Trustee duties and corporate structures: An update following Pilatus v RBC Trustees

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

1. 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.
   
   
2. 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.
   
   
3. 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.