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LORD DENNING MR & GOFF LJ 04 Mar 1976 BENCH LORD DENNING MR, GOFF & SHAW LJJ COMPARATIVE CITATIONS 1976 (1) WLR 852, 1976 (3) AllER 462, 1976 INDLAW CA 116 CASES REFERRED TO Binions and another v Evans 1972 Indlaw CA 33 Mcewan v Mcewan 1971 Indlaw PDA 15 Scottish Co-Operative Wholesale Society Limited v Meyer and Another 1958 Indlaw HL 9 Re Mann (a debtor), Ex parte The Debtor v Harrods Limited 1958 Indlaw CHD 46 Harold Holdsworth and Company (Wakefield) Limited v Caddies 1955 Indlaw HL 24 Foster v Robinson 1950 Indlaw CA 30 Bannister v Bannister [1948 (2) AllER 133] THIS JUDGMENT WAS FOLLOWED IN 22 CASE(S) ACTS REFERRED Land Compensation Act, 1961 Compulsory Purchase Act, 1965[s. 20(1), s. 20, s. 5] Finance Act, 1930[s. 42] Companies Act, 1948[s. 210]
LAWYERS George Dobry QC, Michael Barnes, Graham Eyre QC, Anthony Dinkin, Asher Fishman & Co, Solicitor, London Borough Of Tower Hamlets .JUDGMENT TEXT The judgments were delivered by LORD DENNING MR and GOFF LJ :LORD DENNING MR. 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
It was owned by three companies. The local authority admit that DHN (who ran the business) and Transport (who owned the vehicles) were greatly disturbed in their business. That section says if a person has no greater interest than a tenant from year to year in the land. On 30 October they gave a notice to treat and a notice of entry. then he is only entitled to compensation for that lesser interest. the business had to be closed down. not even for disturbance. DHN Food Distributors Ltd ('DHN'). legal or equitable. rr (2) and (6). compensation for disturbance in having its business closed down. The parent company DHN held all the shares both in Bronze and in Transport. it would have been entitled to compensation under those two heads: first. the London Borough of Tower Hamlets made a compulsory purchase order. They paid for them in cash and carried them away. finding none. The directors were the same in all three companies. But the local authority say that that company are not entitled to compensation for disturbance because they were not disturbed at all. But the firm and its property were not in one ownership. The local authority acted quickly. of the 1961 Act. that the local authority admit that at any time from February 1970. They have actually been paid it. to demolish the warehouse and to build houses on the site. Six years later. The firm tried to find other accommodation so as to move their business there. during the local . They wanted to acquire the property of the firm. the subsidiary which owned the land. They said that if the property was taken. Seeing that a licensee can be turned out on short notice. 000. The inspector accepted the view of the local authority. Private individuals came by car. and DHN.The strange thing about the case is this. but. Compensation under the Land Compensation Act 1961 is to be made for the value of the land and also compensation for disturbance of the business: see s 5. the compensation payable to DHN would be negligible. being licensees only with no interest in the land. In February 1970 there was a local inquiry. which has been assessed in excess of 360. their only claim was under s 20(1) of the Compulsory Purchase Act 1965. but they said that the housing requirements took priority and that the firm would receive compensation for any loss. in 1969.' So he recommended the implementation of the compulsory purchaser order.Now comes the point. If the firm and its property had all been in one ownership. because they had no interest in the land. all the three companies are in liquidation. The firm made strong objection. The figure has not yet been assessed. the value of the land. called Bronze Investments Ltd ('Bronze'). It is about compensation. second. 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 Bronze and that that company are entitled to the value of the land 360. As the result of the business having to be closed down. It was confirmed by the Minister in his decision letter of 12 October 1970. The local authority realised that the firm would lose its business.carry' business. The business was owned by the parent company. They bought substantial quantities wholesale. But the local authority say that those two companies are not entitled to any compensation at all. 000. The vehicles were owned by another subsidiary. 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. They say that in 1970 DHN were only licensees of Bronze. DHN Food Transport Ltd ('Transport'). it would mean the end of their business. The land was owned at the time of acquisition by a subsidiary.
