Air Jamaica Ltd v Charlton [1999] UKPC 20 is an English trusts law case,

concerning resulting trusts. In it Lord Millett expressed the view that a resulting trust
arises because of the absence of intention to benefit a recipient of money.
Facts

Air Jamaica Ltd was privatised, the employee discontinued, and J$400 million was left
over. The pension trust deed clause 13.3 said ‘any balance of the Fund shall be applied
to provide additional benefits for Members and after their death for their widows or their
designated beneficiaries in such equitable and non-discriminatory manner as the
Trustees may determine’. Clause 4 said ‘No moneys which at any time have been
contributed by the Company under the terms hereof shall in any circumstances be
repayable to the Company’. Air Jamaica Ltd wished to remove clause 4, and change
clause 13.3 to say that surpluses would be held on trust for the company.
The Judge held that clause 13.3 was void, going against the rule against perpetuity, and
so the surplus passed on trust as bona vacantia to the Crown. The Court of Appeal held
that the surplus should be dealt under the rules of the scheme, by the trustees.
Advice

The Privy Council advised that a resulting trust of the surplus funds could still arise in
favour of the company, and so it would not be bona vacantia. Clause 13.3 would usually
be void for perpetuity because there was no statutory exemption in Jamaica to the
common law rule. But with each new member, there was a new settlement, and each
member was a life in being, so the termination of a new settlement could in fact be
calculated, and so the scheme was in fact not void for perpetuity. The powers for the
trustees to change the settlement’s terms were void for perpetuity, and so was the
power for the widows to designate a beneficiary to receive benefits, because these were
only contingent on termination of the plan itself which could occur more than 21 years
after the death of any particular beneficiary. (The individual settlements were contingent
on the death of each individual beneficiary under the scheme.) In any event, the
scheme’s terms prohibited granting beneficial rights in the scheme to the company in
clause 4. But a resulting trust for the company could still exist.
Lord Millett remarked[1] that although Mr Vandervell, in Re Vandervell No 2 did not wish
the share option to result to him, he did not wish to make an outright gift to the trustee
company either. A presumption in the transferor’s favour can only be made where there
is no evidence that there was an intention to create a trust, or make a gift, or make a
loan of the property to the transferee.
The validity of the 1994 amendments
41. Their Lordships are satisfied that the 1994 amendments are incurably bad. There
are several reasons for this. In the first place, as their Lordships have already
“ explained, any power to amend the trusts is void for perpetuity. This does not mean
that an amendment is wholly without effect. An employee who joins the Plan after an
amendment makes his settlement upon the trusts of the Plan as amended. But an
amendment cannot affect existing Members. The 1994 amendments, which were
made after the Plan had been closed to new Members, were therefore without effect.
42. In the second place, and perpetuity apart, the Company’s power to amend the Plan
was subject to an obligation to exercise it in good faith: see Imperial Group Pension
Trust Ltd v Imperial Tobacco Ltd [1991] 1W.L.R. 589. The Company was not entitled
simply to disregard or override the interests of the Members. Once it became likely that
the Plan would be wound up, the Company 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
the Company. 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.
Destination of the surplus
43. Prima facie the surplus is held on a resulting trust for those who provided it. This
sometimes creates a problem of some perplexity. In the present case, however, it does
not. Contributions were payable by the Members with matching contributions by the
Company. In the absence of any evidence that this is not what happened in practice,
the surplus must be treated as provided as to one half by the Company and as to one
half by the Members.
44. The Attorney-General contended that neither the Company nor the Members can
take any part in the surplus, which has reverted to the Crown as bona vacantia. He
argued that clause 4 of the Trust Deed precludes any claim by the Company, while the
Members cannot claim any part of the surplus because they have received all that they
are entitled to. There is authority for both propositions. Their Lordships consider that
they can be supported neither in principle nor as a matter of construction.
45. In In re A.B.C. Television Ltd. Pension Scheme unreported, 22nd May 1973 Foster J.
held that a clause similar to clause 4 of the present Trust Deed "negatives the possibility of
implying a resulting trust". This is wrong in principle. Like a constructive trust, a resulting trust
arises by operation of law, though unlike a constructive trust it gives effect to intention. But it
arises whether or not the transferor intended to retain a beneficial interest - he almost always
does not - since it responds to the absence of any intention on his part to pass a beneficial
