Trusts and security arrangements

Abstract

Recent practice has indicated an exponential growth in the employment of trusts, especially as commercial tools. The trust instrument has undergone an evolutionary development, moulding itself along the years to suit various needs, which phenomenon has undoubtedly led to the adoption of the trust concept in jurisdictions such as the Maltese, wherein the trust was formerly considered anathema to basic civil law concepts. The thrust of this thesis is to explore the multiple guises security can take as well as the malleability of the trust concept in relation to its applicability in the area of security arrangements. Accordingly, Chapter 1 sets forth a chronological approach to the subject commencing with the exploration of the origins of the trust which are traced back to the Roman law flducia wherein· the fiducia cum creditore, as a sub-species of the fiducia, fulfilled a security role in the context of creditor-debtor relations. The development of the traditional forms of security can be traced back to these antecedents and it is interesting to see how the origins of the trust (jiducia) fulfilled a security purpose. The English 'use.' is explored to consider the English development of the trust, as well as the possibility of convergence between both systems of law, viz. the common law system and the civil law system. In Chapter 2 the salient features of the Maltese system of security is explored, with particular reference to the alternative security arrangements available, viz. irrevocable mandate, title transfer security and contractual set-off. This Chapter delimits the context wherein discourse on security must be made in terms of the Maltese legal regime, and outlines the underlying tenets of Maltese security law. The employment of trusts as security mechanisms is considered in Chapter 3 with particular attention to the provisions of Article 2095E of the Civil Code in relation to the regulation of security trusts. The analysis centres on how trust law is rendered operational in acommercial context, particularly m the security milieu, so as to facilitate trade. The scope of the thesis reaches its culmination in Chapter 4 wherein practical examples of the employment of trusts for security purposes are explored and the advantages that militate in favour of the employment of security trusts in several particular situations are analysed. The ultimate conclusion of this thesis is two-pronged: on the one hand, it is imperative to enhance the security framework as a buttress in a dynamic commercial context; on the other hand, the trust emerges as a multifarious tool that can expedite matters and overcome limitations that were inherent in traditional institutes of security. Succinctly, the fundamental crux of my thesis is that the trust institute has the potential to become a ubiquitous tool in the commercial field, provided it is properly construed and aptly applied in practice.