.com                            www.fff-legal.com
 
 the judgment was given in the context of a clear
contractual acceptance of fiduciary obligations by
the VC members, as well as a wide discretion
given in order to fulfil a duty to find an equitable
conclusion to their mandate;
 
Can similar duties be implied in respect of a
fiduciary who is simply given discretionary powers
without a specific reference to principles of equity
and justice?
 
tfenech@fff-legal.com                            www.fff-legal.com
 
Art 993, Civil Code:
 
“Contracts must be carried out in good faith,
and shall be binding not only in regard to the
matter therein expressed, but also in regard to
any consequence which, by equity, custom, or
law, is incidental to the obligation, according to
its nature.”
 
 
 
tfenech@fff-legal.com                            www.fff-legal.com
 
Pace vs Micallef, Ct. of Appeal, 15.12.2004, made
reference to principles of equity in good faith, in order
to attack a rigid interpretation of contractual duties;
It stated that a certain element of equity together with
practical and moral considerations were included in the
concept of good faith. It characterized its own logic as
reflecting the principle of Roman law, that  “
in
omnibus quidem, maxime tamen in jure, aequitas
spectanda sit
 (Dig. 50, 17, 90)“
 
In English: 
“In all affairs, and principally in those which
concern the administration of justice, the rules of equity
ought to be followed.”
 
 
tfenech@fff-legal.com                            www.fff-legal.com
 
“Din il-Qorti tifhem li fil-kuncett tal bona fidi jidhol
ukoll 
certu element ta’ ekwita kif ukoll ta’ sens
prattiku u morali
 li jigi vjolat mhux biss meta
konfrontat b’agir specifiku doluz biex jaghmel il-
hsara, izda wkoll b’dak il-komportament
li jkun ghal kollox sproporzjonat u li ma jkunx
accettabbli skond in-normi stabiliti tas-socjeta u tal-
logica guridika………omissis…….. Il hsieb ta’ din il-Qorti
f’dan ir-rigward hu rifless fil-massima tad-dritt komuni li
ghal sekli shah iddomina l-kontinent Ewropew: 
in
omnibus quidem, maxime tamen in jure, aequitas
spectanda sit
 (Dig. 50, 17, 90)"
 
tfenech@fff-legal.com                            www.fff-legal.com
 
The Court considered this to be applicable in all
contractual relationships;
 
What about contracts where principles of equity
and fairness are imposed on the contracting
party?
How much more applicable would such principles
be on fiduciaries who are given discretion and who
owe duties of utmost good faith?
 
tfenech@fff-legal.com                            www.fff-legal.com
 
It is submitted that, where fiduciary obligations
are owed, the party must go beyond normal
good faith. Thus the principles and behaviour
set out in Art. 1124A must also be coloured by
the Mizzi Case judgment, which can be seen as a
re-affirmation of the judgment in Pace vs
Micallef.
 
Therefore principles of equity must be
considered just as much as the reference to
honesty and utmost good faith in Art, 1124A;
 
tfenech@fff-legal.com                            www.fff-legal.com
 
 
As a result of judgments like Pace vs Micallef and the Mizzi
Case, there could in my view be increasing pressure on
fiduciaries going forward, in the sense that they must
instill more than that “certain element of equity together
with practical and moral considerations” which Pace vs
Micallef associated with good faith.
 
There will be that additional element imposed on
Fiduciaries, possibly oriented around 
pro-activity
, where
they will be expected to really deal with situations in an
active manner rather than merely administer in an honest
manner.
In such case, fiduciaries will be exonerated from such
duties only where this is specifically excluded.
 
tfenech@fff-legal.com                            www.fff-legal.com
 
 
How would the industry in Malta react to
such developments?
 
Anglo-Saxon groups will possibly resist such
developments
 
What about the others?
 
tfenech@fff-legal.com                            www.fff-legal.com
 
Bristol & West Building Society v Mothew
(1998):
“The distinguishing obligation is the obligation of loyalty.
This core liability has several facets. A fiduciary must act in
good faith; he must not make profit out of his trust; he
must not place himself in a position where his duty  and his
interest may conflict; he may not act for his own benefit or
the benefit of a third person without the informed consent
of his principal”.
 
www.fff-legal.com
 
The traditional and mainstream opinion in
the UK: the duty is articulated on the basis of
what a fiduciary must not do (proscriptive),
and not on what he ought to do;
However the courts sometimes  express
themselves in a more prescriptive manner:
Item Software v Fassihi (2005)
Sinclair Inv. v Versailles Trade Finance (2012)
F&C Alternative Investments v Barthelemy (2012)
 
www.fff-legal.com
undefined
 
Dr. Tonio Fenech
tfenech@fff-legal.com
www.fff-legal.com
 
Art 3 of the Trusts & Trustees Act:
A trust exists where a person (called a trustee) holds, as
 
owner or has
vested in him property under an obligation to deal
 with that property
for the benefit of persons (called the beneficiaries
, whether or not yet
ascertained or in existence, which
 
is not for the benefit only of the
trustee, or for a charitable purpose,
 
or for both such benefit and
purpose aforesaid.
A mandate for an undisclosed principal pursuant to
Art.1871A(2) could in some senses be covered,
therefore intention (and documenting such intention)
is important.
This is also significant in the context of trusts where
the settlor is himself the beneficiary, or bare trusts,
which in most cases are really a form of mandate
 
 
www.fff-legal.com
 
A trust can come into existence in “any manner”
Without prejudice to the foregoing, also: unilaterally
or otherwise by oral declaration, or by an instrument
in writing including a will, by operation of law or by a
judicial decision:
But where by oral arrangements of a fiduciary nature, the
presumption is mandate, or deposit, unless there is
evidence to create an oral trust
A unilateral declaration of trust is a declaration in writing
by a trustee stating that it is holding as trustee, containing
all the terms of the trust, including information enabling
identification of beneficiaries
A unit trust must be created by written instrument
 
www.fff-legal.com
 
The amendment which introduced specific
regulation of fiduciary obligations is of 2004;
 
However, the principle has existed since time
immemorial within the Civil law
 
Anthony Caruana & Sons Limited v. Caruana
(Ct. Appeal, 28/2/2014)
 
www.fff-legal.com
 
“…dak l-Artikolu ma hu xejn hlief riproduzzjoni ta’
principju ta’ dritt applikabbli gia fid-dritt Ruman fejn
kien meqjus bhala “a parasitic institution”….. mhux
bhala kuntratt imma bhala li jimponi 
obbligi
addizzjonali ghal dawk kuntrattwali 
fil-kaz ta’ certi
kuntratti. Il-kuncett ta’ obbligazzjonijiet fiducjarja
lanqas ma hu marbut necessarjament mal-kuncett ta’
trusts…u hu ta’ applikazzjoni generali f’kull kaz li dak li
jkun ikun qed jagixxi f’interess ta’ haddiehor meta
allura hu mistenni li jagixxi bid-debita attenzjoni u
kura.”
 
