- within Real Estate and Construction and Transport topic(s)
In December 2025 the Guernsey Court of Appeal handed down its
decision in Pilatus (PTC) Ltd v RBC Trustees Ltd. The
judgment provides important guidance on what constitutes trust
property and the scope of a trustee's duties when corporate
structures are involved.
The case underscores the breadth of the definition of trust
property and clarifies that trustees cannot ignore corporate
realities when managing assets linked to the trust.
Background
The trustee sold a trust asset company, which held two
subsidiaries, to a third party via a share sale. The terms of the
sale divested the trust of the company and its subsidiaries in
their entirety, however the parties also agreed an Option Agreement
that granted the trustee the right to reacquire the company and
subsidiaries within a specified timeframe.
As part of the sale, it was agreed that the trustee's in-house
service companies, which had acted as directors and administrators
of the subsidiaries, would resign with provision for suitable
replacements to be appointed.
Following the resignations, the replacement appointments were
attempted but both failed. For one subsidiary, the board meeting to
appoint the replacements was inquorate and therefore ineffective.
For the other subsidiary, consent was required from two directors,
one of whom refused to give consent. As a result, control of the
boards of the subsidiaries shifted to another party. Following the
exercise of the Option and the company returning to the trust, the
alleged loss of control had devalued the company, which resulted in
a loss to the trust.
What constitutes trust property?
At first instance, the Royal Court held that the company and its
subsidiaries ceased to be trust property after the sale, so no
breach of trust could arise. However, the Court of Appeal disagreed
and reversed the decision, finding that the Option itself was
'trust property' under section 80 of the Trusts (Guernsey)
Law, 2007 (Trusts Law).
Under the Trusts Law, 'property' means real and personal
property of any description, including tangible and intangible
property wherever situated, and any share, right or interest in it.
Further, section 7 states any property may be held on trust.
Although the trust no longer held the shares in the company, the
contractual right to reacquire them was a trust asset requiring
protection and the trustee had duties in relation to it.
Breach of trust and corporate crossover
The more complex question was whether the trustee's failure
to ensure an orderly handover of board control for the subsidiaries
could be regarded as negligent and amount to a breach of trust. The
trustee argued that its duties were limited to 'holding'
the Option and did not extend to the acts of its subsidiary service
companies, which were separate corporate entities.
The Court of Appeal rejected this. On the face of it, the duties of
the trustee could be distinguished from those of its subsidiaries
unless the facts demonstrated effective control. The Court of
Appeal held that the trustee's duties extended to taking
reasonable steps to ensure the corporate directors were replaced
effectively and the failure to do so was a breach of the duty to
act en bon père de famille.
Practical takeaways
- Trust property is broadly defined
Contractual rights, contingent interests, and choses in action fall within the scope of trust property. Trustees have a duty to protect those assets as trust assets.
- Corporate structures do not shield
trustees
The use of service companies does not relieve trustees of their duties to manage trust assets. Courts will look at substance over form, especially where operational control and coordinated actions are evident.
- Fact-specific analysis
Duties depend on the circumstances. Courts will scrutinise the trustee's knowledge, the foreseeability of harm, and the steps taken to mitigate risk.
Originally published 21 January 2026.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
