Creditor’s clawback action against the family trust. Is the family trust slowly fading?

With the final judgement no. 3641/2018 the Italian Supreme Court has ruled on the creditor’s right to undertake the clawback action against a family trust, which had been established by one of the defendants (the husband) directly on his property and on the duty to summon also the debtor’ s children as co-defendant in the proceeding.

The case originates from the clawback action taken, according to the article 2901 of the Italian Civil Code, by Banca San Paolo IMI against a family trust established by one of the defendants on his property.

The Claimant alleged that the family trust was reducing his credit warrant and for this reason had to be declared ineffectual.

Notwithstanding the fact that the Claimant (Banca San Paolo IMI) won, first before the Court of Varese and then before the Court of Appeal of Milan, the defendants appealed the judgement before the Italian Supreme Court, sustaining the violation of the articles no. 101 of the Italian Procedure Civile Code, no. 2901 and 167 of the Italian Civile Code.

With the first ground of appeal the Appellants sustained that their children were entitled to be part of the proceeding because they had rights on the family trust, the latter established even in their favour.

The above because the Court of Appeal of Milan, on the contrary, affirmed that the family trust’s establishment determined only a costraint on use on the assets of the family trust, but it could not affect the ownership of the assests in question, nor implied any right in favour of the family members. Therefore it confirmed the first istance judgement in which it was already ruled that debtor’s children were not entitled to be part of the proceeding as co-defendant (litisconsorti necessari).

Secondly they affirmed that the family trust could not be subjected to the clawback action, because, in this case, the property in question had not been transferred from a third party to the spouses or from one spouse to the other, but, as said before, it had been established directly by one of the defendants directly on his own property. Finally the family trust was aimed to grant a household to the family and it represented a concrete mean of support, therefore, it could not be considered as a mere donation.

The Supreme Court rejected all the grounds of appeal: it affirmed that the debtor’s children were not entitled to be part of the proceeding as co-defendant (litisconsorti necessari).

According to the Court’s decision the above mentioned circumstance is, in general, confirmed by the fact that the family trust does not continue to exsist after the marriage ends.

Secondly, the Supreme Court recognized the creditor’s right to undertake the clawback action against a family trust, underlining that the latter, even though established by a married couple, is free of charge and for this reason susceptible to the creditor’s clawback action.

Having said that, in the end the Court explained that, anyway, the family trust is not a legal duty but it represents just an additional instrument to support the family needs.

The scope of the judgment in question is undoubtely much more significant and complex than it seems.

This decision, in fact, is another important piece in the jigsaw to strip the family trust of its judicial function, starting from a larger concept of “family needs”, then recognizing the right to take legal action directly against the goods that constituite the family trust, according to the article 2929 bis of the Italian Civil Code and finally by allowing the creditor to undertake the clawback action against the family trust.

This article is for information purposes only and is not intended as a professional opinion. 

For further information, please contact Michelle Pepe.