www.fff-legal.com
 
Law of Contract (Art. 993): “Contracts must be carried out in
good faith, and shall be binding not only in regard to the matter
therein expressed, but also in regard to any consequence
which, by equity, custom, or law, is incidental to the obligation,
according to its nature.”
Pace vs Micallef pro et noe (Ct. Appeal, 5.12.2004): “…fil-
kuncett tal-bona fidi jidhol  ukoll certu element ta’ ekwita kif
ukoll ta’ sens prattiku u morali…“
The court endorsed the Latin maxim which translates to ”In
all affairs, and principally in those that concern the
administration of justice, the rules of equity ought to be
followed”
 
 
www.fff-legal.com
 
The Civil Code is clearly “Civilian” in all senses, and the law of fiduciary
obligations is also properly allocated to a civilian form of regulation
The particular fiduciary relationship known as a trust has, however, been
regulated through a specialized law, Cap. 331, which was deliberately
modelled around Jersey law, in order to remove doubt when Maltese trusts
are examined within an international context;
It is therefore the Anglo-Saxon notion of trust that was looked to, in terms of
the legislative objective, when the concept was introduced;
It was only later that the relationship was also given further support through
specific regulation in the Civil Code, and a clear allocation of the relationships
involved through the development of the law of fiduciary obligations
One must therefore clearly understand the concept also as of Anglo-Saxon
origin and orientation, and Anglo Saxon judicial authority remains of utmost
importance, if one were to understand how the different offices involved in a
trust should properly inter-act.
 
www.fff-legal.com
undefined
 
Dr. Tonio Fenech
tfenech@fff-legal.com
www.fff-legal.com
 
Maitland:
“If we were asked what is the greatest and
most distinctive achievement performed by
Englishmen in the field of jurisdprudence, I
cannot think that we shall have any better
answer to give than this, namely the
development from century to century of the
trust idea.”
 
www.fff-legal.com
 
Lapaulle (as quoted in Hayton):
“....from settlement of the greatest of wars down to the
simplest inheritance on death, from the most audacious
Wall Street scheme down to the protection of
grandchildren, the trust can see marching before it that
motley procession of the whole of human endeavour:
dreams of peace, commercial imperialism, attempts to
strangle competition or to reach paradise, hatred or
philantropy, love of one’s family or the desire to strip it of
everything after one’s death, all those in the procession
being dressed either in robes or in rags, and either
crowned with a halo or walking with a grin. The trust is the
guardian angel of the Anglo-Saxon, accompanying him
everywhere, impassively, from the cradle to the grave.”
 
 
www.fff-legal.com
 
The trust developed out of the exercise of the
Chancellor of England’s jurisdiction to “soften
the rigours” of the common law
All land was owned by the crown;
In the feudal hierarchy, the King granted “estates” in
land to his supporters, who in turn granted types of
tenure in parts of this land to their own supporters,
etc
There were 3 
common law 
estates:
Estate for Life: 
dispose, manage and enjoy land for life
Estate in fee tail: 
for as long as there are lineal descendants
Estate in fee simple: 
heirs (later a form of perpetual tenure)
 
www.fff-legal.com
 
Legal action on land could only brought by a male,
claiming a better right to possession of the land than some
interloper;
Knights going on the crusades would vest his estate in
land in a friend to hold “
to the use of
” the knight , and until
his return, his wife and children.....or the land was
defenceless!
However, if the friend did not retransfer, there was no
remedy in the common law courts
The knight could only petition the King to remedy the
wrong, since 
in equity 
the friend should be forced to
recognize the knights interest and retransfer
Typical situation also for someone who wanted to grant
land to a monastic order with vows of poverty
 
www.fff-legal.com
 
The King would refer petitions to the Chancellor, an ecclesiastic
learned in law and qualified to advise others on matters of
conscience and equity;
 
The 
Chancellor sat in what became known as the Court of
Chancery, where rules of equity started developing systematically
 
Legal estates recognized but the legal estate owner was
compelled to use his legal title for the beneficiaries who in equity
should have benefited from the land
 
Equitable estates thus could correspond to legal estates
 
to the use of
” became known as “
trust
” after the Statute of Uses
of 1535
 
www.fff-legal.com
 
Do not think in terms of legal personality
;
The 2nd Schedule, Cap 16, excludes application of its
provisions to trusts;
It is a relationship created by the act of a person (the Settlor)
who settles the property (by way of donation or otherwise)
onto another person (the trustee), charging the latter to
hold, manage and administer th
e
 same for the benefit of
beneficiaries or for a charitable purpose
;
Assets are normally transferred to trustee in ownership, but
the trustee accepts such assets subject to fiduciary
obligations
 
www.fff-legal.com
 
Scott:
“it is a fiduciary relationship with respect to
property, subjecting the person by whom the
title to property is held to equitable duties to
deal with the property for the benefit of
another person, which arises as a result of a
manifestation of an intention to create it.”
 
www.fff-legal.com
 
Underhill & Hayton:
 
“A trust is an 
equitable obligation 
binding a person
(who is called a 
trustee
) to deal with property
over which he has control (which is called the
trust property), for the benefit of persons (who
are called 
beneficiaries
 
[omissis]
), of whom he
himself may be one, and anyone of whom may
enforce the obligation. Any act or neglect on the
part of a trustee which is not authorised or
excused by the terms of the trust instrument, or
by law, is a breach of trust.”
 
www.fff-legal.com
 
Keeton:
 
“A trust....is the relationship which arises wherever
a person called the trustee is compelled in equity
to hold property, whether real or personal, and
whether by real or equitable title, for the benefit
of some persons (of whom he may be one and
who are termed beneficiaries) or for some object
permitted by law, in such a way that the real
benefit of the property accrues, not to the
trustee, but to the beneficiaries or other objects
of the trust.”
 
www.fff-legal.com
 
Lewin (description in 
Re Scott
):
“the word ‘trust’ refers to the duty or aggregate accumulation of
obligations that rest upon a person described as trustee.
The responsibilities are in relation to property held by him, or
under his control. That property he will be compelled by a court in
its equitable jurisdiction to administer in the manner lawfully
prescribed in the trust instrument, or where there be no specific
provision written or oral, or to the extent such provision is invalid
or lacking, in accordance with equitable principles.
As a consequence the administration will be in such a manner that
the consequential benefits and advantages accrue, not to the
trustee, but to the persons called 
cestuis que trust
, or beneficiaries,
if there be any; if not for some purpose which the law will
recognize and enforce.
A trustee may be a beneficiary, in which case advantages will
accrue in his favour to the extent of his beneficial interest.”
 
www.fff-legal.com
undefined
 
Dr. Tonio Fenech
tfenech@fff-legal.com
www.fff-legal.com
 
3(1): A trust exists where a person (called a
trustee) holds, as
 
owner or has vested in
him property under an obligation to deal
with that property for the benefit of persons
(called the beneficiaries
, whether or not yet
ascertained or in existence, which
 
is not for
the benefit only of the trustee, or for a
charitable purpose,
 
or for both such benefit
and purpose aforesaid.
 
 
 
 
www.fff-legal.com
 
3(3): trustee has “full power as well as the duty for which
he is accountable, to administer, employ or dispose of
the trust property in  accordance with the terms of the
trust and any special duties imposed on the trustee by
any law applicable thereto, to sue and be sued in respect
of the trust and otherwise to act in all matters
concerning the trust”
3(6): “Trusts create fiduciary obligations on the trustee
in favour of the beneficiary of the trusts. The settlor of
trusts shall have no rights in relation to trust property
except as provided by this Act”
 
 
www.fff-legal.com
 
A mandate for an undisclosed principal
pursuant to Art.1871A(2) could in some
senses be covered, therefore intention (and
documenting such intention) is important.
 
