Air Jamaica Ltd v Charlton [1999] 1 WLR 1399

Facts

• The dispute arose from the winding up of a pension scheme established by Air Jamaica Ltd.
• A significant surplus had accumulated in the scheme, and there were no clear directions in the governing trust deed regarding how excess funds should be distributed.
• Air Jamaica Ltd claimed entitlement to the surplus, while beneficiaries argued that the surplus should be divided among contributors.
• The Privy Council was required to interpret the trust deed, consider the intentions of the parties, and apply established principles of trust law to determine the proper distribution of the unallocated surplus funds.

Issues

1. Whether, in the absence of clear provision in the trust deed, surplus funds from a pension scheme revert to the company or are held for contributors.
2. Whether the doctrine of resulting trusts applies to surplus funds unallocated to any specific beneficiary.
3. How trust deeds should be interpreted in relation to surplus asset distribution in pension schemes.

Decision

• The Privy Council found that the trust deed lacked any provision entitling Air Jamaica Ltd to claim surplus assets upon winding up.
• The court held that the unallocated surplus was subject to a resulting trust in favour of the contributors, not the company.
• The ruling emphasized that the intentions of the parties, as reflected in the wording of the trust deed, are critical in determining the distribution of surplus funds.
• The judgment highlighted the necessity for clear and comprehensive drafting of trust instruments to avoid disputes regarding distribution of surplus assets.

Legal Principles

• The doctrine of resulting trusts applies where trust property remains unallocated due to the absence of clear beneficial entitlement, returning the property to contributors.
• Trust deeds must be interpreted according to their wording and the intentions of the parties, especially regarding surplus distribution.
• Trustees and settlors should ensure trust instruments are drafted with precision to prevent uncertainty and litigation over surplus assets.
• The fair and equitable distribution of surplus funds is a guiding principle in the administration of pension schemes.

Conclusion

The Privy Council decision in Air Jamaica Ltd v Charlton established that, absent express provision in the trust deed, surplus pension scheme assets are held on resulting trust for contributors and not for the company, underscoring the critical importance of precise and comprehensive trust deed drafting in pension fund administration.