It is said that. but the President of the Lands Tribunal rejected it. 000. This bank provided the 115. But that in this case the group did not put their house in order in time and so. and I am not prepared to say that he was wrong. DHN appeal to this court. No stamp duty would be payable because it would be exempt under s 42 of the Finance Act 1930. In that case counsel for the local authority submits that DHN have no legal or equitable interest in the property but are . DHN acquired the equitable interest of the bank. he submits. DHN (having borrowed money elsewhere) acquired all the shares in Bronze (so then Bronze became a wholly owned subsidiary of DHN) and DHN repaid the 115. They are left behind on the quay because of 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. DHN occupied the premises from the time when they were first acquired in 1964 until the local authority entered under their compulsory powers. So much so that. third. Second. So it cannot claim compensation for disturbance. in one or other of these three capacities. 000 to the bank. 000. First. that they had an equitable interest in the land.Counsel for DHN took three points before us: first. And DHN being the owners could also claim compensation for disturbance. It may be that. in order to overcome the technical point. They were very complicated. the bank would not have acquired any equitable interest. All they had to do was to take a very simple step. Two years later. they were entitled to compensation for disturbance. So they got the help of the Palestine British Bank. in 1966. alternatively. But that was not done. In 1963 the vendors of the factory and warehouse agreed to sell it to the group for 115. equitable interest. We were told by counsel who argued this case for the local authority that a similar contention has succeeded in other cases before the Lands Tribunal. They would only be creditors of Bronze. This depends on the conveyancing transactions by which the land was acquired. that we should lift the corporate veil and treat DHN as the owners. there is no claim for disturbance. So the legal title remained in Bronze. they had an irrevocable licence.inquiry and afterwards (right up to the time in October 1970 when the local authority gave notice to treat) the people running the three companies could have put their house in order so as to make the claim impregnable. on those facts. but DHN had the benefit of the property. when DHN repaid the purchase money to the bank. they simply stood in the shoes of the bank as creditors of Bronze. 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. If so. But when DHN repaid the 115. The President of the Lands Tribunal was asked to determine preliminary points of law. The group had not the money to pay the price. So at any time up to 30 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. which is negligible. Bronze held the legal title on a resulting trust for the bank (which provided the purchase money) and that afterwards. in the first place. on those facts. In 1964 the conveyance was made to Bronze which was a wholly owned subsidiary of the bank. by failing to do it. irrevocable licence. 000 to Bronze with which Bronze bought the property. That may be right. And that. they could have arranged for Bronze to convey the land to DHN. Being in control of all three companies. He held that DHN had no interest in the land such as to entitle them to any compensation for disturbance beyond the amount allowed by s 20 of the 1965 Act. DHN had no interest in the land. 000 provided by the bank. It was only a licensee. the group have missed the boat. the bank lent the 115. second. The local authority say that.
only licensees. Those cases show that a contractual licence (under which a person has the right to occupy premises indefinitely) gives rise to a constructive trust. These companies as a group are entitled to compensation not only for the value of the land. It is plain to me that thereafter Bronze could not determine the licence so as to ruin DHN. We all know that in many respects a group of companies are treated together for the purpose of general accounts. The result is that this case has come to appear complicated and difficult. First assuming. In the circumstances. I agree. be treated as one. 1969). I think the licence was virtually an irrevocable licence. The directors of Bronze could not turn out themselves as directors of DHN. In those circumstances. balance sheet and profit and loss account. under which the legal owner is not allowed to turn out the licensee. DHN no longer wished to continue to stay there. but I do not think so. for present purposes. to which I would add Bannister v Bannister and Siew Soon Wah alias Siew Pooi Tong v Yong Tong Hong. . GOFF LJ. in my view. I would allow the appeal accordingly. wholly inaccurate. So here. lifting the corporate veil. A striking instance is the decision of the House of Lords in Harold Holdworth & Co (Wakefield) Ltd v Caddies. Counsel for the local authority suggested that they were bare licensees. felt it necessary to decide as he did. Both companies had common directors running the companies. in their own interests. This group is virtually the same as a partnership in which all the three companies are partners. It was not necessary for them to go through a conveyancing device to get it. DHN were the parent company holding all the shares in Bronze. in view of previous cases. we must decide differently from him. So here. whereas in truth. Professor Gower in his book on company lawc says: 'there is evidence of a general tendency to ignore the separate legal entities of various companies within a group. p 216 I realise that the President of the Lands Tribunal. but also compensation for disturbance. it is simple and straightforward. But now that the matter has been fully discussed in this court. and to look instead at the economic entity of the whole group'. They would be in breach of their duties to both companies if they did so: see Scottish Co-operative Wholesale Society v Meyer (1958 (3) ALLER 66at 87. I am prepared to allow that DHN were licensees of Bronze. They are treated as one concern. It was equivalent to a contract between the two companies whereby Bronze granted an irrevocable licence toDHN to carry on their business on the premises. A further very interesting point was raised by counsel for the claimants on company law.c Principles of Modern Company Law (3rd Edn. should be treated as that one. They should not be deprived of the compensation which should justly be payable for disturbance. 