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Insights
15/10/2025
Section 53(1)(b) of the Law of Property Act 1925 (‘LPA 1925’) provides that:
‘a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will.’
This case, arising in an insolvency context, raises questions of wider applicability. This article focuses on two that are relevant for practitioners of property, trusts and estates:
a) Does ‘some person who is able to declare such trust’ include an agent of the person whose interest in the land is the subject of the declaration of trust?
b) If a declaration of trust is made, but it is not compliant with s.53(1)(b) LPA 1925 (‘s.53(1)(b)’), what is the status and effect (if any) of that declaration?
These questions were before the Court of Appeal in National Iranian Oil Company v Crescent Gas Corporation Limited [2025] EWCA Civ 1211.
A dispute arose when the National Iranian Oil Company (‘NIOC’) failed to supply gas to Crescent Gas Corporation Limited (‘CGC’), in breach of a contract entered into in 2001. NIOC was eventually ordered to pay nearly $2.5 billion to CGC following arbitration.
On 15 August 2022 CGC was granted permission to enforce the award. When CGC sought to register an interim charging order against a property owned by NIOC called NIOC House, it discovered that on 23 August 2022 NIOC had effected a transfer (‘the Transfer’) of NIOC House to the Retirement, Savings and Welfare Fund of Oil Industry Workers Fund (‘the Fund’), the second appellant in this matter.
CGC issued a claim for relief under s.423 Insolvency Act 1986 (‘s.423’) on the basis that the Transfer was a transaction at an undervalue entered into with the purpose of putting assets beyond the reach of NIOC’s creditor i.e. CGC.
NIOC and the Fund’s defence was that s.423 was not engaged as the Fund was already the beneficial owner of NIOC House. As such the Transfer was a) of legal title only and b) not at an undervalue.
This defence failed at first instance. The court accepted that there were declarations of trust contained within mortgage documents granted by NIOC over NIOC House in 2019. However, the judge held that this was not effective to create an enforceable trust as they were not signed by NIOC but by its agent, and s.53(1)(b) requires the signature to be that of the legal owner of the land.
Having found that the trust was unenforceable, the judge found that the owner of the beneficial interest of NIOC House at the date of the Transfer was NIOC and that NIOC had entered into the Transfer at an undervalue, with the purpose of putting assets beyond the reach of CGC. He ordered the transfer of NIOC House, with full title guarantee, from the Fund to CGC.
The first question before the Court of Appeal was a question of construction, namely whether ‘some person who is able to declare such trust’ (s.53(1)(b)) includes an agent authorised to act on behalf of the person holding the relevant interest. Despite the LPA 1925 being 100 years old and the Statute of Frauds 1677 containing a materially similar provision, this is the first decision to authoritatively determine this point.
The Court of Appeal held that ‘some person’ does not include an agent; where Parliament permitted signature by an agent in other provisions of the LPA 1925 it expressly stated as much. Moreover, the legislative intent was to protect landowners from false claims of a declaration of trust over their land. If s.53(1)(b) included agents, it would include agents whose authority was not evidenced in writing, and there is at much risk to a landowner facing allegations that a trust had been declared by that agent as where it is alleged that the landowner had himself declared an oral trust.
Arguments that a) a company can sign via its agent even if a natural person cannot and b) alternatively that NIOC had not signed through an agent but as itself also failed.
For the purpose of s.423, the Transfer was a transaction at an undervalue if NIOC received something of significantly less value than it provided. The Court of Appeal was therefore tasked with determining the nature of NIOC’s interest in NIOC House immediately prior to the Transfer.
NIOC contended that the Transfer perfected a valid trust, that the distribution of property to the beneficiary of a bare trust could not be characterised as being voluntary or at an undervalue, and further that it received consideration in the form of release from its obligations to the Fund as trustee.
A majority of the Court of Appeal rejected this as defying ‘commercial reality and common sense’. A beneficiary in the Fund’s position requires written evidence compliant with s.53(1)(b) before it can enjoy the benefit of the trust or take legal action to enforce it, which a trustee cannot be forced to provide. That beneficiary cannot realistically borrow on the security of the property or sell the beneficial interest for anything close to a property’s market value. Whilst the later provision of evidence compliant with s.53(1)(b) means a trust is treated as having existed from the date of declaration, this means that the provision of that evidence itself provides something of substantial value to the beneficiary. The fact that immediately prior to the Transfer the trust was unenforceable by the Fund must ‘fundamentally affect the value of what the Fund can be regarded as having provided in exchange for the Transfer’, and NIOC’s ‘moral obligation’ to the Fund was worth significantly less than the open market value of NIOC House.
In his dissenting judgment, Zacaroli LJ opined that ‘the orthodox view is… clearly established in law: if a trust has been declared, but there is insufficient evidence to satisfy s.53(1)(b), the trust is nevertheless valid’. Zacaroli LJ rejected the idea that the moment at which the beneficial interest vests in the beneficiaries could be the point at which evidence satisfying s.53(1)(b) is provided, noting the wide range of forms such evidence can take, and the fact this can occur at any time after the creation of the trust. Moreover, if the existence of a trust is admitted by a trustee it can be accepted as existing without adducing evidence of compliance with s.53(1)(b).
Zacaroli LJ further considered that the purpose of s.53(1)(b) was to protect landowners generally against the risk of fraudulently claimed trusts. To refuse this ground of appeal ‘would be to construe the section in a manner against the interests of the person (the landowner who had declared a trust) for whose protection it was enacted, on the premise that they could choose to act either dishonestly or in breach of that trust, or both’.
As to the orthodoxy referred to by Zacaroli LJ, the majority found that the relevant cases were distinguishable on the basis that a) they are limited to cases where property is transferred to a trustee (a ‘3-party case’) rather than cases where a trust is declared by the beneficial owner of property (a ‘self-declaration’ case), b) in contrast to the instant case, the relevant compliant evidence had been produced, albeit some time after the declaration of trust and c) they were not concerned with interpreting s.423.
It is already the case that ‘the trust, however late the proof, operates retrospectively from the time of its creation’ (Lewin on Trusts 20th Edition at 3-014). The Court of Appeal was split in its efforts to evaluate the extent of the beneficial interest created in that twilight period between the alleged creation and the date of proof.
On one level, the conclusion that an unenforceable trust is of little value to a beneficiary is perhaps unsurprising. However, the value of the beneficial interest in a property must sit somewhere. The Court of Appeal, as a corollary of the logic that it does not sit with the beneficiary, necessarily concluded that the beneficial interest in the property itself had not been transferred i.e. the validity of the trust itself was impugned: ‘The straightforward meaning of s.53(1)(b) is that, without evidence complying with it, the court cannot recognise the existence of the trust’.
Permission has been granted for appeal to the Supreme Court, so it remains to be seen whether this will establish a new orthodoxy, and whether its application will go beyond s.423.
Call: 2023
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