Smith Stone And Stone V Birmingham Corporation Case Study
Sometimes in the case of a group of companies, courts may pierce the veil to treat the companies in the group as one legal entity when it is equitable to do so. This is illustrated in two following cases.
In Smith, Stone and Knight Ltd. v. Birmingham Corporation, the premises, which was occupied by Birmingham Waste Co. Ltd., a wholly-owned subsidiary of Smith, Stone and Knight Ltd., was compulsorily acquired by Birmingham Corporation, a local government authority. In order to claim for compensation for loss of business, Smith, Stone and Knight Ltd. established that Birmingham Waste Co. Ltd. was its agent in undertaking business on the premises. The King's Bench Division held that Smith, Stone and Knight Ltd. was entitled to compensation given that two companies, i.e. Smith, Stone and Knight Ltd. and Birmingham Waste Co. Ltd., were one and the same entity.
In DHN Food Distribution Ltd. v. London Borough of Tower Hamlets (“DHN”), DHN Food Distribution Ltd. ran a wholesale grocery business. Its premises were owned by one of its subsidiary, Bronze, which had no actual business. The only assets of Bronze were the premises, of which DHN Food Distribution Ltd. was the licensee. In 1970, the premises were compulsorily acquired by Tower Hamlets London Borough Council, resulting in DHN Food Distribution Ltd. closing down its business. Compensation was only paid to Bronze. It was considered that DHN Food Distribution Ltd. could only be entitled