interest to the recipient. It may arise even where the transferor positively wished to part with
the beneficial interest, as in Vandervell v Inland Revenue Commissioners [1967] 2 A.C.
291. In that case the retention of a beneficial interest by the transferor destroyed the
effectiveness of a tax avoidance scheme which the transferor was seeking to ”
implement. The House of Lords affirmed the principle that a resulting trust is not
defeated by evidence that the transferor intended to part with the beneficial interest if
he has not in fact succeeded in doing so. As Plowman J. had said in the same case
at first instance ([1966] Ch. 261 at p. 275):-
"As I see it, a man does not cease to own property simply by saying ‘I
don’t want it.’ If he tries to give it away the question must always be,
has he succeeded in doing so or not?"
46. Lord Upjohn expressly approved this at p. 314.
47. Consequently their Lordships think that clauses of this kind in a pension scheme
should generally be construed as forbidding the repayment of contributions under the
terms of the scheme, and not as a pre-emptive but misguided attempt to rebut a
resulting trust which would arise dehors the scheme. The purpose of such clauses is
to preclude any amendment that would allow repayment to the Company. Their
Lordships thus construe clause 4 of the Trust Deed as invalidating the 1994
amendments, but not as preventing the Company from retaining a beneficial interest
by way of a resulting trust in so much of the surplus as is attributable to its
contributions.
48. The Members’ contributions stand on a similar footing. In Davis v. Richards &
Wallington Industries Ltd. [1990] 1 W.L.R. 1511 Scott J. held that the fact that a party
has received all that he bargained for is not necessarily a decisive argument against
a resulting trust, but that in the circumstances of the case before him a resulting trust
in favour of the employees was excluded. The circumstances that impressed him
were twofold. He considered that it was impossible to arrive at a workable scheme for
apportioning the employees’ surplus among the different classes of employees and
he declined, at page 1544 to "impute to them an intention that would lead to an
unworkable result". He also considered that he was precluded by statute from
"imputing to the employees an intention" that they should receive by means of a
resulting trust sums in excess of the maximum permitted by the relevant tax
legislation.
49. These formulations also adopt the approach to intention that their Lordships have
already considered to be erroneous. Their Lordships would observe that, even in the
ordinary case of an actuarial surplus, it is not obvious that, when employees are
promised certain benefits under a scheme to which they have contributed more than
was necessary to fund them, they should not expect to obtain a return of their excess
contributions. In the present case, however, the surplus does not arise from
overfunding but from the failure of some of the trusts. It is impossible to say that the
Members "have received all that they bargained for". One of the benefits they
bargained for was that the trustees should be obliged to pay them additional benefits
in the event of the scheme’s discontinuance. It was the invalidity of this trust that gave
rise to the surplus. Their Lordships consider that it would be more accurate to say
that the Members claim such part of the surplus as is attributable to their contributions
because they have not received all that they bargained for.
50. Pension schemes in Jamaica, as in England, need the approval of the Inland
Revenue if they are to secure the fiscal advantages that are made available. The tax
legislation in both countries places a limit on the amount which can be paid to the
individual employee. Allowing the employees to enjoy any part of the surplus by way
of resulting trust would probably exceed those limits. This fact is not, however, in their
Lordships’ view a proper ground on which to reject the operation of a resulting trust in
favour of the employees. The Inland Revenue had an opportunity to examine the
Pension Plan and to withhold approval on the ground that some of its provisions were
void for perpetuity. They failed to do so. There is no call to distort principle in order to
meet their requirements. The resulting trust arises by operation of the general law,
dehors the pension scheme and the scope of the relevant tax legislation.
51. Scott J. was impressed by the difficulty of arriving at a workable scheme for
apportioning the surplus funds among the Members and the executors of deceased
Members. This was because he thought it necessary to value the benefits that each
Member had received in order to ascertain his share in the surplus. On the separate
settlement with mutual insurance analysis which their Lordships have adopted in the
present case, however, no such process is required. The Members’ share of the
surplus should be divided pro rata among the Members and the estates of deceased
Members in proportion to the contributions made by each Member without regard to
the benefits each has received and irrespective of the dates on which the
contributions were made.
Lord Steyn, Lord Hope, Sir Alexander Slade and Sir Andrew Legatt concurred.