This is also significant in the context of trusts
where the settlor is himself the beneficiary, or
bare trusts, which in most cases are really a
form of mandate
 
www.fff-legal.com
The manner in which influence over decisions is wielded will help determine the
manner in which the structure will be judicially recognized
Benefial
interest
holders
 
21(1): “Trustees shall……act with the prudence,
diligence and attention of a 
bonus paterfamilias
, act
in utmost good faith and avoid any conflict of
interest.”
21(2): “Subject to the provisions of this Act, trustees
shall carry out and administer the trust according to
its terms…shall ensure that the trust property is
vested in them or is under their control 
and shall, so
far as reasonable and subject to the terms of the
trust, safeguard the trust property from loss or
damage
 ” (various provisos apply)
 
 
www.fff-legal.com
 
21(2)(b): “
Trustees shall, when accepting their
appointment, draw up in writing an inventory and shall
declare that the inventory includes all the trust property
and of which the incoming trustee is aware.”
 
21(4): “Trustees shall keep accurate accounts and
records of their trusteeship and shall, upon a request by
any beneficiary, disclose such accounts and records to
such beneficiary and shall, subject to the terms of the
trust, provide a copy of such accounts within a
reasonable time of a request”
 
www.fff-legal.com
 
21(5):  Trustees shall keep trust property distinct and
separate from their own property as well as from any other
property held by them under any other trust or title, and
separately identifiable therefrom: Provided that trustees
may, if expressly permitted by the terms of the trust, or in
any case where the trust property consists of fungible things,
place and keep trust property in a common pool of identical
assets or in a clients’ or common account.
25(1): A trustee may not delegate his powers unless
permitted to do so by this Act, or by the terms of the trust, or
by the court.
 
www.fff-legal.com
 
(1) Subject to the terms of the trust and to the
provision of this Act, a trustee shall, in relation
to the trust property, have all the powers of a
natural person having the absolute title to such
property.
(2) A trustee shall exercise his powers in the
interest of the beneficiaries and in accordance
with the terms of the trust.
 
www.fff-legal.com
 
29(1): “A trustee shall, so far as is reasonable and within a
reasonable time of receiving a request in writing to that
effect, provide full and accurate information as to the state
and amount of the trust property, including the accounts of
the trust, and subject to subarticle (2), the conduct of the
trust administration to:
The Court
Subject to the terms of the trust, the settlor;
The protector of the trust;
……..any beneficiary of the trust who is of full age and
capacity……;”
 
www.fff-legal.com
 
29(2): “……….a trustee or any other person shall not
be required to disclose to any person any document
or information which –
(a) discloses the trustee’s deliberations as to the manner in
which a power or discretion was exercised, or a duty conferred
or imposed by law or by the terms of the trust was performed;
(b) discloses the reason for any particular exercise of such power
or discretion or performance of duty or the material upon which
such reason will be or might have been based;
(c) relates to the exercise or proposed exercise of such power or
discretion or the performance or proposed performance of such
duty.”
 
www.fff-legal.com
 
Art. 2:
“settlor” means the person who makes the trust and
includes a person who provides trust property or
makes a disposition on trust or to a trust;
 
Settlor normally goes out of the picture following
settlement of the trust, retaining influence only
through issuance of letters of wishes
He can also appoint a protector, or reserve certain
powers (latter is a 2014 amendment)
 
 
www.fff-legal.com
 
The reservation or grant by the settlor of any beneficial
interest in the trust property or of any of the following
powers shall not affect the validity of the trust, nor delay
the trust taking effect:
 
(a) any powers to appoint, add or remove any
 
trustees, protectors or beneficiaries;
 
(b) any powers to appoint an investment adviser or
 
investment manager:
Provided that the reservation of powers referred to in
paragraphs (a) and (b) shall be without prejudice to other
powers that can be reserved by the settlor in terms of the
other provisions of the Act.
 
The terms of a trust may provide for the office of
protector of the trust.
Subject to the terms of the trust, the protector shall
have the following powers:
(a) to appoint a new or additional trustee;
(b) to remove a trustee;
(c) to require the trustee to obtain his consent before
exercising a discretion.
In the exercise of his office the protector shall not be
deemed to be a trustee.
 
www.fff-legal.com
 
T&T Act, Art. 2:
 
“terms of a trust” means the written or oral
terms of a trust, expressed or implied, and
any other terms made applicable by the
proper law;
 
www.fff-legal.com
 
“A beneficiary has an entitlement, called a
beneficial interest, in or to the trust property,
as the case may be. The beneficiary may
enjoy the beneficial interest subject to the
terms of the trust and the provisions of this
Act and any other provisions of law applicable
to trusts”
 
www.fff-legal.com
 
A trust can come into existence in “any
manner”
 
Without prejudice to the 
above, some specific
manners are:
Unilateral
 declaration;
O
ral declaration
;
by an instrument in writing including a will,
by operation of law
by a judicial decision:
 
www.fff-legal.com
 
W
here 
a trust is created 
by oral arrangements of a
fiduciary nature, the presumption is mandate, or
deposit, unless there is evidence to create an oral
trust
;
A unilateral declaration of trust is a declaration in
writing by a trustee stating that it is holding as
trustee, containing all the terms of the trust,
including information enabling identification of
beneficiaries
A unit trust must be created by written instrument
 
www.fff-legal.com
 
“the sole consideration for the validity of such
transactions may be the imposition or
assumption, the performance, or the
termination, as the case may be, of legally
enforceable obligations on or by a trustee in
relation to such property”
 
www.fff-legal.com
undefined
 
Dr. Tonio Fenech
tfenech@fff-legal.com
www.fff-legal.com
 
 
[in preparation]
 
www.fff-legal.com
undefined
 
Dr. Tonio Fenech
tfenech@fff-legal.com
www.fff-legal.com
 
Classifications are various, but normally one
would look at different types of trusts from
three separate view-points:
 
A.
Manner of creation
B.
Function of trustees
C.
Reason for and Purpose of trust
 
www.fff-legal.com
 
Two points of Caution / Warnings:
 
1.
 
Words developed in the UK context should not be
blindly adopted in Malta:
 
English system developed from equity, but the volume of case law
makes some commonality inevitable and desirable;
 
Maltese law is developing largely through Statute, and influenced
by contemporary domestic and other factors
 
2.
 
Misconception that trusts are an ‘off-the-shelf’
marketable product
 
 
 
 
 
 
Article 7 provides that a trust may come into
existence in any manner including:
Unilaterally or otherwise
By oral declaration
By an instrument in writing including by a will
By operation of law
By a judicial decision
By conduct
 
Anglo-Saxon commentators have approach
ed the question by identifying the following
forms:
Express trusts (both written as well as oral)
Statutory trusts (implied or declared by law)
Implied or resulting trusts
Constructive trusts and tracing
Trusts created by judicial decision
 
Declared or set out by the donor (settlor or testator)
Intention to set up the trust is clearly and openly
expressed
Must be created by following certain formalities to
be valid
Types of express trusts under Maltese law:
Oral Trusts
Trusts created by conduct
Notarial procedure trusts
Testamentary trusts
Foreign trusts
 
Oral Trusts
S. 7 allows for creation by oral declaration
Exception - Unit trusts
There must be evidence of intention to create having regard
to S. 3(1)
Otherwise Mandate or Deposit is imputed
Hague Convention limited to trusts evidenced in writing
 
 
Testamentary trusts
 
This topic could warrant a whole seminar in itself
 
Useful to prevent the property of a deceased person
vesting absolutely in his adult children who would
then be free to scatter the property as they wish
 
Can preserve and generate family wealth in a tax-
efficient manner
 
 
 
In the Civil Code 
(art. 1124A, 1124B)
, Fiduciary obligations
(but not necessarily a trust) arise from behaviour only where
a person:
appropriates / uses property belonging to others without title, or
receives or otherwise acquires property, or makes other gains through a
fiduciary, when he knows (or should know) fiduciary is acting in breach of
his obligations
 
Art. 33 of the T&T Act deals with constructive trusts:
a person who makes profit, gain or advantage from a breach of trust, is
deemed a trustee thereof for the benefit of the trust or person
concerned.....except where property is acquired under onerous title in
good faith;
He has a duty to deliver property to the beneficiary;
 
 
Art.958A(4) of Civil Code: where a trustee is informed of a claim
re legitim rights where trust property is to be sold, the trustee
shall hold on trust a sum in money based on the net transfer
value of property transferred for whoever has a legitimate right
thereon until matter is determined or lapses.
 
