The Malta Financial Services Authority has recently clarified the rules for Trustees of Family Trusts in Malta. The removal of the requirement for the interposition of a professional trustee is of particular interest, as it was apparently due to resistance applied at consultation level.
The reference in the title to the Clapham Omnibus will be familiar to any readers with a background in fiduciary issues at a professional level. It is a common adage used by the English courts to assess whether a person has acted as a reasonable person would. However, Trustees who are paid for their services are expected to display a higher level of ‘reasonableness’ than the common man as they hold themselves out to have a professional ability beyond that of a lay person.
It is therefore curious, perhaps, that the feedback from interested parties in Malta would kick against the introduction of a requirement for a professional trustee. I have often thought that if one sat and considered the role of a trustee and the risks associated with it versus the financial reward it offers, it’s not obvious why any would accept it.
Whilst I have no issue with non-professionals acting as Trustees I do wonder how aware they are of the role and duty they have taken on – which in some cases could be for years – and how many are aware they are answerable for actions during their tenure for the rest of their lives? Their duties include, but are not limited to, the following:
- Duty on appointment (i.e. to ensure trust documents have been reviewed carefully and no breaches are apparent) to ensure they effectively take control of trust assets
- Duty to keep records
- Duty not to benefit themselves
- Duty to act with reasonable care and skill
- Duty to keep investments under review
All of the above combined with the time they may need to expend on the role can be a sobering thought to a lay person unfamiliar with trusts. The sheer volume of trust law, precedent, and potential pitfalls for trustees is evidence enough for what an important role it is. The extent to which even experienced professionals can get it wrong is shown in the precedent established by Hastings-Bass, under which courts provide significant leeway with decisions that turn out poorly so long as they were adequately deliberated and within the scope of the trustees defined powers.
Nevertheless, when appointing a professional trustee (and by professional I would expect to see someone who is not only experienced in fiduciary matters but also has a relevant professional qualification such as membership of the Society of Trustee and Estate Practitioners) the settlor has comfort that the person fully understands the role that is asked of them and what they can and cannot do. They will also be pragmatic and understand the need to remain cognisant of the settlor’s wishes whilst avoiding following them without question, consideration, and discussion.
The onslaught of highly technical compliance matters such as FATCA and CRS also require the experience and capability of a professional trustee to ensure not only the structure is compliant but that it is also correctly identified and categorised from a reporting angle.
Overall, riding the “Clapham ‘bus” by appointing a non-professional trustee may be a reasonably comfy and cost effective option for getting where you need to go when establishing a Maltese trust. However, to continue the analogy I would suggest that a professional trustee would then be the equivalent of a London Black Cab: it might be more costly, but the driver knows the streets and can use that knowledge to get you to your destination faster and more efficiently.