12.1 Introduction
A charitable trust is a type of purpose trust in that it promotes a purpose and does not primarily benefit
specific individuals. However, in furthering a purpose the performance of the trust may result in
individuals or members of the public deriving direct benefits. Even so, the trust remains one for a
purpose and not for the benefit of those individuals. The purpose of the trust is to benefit society as a
whole or a sufficiently large section of the community so that it may be considered public. Thus, a
charitable trust is a public purpose trust and is enforceable by the Attorney General on behalf of the
Crown.

Private trusts, on the other hand, seek to benefit defined persons or narrower sections of society than
charitable trusts and, as we saw, a private purpose trust is void for lack of a person to enforce the trust.

Generally, charitable trusts are subject to the same rules as private trusts but, as a result of the public
nature of such bodies, they enjoy a number of advantages over private trusts in respect of:

(a) certainty of objects;

(b) the perpetuity rule;

(c) the cy-près rule; and

(d) fiscal privileges.

perpetuity

Endless years. There is a rule against perpetuities which, if infringed, will make a gift void.
cy-près

Nearest alternative gift.

The Charities Act 2006 introduced five main statutory modifications to the law of charities. These are:

1. the restatement of charitable purposes in a modern statutory form;

2. the public benefit obligation;

3. changes in the function of the Charity Commission;

4. the establishment of a Charity Tribunal;

5. the improvement of the range of legal entities that are available to charities.

The principles that were enacted in the 2006 Act have since been repealed and replaced by
equivalent provisions in the Charities Act 2011. This Act was brought into force on 14 March
2012. The Charities Act 2011 is divided into 19 Parts, contains 358 sections and 11 Schedules.

Section 1(1) of the Charities Act 2011 adopts a two-tier definition of a charity. It is an
institution which:

(a) is established for charitable purposes only; and

(b)falls to be subject to the control of the High Court in the exercise of its jurisdiction with
respect to charities.

The definition in s 1(1)(a) of the 2011 Act is related to the test for certainty of charitable
objects (see below). In addition, the institution is required to be subject to the control of the
High Court. This is the jurisdictional aspect of the definition.

A number of British registered charities carry on their activities abroad. There is little judicial
authority on the attitude of the courts to such overseas activities. In 1963, the Charity
Commissioners issued guidelines on the way they would approach this problem. Their view is
that activities of trusts within the first three heads of Lord Macnaghten’s classification (trusts
for the relief of poverty, for the advancement of education and for religion) are charitable
wherever such operations are conducted. In respect of the fourth head, such purposes would be
charitable only if carried on for the benefit (direct or reasonably direct) of the UK community,
such as medical research. The Commissioners added that it may be easier to establish this
benefit in relation to the Commonwealth (although this link has become weaker since the
statement was made).

The limited number of authorities in this field seem to make no distinction between activities
conducted abroad as opposed to UK activities.

CASE EXAMPLE

Keren Kayemeth Le Jisroel Ltd v IRC [1932] AC 650A company was formed with
the main object of purchasing land in Palestine, Syria and parts of Turkey for the
purpose of settling Jews in such lands. It was argued that the company was
established for charitable purposes, namely the advancement of religion, the relief of
poverty and other purposes beneficial to the community. The court held that the
company was not charitable, because of the lack of evidence of religion and poverty.
In addition, the company was not charitable under the fourth head because of the
uncertainty of identifying the community.
In Re Jacobs (1970) 114 SJ 515, a trust for the planting of a clump of trees in Israel was held
to be charitable because soil conservation in arid parts of Israel is of essential importance to
the Israeli community. The court relied on IRC v Yorkshire Agricultural Society [1928] 1 KB
611: the promotion of agriculture is a charitable purpose.

However, if the organisation is not registered in the United Kingdom but abroad, and carries on its
activities substantially abroad, the connection with the UK could be so insignificant that the English
courts may reject jurisdiction. The justification for this rule is that the activities of the charity as well as
the trustees will be outside the court’s control. In Gaudiya Mission v Brahmachary (1997), the Court of
Appeal refused jurisdiction on the ground that the statutory and practical controls could not have been
extended to such institutions.

