D.H.N. Food Distributors Ltd v Tower Hamlets London Borough Council

JurisdictionEngland & Wales
Judgment Date04 March 1976
Judgment citation (vLex)[1976] EWCA Civ J0304-4
CourtCourt of Appeal (Civil Division)
Date04 March 1976
D.H.N. Food Distributors Limited (in Liquidation) and Others
London Borough of Tower Hamlets

[1976] EWCA Civ J0304-4


The Master of the Rolls (Lord Denning)

Lord Justice Goff and

Lord Justice Shaw

In The Supreme Court of Judicature

Court of Appeal

Civil Division

On appeal from decision of Lands Tribunal

Mr G. DOBRY, Q.C. and Mr M. BARNES (instructed by Messrs Asher & Co.) appeared on behalf of the Appellants (Claimants).

Mr G. EYRE. Q.C. and Mr A.D. DINKIN (instructed by The Solicitor to the London Borough of Tower Hamlets) appeared on behalf of the Respondents.


This case might be called the "Three in one". Three companies in one. Alternatively, the "One in three". One group of three companies. For the moment I will speak of it as "the firm". In 1963 at Bow in the East End of London there was a firm of grocery and provision merchants. It imported groceries and provisions and distributed them to shopkeepers. It had a warehouse in Malmesbury Road. The firm had lorries which collected goods from the docks: and distributed them to shopkeepers. Soon afterwards the firm developed a "cash and carry" business. Private individuals came by car. They bought substantial quantities wholesale. They paid for them in cash and carried them away.


Six years later in 1969 the London Borough of Tower Hamlets made a compulsory purchase order. They wanted to acquire the property of the firm, to demolish the warehouse and build houses on the site. In February 1970 there was a local inquiry. The firm made strong objection. They said that if the property was taken, it would mean the end of their business. The borough council realised that the firm would lose its business, but they said that the housing requirements took priority and that the firm would receive compensation for any loss.


The inspector accepted the view of the borough council. He said in his report: "Whatever the cost may be (of acquisition) it must be seen against the gain in housing accommodation which would result from the residential development of the application site". So he recommended the implementation of the compulsory purchase order. It was confirmed by the Minister in his decision letter of the 12th October, 1970. The borough council acted quickly. On the 30th October, 1970 they gave a notice to treat and a notice of entry. The firmtried to find other accommodation so as to move their business there, but, finding none, the business had to be closed down.


Now comes the point. It is about compensation. Compensation under the statute is to be made for the value of the land and also compensation for disturbance of the business. See Section 5, subsections (2) and (6), of the Land Compensation Act, 1961.


If the firm and its property had all been in one ownership, it would have been entitled to compensation under those two heads: First, the value of the land, which has been assessed in excess of £360,000. Second, compensation for disturbance in having its business closed down. The figure has not yet been assessed.


But the firm and its property were not in one ownership. It was owned by three companies. The business was owned by the parent company, D.H.N. Food Distributors Limited. The land was owned at the time of acquisition by a subsidiary, called Bronze Investments Limited. The vehicles were owned by another subsidiary, D.H.N. Food Transport Limited. The parent company D.H.N, held all the shares both in the Bronze company and in the Transport company. The directors were the same in all three companies. As the result of the business having to be closed down, all the three companies are in liquidation.


The question is: what is the effect of the firm being in truth the three companies? The local authority say that the owners of the land were the Bronze Investment company, and that company are entitled to the value of the land £360,000. They have actually been paid it. But the local authority say that that company are not entitled to compensation for disturbance because they were not disturbed at all. The local authorityadmit that D.H.N, (who ran the business) and the Transport subsidiary (who owned the vehicles) were greatly disturbed in their business. But the local 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. They say that in 1970 D.H.N, were only licensees of Bronze, the subsidiary who owned the land: and D.H.N, being licensees only, with no interest in the land, their only claim was under Section 20, subsection (1), of the Compulsory Purchase Act, 1965. It says if a person has no greater interest than a tenant from year to year in the land, then he is only entitled to compensation for that lesser interest. Seeing that a licensee can be turned out on short notice, the compensation payable to D.H.N, would be negligible.