Resulting / implied trusts are not specifically provided for in
Maltese law, but 
Art. 37(2)(b) of the T&T Act provides that
the Court can 
inter alia 
make any declaration as to “the
existence of any resulting or constructive trust”
 
 
In Anglo-Saxon thought, these a
rise from an 
unexpressed
, but
presumed
 intention of the settlor
 
Resulting
 – meaning ‘springing back’ ie: beneficial interest
reverts back to the settlor
 
Not subject to formal requirements present in express trusts
 
English authors give two general categories of implied or
resulting trusts:
settlor fails to deal with whole of beneficial interest; and
a purchase made in another persons’ name
 
Various instances where trustee is bound to hold 
“in
trust for the settlor absolutely, or if he is dead, for his
heirs”, 
eg:
S.11(6) failure of trusts
S.15(2) revocation of trust
S.16(1) interest lapses, trust terminates or no beneficiaries
S.958B(2)CC if/when trust property reduced to disposable
portion (on succession), any excess is held in trust for
settlor’s heirs or other persons entitled thereto
 
 
 
Simple Trusts in anglo-saxon systems.....
Possibly no trust at all under Maltese law
 
Trustee as a mere repository of trust property – no active
duties to perform
 
Referred to as a ‘
passive
’ or ‘
bare
’ trust, quite similar to a
Nominee
 
Sole obligation to deliver trust property to beneficiary or
to his order, on request
 
Beneficiaries are in most cases considered ‘
absolute
owners
 
 
Maltese nominees and nomineeship in general, if
created by written agreement, can be considered
bare trustees, but it is the Civil Code which is more
directly applicable as opposed to the T&T Act
 
Such situations are governed by title of Fiduciary
Obligations in Civil Code (Ss. 1124A & B of the CC) as
well as Mandate (S. 1871 - 1871A)
 
Special Trusts or true trusts
 
Here, trustee is an active trustee, called upon by settlor to
perform a particular task and must actively accomplish it
 
Fixed (interest) trust v Discretionary trust
 
Fixed trust – beneficiary has a current fixed entitlement to an
ascertainable part of the ‘net’ income of the trust fund
 
A full Discretionary trust would not normally give any fixed
interests whatsoever – much left to the 
discretion
 of the
trustees
 
 
Discretionary and fixed interest trusts are
recognised by Maltese law in Art.2 which def.
a beneficiary as:
 
“…a person entitled to benefit under a trust
or in whose favour a discretion to distribute
property held in trust may be exercised”
 
Trust relationships are formed for many reasons and
purposes, and there is higher risk of wrongly
considering such relationships as a ‘
product
’, when
trusts become over-commoditized.
Accumulation and maintenance trusts
Protective trusts
Matrimonial trusts
Charitable trusts
Secret trusts
Commercial  use trusts
 
 
Normally used in settlements in favour of minor child
benefiting on attaining certain age: typically, no benefits
until such time but accumulation - accretion to capital
 
Trustees are usually given discretionary powers to distribute
upon attaining majority or some other time
 
Art.26 of T&T Act clearly outlines such discretionary powers
of the trustees in respect of 
accumulation
, 
advancement
 or
appropriation
 of such settled property, where the trust deed
so specifies
 
 
Often referred to as “
spendthrift trusts
” as used to protect
spendthrift beneficiaries and also avoid exploitation
 
Important protection against beneficiary’s creditors in the event of
bankruptcy
 
Arts.9(7) & 9(14) allow flexibility in the use of such terms – but
Art.13 specifically allows for restriction and exclusion from benefit,
etc
 
Art.13 also provides for the possibility of protection of beneficiary
interest from beneficiary bankruptcy or garnishee orders issued
against the trustee or termination without a court order, when
interest is expressed to be for maintenance or as a pension
 
 
 
Private trust – benefits either one person or a
defined number of persons
 
Charitable (or Public) trust – benefits society as a
whole or some considerable section of it
 
Because they are public in nature, Charitable trusts
enjoy certain privileges not enjoyed by Private
trusts
 
 
 
Detailed and wide definition of “charitable
purpose”….
 
“any charitable, benevolent or philanthropic purpose, and
without prejudice to the generality of the aforesaid
includes….”
- advancement of education, sports, religion, health, social and
community advancement, culture, environment etc….
 
 
....but not promotion of a political party /
candidate!
 
Used in the UK to secure welfare of certain persons
without much publicity – may be fully or half secret
 
No apparent provisions in Maltese law to prohibit
trust arrangements where trustee is enjoined to
confidentiality as to trust terms
 
Supported by the Professional Secrecy Act as well
as S.1124A of the CC on Fiduciary Obligations
 
However, S.29(5)&(6) indicate that secrecy is not
possible indefinitely vis-à-vis beneficiaries unless by
Court sanction
 
 
 
Also trustee must (s. 29(1)), if requested “
provide full
and accurate information as to the state and amount
of the trust property, including accounts of the trust
to various stakeholders in the trust, including the
court and the protector.
 
This duty is only extendable 
subject to the terms of
the trust
, in favour of the settlor, beneficiaries of full
age (or lawful guardian)
 
Civil Code Art. 2095A
Not capable of creation by operation of law
Property in community of acquests or
community of residue may only be settled
with the consent of both spouses
The Civil Code contains detailed rules in order
to ensure proper balance of rights between
spouses
 
www.fff-legal.com
 
A Commercial trust refers to type of trust used in a
commercial environment or transaction. “commercial
transactions” is defined  extensively:
Securities offerings whether to the public or for private placement,
portfolio management and custody of investment instruments
securitisation of assets
establishing / holding of real / personal security interests (such as
hypothecs, privileges and guarantees)
collective investment schemes
employment benefit or retirement schemes
syndicated loans / other banking facilities
Insurance policies and payment of proceeds thereunder
timeshare and multi-property structures
any other transaction prescribed by the Minister
 
 
 
 
 
 
Key features which make the commercial use
of a trust attractive:
 
Protection against insolvency
Flexibility of the provisions which can be inserted
into the trust instrument thus allowing for tax
planning potential
 
Security trusts CC 2095E
 
In terms of S.84Z of the Merchant Shipping
Act , a shipping organisation, as defined
therein, may operate under a ‘
shipping trust
 
 
These have become increasingly popular nowadays
through setting up of profit-sharing schemes for
employees and/or pension funds
 
Normally advantageous to both employer and
employee in tax planning as well as effective risk
management tool maximising employee fidelity
 
Pension funds, either contributory or non-
contributory, are usually administered by trustees
 
Employment benefit or retirement schemes
or arrangements are afforded status of
“commercial transactions”
 
Professional Compensation Funds are also
gaining in popularity and provide
compensation in the event of losses or
hardship incurred by members of a profession
 
9. Other types
 
A comprehensive list of types of trust would be
impossible
 
Indeed, a settlor may tailor a trust for any purpose
not against public policy, illegal or in contravention
of certain fundamental tenets of trust law
 
Within such limits, the purpose for which trusts may
be used, it is up to the imagination of the
professional advisors concerned
undefined
 