1959 AC 324 at 366. 367). This irrevocable licence gave to DHN a sufficient interest in the land to qualify them for compensation for disturbance. 88. so much so that it can control every movement of the subsidiaries. and the parent company. in my view. So that DHN are entitled to claim compensation accordingly. The book-keeping adopted by the claimants was in many respects unhappy and in some. In my judgment the appeal succeeds on each of three entirely separate grounds. The three companies should. DHN were in a position to carry on their business on these premises unless and until. Now. These subsidiaries are bound hand and foot to the parent company and must do just what the parent company says. In this situation counsel for the claimants cited to us Binions v Evans. This is especially the case when a parent company owns all the shares of the subsidiaries. They should not be treated separately so as to be defeated on a technical point. Bronze was a wholly owned subsidiary of DHN. Third. DHN.
The courts of equity will not allow the landlord to turn the occupier out in breach of the contract (see Foster v Robinson) nor will they allow a purchaser to turn her out if he bought with knowledge of her right. this is too technical an argument. They show that a right to occupy for life. still. and I cite from the judgment of Lord Denning MR. it ranks as a contractual licence. and one cannot acquire a licence even though it be an irrevocable one. further. I am relying on the facts of this particular case. the directors of this company were to be the nominees of the appellant company. certainly by Binions v Evans (1972 (2) ALLER 70at 75. which are legion. therefore. He there said:'Seeing that Mrs Evans has no legal estate or interest in the land. and it must be construed in the light of the facts and realities of the situation. 1955 (1) WLR 352 at 367) where Lord Reid said:'It was argued that the subsidiary companies were separate legal entities.. On all the modern cases. from the business association between these three companies and the fact (which is uncontroverted) that DHN paid all the money that was paid. on the footing that that is not in itself sufficient. in my judgment. My Lords. 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. if not by s 5. they had no separate business operations whatsoever. this is a case in which one is entitled to look at the realities of the situation and to pierce the corporate veil. each under the control of its own board of directors. who argued this case with great skill on behalf of the local authority. the question is what right has she? At any rate. still it seems to me that one must imply. that DHN were licensees only. in my judgment. just as it does when it arises under a settlement (see Re Carne's Settled Estates and Re Boyer's Settled Estates). first from Harold Holdworth & Co (Wakefield) Ltd v Caddies (1955 (1) ALLER 725at 737. The question is: what is it in reality? To my mind it is a licence. but in this case the two subsidiaries were both wholly owned. in my judgment.contrary to the view which I hold. 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. the appellant company could . namely whether the owners of this business have been disturbed in their possession and enjoyment of it. 1972 Ch 359 at 367) in this court. relied on Horn v Sunderland Corpn and he said that compensation for disturbance is only part of the price which is being paid for the land compulsorily acquired. compensation for disturbance must be assessed on the basis that DHN had an irrevocable or indefinite licence. So. Counsel. therefore. of the Compulsory Purchase Act 1965. and that subject thereto the whole legal and equitable interest in the business premises was vested in Bronze. I find support for this view in a number of cases.. and no tenancy. 738. and not a tenancy . and. and that. but that does not matter. In my judgment. But it seems to me that that is answered. gives to the occupier an equitable interest in the land. under the agreement of 1947. from which I would make a few brief citations. that there was an agreement that that licence should not be revoked during the continuation of the business. I know that in the agreement it is described as a tenancy. This is an agreement in re mercatoria.' Secondly. in fact. It is a privilege which is personal to her. arising by contract. thirdly. r(2).. she has a contractual right to reside in the house for the remainder of her life or as long as she pleases to stay. the agreement cannot be construed as entitling them to assign any such duties to the respondent. 'What is the status of such a licence as this? There are a number of cases in the books in which a similar right has been given. the nature of the question involved is highly relevant. The appellant company owned the whole share capital of British Textile Manufacturing Co. I wish to safeguard myself by saying that so far as this ground is concerned.
