This year has seen a flurry of section 423 cases. In the latest, National Iranian Oil Company and another v Crescent Gas Corporation Ltd [2025] EWCA Civ 1211, the Court of Appeal considered whether a transfer of property to an intended beneficiary under a purported trust constituted a “transaction at an undervalue” for the purposes of s423 of the Insolvency Act 1986 (s423).

The judgment considers questions relating to the manner of formation of trusts in respect of land, the subsequent transfer of legal title to that land and the resulting interplay with the law on transactions at an undervalue. Further developments are anticipated, as the Court of Appeal has granted permission to appeal to the Supreme Court.

Section 423 of the Insolvency Act

Section 423 applies where:

• there has been a “transaction at an undervalue”, being a gift or transaction where the transferor received no or significantly less consideration than that which it transferred (TUV); and
• such transaction is carried out for the purpose of putting an asset beyond the reach of a creditor making a claim or prejudicing their interests.

Claims can be brought by insolvency office holders and those whose interests have been harmed by a transaction, and the court has flexible remedies available to it, including undoing the transaction. The first element to establish is whether there has been a “transaction”, being a transfer of value. This is often straightforward, but where assets are held on trust, the position is more complicated.

What happened?

In 2021, Crescent Gas Corporation (CGC) obtained an enforcement order in England against National Iranian Oil Company (NIOC) in respect of an arbitral award for $2.4 billion.

Following the making of the enforcement order, NIOC transferred title to NIOC House (its London headquarters) (the Property) to the operator of its pension fund (the Retirement Fund) (the Transfer).

CGC claimed that the Transfer was a TUV for the purposes of s423 and sought to have the Transfer set aside.

NIOC claimed that the Retirement Fund was already the beneficial owner of the Property under one of various declarations of trust made over a period of many years. It contended that, because of this, beneficial ownership of the Property was already vested in the Retirement Fund prior to the Transfer. Consequently, there was no transfer of value from NIOC to the Retirement Fund (all that was transferred was the legal title) and accordingly there could not be a TUV.

The court at first instance found that a trust had been declared in 2020 in respect of the Property in favour of the Retirement Fund. However, there was an issue with the trust document in that it had been signed by an agent of NIOC, and not by NIOC itself. The court had to decide whether this was a material factor in determining whether the Transfer amounted to a transfer of value in order to then decide whether there had been a TUV sufficient for the purposes of s423.

Section 53 of the Law of Property Act

Section 53 of the Law of Property Act 1925 (LPA25) provides that certain interests in land must be created in writing (or in a will or by operation of law). With respect to a declaration of trust of land, section 53(1)(b) LPA25 (s53(1)(b)) provides that it must be signed by ‘some person who is able to declare such a trust’ – there is no mention of this being able to be done by an agent of that person. In contrast, sections 53(1)(a) and (c) LPA25 – which deal with other types of interest in land – specifically provide that an agent can sign.

Interplay between s53(b)(1) and s423

The Court of Appeal agreed with the lower court that as the declaration of trust had been signed by an agent, rather than NIOC itself, it did not meet the requirements of s53(b)(1). However, the judges were divided on what this meant for the s423 claim.

The majority held that as the declaration did not comply with s53(1)(b) LPA25 there was no evidencable trust. This meant that – as far as the rest of the world was concerned – the beneficial interest in the Property remained with NIOC prior to the Transfer, and so the Transfer was a disposal by NIOC of an asset of value. It was also found that the Transfer was made with a view to putting assets beyond the reach of NIOC’s creditors for the purpose of s423 and the Transfer should therefore be set aside.

However, there was strong dissent from the minority, Lord Justice Zacaroli, on this point. His view was that despite non-compliance with s53(1)(b) a valid trust had been created and beneficial interest had been transferred prior to the Transfer. Zacaroli LJ therefore considered that there was no transfer of value at the time of the Transfer (since all that transferred was legal title to the Property) and that accordingly there was no TUV.

Takeaways

This judgment highlights the importance of compliance with s53(1)(b) LPA25 where an interest in land (including under a trust) is created. Parties commonly seek to divest themselves of interests in land under a trust in the context of potential insolvency to defeat or avoid potential creditor claims. This case confirms that any trust of land must be created in writing by the settlor themselves to be considered valid.

Of course, the creation of a trust for the purpose of putting assets beyond the reach of creditors could still be challenged as a transaction defrauding creditors if the requisite intent can be proved at the time the trust was created. In this case, however, had there been an enforceable trust, the Transfer would have merely transferred legal title and so there would have been no TUV. Whether there could have been a TUV at the time NIOC attempted to create the trust, however, is another question.

As mentioned above, this case may yet come before the Supreme Court for further scrutiny, so we await definitive guidance as to whether a valid trust in land can be created despite non-compliance with the requirements of s53(1)(b) LPA25.