The Court of Appeal’s decision on November 9 in the lawsuit Bettina Vossberg vs Equinox International Ltd; Andreas Gerdes (No. 163/2006), reported in The Times (November 26), is a landmark judgment in the recently introduced Law of Trusts in Malta and in the evolution in local jurisprudence of this important institute.
The basic point is the safeguard accorded to a creditor that his credit is protected – in this case, the wife, Bettina Vossberg, acting on her behalf and on behalf of her two minor children, wanted to ensure that maintenance due to her and to her minor children from her ex-husband, Andreas Gerdes, is safeguarded. The Court of Appeal found defendant Gerdes’s attempt to have his sole immovable property in Malta transferred to his trust, and, thereby, taken out of his patrimony, to have been a fraudulent act and was therefore revoked.
This is a judicial decision in the right direction. Trusts in Malta were never intended to be set up to defraud creditors, whether they are third parties or separated consorts and, especially, minor children.
This was not a judicial request to have the trust in question declared null. The judgment of the court of first instance had considered this lawsuit to be based on such a request and had dismissed the application on this basis. However, this was a misreading of the whole pendency between the parties and the legal reasoning was placed in the proper perspective in the Court of Appeal stage, which decided that, while the trust was not under attack, it was the gratuitous settlement of property in the trust to defraud a creditor that was being legitimately questioned under the traditional action of actio pauliana, which safeguards creditors or potential creditors from fraud by their debtors. It was this law that was applied in this case. In other jurisdictions, this aspect has been taken up even further, in the sense that, at the request of the interested party, a creditor may request that his/her interest be duly registered on the trust itself. In the local lawsuit under review, the applicant did not make such a request.
What is paramount is that this judgment has recognised and established that trusts have not been introduced in Malta to be used as a vehicle so that individuals would defraud third party creditors. Indeed, it is good to see that the courts, at appeal level, have made a strong statement with a clear direction on the limits of what can be done, navigating in this new and complex legal area of trust with full confidence and competence.
This point is being emphasised because some mothers may find themselves faced with a similar unhappy situation.
The novel judicial situation now obtaining should help readjust such unfairness.