a then wholly owned and inactive . 100. There was also a provision giving the bank an option to acquire an equity interest in the group. especially cogent having regard to the fact that counsel for the local authority was constrained to admit that in this case. It provided that the bank should buy the property and sell it to the group. The group was to have one year after completion of the bank's purchase in which to complete the sub-contract and were to pay interest on the balance of the purchase money. but perhaps ought to come first. is that in my judgment. Short-term finance was arranged with the Palestine British Bank (later called the Israel British Bank). 1959 AC 324 at 343): 'I do not think that my own views could be stated better than in the late Lord President Cooper's words on the first hearing of this case. in the meantime at 12 per cent.' The third ground. of which 20. in the unlikely event of there being any difficulty. 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. as I have said. 207) where he said that the cases'show that where the character of a company. It was written by DHN's accountants to the managing director of the bank and confirmed by him by endorsed written note the next day. the section warrants the court in looking at the business realities of a situation and does not confine them to a narrow legalistic view". by moving the pieces on their chess board. it was necessary to obtain outside financial assistance so that suitable new premises could be acquired. I also refer to Scottish Co-operative Wholesale Society Ltd v Meyer. and the terms of the arrangements which were made are set out in a letter dated 2 December 1963. 000. When the three original companies had amalgamated by causing DHN to be incorporated and assigning their businesses to that company. He said [1954 SC 381 at 391]: "In my view. it will be necessary for me to refer in some detail to the facts. in truth. DHN could. have put themselves in a position in which the question would have been wholly unarguable. meaning. and Viscount Simonds said (1958 (3) ALLER 66at 71. DHN. for 120. the letter said: 'It is understood that the Group will be permitted full and exclusive use and enjoyment of the said property as from the date of your own completion with the vendors. I think. It is headed in the matter of the three original companies. but I think it is clear it must be treated as embodying an agreement between the bank and DHN. 000.'The premises were bought for 115. In order to resolve this matter. but nothing turns on that as it was not exercised. which I place last because it is longest.control the internal management of their subsidiary companies. it was only necessary to go through formal procedure in order to make the decision of the appellant company's board fully effective. Finally. That was a case under s 210 of the Companies Act 1948. is a relevant feature the court will go behind the mere status of the company as a legal entity. 000 and transferred to Bronze. as it were. DHN were the equitable owners of the property.'My third citation is from the judgment of Danckwerts LJ in Merchandise Transport Ltd v British Transport Commission (1961 (3) ALLER 518.' That particular passage is. 1962 (2) QB 173 at 206. if they had thought of it soon enough. or the nature of the persons who control it. and. 000 was to be paid on exchange of contracts between the bank and the group.
