NIOC v Crescent Gas: Court of Appeal clarifies section 53(1)(b) requirements

The Court of Appeal's recent decision in National Iranian Oil Company & Anor v Crescent Gas Corporation Limited [2025] EWCA Civ 1211 provides significant clarity on the interpretation of section 53(1)(b) of the Law of Property Act 1925, whilst revealing judicial disagreement on its consequences for transactions at undervalue.

The statutory formality question

The Court unanimously held that section 53(1)(b) requires written evidence of a declaration of trust over land to be signed personally by the settlor, not merely by their agent. This conclusion rested on several factors: the contrast with subsections (a) and (c), which expressly permit signature by agents authorised in writing; the historical position under the Statute of Frauds 1677; and the protective purpose of the provision against fraudulent claims.

Zacaroli LJ rejected arguments that the change from "the partie" in section 7 of the Statute of Frauds to "some person" in section 53(1)(b) expanded the provision to include agents. The comparison with section 40 LPA 1925, which explicitly permitted signature by lawfully authorised agents, proved particularly compelling.

The appellants contended that companies must necessarily sign through agents. Whilst UBAF Ltd v European American Banking supported this proposition, the Court found it had been overtaken by subsequent company law developments. Section 44 of the Companies Act 2006 now prescribes how companies themselves execute documents, distinguishing between execution by the company and execution by an agent on its behalf. The Court followed Hilmi Associates Ltd v 20 Pembridge Villas Freehold Ltd, holding that documents serving important legal functions require execution in accordance with section 44.

The undervalue dispute

The judges divided sharply on whether the absence of compliant written evidence rendered a declared trust unenforceable for the purposes of section 423 of the Insolvency Act 1986. NIOC had transferred NIOC House to the Fund shortly after a judgement was granted permitting enforcement of a substantial arbitral award.

Zacaroli LJ would have allowed the appeal on this ground. He accepted the orthodox view that section 53(1)(b) is evidential rather than constitutive—a valid trust exists from declaration, but cannot be proved without compliant writing. Since NIOC did not dispute declaring the trust, the section's protective purpose against fraudulent claims was spent. The transfer merely perfected an existing trust, involving no transaction at undervalue.

Falk LJ and Sir Julian Flaux disagreed. They held that, absent compliant writing, the court must treat NIOC as beneficial owner at the transfer date. Section 53(1)(b)'s mandatory language ("must be manifested and proved") is not limited to cases where trustees dispute the trust's existence. Without enforceable obligations, the beneficiary's interest possessed minimal value. The transfer therefore constituted consideration significantly less than the property's value, satisfying section 423(1).

The majority's reasoning emphasises commercial reality. Until compliant writing exists, beneficiaries cannot enforce trusts, recover income, or compel transfers under Saunders v Vautier. The trustee retains practical control, however unconscionable their conduct might be.

The split judgement creates uncertainty around voluntary perfection of insufficiently evidenced trusts in insolvency contexts. The case may well proceed to the Supreme Court, particularly given the absence of authoritative precedent on these fundamental questions despite section 53(1)(b)'s statutory ancestry stretching back three and a half centuries.