Emile Yusupoff<\/strong>\u202f, Junior Barrister at 36 Stone<\/strong><\/a><\/p>\n\n\n\n
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The England & Wales High Court\u2019s recent judgment in Crescent Gas Corporation Limited v (1) National Iranian Oil Company; (2) Retirement, Saving and Welfare Fund of Oil Industry Workers<\/em><\/a> [2024] EWHC 835 (Comm) concerns a successful application under s.423<\/a> of the Insolvency Act 1986 (the \u201c1986 Act<\/strong>\u201d) and provides useful authority on the meaning of s.53(1)(b)<\/a> of the Law of Property Act 1925 (the \u201c1925 Act<\/strong>\u201d).\u00a0\u00a0<\/p>\n\n\n\n The parent company of the claimant judgement creditor (\u201cCGC<\/strong>\u201d) had entered into a gas purchase contract with the defendant judgment debtor (\u201cNIOC<\/strong>\u201d), who breached this agreement by failing to supply any gas. CGC was assigned its parent\u2019s rights, brought arbitral proceedings, and obtained an award against NIOC in 2021<\/a> for a principal sum of US$2,429.97 million. On 15 August 2022, CGC obtained permission to enforce the award as a judgment and sought instant relief in respect of a property known as NIOC House worth \u00a380-104 million (the \u201cProperty<\/strong>\u201d). NIOC purchased the Property in 1975 with monies belonging to a pension fund set up to benefit, inter alia<\/em>, current and former employees of NIOC (the \u201cFund<\/strong>\u201d). In August 2022, NIOC remained registered as the Property\u2019s sole owner. On 23 August 2022, the Property was transferred to the Fund for no value (the \u201cTransfer<\/strong>\u201d). <\/p>\n\n\n\n CGC maintained that the Transfer fell under s.423 of the 1986 Act as a transaction intended to defraud creditors. <\/p>\n\n\n\n The defendants maintained that:\u00a0\u00a0<\/p>\n\n\n\n The Court found<\/a> that the money used to purchase the Property had been taken from the Fund as a loan. The loaned money, and therefore the Property, belonged to NIOC, despite documentation showing that NIOC\u2019s board subsequently understood the Fund to be the owner. Subsequent steps taken by NIOC between 1975 and 2022 were held not to have transferred ownership (despite NIOC\u2019s counsel making submissions to the contrary). See: [47-52], [77], [89], [118], [135] of the judgment. <\/p>\n\n\n\n As a matter of Iranian law, and in contrast with English law trust concepts, an amin<\/em> does not have legal ownership under an amanat<\/em> arrangement. Accordingly, because the defendants could not establish that the Fund rather than NIOC had absolute ownership, the Property did not fall under an amanat<\/em>. See: [150-157] of the judgment<\/a>. <\/p>\n\n\n\n As to English law, it was undisputed that Art. 14 of the Hague Trust Convention<\/a> meant that an Iranian entity could create a trust over English property despite Iranian law not distinguishing between legal and beneficial ownership. Nonetheless, the defendants failed to demonstrate that there had been a declaration of trust over the Property that could be enforced against CGC. <\/p>\n\n\n\n The Court held that the Fund had only acquired legal personality in 2019, meaning that there could be no declaration prior to then (see: [165-184] of the judgment). After 2019, there was a clear manifestation of intention to declare a trust in a document executed by NIOC\u2019s attorney. However, s.53(1)(b) of the 1925 Act provides that: \u201ca declaration of trust respecting any land or any interest thereon must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will<\/em>\u201d. This contrasts with the position under ss.53(1)(a) and (c), which expressly provide for interests in land to be created or disposed of by signature by agents. Prior to this judgment, there had been no direct authority on the point of whether this linguistic distinction reflected a substantive distinction. The Court held that it did. NIOC\u2019s counsel argued that no such distinction could be drawn because a company could only<\/em> declare a trust through natural persons, i.e., its agents. The Court dismissed this argument on the basis that a distinction could be drawn between a company\u2019s officers, who were persons \u201cable to declare<\/em>\u201d a trust on its behalf, and mere agents. Accordingly, the document executed by the attorney was inadequate. Although subsequent signed writing by NIOC\u2019s officers would have been sufficient to prove the trust (Taylor v Taylor<\/em> [2017] EWHC 1080 (Ch)<\/a>, applied), there was no such writing. See: [185-200] of the judgment.\u00a0\u00a0<\/p>\n\n\n\n There was also a dispute over the effect of non-compliance with s.53(1)(b) of the 1925 Act. It was established that a trust could be made without compliance and that once there had been compliance the trust was retrospectively enforceable (Taylor<\/em>, applied). Counsel for NIOC submitted that this meant that non-compliance with s.53(1)(b) only rendered a trust unenforceable where a beneficiary<\/em> sought to enforce their interest against a trustee. This line of argument was dismissed, and it was accordingly held that no enforceable trust had been established. See: [201-213] of the judgment. <\/p>\n\n\n\n It was established that s.423 of the 1986 Act could be relied upon by a creditor when a <\/em>purpose of a transaction is to put an asset beyond their reach, even if it was not the main<\/em> purpose (JSC BTA Bank v Ablyazov<\/em> [2018] EWCA Civ 1176<\/a>, followed). The timing of, and urgency in enacting, the Transfer meant it was clearly a purpose of NIOC to put the Property beyond CGC\u2019s reach. See: [214-224] of the judgment. <\/p>\n\n\n\nThe Parties\u2019 Cases<\/strong>\u00a0<\/strong><\/h2>\n\n\n\n
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Judgment<\/strong>\u00a0<\/h2>\n\n\n\n
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