They have suggested that since Bronze Investments Ltd. Pursuant to the original agreement. It is clear from that mortgage. bought the property in January 1964 for the sum of 115. 000. namely 115. On the same day 8 February 1966. is selling for 5. but no matter.subsidiary of the bank. 000. 000 from Credit for Industry Ltd. described as 'being the amount loaned to the Company [that is Bronze] by the Vendor'. 000. Bronze were duly registered at Her Majesty's Land Registry on 12 March 1964 as proprietors of the freehold interest. not for 5. 000. are agreeable in principle. 000 more than it paid. but for 3. 000 deposit now held by Israel British Bank Ltd. They state that Bronze Investments Ltd. and DHN duly paid 20. should buy the issued share capital of Bronze Investments Ltd. and is . D. H. and. 000. the latter should buy the shares in Bronze from the bank. the date for completion of the resale contract was postponed to 6 January 1966 and interest was reduced from 12 per cent to 10 per cent. It is now intended that. which flourished extremely well. That letter reads as follows: 'Bronze Investments Ltd. all in accordance with the letter of 2 December. as you know obtaining a mortgage advance of 100. in cl 6 of the agreement. How this particular figure was arrived at.'Then on 8 February 1966 there was a further agreement between the bank and DHN under which. 000 as a deposit to the bank as stakeholders. H. 000 and are. the bank agreed to sell the shares in Bronze to DHN. would then be applied entirely towards discharging the remaining part of the monies due from Bronze Investments Ltd. DHN borrowed the 100. and the shareholders of Bronze Investments Ltd. and DHN were at once let into possession and began to carry on their new business. it would have no further claim against the company or the purchaser on any account whatsoever. first. 402 15s to the bank. 000. 597 5s. On 27 May 1964 they entered into a contract (which I will call the resale contract) whereby they agreed to sell to DHN for 120. It seems that DHN needed more time to arrange permanent finance. It is suggested. DHN undertook that on completion Bronze would pay 116. 402 15s was. 5. being in fact one year after the transfer to Bronze. and DHN and Bronze concurred to mortgage the freehold to secure repayment. the resale contract provided for completion on 6 January 1965. N. of 120. I do not know. therefore. therefore. By December 1965 DHN had managed to borrow 100. have paid a deposit of 20. should be 5. The bank warranted and declared that on receipt of the sum. it was decided that in order to save a second lot of stamp duty on the conveyance by Bronze to DHN.. The Mortgage advance coming from Credit for Industry Ltd. So far. D. 597 5s. but at this stage. H. 000 from Credit for Industry Ltd. in order to obviate stamp duties so far as possible. the consideration for the shares of Bronze Investments Ltd. 000 should be applied towards the purchase of the shares of Bronze Investments Ltd. for the amount of the purchase money. is indebted to Israel British Bank Ltd. The sum of 116. possibly taking up a suggestion which the bank itself had made on 6 December 1963. Those proposals were set out in a letter dated 17 December 1965 from DHN's solicitors to DHN's accountants. N. in consideration of a further payment of 1. with the 3. 000 from Credit for Industry Ltd. Secondly. N. and the balance towards discharging the indebtedness of that company to Israel British Bank Ltd. 000. 150 which DHN made to Bronze. that of the 20. that is the bank. A caution to protect the resale contract was duly entered on the register. 'D. by a further agreement of 14 December 1964 made between Bronze and DHN. making a total. entered into a contract to buy the property from Bronze Investments Ltd for 120.
If so. evidence of what the relevant transaction was. and he says: 'There we have the bank and DHN solemnly declaring and agreeing that what happened was that the bank lent the money to Bronze to enable it to purchase for its own benefit. which I have read. I would have thought the clear inference was that when the property was purchased. 402 15s. because that was the original agreement. I do not think it would be a correct inference that Bronze borrowed the money from the bank and bought the property for its own use and benefit. and this court accepting. In my judgment. but it is not. of course. namely that DHN should form a new company and mortgage the shares to the bank. Pausing there. Much more seriously. on counsel for the local authority's hypothesis. less credit for the 20.the fact. That was never implemented in any shape or form. not Bronze. As in all the circumstances DHN would have constructive notice of the trust. already held by the bank. Counsel for the local authority takes his stand on that agreement of 8 February 1966. 400 odd. because it did not provide what was to happen to the 20. Bronze could not have entered into the resale contract because the bank would have been a necessary party. the bank would no doubt have been a necessary party to the conveyance had the contract not been rescinded. it borrowed 115. which is the fons et origo of the whole matter. that the relationship between the bank and Bronze was simply that of creditor and debtor. clearly Bronze. and when DHN paid off the Bronze liability of 116. That sum. 000 and no more. If this was an action on that agreement. In that letter the bank itself proposed an entirely different arrangement. Then it was argued. plainly as nominee. but the bank there referred to 'our . Even if the bank had . it caused the property to be conveyed to a nominee. save only that. became repayable to DHN when the contract was rescinded. not 116. and that was the sum which fell to be repaid. there might well be an estoppel. that DHN. if that were so. the most cogent. if it be satisfied. there was clearly a resulting trust situation and Bronze held in trust for the bank. that contract was wrong in substance. and that clearly provided that the bank were going to be the purchasers. nominee company'. but the contract should have dealt with this. which gave it no rights-but that did not matter because it also bought all the shares-or was a payment which subrogated DHN to the bank's rights against Bronze as a creditor'.Then the letter four days later is not without interest. He says it is the only. that was either a voluntary payment. or at any rate. There was nothing to prevent Bronze entering into that contract with the approval of its beneficiary. 