Air Jamaica Ltd and Others v Joy Charlton, Clive Goodall, Barbara Clarke and Ian Philpotts (suing on behalf of themselves and members of the Pension Plan for Employees of Air Jamaica (1968) Ltd)
| Jurisdiction | UK Non-devolved |
| Judge | Lord Millett |
| Judgment Date | 28 April 1999 |
| Judgment citation (vLex) | [1999] UKPC J0428-1 |
| Court | Privy Council |
| Docket Number | Appeal No. 27 of 1998 |
| Date | 28 April 1999 |
[1999] UKPC J0428-1
Present at the hearing:-
Lord Steyn
Lord Hope of Craighead
Lord Millett
Sir Christopher Slade
Sir Andrew Leggatt
Privy Council
[Delivered by Lord Millett]
Background
Air Jamaica Limited ("the Company") was incorporated in 1968 under the Jamaican Companies Act to operate as the national civil aviation carrier for Jamaica. It was established in response to the need to provide air services on a continuous basis to an island nation dependent on tourism and communication. The Accountant General held a controlling interest in the Company on behalf of the Government of Jamaica.
A pension scheme for the employees of the Company was created by a Trust Deed and Pension Plan dated 1st April 1969. These established a contributory pension scheme which provided defined benefits for employees of the Company, their widows and designated beneficiaries. The Trust Deed was varied in 1973 in order to introduce an unlimited power of amendment. The Pension Plan was amended in minor respects not material to the present appeals in 1993. The second appellant ("the Manager") was appointed manager of the pension scheme.
The Company incurred substantial losses from its operations and the Government of Jamaica decided to dispose of its controlling interest to the private sector. On 6th May 1994 it entered into a Privatisation Agreement with Air Jamaica Acquisition Group Ltd. for the sale and purchase of the Government's shareholding. The Agreement recorded the intention of the parties that there should be continuity of flag carrier services by the Company as the national airline of Jamaica, and that substantial ownership and effective control of the airline should continue to be vested in Jamaican nationals.
The Privatisation Agreement required the Government to procure the Company to serve redundancy notices upon all its employees with the exception of up to 10 employees selected by the new owners. It also authorised the new owners during the period before completion of the acquisition to require the Company to engage up to 10 new employees, though it does not appear that the new owners exercised this right. The Government undertook responsibility for redundancy payments to the employees made redundant prior to completion.
In accordance with the terms of the Privatisation Agreement virtually all the employees of the Company were made redundant on 30th June 1994. There were only four exceptions. These were the four trustees of the pension scheme. They were made redundant on 30th September 1994.
Under the Privatisation Agreement the new owners were obliged to continue the Company's operations and to maintain a level of service consistent with its status as Jamaica's national airline. To enable them to discharge these obligations the new owners offered to re-engage many of the former employees of the Company, and those who accepted entered into new pension arrangements.
By 1994 a substantial actuarial surplus had been built up in the trust fund. As a result, after the defined benefits had been paid out in accordance with the Pension Plan, a balance remained in excess of $400 million. On 10th August 1994 the respondents, as representative Members of the pension scheme, issued an Originating Summons seeking a Declaration that the Plan had been discontinued and an Order that the balance of the fund should be applied for the benefit of Members and their dependants in accordance with section 13 of the Plan, that being the rule which was applicable in the event of discontinuance. The Company, the trustees and the Manager were made defendants to the proceedings.
On 19th August 1994 the Company purported to make further amendments to the Trust Deed and Pension Plan in order to enable the surplus to be paid to the Company. The respondents challenged the validity of these amendments and obtained an interlocutory injunction to restrain the defendants from implementing them. The Attorney-General obtained leave to intervene in the proceedings in order to claim that the trusts of the pension scheme were void for perpetuity and that the surplus funds were bona vacantia. The injunction was discharged by consent and replaced by an undertaking given by the Attorney-General on behalf of the Government of Jamaica that, should the Court uphold the respondents' contentions, the Government would replenish the trust fund "to the full extent required". At the direction of the trustees the Manager then paid the balance of the trust fund to the Company, where it had the effect of reducing the financial obligations of the Government to the new owners under the Privatisation Agreement.
The Trust Deed and Pension Plan
The Trust Deed established a trust fund to be held by trustees upon irrevocable trusts for the purpose of securing retirement pensions and other benefits for contributing employees of the Company, their widows and designated beneficiaries. The Trust Deed contained a covenant by the Company with the trustees to pay contributions to the fund in accordance with the Plan. Clause 4 of the Trust Deed provided that:-
"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."
The Plan provided for contributions to be made by Members by deduction from their salaries and for matching payments to be made by the Company. The Company was also obliged to make further payments into the fund if these were required by the trustees, acting on actuarial advice, in order to provide the benefits specified by the Plan. Their Lordships understand that no such further payments were in fact ever required. "Members" were defined as contributing employees of the Company.
The Plan provided for fixed retirement pensions to be paid to Members who reached normal retirement age and for smaller pensions to be paid to Members who retired early. Where a Member died in service then, depending on his circumstances, either (i) his widow became entitled to a widow's pension or (ii) his contributions were payable to his designated beneficiary with compound interest (section 8.1). Where a Member died after his pension payments had commenced, his widow was entitled to a widow's pension. Where a Member's contributions with interest to the date his pension commenced or his earlier death exceeded the total of any pension payments made to the Member or his widow, or designated beneficiary the excess was payable to the beneficiary designated by the person last in receipt of a pension (section 8.6). Section 8.7 authorised the Member to designate in writing the beneficiary to receive any benefits under sections 8. 1 or 8.6 and the Member or his widow from time to time to change such beneficiary.
Before the latest amendments in August 1994 section 13 of the Plan authorised the Company to amend the Plan from time to time and to discontinue the Plan at any time, but not so as to enable any part of the trust fund to be used otherwise than for the exclusive benefit of Members or other persons entitled to benefits under the Plan. Section 13.3 provided for what was to happen in the event of discontinuance. It directed the trustees to convert the trust fund into money and apply it first in the purchase of annuities in place of pensions in payment and secondly in the purchase of annuities or deferred annuities for those entitled to future pensions. Subject thereto section 13.3(ii) provided that:-
"… 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 in accordance with the advice of an Actuary."
If valid, this would have enabled the trustees to deal effectively with the surplus by using it to provide additional benefits for Members, their widows and designated beneficiaries.
The 1994 amendments
The Trust Deed and Pension Plan were amended in August 1994 in order to enable the surplus to be returned to the Company. This was achieved by amending clause 4 of the Trust Deed, removing the proviso to the power of discontinuance contained in section 13.1 of the Plan, and replacing section 13.3(ii) by a trust to pay any balance of the fund remaining to the Company. Their Lordships observe that the ultimate trust (now in favour of the Company) still arose only in the event of discontinuance. At the same time the Trust Deed was also amended by belatedly introducing a Royal Lives clause. This was intended to meet any claim that the trusts were void for perpetuity.
The course of the proceedings below
There were two issues in the case. The first was concerned with the validity of the 1994 amendments. The second was concerned with the destination of the surplus of $400 million. The trial judge (Theobalds J.) made no express finding whether there had been a discontinuance of the Plan. He held (i) that the trusts of the pension scheme were void for perpetuity; (ii) that the 1994 amendments were of no effect; and (iii) that the surplus reverted to the Crown as bona vacantia.
The judge assumed that the effect of the rule against perpetuities was that all the trusts and powers of the scheme were void ab initio. He held that clause 4 of the Trust Deed excluded any resulting trust in favour of the Company, and that since the Members and their dependants had received all the benefits to which they were entitled they could not claim under a resulting trust either....
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