DHN Food Distributors Ltd v Tower Hamlets London Borough Council [1976] 1 WLR 852 is a UK company law case where, on the basis that a company should be compensated for loss of its business under a compulsory acquisition order, a group was recognised as a single economic entity.

The decision was, however, doubted in Woolfson v Strathclyde Regional Council[1] and qualified in Adams v Cape Industries plc.

In 1970 Tower Hamlets London Borough Council compulsorily acquired the premises to build houses.

But the acquiring authority say that those two companies are not entitled to any compensation at all, not even for disturbance, because they had no interest in the land, legal or equitable.

The strange thing about the case is this, that the acquiring authority admit that at any time from February 1970, during the local inquiry and afterwards (right up to the time in October 1970 when the council gave notice to treat) the people running these three companies could have put their house in order so as to make the claim impregnable.

So at any time up to October 30, 1970, this group of three companies could have put themselves in an unassailable position to claim not only the value of the land but also compensation for disturbance.

had no interest in the land such as to entitle them to any compensation for disturbance beyond the amount allowed by section 20 of the Act of 1965, which is negligible.

So much so that, in order to overcome the technical point, it seems that it is the regular thing for the legal advisers of a group of companies to do the necessary conveyancing before the notice to treat.

Mr. Dobry, for D.H.N., took three points before us: first, that they had an equitable interest in the land; second and alternatively, that they had an irrevocable licence; third, that we should lift the corporate veil and treat D.H.N.

It is said that, on those facts, in the first place Bronze held the legal title on a resulting trust for the bank (which provided the purchase money): and that afterwards, when D.H.N.

Those cases show that a contractual licence (under which a person has the right to occupy premises indefinitely) gives rise to a constructive trust, under which th legal owner is not allowed to turn out the licensee.

359, in this court, and I cite from the judgment of Lord Denning MR, at p. 367: “Seeing that the defendant has no legal estate or interest in the land, the question is what right has she?

The courts of equity will not allow the landlord to turn the occupier out in breach of the contract: see Foster v Robinson [1951] 1 KB 149, 156; nor will they allow a purchaser to turn her out if he bought with knowledge of her right …”Secondly, on the footing that that is not in itself sufficient, still, in my judgment, this is a case in which one is entitled to look at the realities of the situation and to pierce the corporate veil.

I would not at this juncture accept that in every case where one has a group of companies one is entitled to pierce the veil, but in this case the two subsidiaries were both wholly owned; further, they had no separate business operations whatsoever; thirdly, in my judgment, the nature of the question involved is highly relevant, namely, whether the owners of this business have been disturbed in their possession and enjoyment of it.

I find support for this view in a number of cases from which I would make a few brief citations, first from Harold Holdsworth & Co (Wakefield) Ltd v Caddies [1955] 1 WLR 352, where Lord Reid said, at p. 367: “It was argued that the subsidiary companies were separate legal entities each under the control of its own board of directors, that in law the board of the appellant company could not assign any duties to anyone in relation to the management of the subsidiary companies and that therefore the agreement cannot be construed as entitling them to assign any such duties to the respondent.

So, in fact, the appellants could control the internal management of their subsidiary companies, and, in the unlikely event of there being any difficulty, it was only necessary to go through formal procedure in order to make the decision of the appellants' board fully effective.” That particular passage is, I think, especially cogent having regard to the fact that Mr. Eyre was constrained to admit that in this case, if they had thought of it soon enough, D.H.N.

‘In my view,’ he said, ‘the section warrants the court in looking at the business realities of a situation and does not confine them to a narrow legalistic view.’” My third citation is from the judgment of Danckwerts LJ in Merchandise Transport Ltd v British Transport Commission [1962] 2 QB 173, 206–207 where he said: “[the cases] show that where the character of a company, or the nature of the persons who control it, is a relevant feature the court will go behind the mere status of the company as a legal entity, and will consider who are the persons as shareholders or even as agents who direct and control the activities of a company which is incapable of doing anything without human assistance.” The third ground, which I place last because it is longest, but perhaps ought to come first, is that in my judgment, in truth, D.H.N.

to be incorporated and assigning their businesses to that company, it was necessary to obtain outside financial assistance so that suitable new premises could be acquired.

Pursuant to the original agreement, the resale contract provided for completion on January 6, 1965, being in fact one year after the transfer to Bronze.

The mortgage advance coming from Credit for Industry Ltd. would then be applied entirely towards discharging the remaining part of the moneys due from Bronze Investments Ltd.” Then on February 8, 1966, there was a further agreement between the bank and D.H.N.

would have constructive notice of the trust, the bank would no doubt have been a necessary party to the conveyance had the contract not been rescinded; but that is purely a conveyancing matter.

It borrowed £115,000 and no more, and that was the sum which fell to be repaid, not £116,402 15s Even if the bank had chosen for some reason or other to give credit against the loan for the purchase price of the shares, the £3,597 5s would have fallen to be deducted from £115,000.

The bank was to have the £120,000, which it would have got under the resale contract, in return for which, instead of conveying the property, it was to transfer the shares and release its equitable interest.

The way in which the contract of February 8, 1966, was drawn was, of course, inconsistent with any original resulting trust in favour of the bank, but the substance of the transaction was entirely consistent with it.

I understand Mr. Eyre conceded that if one could go behind the letter of December 17, 1965, and the agreement of February 8, 1966, and if one found, as I do, an initial relationship between Bronze and the bank of trustee and cestui que trust, not debtor and creditor, the result would be that D.H.N.

True, there was no writing, such as is required under section 53 of the Law of Property Act 1925 for the assignment of an equitable interest in land, but this was not a gift.

[3] Why then should this relationship be ignored in a situation in which to do so does not prevent abuse but would on the contrary result in what appears to be a denial of justice?

If the strict legal differentiation between the two entities of parent and subsidiary must, even on the special facts of this case, be observed, the common factors in their identities must at the lowest demonstrate that the occupation of D.H.N.

The President of the Lands Tribunal took a strict legalistic view of the respective positions of the companies concerned.

It appears to me that it was too strict in its application to the facts of this case, which are, as I have said, of a very special character, for it ignored the realities of the respective roles which the companies filled.