000 which was held by the bank as stakeholders. and was no doubt used towards paying the total of 120. and it was utilised to pay the bank for the shares and the 116. and suggested that the security should be taken in its name. or even the most cogent. but I do not agree. which it clearly had. and I do not see anything to prevent DHN asserting. that agreement and letter are not the only. 400 odd.. That stamps the character of Bronze. but that is purely a conveyancing matter. 000. Then came the admittedly important letter of 17 December 1965 and the contract of 8 February 1966. as it had the right to do.. however. since we have the letter of 2 December 1963. evidence of the original transaction. the bank was carrying out the original agreement of 2-3 December. but it is to be observed that the contract is in any event inaccurate. borrowed this money. If Bronze had borrowed the money to buy the property. that the agreement of 8 February 1966 and the letter of 17 December 1965 both misstated the position. 000.
just as if they had been purchasers under an uncompleted contract to purchase the property itself. 597 5s would have fallen to be deduced from 115. it would not merge because the price had been paid by DHN. The bank was thus to be the first purchaser from the then owners. for those reasons. On my hypothesis. it was to transfer the shares and release its equitable interest. the 3. therefore.chosen for some reason or other to give credit against the loan for the purchase price of the shares. 000. Then DHN would be entitled to call for a proper written assignment. So the purchase money for the payment of the original vendors had to come from the bank. and later the Israel British Bank. as I think. . the claimants are right in saying that in truth Bronze held the premises in trust for DHN. 000 to acquire the whole of the bank's interest in the property. and the bank intended to dispose of it. The date of completion on the resale was to be a year after the date when the bank itself completed. such as is required under s 53 of the Law of Property Act 1925.It is clear that what the parties were seeking to do was to give effect to the original agreement in a substituted from. but this was not a gift. True there was no writing. though its principal object was stated to be property investment. no doubt that is what would have been done. who duly paid it. The original plan was that the bank should buy the land concerned and then sell it to the group (as the consortium represented by DHN Food Distributors Ltd describe themselves in a letter dated 2 December 1963 which initiated the proposals for the acquisition of the land). they paid the 120. as I do. Only the subscribers' shares (two of 2s each) had been issued and the company had not carried on any business. therefore. It went wrong at this stage. The introduction of Bronze to the scene was. it seems to me to follow. the bank took a conveyance to a shell company called Bronze Investments Ltd ('Bronze'). it borrowed 115. of course. I agree with both judgments and I add a few observations because it seems to me that the facts of this matter are of an exceptional and unusual character. The bank was to have the 120. The way in which the contract of 8 February 1966 was drawn was. Why then did DHN pay 120. Even if not conceded. not 120. and but for the mistake. 000. When DHN were minded in 1963 to acquire the land in question. it would have been easy to say so. but if Bronze borrowed the money. because the solicitors and accountants in the letter of 17 December 1965 failed to appreciate the true position. an initial relationship between Bronze and the bank of trustee and cestui que trust. No doubt in order to keep this transaction separate from their ordinary banking business. Of course it would. and that would be enough. which was their wholly owned subsidiary. which it would have got under the resale contract.In my judgment. so far as DHN were concerned. both fortuitous and superfluous. they sought the assistance of an institution then called the Palestine British Bank. DHN were purchasers. SHAW LJ. Even if cl 6 of the agreement of 8 February 1966 operated as a release to Bronze of the bank's equitable interest. Counsel for the local authority argued that if DHN had intended to get in an outstanding equitable interest. In my judgment. the appeal succeeds on each of these three grounds. but the substance of the transaction was entirely consistent with it. inconsistent with any original resulting trust in favour of the bank. 000? I understand counsel for the local authority conceded that if one could go behind the letter of 17 December 1965 and the agreement of 8 February 1966 and if one found. 000. for the assignment of an equitable interest in land. instead of conveying the property. 000. not debtor and creditor. in return for which. the result would be that DHN acquired the bank's equitable interest. and Bronze would hold it on a resulting trust for DHN.
