Background: A state-owned debtor and a prime London asset

In 2021, CGC obtained a US$2.4 billion award of damages against NIOC, resulting from its failure to perform a long-term gas supply agreement to deliver gas from the Persian Gulf to the UAE.

In August 2022, CGC obtained permission to enforce the award in England. However, within days of being served with the enforcement order, NIOC transferred NIOC House – a commercial property it had purchased in 1975 and used as its London headquarters – to the Retirement Fund, a related entity that operated its pension fund (the August Transfer). After discovering the August Transfer when it sought to register an interim charging order against NIOC House, CGC issued a claim in the Commercial Court, London, on the basis that the August Transfer had been carried out to put the property beyond CGC’s reach and was thus a transaction to defraud a creditor under section 423 of the Insolvency Act 1986 (s423).

At first instance, NIOC and the Retirement Fund raised a number of English and Iranian law defences, including that NIOC held the property on an English law trust for the Retirement Fund, such that the August Transfer merely transferred the legal title to the property to the true beneficial owner and was not caught by s423. NIOC and the Retirement Fund relied, inter alia, on two documents from 2019 that purported to evidence the trust: a commercial mortgage and an associated certificate of title (the 2019 Documents), which stated that NIOC held the legal title and the Retirement Fund the beneficial interest. Importantly, the mortgage was executed by NIOC acting by its attorney, Naft Trading and Technology Co Ltd (NTT), a subsidiary of the Retirement Fund, and the certificate of title was signed by NIOC’s solicitors.

Sir Nigel Teare, sitting in the Commercial Court, rejected all of NIOC’s defences. In relation to the English law trust argument, he accepted that the 2019 Documents objectively manifested a declaration of trust, but held the trust was not enforceable because the writings were signed by NIOC’s agents, NTT, and its solicitors, rather than NIOC itself, as required by section 53(1)(b) of the Law of Property Act 1925 (LPA). He proceeded to find that NIOC had transferred NIOC House for the purpose of evading the award debt and thus to defraud a creditor under s423, and he exercised the powers available pursuant to s423 by ordering that NIOC House be transferred directly to CGC to satisfy the award.

NIOC and the Retirement Fund appealed on three grounds:

1. Section 53(1)(b) of the LPA, properly construed, provided that an agent was a person capable of providing the necessary written evidence of a trust over land;
2. Alternatively, the 2019 Documents had been signed “by” NIOC on the basis that a corporate entity could only act by way of agents; and
3. That, even absent written evidence of the trust, NIOC and the Retirement Fund could rely on the trust to defeat a creditor claim under s423.

The Court of Appeal dismissed the appeal, thereby upholding the first-instance s423 relief.

A summary of the Court’s findings

Trust formalities

The Court of Appeal confirmed two important points on trust formalities for land in England and Wales.

First, it held that section 53(1)(b) LPA requires “some writing signed by some person who is able to declare such trust”, and that this does not include signature by an agent. The Court reasoned that where Parliament intended to permit signature by an agent, it said so expressly (as it did in s53(1)(a) and (c) LPA). Reading s53(1)(b) in context and in light of its purpose to guard against fraud in claims over land, the Court of Appeal concluded that a declaration of trust must be evidenced by writing signed by the settlor or legal owner (e.g. the trustee), not by an agent (in NIOC’s case, NTT and its solicitors).

Second, the Court rejected the proposition that the mortgage and certificate were signed “by” NIOC. For English companies, execution must follow the Companies Act 2006 regime; for overseas companies such as NIOC, the Overseas Companies Regulations prescribe how a document is executed “by” the company. The Court agreed with the Commercial Court that signature by a company’s attorney did not constitute signature “by” the company under the relevant companies regime for the purpose of satisfying the requirements of section 53(1)(b) LPA, and therefore the 2019 Documents were not signed “by” NIOC.

Enforcement through s423

On the third ground, the Court of Appeal considered whether NIOC and the Retirement Fund could rely on the asserted but unevidenced trust to defeat the claim on the basis that the August Transfer was not a transaction at an undervalue under s423.

By a majority, the Court held that the alleged trust over NIOC House was unenforceable by the purported beneficiary, the Retirement Fund, due to the absence of written evidence, and it should equally not be enforceable against a third-party creditor. NIOC’s obligations to the purported beneficiary were, at best, “moral” or conscience-based and incapable of being compelled, and were not, in money or money’s worth, equivalent to the market value of a prime central London commercial freehold. Since the August Transfer depleted assets otherwise available to creditors and delivered to the Fund something of substantial value for no, or significantly insufficient, consideration, it constituted a transaction at an undervalue for the purpose of s423. As a result, the Commercial Court’s order that NIOC House be transferred to CGC in partial satisfaction of the arbitral award was upheld.

Conclusion

The Court of Appeal’s decision sends a clear message that it will robustly deal with attempts to dissipate assets in order to avoid enforcement, including in relation to assets affiliated with State entities. It also follows from the judgment that a trust in respect of land must be properly evidenced and that a mere assertion that the trust exists may be insufficient to defeat a claim by a creditor seeking to enforce against that land.

Client Alert 2025-251