Can agents declare trusts of land? (National Iranian Oil Company v Crescent Gas Corporation Limited)

Section 53(1)(b) of the Law of Property Act 1925 (‘LPA 1925’) states 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’.

In the recent Court of Appeal case of National Iranian Oil Company v Crescent Gas Corporation Limited [2025] EWCA Civ 1211, the key issues were (1) whether an agent’s signature was sufficient to comply with the statutory requirement, (2) if not, how a company could execute a declaration of trust, and (3) what the consequences were if a declaration did not comply with s53(1)(b).

In short, it was held that:

• A signature by an agent does not comply with section 53(1)(b).
• A company which executes a document pursuant to section 44 of the Companies Act 2006 signs the document itself (rather than having an agent sign on its behalf).
• A declaration which does not comply with section 53(1)(b) is valid, but cannot be enforced. Therefore, if an oral declaration is made in favour of an entity and the property is later transferred to that entity, the transfer can constitute a transaction at an undervalue.

It was noted at the start of the judgment that none of the 15 counsel instructed on the matter had been able to find binding authority on the agency question. This issue – and the consequences of the decision made – will be the subject of this article.

The judgment

The appeal concerned an alleged transaction at an undervalue pursuant to section 423 of the Insolvency Act 1986. At first instance, it had been found that certain mortgage documents amounted to declarations of trust, but that they were not valid as a result of not having been signed by the National Iranian Oil Company (the owner) itself, and instead by an agent. At a later date, the property was transferred to the same party in whose favour the declaration of trust had been declared. It was held that the transfer had been effected with the intention of putting assets beyond the reach of the Respondent, a creditor of the First Appellant. The section 423 claim succeeded.

The first instance judge’s reasoning was essentially as follows:

• Section 53(1)(a) LPA 1925 states that an interest in land may be created in signed writing by a person or his agent. Section 53(1)(b) made no such reference to ‘agent’. This was believed to reflect Parliament’s intention that a trust may not be declared by an agent.
• A company could sign by its director(s), as it acts by its officers. A director can therefore declare a trust. An agent cannot.
• There was a need for certainty which the formality requirements in section 53 sought to address. It appeared that Parliament felt a need to limit the scope of section 53(1)(b).

Zacaroli LJ proceeded to conduct a thorough review of the case law and textbook references and found that there was no conclusive authority. For instance, Megarry & Wade, The Law of Real Property, said an agent’s signature was not sufficient under section 53(1)(b). The two authorities cited for the proposition (both from the 19^th century), however, provided little support for this.

As to the history of these provisions, the predecessors to section 53(1)(a) and section 53(1)(b) respectively had been section 3 and section 7 of the Statute of Frauds 1677. The distinction (a reference in the former to ‘agent’ which was absent in the latter) was already present at that time. It was held that the intention had been, in the 1677 statute, to exclude agents from section 7. While there were certain differences between the language used in section 7 of the 1677 Act and section 53(1)(b) of the LPA 1925, Zacaroli LJ did not consider the effect of those changes to be such that it widened the class of persons who could declare trusts.

After the historical comparison, Zacaroli LJ considered the purpose of section 53(1)(b). He concluded that, like section 7 of the 1677 Act, its purpose was to protect landowners from the risk that another person would falsely claim that the land or an interest in it had been transferred to them, or declared in trust for them. He noted that no one suggested section 53(1)(b) could be limited to agents authorised in writing, and that the risks involving an orally authorised agent were similar to allowing the trust to be orally declared. He therefore concluded that only the settlor or the person with the relevant interest personally could declare the trust, and not an agent.

In relation to companies, the appellants had contended that since companies could only act by their agents, s53(1)(b) must allow a person to sign as agent for a company. In relation to that, the provisions for execution of documents by a company (under sections 36 and 36A of the Companies Act 1985, and later section 44 of the Companies Act 2006) were considered. It was held that these prescribed how a company may itself execute documents, not how it may execute documents by an agent.

Falk LJ, as well as Sir Julian Flaux CHC, agreed with Zacaroli LJ on Grounds 1 and 2. The second ground of appeal concerned the question whether in the circumstances of this case, the document had been signed ‘by’ the First Appellant. As this was specific to the facts of the case, it will not be addressed further here.

The third ground concerned the effect of non-compliance with section 53(1)(b). In particular, the question was whether the lack of the necessary writing had the consequence that the beneficial interest in the property  remained with NIOC. By way of a brief summary, Zacaroli LJ – in the minority – considered that there could have been no transaction at an undervalue because the beneficial interest no longer vested in NIOC at the time of the relevant transaction. Falk LJ disagreed with this. She considered that, since the trustee could not be compelled to confer the benefits of the trust on the beneficiary in the absence of a written declaration, providing such declaration was providing something of substantial value. On that basis, the transfer was at an undervalue. Sir Julian Flaux also took this view, meaning the majority considered there to have been a transfer at an undervalue.

Consequences of the decision on agency

It was doubtful even prior to this judgment whether a signature by an agent complied with section 53(1)(b)  (as shown, for instance, by the comments in Megarry & Wade mentioned above). Nevertheless, there will be some cases in which agents have executed declarations of trust, believing in the absence of clear authority that such a declaration would be enforceable.

In most cases, it should be possible to rectify the situation by having the owner sign a declaration of trust now, particularly given that both Falk LJ and Zacaroli LJ accepted that the effect of producing the necessary writing later is that the trust is valid from the time at which it was originally declared.

However, this leaves the question of the impact on those who can no longer sign the relevant declaration. For instance, this will be the case where:

• The trustee has since died;
• The trustee has since lost mental capacity;
• The trustee already lacked mental capacity and someone else signed the declaration of trust on their behalf under a lasting power of attorney.