DHN Food Distributors Ltd v Tower Hamlets London Borough Council
[1976] 1 WLR 852
Independent editorial summary โ not the official judgment. Read the full judgment via the source link.
Ratio Decidendi
The corporate veil may be lifted to treat a group of companies as a single economic entity where the subsidiaries are wholly owned and controlled by the parent, and justice requires it.
Facts
DHN traded from premises owned by its wholly-owned subsidiary, Bronze. The council compulsorily acquired the premises and offered compensation to Bronze (as owner) but refused business disturbance compensation to DHN (as it had no legal interest in the land).
Judgment Summary
The Court of Appeal held that DHN was entitled to compensation for disturbance to its business on the compulsory acquisition of the premises. Lord Denning MR, treating the wholly-owned group as a single economic entity, said the three companies should be regarded as one, so that the parent (DHN), which actually carried on the business, could claim as though it owned the land held by its subsidiary Bronze. Goff LJ reached the same result on the narrower ground that, on the particular facts, DHN had an irrevocable licence to occupy the premises amounting to an interest sufficient to found a disturbance claim. Shaw LJ agreed. The decision is often cited as a high-water mark of the 'single economic unit' approach to lifting the corporate veil within a group of companies โ reasoning that has since been heavily doubted and confined to its facts.
Key Quotes
"These three companies should, for present purposes, be treated as one."
โ Lord Denning MR
Subsequent Treatment
Disapproved in Woolfson v Strathclyde [1978] and Adams v Cape Industries [1990]. The single economic unit theory is no longer generally accepted as grounds for piercing the veil.
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