before the onset of variations and complications. of advantage to DHN or anyone else in this elaboration of what was meant to be a simple purchase of the referenced properties for the purposes of the group's business.In May 1964 Bronze entered into a contract to sell the properties to DHN. There was little. The advance was to enable DHN to pay the bank. This was the method adopted for whatever reason of describing the result of the bank having paid the initial purchase price and taken the conveyance in the name of their then subsidiary. According to cl 6 of the agreement. Their new and more complicated procedure was proposed and documented in a letter dated 17 December 1965 and an agreement made on 8 February 1966. It had no business. 'being the amount loaned' to that company by the vendor. it can hardly be in question that while the legal title was vested in Bronze. of course. DHN procured a loan of 110. DHN undertook that it would. Goff LJ has already pointed out the inaccuracy inherent in that introductory passage. for the objective was still that DHN should become the owners. save insofar as ignorance may throw light on the later conduct of those concerned.Even if this were not right. The role of Bronze was throughout entirely negative. to make their claim for compensation for disturbance both competent and proper. that equitable interest settled on them. procure that Bronze should pay to the vendor the sum of 116. DHN were to buy from the bank their entire shareholding in that company. secured by a mortgage on the referenced properties. and their knowledge or ignorance of its existence is irrelevant and immaterial. When DHN in their turn paid the bank. but a supplemental agreement postponed completion for a year. As such a trust arises by operation of law. Thus they were entitled to call for the execution in due form of an assignment of that equitable interest by the bank. no capital and no function. In the light of the history. there is the further argument advanced on behalf of the claimants that there was so complete an identity of the different companies comprised in the so-called group that they ought to be regarded for this purpose as a single entity. it was manifest that the moneys they were to be procured to pay must have their source in DHN. 000. DHN would have a sufficient interest in the land. On this basis. 000 from a company called Credit for Industry Ltd. The directors of DHN were the same as the directors of Bronze. In the interval. The outcome of it was that DHN became the owners of all the shares in Bronze while that wholly redundant legal persona retained the bare legal title to the land. The completeness of that identity manifested itself in various ways.In this situation. As Bronze had no funds and had never had any. who nonetheless had no direct overt title to the properties concerned. The value of the shares was adjusted so as to account for the 20. It seems to me that the true position was that the resulting trust in favour of the bank which came into existence in 1963 still hovered about the parties in 1966. But in February 1966 a change of method was proposed and adopted. What was in the minds of DHN's professional advisers in adopting this tortuous mode of proceeding it is difficult to fathom. the shareholders of Bronze were the same as . as was properly conceded by counsel for the local authority. They had established themselves in the property and used the warehouse premises comprised in it for their business. that language was not only inapt but inept. there was a resulting trust of the beneficial interest in favour of the bank. Instead of taking a conveyance from Bronze. on completion of the purchase of the shares. The date for completion was 6 January 1965. its existence is independent of the intention of the parties. 000 which had been paid as a deposit under the contract of sale made in May 1964. The moneys to be paid were expressed to be 'the amount loaned to Bronze by the bank'. a necessary party as the titular owner. if anything. To that mortgage Bronze was.