Dr. Tonio Fenech
tfenech@fff-legal.com
www.fff-legal.com
 
The general rule is in Art 43(1):
“...any person, resident or operating in Malta, or a
corporate trustee, who receives property upon trusts
or accepts to act as trustee or co-trustee of a trust and
who –
receives or is entitled to remuneration for so acting, or
does so
 
on a regular and habitual basis, or
holds himself out to be a trustee
shall require authorization by the Authority
irrespective of governing law, or whether the trust
property is in Malta or otherwise
MFSA empowered to decide on doubtful sitations, and
to issue rules
 
www.fff-legal.com
 
Objects include acting as trustee and carrying on
activities ancillary or incidental thereto, and does
not include activities not compati
b
le therewith;
Its actual activities are compatible and connected
with the services of a trustee;
At least 3 directors, all of whom must be 
approved
persons;
Minimum capital of €15,000,  which must be
maintained;
Insurance cover proportionate to the nature and
size of the trustee’s business operations;
 
 
www.fff-legal.com
 
Adequate systems to maintain proper records of:
 
(i) identity and residence of beneficiaries,
(ii) dealings and actions in connection with trusts,
(iii) compliance with applicable law;
 Any person having 10% or over of capital of licensee
must be 
approved
 as “fit and proper”;
Name should not be inconsistent with trust activity;
If foreign, it must be incorporated in an approved
jurisdiction;
 
www.fff-legal.com
 
“ a person of 
good reputation 
possessing
experience 
and
 qualifications 
in financial, fiduciary,
accounting or legal services and approved by the
Authority as being 
fit and proper 
to carry out the
duties of a trustee”
In exceptional circumstances, a person with
experience but lacking qualifications can be
approved;
Bodies corporate: the majority of directors must
satisfy all 3 tests: fit & proper, experience and
qualifications
 
www.fff-legal.com
 
Resident or operates in or from Malta;
Is an approved person;
Adequate systems to maintain proper records of (i)
identity and residence of beneficiaries, (ii) dealings
and actions in connection with trusts, (iii)
compliance with applicable law;
Minimum capital of €15,000;
Insurance cover proportionate to the nature and
size of business operations
 
 
www.fff-legal.com
 
“Without prejudice to the nature of the legal
relationship in any particular case”, the above
persons require licence, irrespective of:
 extent of activity,
whether remuneration is payable or not, or
whether they hold themselves out or otherwise to
the public as providing such services
 
www.fff-legal.com
 
licensees under the Banking Act;
licensees under the Investment Services Act
to hold clients’ assets;
Licensee under the Insurance Business Act or
enrolled in the Brokers’ list under the Ins.
Brokers & other Intermediaries Act to hold
clients’ assets
Equivalent to above in approved jurisdiction;
Licensee under Financial Markets Act to
operate a central securities depositary
 
 
 
 
 
 
www.fff-legal.com
 
Approved trustee of a shipping trust or a
shipping foundation as defined by art. 84z
MSA
Trustee to retirement schemes registered
under Special Funds (Reg) Act.
 
 
www.fff-legal.com
 
created to hold security in relation to any
financial transaction for the benefit of lenders or
other creditors
Of movable property held as security for persons
with determinable or conditional entitlement
Liquidator, curator in bankruptcy or court
appointed administrator
Advocate, notary, LP or CPA, only if trusteeship
is necessary and incidental to his professional
duties, and if he does not otherwise hold himself
out as a trustee to the public;
 
 
www.fff-legal.com
 
Unit trust which is a collective scheme
Charitable trusts, provided there is no
remuneration or holding out;
Co-trustee when 
the 
other is authorized (or
majority)
Companies formed to hold trust property,
provided wholly owned and controlled by
authorized persons, and directors of which
are also authorized;
 
www.fff-legal.com
 
A party accepting property on trust in the
context of or as ancillary to the performance
of a contract (provided 
there is 
no
remuneration or holding out);
Person holding shares without special voting
rights, and whose nominal value does not
exceed €5;
 
www.fff-legal.com
 
Securities or interests in or issued by a Maltese legal
entity (other than listed securities) or immovable
propertyin Malta can be held on trust by a non-
licensed person, but only if an authorized person (or a
financial institution) is engaged to carry out the
following compliance functions on an indefinite basis
(and agreement notified to MFSA):
Ensure due compliance with all fiscal, AML and other legal
obligations, and shall notify MFSA of his resignation or
termination of appointment or is hindered in performin
g
his duties
Must approve transactions, including assignment of
beneficial interest of trust
 
www.fff-legal.com
 
Shares in a company without special voting
rights and value not exceeding €5;
 
Trustees appointed by a testamentary trust in
respect of the initial 6 months from date of
acceptance, unless a substantial transaction
is to be made
 
www.fff-legal.com
 
Relatives to a certain degree or
acquaintances for at least 10 years, do not
need authorization, if they:
Are not remunerated (except as permitted by
MFSA Rules);
Do not hold themselves out as trustees to the
public
Do not habitually act as trustees, in any case to
more than 5 settlors at one time
Provided:
 
 
 
www.fff-legal.com
 
Must be created by a notarial trust deed;
If testamentary, an inventory by notarial deed
within 6 months, annexing extract of will;
Further property is settled by notarial deed;
Records of meetings, exercises of discretion
in appointing/removing beneficiary or other
material events in writing and deposited with
Notary (together with accounts, etc)
 
www.fff-legal.com
 
 
In terms of Art. 43A(13), a settlor wishing to
appoint as trustee a person other than a
private trustee, but wishes Art. 43A to apply,
must so inform the notary public;
 
www.fff-legal.com
 
 
Notary publishing will that contains a testamentary
trust or receiving a notarial trust deed 
inter vivos
shall be the sole depositary of all relevant acts;
 
A notary who is trustee cannot also be depositary
notary, notary keeper or qualified person;
 
Trustee must deliver all documents relative to the
trust within 15 days of coming into existence;
 
www.fff-legal.com
 
 
Trust deed and all documentsfiled with
depositary notary are confidential;
 
Art. 68A of Notarial Profession & Archives Act
also in the same sense;
 
www.fff-legal.com
 
Definition:
“a trust created to hold property settled by the
settlor for the present and future needs of family
members or family dependants who are definite
and can be ascertained”
 
Rules yet to be issued by the MFSA may
further define the relevant meanings of
terms, etc.
 
 
www.fff-legal.com
 
No license needed, but company must
register with MFSA, if it is limited as follows:
its object and activities are limited to acting as trustee
in relation to a specific settlor or settlors and
providing administrative services in respect of a
specific family trust or trusts;
it does not otherwise hold itself out as a trustee to the
public;
it does not habitually act as a trustee, in any case in
relation to more than 5 settlors at a time;
 
www.fff-legal.com
 
The auditor of a trustee “shall have the duty to report
immediately  to the Authority any fact or decision”
which:
Is likely to lead to serious qualification or refusal of the
auditor’s report on the accounts of such trustee;
Is likely to constitute a material breach of the legal and
regulatory requirements applicable to trustees;
Gravely impairs the trustee’s ability to continue as a going
concern;
Relates to any other matter which may be prescribed (may
relate to any interested person other than the trustee);
 
 
 
www.fff-legal.com
 
 
The duty to report includes any fact or
decision regarding any person having close
links with the trustee which the auditor may
have become aware in his capacity as auditor
of the trustee or of the person having such
close liinks
 
www.fff-legal.com
 
Students are welcome
to make contact if they
have questions that
haven’t been
addressed during 
my
lecture, copying the
other students with
such communication
 
 
 
 
 
 
 
 
 
 
 
Dr. Tonio Fenech
Fenech Farrugia Fiott Legal
Swatar & Valletta
tfenech@fff-legal.com
+356 2549 6000
www.fff-legal.com
 
www.fff-legal.com
Slide Note
Embed
Share

Malta, with a unique legal system integrating civil and common law concepts, has evolved its trust law over the years. The concept of trust was gradually adopted, culminating in full integration into domestic law post-2004. Recent amendments have further solidified the legal framework, bridging the gap between civil law traditions and fiduciary obligations. This evolution reflects influences from Roman law and English trust concepts, reshaping Malta's legal landscape.