CASE EXAMPLE

Gaudiya Mission v Brahmachary [1997] 4 All ER 957, CAThe claimant, an Indian

charity (the Mission), maintained preaching centres and temples in order to advance
the doctrines of the Vaishnava faith throughout India and also Cricklewood,
northwest London. The Mission was not registered in England. Rival factions within
the Mission set up a trust under the name ‘Gaudiya Mission Society Trust’ (the
Society), which was a registered English charity. The defendants were the priest in
charge of the charity’s London temple and the trustees of the English registered
Society. The claimant contended that the assets held by the Society belonged to it
and that the Society was passing itself off as the Mission. The question in issue was
whether the Mission was an institution established for charitable purposes, and
thereby subject to the control of the High Court under its supervisory jurisdiction.
The judge decided that the Mission was within the control of the High Court and,
consequently, that the Attorney General ought to be added as a party to the
proceedings. The Attorney General appealed to the Court of Appeal.Held: The
Court of Appeal allowed the appeal on the ground that the English law of charities
was not applicable to institutions other than those established for charitable purposes
in England and Wales. Charitable institutions within England and Wales are required
to register with the Charity Commission. The legal and practical considerations of
enforceability are decisive factors, which indicate that the law was never intended to
extend to an institution registered abroad. Thus, the Mission was not a charity within
English law and the Attorney General was not a proper party to be joined.
JUDGMENT

‘Under English law charity has always received special treatment. It often takes the
form of a trust; but it is a public trust for the promotion of purposes beneficial to the
community, not a trust for private individuals. It is therefore subject to special rules
governing registration, administration, taxation and duration. Although not a state
institution, a charity is subject to the constitutional protection of the Crown
as parens patriae, acting through the Attorney-General, to the state supervision of
the Charity Commissioners and to the judicial supervision of the High Court. This
regime applies whether the charity takes the form of a trust or of an incorporated
body. The English courts have never sought to subject to this regime institutions or
undertakings established for public purposes under other legal systems. [The
authorities] show that the courts of this country accept that they do not have the
means of controlling an institution established in another country, and administered
by trustees there.’
Mummery LJ

12.2 Certainty of objects

In s1(1)(a) of the Charities Act 2011, the expression, ‘charity’ has been partially defined by reference to
the exclusivity of charitable purposes promoted by the institution. This is a reference to the test for
certainty of the charitable objects and amounts to a statutory recognition of the common law approach
that preceded the passing of the Act. At common law a charitable trust is subject to a unique test for
certainty of objects, namely whether the funds of the institution are applicable for charitable purposes.
In other words, if the trust funds may be used solely for charitable purposes, the test will be satisfied.
Indeed, it is unnecessary for the settlor or testator to specify the charitable objects which are intended
to take the trust property: provided that the trust instrument manifests a clear intention to devote the
funds for ‘charitable purposes’, the test will be satisfied. Thus, a gift ‘on trust for charitable purposes’
will satisfy this test. The Charity Commission and the courts have jurisdiction to establish a scheme for
the application of the funds for charitable purposes (i.e. the court will make an order indicating the
specific charitable objects which will benefit).

But if the trust funds are capable of being applied in a substantial manner to promote
charitable and non-charitable purposes the trust will fail to satisfy the test for certainty of
charitable objects and a resulting trust may arise in favour of the settlor or his estate, if he is
dead. In Morice v Bishop of Durham, the gift failed as a charity on this ground.

CASE EXAMPLE

Morice v Bishop of Durham [1804] 9 Ves 399A fund was given upon trust for such
objects of benevolence and liberality as the Bishop of Durham should approve. The
question in issue was whether the fund was charitable.
Held: The gift was not valid as a charity because the objects were not exclusively
charitable. A resulting trust was created.

JUDGMENT
 ‘[I]t is now settled, upon authority, which it is too late to controvert, that, where a
charitable purpose is expressed, however general, the bequest shall not fail on
account of the uncertainty of the object: but the particular mode of application will
be directed by the King in some cases, in others by this court. I am not aware of any
case, in which the bequest has been held to be charitable, where the testator has not
either used that word, to denote his general purpose or specified some particular
purpose, which this court has determined to be charitable in its nature.’
Grant MR
In Moggridge v Thackwell (1807) 13 Ves 416, a bequest to ‘such charities as the trustee sees
fit’ was valid as a gift for charitable purposes. The court approved a scheme for the disposition
of the residuary estate.

