• In the case of Air Jamaica Ltd v Charlton [1999] 1 W.L.R. 1399, it was held that an automatic resulting trust is not based on the presumed intention of the parties. A resulting trust of surplus assets arises in favour of the contributors whether they intended to see their money again or not.

Facts of the Case

  • D created a pension scheme to benefit their employees, their widows and dependants, funded by member’s contributions and matching payments by D.
  • The trust deed provided that no money which at any time had been contributed by C was in any circumstances to be repayable to D.
  • The plan allowed D to amend the plan from time to time and discontinue the plan at any time, but not so that any part of the trust could be used for anyone but the members and their beneficiaries.
  • Upon its discontinuance, the plan directed the trustees to convert the fund into money and purchase annuities for those receiving or entitled to future pensions.
  • In May 1994, the government decided to dispose of its controlling interest in D and entered into an agreement for selling their shareholding. No further contributions were made to the trust fund.
  • Under the agreement on 30th June, D made all but 4 employees redundant. A substantial balance remained in the trust fund after the payment of benefits.
  • C, as representative members of the pension scheme, sought a declaration against D that the pension plan had been discontinued by D and that the funds be dealt with according to the plan.
  • In August 1994, D amended the trust deed and pension plan to enable the surplus to be paid to D.
  • C challenged the validity of those amendments and obtained an injunction to prevent their implementation. 


  • Should the surplus be distributed under the original rules or the amended rules?

Held by the Privy Council (Jamaica)

  • Finding for C (in part), that the surplus was held on a resulting trust for C.
  • The pension scheme would ordinarily be void for offending the rule against perpetuities. However, each time a new member joined the scheme, a new settlement was created and added a ‘life in being’ that renewed the fund’s lifespans.
  • The powers granting the trustees the right to change the terms of the settlement were void for perpetuity.

Lord Millett

  • The only obligation undertaken by D, and one which it has fully performed, was to contribute to the fund. The obligation to make payments was not a contractual obligation undertaken by D, but a trust obligation imposed on trustees. Each employee becomes a scheme member by virtue of his employment, but his entitlement to a pension arises under the trusts of the scheme.
  • The rule against perpetuities applies not only to the trust, but also to the administrative trusts and powers of trustees. Such powers must not be capable of being exercised outside the perpetuity period, and they may be void even if the trusts to which they are attached are valid.
  • The 1994 amendments are incurably bad. Any power to amend the trusts is void for perpetuity. An amendment is not wholly without effect. An employee who joins the plan after an amendment makes his settlement upon the trusts as amended. But an amendment cannot affect existing members. The 1994 amendments, which were made after the plan had been closed, were therefore without effect.
  • “In the second place, and perpetuity apart, D’s power to amend the plan was subject to an obligation to exercise it in good faith…D was not entitled simply to disregard or override the interests of C. Once it became likely that the plan would be wound up, D would have to take this fact into account, and it is difficult to see how the plan could lawfully be amended in any significant respect once it had actually been discontinued. But even if it could, their Lordships are satisfied that it could not be amended in order to confer any interest in the trust fund on D. This was expressly prohibited by clause 4 of the trust deed. The 1994 amendments included a purported amendment to the trust deed to remove this limitation, but this was plainly invalid. The trustees could not achieve by two steps what they could not achieve by one” [1411E].