Uploaded on Jul 31, 2024 | 4 Views


Download Presentation

Please find below an Image/Link to download the presentation.

The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author. Download presentation by click this link. If you encounter any issues during the download, it is possible that the publisher has removed the file from their server.

E N D

Presentation Transcript


  1. Dr. Tonio Fenech tfenech@fff-legal.com www.fff-legal.com

  2. Civil law system, but with the benefit of over 150 years of British rule, juridicallyspeaking Malta has therefore experienced dove-tailing common law and civil law concepts for over a hundred years, something that the EU was still trying to get right until Brexit happened; Theconcept wasadopted instepsbetween 1988 and2004; After 2004 the concept of trust has become fully integrated into our domesticlaw; The trust can now be seen as falling within the general category of relationships where fiduciary obligations are owed, and has a particular statute regulating the relevant relationships; Latest amendments to the Trusts Statute were in 2017, but the civil code provisions of Fiduciary obligations were last amended in 2018 www.fff-legal.com

  3. Concept adopted for limited purposes, and in a clearly ring-fenced manner by the Offshore TrustsAct1988: completelyoffshore Very closely and openly modelled on the Jersey Act1984, toprovideforcertainty As Recognition of Foreign Trusts Act 1994 allowed for the the local recognition of foreign trusts, while maintaining theonshore-offshore divide experience started consolidating, the www.fff-legal.com

  4. With the enactment of the Act XIII of 2004, a number of laws were amended, and the Civil Code was also fundamentally amended, in order to fully integrate the concept The legislator clearly concludedthat the traditional view that the concept is completely alien to the Civil law was too simplistic, and ought to be discarded; In fact the equivalent of the English concept of trust can be found in the Early Roman Law concept of fiducia being an agreement appended to a conveyance of property, involving a direction or trust as to what was to be done with it (Buckland). Although recognized as a concept, it eventually disappeared by the time of the Justinian codification of Roman law www.fff-legal.com

  5. Ganado: The English concept of Trust is itself a derivation of the Roman Law concept of fiducia, being an agreement appended to a conveyance of property, involving a direction or trust as to what was to be done with it (Buckland). Institute recognized, but never listed as a nominate contract. Some considered it a pactum , which could only occur as an appendage to a conveyance, and need not be reduced to writing By the time of Justinian, the concept seems to have disappeared, but its subtle effects are very evident in the Civil Code to this very day. www.fff-legal.com

  6. The unfortunate thing about the Codes is that because of their very brilliance and nature, being guidelines within a framework, they necessarily result in some subsequent rigidity in thought....if one is told how to do certain things to achieve certain ends then one follows the pattern. The risk is that one then assumes that anything outside the patternis not possible. The Code Napoleon, influenced by the French Revolution, sought to prohibit entails to destroy the illiquidity of land, andconcentration of property inthe handsof the nobility. Many civilian lawyers came to assume that ALL trusts are entails,andtherefore contrary to public policy www.fff-legal.com

  7. Title IIIA in Part IIof Book Second of the Civil Code , entitled Of Trusts & their effects has 10 Articles: Art. 958L 958U; Art. 958L(1): Property under trusts shall be regulated by the speciallaw on trusts and to the extent applicable, the rules of this Coderelating to trusts. Title XXIIIA of the Code is entitled Of Trusts and Obligations has 5 articles, dealing with the effect of trusts on marriage and annuities, as well as security trusts; The Trusts & Trustees Act (originally enacted as the Offshore Trusts Act in 1988 but substantially amended on various occasions since then), is Chapter 331 of the Laws of Malta. Obligations in general under the Civil Code now include Fiduciary Obligations , ie Art. 1124A to J. The most recent amendments here were in 2018, which has widened the legislative treatment from 2 to 10 Articles www.fff-legal.com

  8. Dr. Tonio Fenech tfenech@fff-legal.com www.fff-legal.com

  9. The 2018 amendments to the provisions of fiduciary obligations seem to have the objective of completing the project started in 2004; In 2004, the objective seems to have been that of having trusts properly allocated to the general class of relationships that create fiduciary obligations; In 2018, more detailed provisions and stipulations were introduced for this general category, including specific remedies, but the approach remained clear: The Civil Code provisions were a general platform over which specific types of fiduciary obligation could be regulated through a specific title in the Code or more specialized legislation, such as the case of trusts. www.fff-legal.com

  10. In order to complete the project, some rules were required in order to ensure clarity as to which set of rules applied, and when. Therefore, of the 10 Articles which now regulate fiduciary obligations in general, it would seem important to start with the last Article, entitled Applicability provisions of this Title of the www.fff-legal.com

  11. When a fiduciary relationship is governed by particular rules, whether because of the source and type of the obligations or because of any special law, such particular rules shall apply to the context and these provisions shall apply as necessary to support the interpretation of the said rules; a. It shall be presumed that the provisions of the Title are consistent with particular rules, but the particular rules prevail where inconsistent; b. The provisions of the Title apply to all fiduciary obligations, even those existing before 2018, but there is no retrospective application where this denies or restricts vested rights or creates a new liability; c. www.fff-legal.com

  12. d. where a fiduciary obligation is vitiated (becoming unenforceable due to the falsity of illegality of the cause ) by a breach or attempted breach of law by the parties or any one of them, either party can render this enforceable by complying with the relevant law thus rendering the cause legal; The court can in such cases give interim orders to ensure compliance or to prevent further abuse. www.fff-legal.com

  13. Fiduciary obligations arise in virtue of law, contract, quasi-contract, unilateral declarations including wills, trusts, assumption of office or behaviour whenever a person (the ''fiduciary ) owes a duty to protect the interests of another person and it shall be presumed that such an obligation where a fiduciary acts in or occupies a position of trust is in favour of another person; or Has registered in his name, holds, exercises control or powers of disposition over property for the benefit of other persons, including when he is vested with ownership of such property for such purpose; or receives information from another person subject to a duty of confidentiality and such person is aware or ought, in the circumstances, reasonably to have been aware, that the use of such information is intended to be restricted. A delegate of a fiduciary, is also deemed a fiduciary if he was aware, or should, from the circumstances, have been natureofthe relationship. aware, of the fiduciary www.fff-legal.com

  14. Fiduciary obligations arise from behaviour when a person without being entitled, appropriates or makes use of property or information belonging to another, whetherfor his benefit or otherwise; or being a third party, acts, being aware, or where he reasonably ought to be aware from the circumstances,of the breach of fiduciary obligations by a fiduciary,and receives or otherwise acquires property or makesother gains from or through the acts of the fiduciary www.fff-legal.com