for DHN undertook the obligation to procure their subsidiary company to make the payment which the bank required to be made. Accordingly. As Bronze did not trade and carried on no business. They could not have been criticised still less prevented if they had chosen to do so. Counsel for the local authority again conceded that if they had gone through that formal operation the day before the notice to treat was served on 12 October 1970 they would have had a secure claim for compensation for disturbance. of a very special character.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. DHN. and they had a common interest in maintaining on the property concerned the business of the group. Solicitors: Asher Fishman & Co (for the claimants). If it was a licence at will. it had no actual or potential creditors other than its own parent. be observed. it could have gone on for an indeterminate time. Thus no abuse is precluded by disregarding the bonds which bundled DHN and Bronze together in a close and. The directors of that company could at any time they chose have procured the transfer of the legal title from Bronze to itself. Bronze would have had the land but no business to disturb. If anything were necessary to reinforce the complete identity of commercial interest and personality. to which I have referred already. DHN. Yet if the decision of the Lands Tribunal be right. which are.in DHN. nobody at all could have claimed compensation in a case which plainly calls for it. that the licence subsisted. they could in law have sought and obtained whatever advantages were derived up to that date from a separation of title and interest between the two companies and still quite legitimately have redisposed matters right up till October 1970 so as to qualify for compensation. DHN would have have had the business but no interest in the land. for it ignored the realities of the respective roles which the companies filled. that is to say. so far as Bronze was concerned. If each member of the group is regarded as a company in isolation. London Borough of Tower Hamlets. demonstrates it. the parent company. as I have said. indissoluble relationship. it was at the will of the licensee. which means for practical purposes for as long as DHN wished to remain in the property for the purposes of its business. Appeal allowed. so long as the relationship of parent and subsidiary continued. The President of the Lands Tribunal took a strict legalistic view of the respective positions of the companies concerned. I would allow the appeal. cl 6. It appears to me that it was too strict in its application to the facts of this case. Solicitor. Life Insurance Corporation and Another 2007 Indlaw DEL 2007 . LIST OF CASE(S) REFERRING THIS JUDGMENT Iyer and Son Private Limited vs. the common factors in their identities must at the lowest demonstrate that the occupation of DHN would and could never be determined without the consent of DHN itself. In this utter identity and community of interest between DHN and Bronze there was no flaw at all. even on the special facts of this case. Accordingly. it made all the difference that they had not.
G. ex parte the trustee of the bankrupt vs.In Re: Magnaquest Solutions Private Limited vs. Union of India 1976 (1) WLR 852 . 2007 Indlaw AP 696 Her Majesty's Commissioners of Inland Revenue vs. Distribution Transformers Limited 1990 Indlaw MAD 271 State of Uttar Pradesh and Others vs. Sharpe and another 1979 Indlaw CHD 6 Vodafone International Holdings B. Hockenrode 6 vs. Chet Ram Vashist (Dead) By Lrs vs.C. United Dominions Trust Limited (Saunders Abbott (1980) Limited. Arnold and another 1988 Indlaw CA 97 R and B Customs Brokers Company Limited vs. Union of India 1994 Indlaw SC 2005 Pt. Municipal Corporation of Delhi 1994 Indlaw SC 1147 New Horizons Limited and Another vs. Kirklees Metropolitan Council 1982 Indlaw CA 32 Amalgamated Investment and Property Company Limited (in liquidazion) vs. State of Assam and others 1976 (3) AllER 462 New Horizons Limited and Another vs. Pallava Hotels Corporation Limited and Others 1998 Indlaw MAD 5 Yukong Line Limited of Korea vs. Pirelli Cable Holding Nv and Others 2006 Indlaw HL 4 Base International Holdings N. Texas Commerce International Bank Limited 1981 Indlaw CA 30 Re Sharpe (a bankrupt). Union of India and Others 1993 Indlaw DEL 115 Hackbridge-Hewittic and Easun Limited vs. Cape Industries plc and another 1988 Indlaw CHD 12 Ashburn Anstalt vs.E. Total Oil Gb Limited 1984 Indlaw CA 47 Pennine Raceway Limited vs. V. V vs. Renusagar Power Company and Others 1988 Indlaw SC 534 Adams and others vs. Skipper Construction Company Private Limited and Another 1996 Indlaw SC 3923 New Horizons Limited vs. Rendsburg Investments Corp of Liberia and others (No 1997 Indlaw QBD 35 Delhi Development Authority. vs. Union of India and Others 1976 (1) WLR 852 New Horizons Limited vs. Union of India 1976 (3) AllER 462 Shree Pacetronix Limited and another vs. third party) 1987 Indlaw CA 83 Alec Lobb (Garages) Limited and others vs.
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