[2025] EWCA Civ 1211

It is important correctly to identify the issue that arises for decision under Ground 3. Framing the debate as one of “enforcement” of a trust against CGC tends to obscure the issue. Since August 2022 there has been no trust at all, the legal and equitable estates having both vested in the Fund as a result of the Transfer. As Mr Thanki submitted, it is a misnomer to speak of enforcing a trust which has been performed or perfected by the transfer of the legal estate to the beneficiary.

The ultimate question is whether the judge was correct to find that the Transfer amounted to a transaction at an undervalue for the purposes of s.423. For that purpose, it is necessary to determine the nature of NIOC’s interest in NIOC House immediately prior to the Transfer and whether the transfer of that interest to the Fund was the transfer of something with any significant value.

Under s.423, the Transfer could be impugned if it was (a) a gift, or otherwise entered into on the basis that no consideration was received; or (b) a transaction for a consideration the value of which, in money or money’s worth, was significantly less than the value, in money or money’s worth, of the consideration provided by NIOC.

Transaction is defined by s.436(1) of the Insolvency Act 1986 as “a gift, agreement or arrangement, and references to entering into a transaction shall be construed accordingly.” As the Supreme Court recently noted in El-Husseiny v Invest Bank [2025] UKSC 4; [2025] 2 WLR 320, (“El-Husseiny”) at §30, the inclusion of “arrangement” makes for a broad definition of “transaction”.

The definition of “transaction at an undervalue” for the purposes of s.423 is the same for the purposes of s.238 and s.339 of Insolvency Act 1986 (transactions at an undervalue in the context of corporate and personal insolvency respectively). There is no good reason for giving different meanings to the concept in each of these statutory provisions: see El-Husseiny at §72. It follows that it is appropriate to consider the implications of the parties’ contentions as to the consequences of the lack of written evidence of a trust of land in the context of each of those statutory provisions.

The value of the consideration provided, and received, under a particular transaction is a question of fact, although it may also raise issues of law: Phillips v Brewin Dolphin Bell Lawrie Ltd [2001] 1 WLR 143, at §20. Regard must be had to “reality and common sense”: Agricultural Mortgage Corp Plc v Woodward [1994] BCC 688 at p.697A. Value is to be considered from the perspective of the debtor: Re MC Bacon Ltd (No.2) [1990] BCLC 324, at p.340g. It is to be valued at the time of the transaction: Phillips v Brewin Dolphin (above) at §26.

There is no doubt that the transfer of legal title in NIOC House fulfils the definition of a “transaction”. Having regard to the purpose of s.423, however, the Transfer will not fall within s.423 if it “had no effect on the availability or value of assets otherwise available to meet the claims of creditors”: see El Husseiny at §59.

CGC did not dispute that in the case of valid and enforceable trust obligations, the transfer of the legal estate from the trustee to the beneficiary falls outside the scope of s.423 because it does not involve the transfer of any significant value: see, for example, Re Schuppan (a bankrupt) (No.2) [1997] 1 BCLC 256, at p.267b, per HHJ Maddocks sitting as a judge of the High Court; Kubiangha v Ekpenyong [2002] EWHC 1567 (Ch); [2002] 2 B.C.L.C. 597, at §15, per Launcelot Henderson QC, as he then was, sitting as a deputy judge of the High Court. It contends, however, that those cases have no application in the case of a trust of land which is not evidenced in writing.

The critical question, therefore, is whether the lack of sufficient writing to satisfy s.53(1)(b) immediately prior to the Transfer has the consequence that the beneficial interest in NIOC House remained with NIOC, such that it was the Transfer which had the effect of transferring the beneficial interest to the Fund.

The judge concluded that NIOC was indeed the beneficial owner of NIOC House at the time of the Transfer, because the trust relied on by the Fund “cannot be established” (see §213 of the judgment). If he was wrong about that, then his conclusion that there was a transaction at an undervalue – because the Fund could not establish by the requisite proof that NIOC House was held on trust for it – cannot stand.

NIOC contends that s.53(1)(b) does not prevent NIOC and the Fund from relying on the fact that, on the judge’s findings, NIOC had validly declared a trust of NIOC House in favour of the Fund. It submitted that s.53(1)(b) is a provision concerned only with how a declaration of trust is evidenced, and it does not alter the true disposition of property rights, citing Gardner v Rowe (1828) 5 Russ. 258 (“Gardner”) and Rochefoucauld v Boustead [1897] 1 Ch 196 (“Rochefoucauld”) (cases to which I will return in detail below). The textbooks are therefore correct to conclude that an unwritten declaration of trust is valid, but unenforceable, and the judge was wrong to conclude that NIOC had the beneficial interest in NIOC House at the time of the Transfer.

CGC’s case, as developed in its post-hearing written submissions, is that a “non-compliant” declaration of trust (by which it means a trust of land which is not sufficiently evidenced in writing for the purposes of s.53(1)(b)) creates no enforceable obligation requiring the putative trustee to hold the land on trust for the putative beneficiary. As a result, the putative trustee holds the legal interest unencumbered by any trust obligations.

CGC accepts that the orthodox view is that a trust of land which is not sufficiently evidenced in writing is nevertheless a valid trust. It contends, under its Respondent’s Notice Point 1, that the orthodox view is wrong, but it maintains that, even if it is not correct to “label” the trust as invalid, the putative trustee does not become subject to any obligation which can be enforced in equity by a putative beneficiary. Put another way, it says, a non-compliant declaration should not have any status, or be capable of proof “for any purpose” until the section is complied with, and a declaration that cannot be proved cannot be enforced. It follows, CGC contends, that the consideration provided by NIOC was the full value of the beneficial interest in NIOC House, because immediately prior to the Transfer, that full value would have been available to NIOC’s creditors. At most, the Transfer resulted in NIOC being released from an unenforceable trust obligation, something of little or no value.

CGC further contends that, given that the purpose of s.53(1)(b) is to safeguard against fraud, there has to be an effective sanction for non-compliance. Without writing, the trust cannot be proved for any purpose, and so it is unenforceable for any purpose, including for the purpose of defeating a creditor’s claim. The consequence of admitting evidence of the trust in the context of CGC’s s.423 claim would amount to “enforcement of the trust against the creditor”. It submitted that NIOC’s case would turn the purpose of s.53(1)(b) on its head, because it would transform an anti-fraud provision into an instrument of fraud. It would permit a debtor to make an oral, unevidenced declaration of trust over its land, then wait and see if a creditor successfully pursues it: if so, it could rely on the unevidenced declaration of trust to defeat the creditor’s claim and, if not, it could retain its land free of the trust.

As to the correctness of the orthodox view, CGC points to authorities (Gissing v Gissing [1971] AC 886, at pp.905 to 906, and Lloyds Bank v Rosset [1991] 1 AC 107, at p.129) in which there is passing reference to the point that, at least until such time as s.53(1)(b) is complied with, there is no valid trust. It suggests that this is supported by the requirement that s.53(1)(b) requires the trust to be both “manifested” and “proved”, the former being otiose unless it connotes the coming into existence of the trust. It also relies on Millett LJ’s seminal analysis in Armitage v Nurse [1998] Ch 241, at p.253, that there is an irreducible core of obligations owed by trustees to beneficiaries “and enforceable by them” and that “if the beneficiaries have no rights enforceable against the trustees there are no trusts”.