  15. General duty to act with utmost good faith and honestly, in all cases www.fff-legal.com

  16. Other duties, alterable by instrument in writing or express provision of law: to exercise the diligence of a bonus pater familias inthe performance of his fiduciary obligations; to avoid any conflict of interest or conflict of trust or fiduciary obligations; not to receive undisclosed or unauthorised profit from his position or functions nor permit any other person from doing so, nor enter into any transaction related to the property, directly or indirectly, unless authorized to do so by the instrument creating the fiduciary obligation or permitted by a person or authority empowered to approve such dealings; to act impartially when the fiduciary duties are owed to more than one person; to keep any property acquired or held as a fiduciary segregated from his personal property and that of other beneficiaries, and to affect a change in the registration of any relevant property, as may be required for such purpose; to maintain suitable records in writing of the interest of the person to whom fiduciary obligations are owed; to render account in relation to the property subject to fiduciary obligations; www.fff-legal.com

  17. Other duties capable of alteration: to return on demand (or upon termination of the fiduciary obligation) any property held to the person lawfully entitled thereto or as instructed by him or as otherwise required by applicable law. To keep the affairs of the beneficiary confidential To carry out the designated purpose, where property has been entrusted to him Confidential information can be disclosed to the beneficiary in accordance with and subject to any restrictions contained in the written instrument, if any, giving rise to the fiduciary obligation. A declaration by a fiduciary that he is acting in such a capacity is not a breach of such duty. In addition to other remedies at law, the fiduciary must return any property together with any benefits derived, directly or indirectly, including property into which the original property will have been converted -Art. 1124A(5)&(6) www.fff-legal.com

  18. 1124A7-10 were all added in 2018 A competent court may make an order or declaration in favour of beneficiary, including: Order the transfer, restitution or delivery of any property, or change in registration to another fiduciary; Terminate powers of disposition of property; Order the provision of adequate security; Establish a trust, including its terms; Rescind any transfer or other transaction or declaring the same null and void; Impose damages on the fiduciary Above powers available in any proceedings by any beneficiary or other person whom the court considers entitled under the relevant fiduciary obligation. Third party acquiring under onerous title shall not be prejudiced, provided he was not aware that he was dealing with a fiduciary www.fff-legal.com

  19. Fiduciary duties may, in particular cases, be considered implicitly waived in certain circumstances, such as: Method of engagement of fiduciary, in particular where he has multiple purposes, functions or offices or where he is granted contemporaneous entitlement; Scope, purposes and contexts of the fiduciary obligations imposed; Delivery of property to a beneficiary s creditor by way of security or for a purpose which is distinct from that of the beneficiary; Manner of acceptance or assumption or undertaking of the fiduciary obligation Where there is a waiver (implicit or express), the fiduciary may apply for directions from the competent court on how to act in the circumstances The court shall give due regard to the intentions of the person establishing or imposing the fiduciary obligations and to the interests of both the fiduciary and the beneficiary www.fff-legal.com

  20. The marginal note previously read Ownership by a fiduciary . The section was relatively short and provided for three basic principles: Where ownership of property is vested in the fiduciary, third parties may act in relation to such person as though he were the absolute owner thereof; Property held by fiduciary is not subject to claims or rights of action of his personal creditors, nor his spouse or heirs at law; Third parties in good faith can rely on declarations made by the fiduciary re his authority, and need not enquire about this, or obtain consent from the beneficiaries or anyone else www.fff-legal.com

  21. Post 2018 amendments, the section is longer and more complicated; The marginal note now reads dealings with third parties aware of fiduciary obligations Where they are aware that fiduciary is vested with ownership, has registered in his name, holds, exercises control or powers of disposition over property as fiduciary, third parties in good faith can deal with the fiduciary as if he is absolute owner; A third party acquiring property under an onerous title is not affected by fiduciary obligations to which the property is subject, unless otherwise agreed upon ; www.fff-legal.com

  22. The situation is different where a third party acquires in terms of Art. 1124B(1) under gratuitous title, and: the fiduciary will have acted in breach of a fiduciary obligation; or The third party acquired to the detriment of a beneficiary Here, he will be subject to the same fiduciary obligations, as from when he becomes aware or he reasonably ought to have become aware of the breach of fiduciary obligation The obligation is however limited to the extent of the breach or unauthorized gain, unless the Court provides otherwise pursuant to any of the remedies in Art. 1124A www.fff-legal.com

  23. TP in good faith is entitled to rely on fiduciarys declaration regarding his authority, and need not: enquire into terms and conditi0ons of fiduciary s authority, except where transaction is gratuitous; Obtain the consent of the beneficiary of the fiduciary obligations TP is entitled to enquire about the purposes of the fiduciary obligation, including the obligation of not exceeding the value raised by the transaction , or otherwise relating to the property subject to the transaction or the applicability of the funds in question. www.fff-legal.com

  24. The following declarations by a fiduciary are not a breach of confidentiality: That his authority exists, the date the relevant instrument was executed and that the authority has not been revoked; That he is authorised to carry out the transactions being entered into; The identity and address of the fiduciary! But any certificate containing a statement which he knows or ought to know is false shall be guilty of an offence liable to punishment of imprisonment up to 2 years or a fine (multa) www.fff-legal.com

  25. Where a TP has been informed, is aware or should reasonably be aware that a fiduciary is acting in such capacity, the fiduciary is not personally liable for the obligations entered into, other than those entered into in the exercise of his obligations. Where TP is unaware of the fiduciary obligations, the fiduciary is personally liable for the obligations entered into, subject to any terms stipulated or applicable law. Fiduciary has a right of recourse against the beneficiary where contemplated by law, by way of indemnity, unless he has acted in breach of his duties Fiduciary is presumed to have all powers required to perform fiduciary obligations towards beneficiaries or purposes www.fff-legal.com

  26. Property held by a fiduciary (even in ownership), shall constitute a distinct and separate patrimony, consisting of all relative rights and obligations with respect thereto Fiduciary ownership is integral as far as third parties are concerned, but modified by the Code as well as any special laws that may be applicable, as far as the beneficiary (and/or purpose) is concerned. Where property is held but not in ownership, the provisions of this Code and any other special law governing the relationship shall apply in accordance with the terms established by the parties (but can be modified in terms of the law for the protection of the beneficiary or the achievement of the obligation www.fff-legal.com

  27. Any beneficiary can enforce fiduciary obligations on the basis of the provisions of this Title; The demand may be made together with any other action available at law as part of a general action or by an additional application to the Court, at any time of the proceedings until the award of a final judgement by the competent court or the Court of Appeal; Action can be exercised by any person or body granted due authority in the instrument creating the obligation, where this is for a purpose, and in the absence of a beneficiary; Where undertaken by a public benefit organization, the AG can also utilize the remedy www.fff-legal.com

  28. No prescription where action is brought: For fraud or dishonesty to which fiduciary was party, or had knowledge thereof; For recovery of property from the fiduciary where this has been converted to his use, or for benefits or gains received as a result of breach of duty; A fiduciary cannot acquire property as a result of time bar, even if in good faith; Any act of a fiduciary in bad faith is sufficient for an action not to be barred by prescription www.fff-legal.com

  29. Otherwise, an action by a beneficiary for breach of any other fiduciary obligation referred to in Art. 1124A(4) lapses after 5 years, from the date (whichever earlier): of delivery of a written account of fiduciary activity to the beneficiary; On which the beneficiary first had knowledge of the occurrence of the breach of fiduciary duty; If the written account is itself dishonest, then the latter date shall count with reference to such account www.fff-legal.com

  30. To perform obligations agreed in writing, provided in the relevant instrument giving rise to fiduciary obligation, or as may arise at law; Pay remuneration and expenses to fiduciary as may be established under the relative instrument, or as may be reasonable Fiduciary may reimburse himself or pay out of the property expenses properly incurred, and inform beneficiary www.fff-legal.com

