Aneesh Limited v Peter Mark Hinchliffe & Ors

For compensation based on diminution in the value of a freeholder’s interest in other property, the statutory reference to an interest means a legal or equitable proprietary interest. Common ownership or control of separate companies does not itself create such an interest.

The corporate veil may be pierced only within the narrow scope established by the relevant authority. DHN Food Distrbutors Limited v Tower Hamlets London Borough Council was confined to its facts, including the parent company’s lawful occupation of land owned by its subsidiary and the close operational relationship between the companies. Where those features are absent, a claim based on treating separate companies as one economic entity cannot succeed.

The appellant was the freeholder of flats 3 to 6 in a building. The respondents sought collective enfranchisement under the Leasehold Reform, Housing and Urban Development Act 1993. The only dispute concerned compensation for development value arising from the potential development of the flat roof.

The freehold of flats 1 and 2 was owned by Haveli Limited. The appellant and Haveli Limited were owned and controlled by the same individuals, but remained separate companies. The FTT rejected the appellant’s claim that Haveli’s property should be treated as the appellant’s property for paragraph 5 of Schedule 6. The appeal concerned whether that conclusion was wrong, including whether the corporate veil could be pierced by analogy with DHN Food Distrbutors Limited v Tower Hamlets London Borough Council.

1. The appeal was dismissed. The FTT’s assessment of the consideration payable on collective enfranchisement remained undisturbed.

2. Paragraph 5(2)(a) of Schedule 6 to the Leasehold Reform, Housing and Urban Development Act 1993 protects the freeholder against diminution in the value of an interest in other property. The expression refers to property owned by the freeholder or property in which it has a proprietary interest, whether legal or equitable. Common ownership or control of the companies owning the relevant properties does not itself satisfy the provision.

3. The appellant’s alternative argument depended on piercing the corporate veil so that the property owned by Haveli Limited could be regarded as the appellant’s property. DHN Food Distrbutors Limited v Tower Hamlets London Borough Council had not been overruled and remained binding on the Tribunal for what it decided.

4. The Tribunal explained, adopting the analysis in Bishopsgate Parking (No 2) Limited v Welsh Ministers, that the material ratio of DHN Food Distrbutors Limited v Tower Hamlets London Borough Council depended on the parent company’s lawful occupation of land acquired from its subsidiary for the purposes of the group’s business.

5. The present case was materially different. The appellant had no right to occupy Haveli’s property, let alone an irrevocable licence. Haveli had not acquired the property for the appellant’s benefit, the appellant had not funded its purchase, and the companies’ property and operations had deliberately been separated. They were not simply two halves of one business.

6. The Tribunal expressed no general view on circumstances not present in the case. It noted that, if the material differences had been absent, the language of the remainder of the Act, section 5(6), the cautious approach in Prest v Petrodel Resources Limited, and the fairness argument might have required consideration. Those matters did not arise.

• First-tier Tribunal (Property Chamber): rejected the appellant’s argument that property owned by Haveli Limited should be treated as property of the appellant for the purpose of calculating development value.
• Upper Tribunal (Lands Chamber): dismissed the appeal and left the FTT’s assessment of consideration undisturbed.