On the other hand, where the settlor in the trust instrument identifies two sets of purposes, one
set of charitable objects and another set of non-charitable objects, the court will construe the
objects to determine the scope of the disposition. If the trust funds are capable of being
devoted to both charitable and non-charitable purposes the gift will be invalid as a charity for
uncertainty of objects.

CASE EXAMPLE

IRC v City of Glasgow Police Athletic Association [1953] 1 All ER 747The

association promoted both a charitable purpose (efficiency of the police force) and a
non-charitable purpose (promotion of sport). The court decided that the association
was not charitable.

JUDGMENT

‘The private advantage of members is a purpose for which the association is

established and it therefore cannot be said that this is an association established for a
public charitable purpose only. In principle, therefore, if an association has two
purposes, one charitable and the other not, and if the two purposes are such and so
related that the non-charitable purpose cannot be regarded as incidental to the other,
the association is not a body established for charitable purpose only.’
Lord Normand
The courts have created a distinction between on the one hand, the broad notion of a trust for
benevolent purposes and on the other hand, a charitable trust for the benefit of the community.
On construction, the court may decide that benevolent purposes involve objectives that are
much wider than charitable purposes and accordingly the gift may fail as a charity. Thus,
where the draftsman of the objects clause uses words such as ‘charitable or benevolent
purposes’, the court may, on construction of the clause, decide that the word ‘or’ ought to be
interpreted disjunctively, with the effect that benevolent purposes which are not charitable are
capable of taking, thereby invalidating the charitable gift. In Chichester Diocesan Fund v
Simpson (1944), the gift failed as a charity on construction of the objects clause.

CASE EXAMPLE
 Chichester Diocesan Fund v Simpson [1944] 2 All ER 60, HLA testator directed his
executors to apply the residue of his estate ‘for such charitable or benevolent
objects’ as they might select. The executors assumed that the clause created a valid
charitable gift and distributed most of the funds to charitable bodies. The House of
Lords decided that the clause did not create charitable gifts and therefore the gifts
were void. A resulting trust was set up for the testator’s estate.

JUDGMENT

‘It is not disputed that the words charitable and benevolent do not ordinarily mean
the same thing; they overlap in the sense that each of them, as a matter of legal
interpretation, covers some common ground, but also something which is not
covered by the other. It appears to me that it inevitably follows that the phrase
charitable or benevolent occurring in a will must, in its ordinary context, be regarded
as too vague to give the certainty necessary before such a provision can be supported
or enforced.
The conjunction or may be sometimes used to join two words whose meaning is
the same, but, as the conjunction appears in this will, it seems to me to indicate a
variation rather than an identity between the coupled conceptions.
I regret that we have to arrive at such a conclusion, but we have no right to set at
nought an established principle such as this in the construction of wills, and I,
therefore, move the House to dismiss the appeal.’
Viscount Simon LC
Prima facie, the conjunction, ‘and’ is construed conjunctively but may exceptionally be construed
disjunctively in a way similar to the word ‘or’. The construction of the expression will depend ultimately
in the context in which the words were used in the trust instrument or will. In Re Best [1904] 2 Ch 354,
a testator transferred property by his will for ‘such charitable and benevolent institutions in the city of
Birmingham as the Lord Mayor should choose’. The court decided, on construction, that the will
created a valid charitable trust.

JUDGMENT

‘I think the testator here intended that the institutions should be both charitable and
benevolent; and I see no reason for reading the conjunction and as or.’
Farwell J
But in A-G of the Bahamas v Royal Trust Co [1986] IWLR 1001, a bequest to provide
education ‘and’ welfare for Bahamian children failed as a charitable bequest. The expression
‘welfare’ was a word of wide import and, taken in the context of the expression ‘education
and welfare’, was not restricted to the educational prosperity of the objects. The gift was
therefore void for charitable purposes.

JUDGMENT

‘[I]t is not easy to imagine a purpose connected with the education of a child which
is not also a purpose for the child’s welfare. Thus, if welfare is to be given any
separate meaning at all it must be something different from and wider than mere
education, for otherwise the word becomes otiose … the phrase education and
welfare in this will inevitably fall to be construed disjunctively. It follows that, for
the reasons which were fully explored in the judgments in the courts below, and as is
now conceded on the footing of a disjunctive construction, the trusts in paragraph (t)
do not constitute valid charitable trusts.’