Trusts Bill needs 'Maltese colouring' - Labour MP

Labour MP Joe Brincat has expressed concern over the provisions on private trusts in the trusts bill, saying such trusts should be registered and monitored to deter abuse. He also called for the appointment of a public trustee.

Legislation on trusts, he told parliament, needed to be given Maltese colouring - tailored to local circumstances and mentalities.

He observed that in terms of the bill before the House, if one did not possess more than five trusts, such trusts would not need to be registered. Yet he felt these were the trusts which should be monitored and regulated the most. Where such trusts involved people with disabilities and the elderly, his advice to the minister was to have a look at the Public Trustee Act. In some circumstances, it was not enough to leave everything to a private trustee, however reputable, because it was often too late when one realised that the trustee was not acting as he should.

Malta already had elements of fiduciary obligations in the case of powers of attorney, yet there were many cases where people who granted a power of attorney ended up being robbed by the people they trusted. The private trusts would be even worse because property would have been transferred to the trustee and he could dispose of it. And he would not even be registered.

This bill, clearly, was not aimed at the needs of people with disabilities or others who needed help, but to replace offshore trusts and nominee companies which acted as trustees.

In terms of this bill, Maltese residents could now also set up trusts here, governed under Maltese law. Care had to be taken to understand local mentalities. One could not simply transplant the UK mentality of fair play, which did not necessarily prevail in continental Europe and here.

Hence he saw a need for a public trustee, as was found in other countries such as the UK and Australia. The question was who the public trustee could be. In Malta this was a role which could be assumed by the MFSA which would regulate what trustees did. Clearly this was not a role which the courts were expected to play.

Dr Brincat said it had been claimed that this bill would attract foreign trusts. But would somebody set up a trust here and transfer property to it when stamp duty on transfers was much higher here than, say, in the UK?

He disagreed that the minister could establish regulations on how capital gains were calculated. For a start, fiscal legislation should be approved by parliament and not decided by a minister. And investors wanted certainty.

Dr Brincat expressed misgivings that a power of attorney would remain valid after death. This had been copied from abroad, he said, but before its introduction here, people had to get used to controls. It was not enough to say that the MFSA had the authority to question whoever was concerned. More was needed, especially with regard to private trusts.

Neither did he like situations in which a notary, who was a public officer, could be the one who published a will and also be a trustee, thus assuming the property mentioned in the will.

Clearly the role of the MFSA needed to be substantially extended to ensure there were proper controls. The MFSA had to be lion-like, particularly on private trusts. Trustees should be expected to give account of their actions, while the MFSA should have the power to check things out with the beneficiaries. The authorities simply could not rely on what the trustee said on matters such as the sale of property and other assets.

Dr Brincat also warned against trusts being used to circumvent various laws such as those on succession. One should not allow this law, which was basically good, to be used badly, Dr Brincat concluded.

Parliamentary Secretary Carmelo Mifsud Bonnici said the bill had been given Maltese coluring. The drafters had considered the eventualities mentioned by Dr Brincat, which was why the Civil Code was being amended in parallel. Whereas the power of attorney amounted to a blank cheque, there would be much tighter control on trustees.

And one had to bear in mind that trusts were built on confidence, on the fiduciary qualifications of the persons chosen to act as trustees.

This bill was important because to date, Maltese residents could not set up a trust here, governed by Maltese law.

Dr Brincat had said the MFSA should act like a lion. It was true that the MFSA needed to carefully monitor activities. That applied to the whole financial sector.

Referring to points raised in the debate about taxation, Dr Mifsud Bonnici said trusts were tax transparent and tax and duty were paid upon the transfer of properties but future distributions were not taxed again.

The setting up of trusts was especially beneficial for parents of children with special needs. The trusts could be used to assure the future of those children, something the like of which was not currently available in Maltese law.

It was a mistake, Dr Mifsud Bonnici said, to compare trusts with foundations, because they were completely different.

He observed that the bill clearly laid down fiduciary obligations covering trusts and other sectors where fiduciary obligations were involved, effectively breaking new ground in Maltese legislation. Dr Brincat had spoken about a notary who could publish a will and also become a trustee. But the law specified that one could not have a conflict of interest, Dr Mifsud Bonnici said.

The debate continues on Monday.