The strange thing about the case is this, that the local 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. All they had to do was to take a very simple step. Being in control of all three companies, they could have arranged for Bronze to convey the land to D.H.N. No stamp duty would be payable because it would be exempt under Section 42 of the Finance Act, 1930. And D.H.N, being the owners, could also claim compensation for disturbance. So at any time up to 30th October, 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. But that was not done. The local authority say that, by failing to do it, the group have missed the boat. They are left behind on the quay becauseof the technical provisions of our company law whereby each of the three companies is in law a separate person. Each of its interests must be considered separately. D.H.N. had no interest in the land. It was only a licensee. So it cannot claim compensation for disturbance.


The President of the Lands Tribunal was asked to determine preliminary points of law. He held that D.H.N, 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 1965 Act, which is negligible. D.H.N. appeal to this Court.


We were told by Mr Eyre, who argued this case for Tower Hamlets, that a similar contention has succeeded in other cases before the Lands Tribunal. So much so that, in order to overcome the technical point, it is the regular thing for the legal advisers of a group of companies to do the necessary conveyancing before the notice to treat, it seems. But that in this case the group did not put their house in order in time; and so, he submits, there is no claim for disturbance.


Mr Dobry, for D.H.N, took three points before us: First, that they had an equitable interest in the land; second, alternatively they had an irrevocable licence; third, that we should lift the corporate veil and treat D.H.N, as the owners. And that, in one or other of these three capacities, they were entitled to compensation for disturbance.


First, Equitable Interest. This depends on the conveyancing transactions by which the land was acquired. They were very complicated. In 1963 the vendors of the factory and warehouse agreed to sell it to the group for £115,000. The group had not the money to pay the price. So they gotthe help of the Palestine British Bank. This bank provided the £115,000. In 1964 the conveyance was made to Bronze Investment Company which was a wholly-owned subsidiary of the bank. Two years later in 1966 D.H.N. (having borrowed money elsewhere) acquired all the shares in Bronze (so then Bronze became a wholly-owned subsidiary of D.H.N) and D.H.N, repaid the £115,000 provided by the bank. So the legal title remained in Bronze, but D.H.N, had the benefit of the property. D.H.N. occupied the premises from the time when they were first acquired in 1964 until the local authority entered under their compulsory powers.


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, repaid the purchase money to the bank, D.H.N, acquired the equitable interest of the bank. That may be right, but the President of the Lands Tribunal rejected it, and I am not prepared to say that he was wrong.


Second, Irrevocable Licence. It may be that, on those facts, the bank lent the £115,000 to Bronze with which Bronze bought the property. If so, the bank would not have acquired any equitable interest. They would only be creditors of Bronze. But when D.H.N, repaid the £115,000 to the bank, they simply stood in the shoes of the bank as creditors of Bronze. In that case Mr Eyre, Q.C. submits that D.H.N, have no legal or equitable interest in the property but are only licensees.


Now, I am prepared to allow that D.H.N, were licensees of Bronze. Mr Eyre, Q.C. suggested that they were bare licensees, but I do not think so. Bronze was a wholly-ownedsubsidiary of D.H.N. Both companies had common directors running the companies. It is plain to me that thereafter Bronze could not determine the licence so as to ruin D.H.N. The directors of Bronze could not turn out themselves as directors of D.H.N. They would be in breach of their duties to both companies if they did so. See Scottish Co-Operative Wholesale Society v. Meyer, 1959 A.C. 329, at pages 366-7. In the circumstances, I think the licence was virtually an irrevocable licence. D.H.N, was the parent company holding all the shares in Bronze. In those circumstances D.H.N,...

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