company law Cases

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DHN Food Distributors Ltd v Tower Hamlets London Borough Council [1976] 1 WLR 852 Case Summary

Piercing the corporate veil - groups of companies

The corporate veil may be pierced where groups of companies can be treated as partners.

DHN was the holding company in a group of three companies. There were two subsidiaries, wholly owned by DHN. One subsidiary owned land used by DHN, the other owned vehicles used by DHN. The land was subject to compulsory purchase, and DHN sought compensation for disturbance of its business.

In the Court of Appeal, Lord Denning MR said:

"These subsidiaries are bound hand and foot to the parent company and must do just what the parent company says… This group is virtually the same as a partnership in which all the three companies are partners. They should not be treated separately so as to be defeated on a technical point." (at 860)

It was therefore held that DHN was entitled to claim. The separate corporate personality doctrine was overridden. However, this is likely to only be followed where the subsidiaries are wholly owned and serve no purpose other than to own the parent company's assets. The case has not been applied to make one company in a group liable for the debts of another – Re Southard and Co Ltd [1979] 1 WLR 118.