  31. Beneficiary must at all times act in good faith towards the fiduciary Subject to the terms of the instrument, and to the extent of the property (unless agreed otherwise), the beneficiary shall indemnify the fiduciary for any liabilities incurred, except to the extent fiduciary is guilty of negligence, willful misconduct or fraud. www.fff-legal.com

  32. Long and detailed provisions regulating this important aspect of holding property subject to fiduciary obligations. These are deemed beyond the scope of these lectures, but remain an important area that requires careful study www.fff-legal.com

  33. Dr. Tonio Fenech tfenech@fff-legal.com www.fff-legal.com

  34. Mandate relationships in general now fall squarely within the ambit of fiduciary relationships A mandatory for an undisclosed beneficiary (a so-called nominee ) also specifically regulated Art. 127 of the Companies Act deals with company shares held in trust and nomineeship www.fff-legal.com

  35. Deposit: acceptance of custody of a thing gratuitiously to be returned on demand. Title does not pass, and depositary can force depositor to take thing back. Contract terminates on death of depositor; Fideicommissa: A transfers title of thing to B, subject to duty to pass it on to C when A dies. Clearly distinguishable from trust; Community of acquests: a form of reciprocal trust, produced ipso jure as a normal effect of marriage. In certain cases, however, creditors can access paraphernal assets when community of acquests is insufficient www.fff-legal.com

  36. Inheritance with the benefit of inventory: an heir accepts estate without being liable fordebts attaching to it (etc). Separation of estates, and heir can even retain rights if claim against estate, but heir can renounce to estate; Foundation: in some limited senses, this is a form of corporate trust, but settlor can have much more influence. New juridical entity, with administrators its officers Directorship: the Companies Act is not specific about this (see Art. 136A generally), but it is generally held under English law that Directors owe fiduciary duties; www.fff-legal.com

  37. Art. 127 of the Companies Act: Unless otherwise provided in its articles, a company formed and registered in Malta shall not recognise any nominee relationship or trust in respect of any security issued by it, and the company shall not recognise, even when having notice thereof, any interest or other right in such security, but shall only recognise the registered holder thereof. The Article accepts situations where shares are held by a trustee , and provides some definitions: "beneficial owner" means the person beneficially entitled to the shares under a trust or a fiduciary agreement; "trustee" shall mean a person who may act as a trustee in accordance with the Trusts and Trustees Act and shall include any fiduciary holding shares on behalf of another person. www.fff-legal.com

  38. Mizzi et vs Fenech et, decided on 29th September 2016, by Mr. Justice Joseph Zammit McKeon in the First Hall, Civil Court; This case was not appealed from, and should therefore be considered final tfenech@fff-legal.com www.fff-legal.com

  39. dan l-artikolu ma hu xejn ghajr l-applikazzjoni generali tal-ligi illi fil-qadi tad-doveri tieghu, impjegat irid iqis l-interess tal-principal tieghu u jagixxi bid-diligenza kollha fil-qadi ta dmiru, u aktar ma hi gholja l-posizzjoni jew il-kariga, aktar jassumi piz l-obbligu ta fedelta lealta, onesta u buona fede fil-konfront tal-principal Huma in-natura tal-kariga, ir-responsabilitajiet u poteri afdati ..li jiddeterminaw u jiddelineaw il-qies tal-fiducja riposta u mistennija www.fff-legal.com

  40. The Mizzi case is not about the duties of trustees; It is a contractual scenario where a committee of professionals were given wide discretion to evaluate assets with a duty to come to an equitable conclusion between the parties; How is this relevant for trustees in a Maltese context? tfenech@fff-legal.com www.fff-legal.com

  41. Two brothers owned a company between them; Incompatibility of characters and personalities led to a decision to split the business amicably; A valuation committee (VC) was formed to report on and decide how to split certain assets, including immovable assets within the business after valuation The relevant Agreement mandated the VC to utilize specific valuation methodologies for different assets, but otherwise provided for valuations in accordance with generally accepted valuation principles and concepts and in such manner as the Valuation Committee may at its sole discretion consider equitable in the circumstances . The VC appointed architects, who established the value of two buildings (the Building Report) as part of their mandate; tfenech@fff-legal.com www.fff-legal.com

  42. In their final report, the VC gave a value which included a value of the Buildings, but also gave an option to each of the brothers to ignore the Building Report and to opt for a so-called property disposal mechanism , which in essence provided for the sale of the building concerned; One of the brothers opted for this, but the other eventually obtained a Court of Appeal judgment that the mechanism was in fact ultra vires in terms of the VC s remit; A dispute arose as to whether the value without reference to the mechanism had become final, given certain alleged mistakes made by the architect tfenech@fff-legal.com www.fff-legal.com

  43. The brother who had opted for the disposal mechanism filed suit, requesting that the court : 1. Declare the Building Report as defective; 2. Order defendants to revise the Building Report; 3. Alternatively appoint other architects for the same purpose; 4. Declare that the VC has yet to reach an equitable valuation for the relevant building; 5. Order the VC to revise the compensations payable under the Agreement 6. Order the VC to complete the division of assets of the Company tfenech@fff-legal.com www.fff-legal.com

  44. The Court essentially considered the demands in two batches: Issues connected with the Building Report (the first three demands); And The duties, if any, of the VC in the light of the removal of the property disposal mechanism option (the last three demands) tfenech@fff-legal.com www.fff-legal.com

  45. Given that the VC had to be driven by principles of equity, the Court felt it had to evaluate the Building Report, as equity will not be respected if it contains material mistakes and the VC continued to rely on it. The Court found no material defects in the report and rejected the first 3 demands; tfenech@fff-legal.com www.fff-legal.com

  46. The court upheld 4th and 6th demands in the sense that the valuation already made by the VC was subject to possible review, now that the disposal mechanism was not available. The fact that a disposal mechanism was provided indicated that the VC had some doubt about the equitable nature of the theoretical exercise made by the architect alone. The VC can determine whether to adopt measures or make other verifications tfenech@fff-legal.com www.fff-legal.com

  47. The court went out of its way to state that the judgment should not influence the VC, whose sole obligation is an equitable conclusion to their mandate; The judgment should not be interpreted as an indication that the rejection of the first 3 demands implies a requirement to rely on the architect report, or the VC s own report tfenech@fff-legal.com www.fff-legal.com

  48. the judgment was given in the context of a clear contractual acceptance of fiduciary obligations by the VC members, as well as a wide discretion given in order to fulfil a duty to find an equitable conclusion to their mandate; Can similar duties be implied in respect of a fiduciary who is simply given discretionary powers without a specific reference to principles of equity and justice? tfenech@fff-legal.com www.fff-legal.com

  49. Art 993, Civil Code: Contracts must be carried out in good faith, and shall be binding not only in regard to the matter therein expressed, but also in regard to any consequence which, by equity, custom, or law, is incidental to the obligation, according to its nature. tfenech@fff-legal.com www.fff-legal.com

  50. Pace vs Micallef, Ct. of Appeal, 15.12.2004, made reference to principles of equity in good faith, in order to attack a rigid interpretation of contractual duties; It stated that a certain element of equity together with practical and moral considerations were included in the concept of good faith. It characterized its own logic as reflecting the principle of Roman law, that in omnibusquidem, maximetamen in jure, aequitas spectanda sit(Dig. 50, 17, 90) In English: In all affairs, and principally in those which concern the administration of justice, the rules of equity ought to be followed. tfenech@fff-legal.com www.fff-legal.com

Related


More Related Content

giItT1WQy@!-/#giItT1WQy@!-/#giItT1WQy@!-/#giItT1WQy@!-/#giItT1WQy@!-/#giItT1WQy@!-/#giItT1WQy@!-/#