Woolfson v Strathclyde Regional Council

A company’s separate legal personality must normally receive full effect. The corporate veil may be pierced only where special circumstances indicate that the company is a mere façade concealing the true facts.

Common ownership or control does not, without more, permit associated persons and companies to be treated as a single economic entity. Compensation for disturbance presupposes loss suffered by the owner of the relevant interest. A shareholder’s loss arising from injury to the company’s business is indirect and cannot be treated as loss suffered in the shareholder’s capacity as landowner.

Premises compulsorily acquired by Glasgow Corporation were owned partly by Mr Woolfson and partly by Solfred Holdings Ltd. They were occupied by M. & L. Campbell (Glasgow) Ltd, which conducted its own clothing business there. Mr Woolfson had substantial shareholdings in both companies, but neither company was wholly owned by him.

The Lands Tribunal for Scotland held that the appellants could not claim compensation for disturbance under section 12 (6) of the Land Compensation (Scotland) Act 1963. The Second Division of the Court of Session affirmed that decision after refusing to join Campbell and Mrs Woolfson as additional claimants.

The appeal concerned whether the separate personalities of the individuals and companies could be disregarded, or whether the land possessed a special value to Mr Woolfson reflecting losses caused to Campbell’s business.

1. Appeal dismissed unanimously. Lord Keith of Kinkel delivered the leading speech. Lord Wilberforce, Lord Fraser of Tullybelton and Lord Russell of Killowen agreed with his reasons and conclusion.

2. Per Lord Keith, the separate legal status of a limited company and its incorporators must normally receive full effect, consistently with Salomon v Salomon & Co Ltd [1897] AC 22. Departure from that principle is appropriate only where special circumstances indicate that the company is a mere façade concealing the true facts. The facts provided no basis for treating Campbell, Solfred and Mr Woolfson as a single entity. Campbell owned and operated the business but had no control over the owners of the land. Mr Woolfson owned only two-thirds of Solfred, while Solfred had no interest in Campbell.

3. Per Lord Keith, the first ground in D.H.N. Food Distributors Ltd v Tower Hamlets London Borough Council [1976] 1 WLR 852 gave rise to doubt because it permitted the veil to be pierced by treating a corporate group as a single economic entity. In any event, that decision was clearly distinguishable. The landowner in that case was a wholly owned and inactive subsidiary of the business company, which exercised complete control and was the only person interested in the subsidiary’s assets. Those features were absent here.

4. Compensation for disturbance presupposes that the owner of the relevant interest has suffered disturbance. Campbell occupied the land and owned the business, so any direct business loss fell upon Campbell. Any loss to Mr Woolfson arose through his position as Campbell’s principal shareholder, not through his ownership of land. Such loss was indirect and no different in kind from the interests of another shareholder or Campbell’s creditors.

5. The proposed claim based on the land’s alleged special value to Mr Woolfson therefore lacked authority and principle. The appellants had no right to recover the claimed compensation for disturbance under section 12 (6) of the Land Compensation (Scotland) Act 1963.

1. House of Lords: The appeal was dismissed unanimously, affirming the Second Division’s interlocutor.

2. Second Division of the Court of Session: On 3 December 1976, Lord Justice-Clerk Wheatley, Lord Johnson and Lord Leechman affirmed the Lands Tribunal’s decision.

3. Lands Tribunal for Scotland: Following a preliminary proof, the Tribunal ordered on 13 May 1975 that the appellants had no right to compensation for disturbance under section 12 (6) of the Land Compensation (Scotland) Act 1963.