Claiming For Group Losses

The Scottish equivalent of the Court of Appeal has recently confirmed that a parent company, which has made a contract with a third party, is not able to claim for losses suffered by its subsidiaries if the third party breaches the contract.  The decision itself is not surprising, being based on the principle, well established both in England and Scotland, that a parent company and its subsidiary have separate legal personalities.  However, the case highlights the pitfalls that can arise in the contractual arrangements of groups of companies.  The case is The Harbro Group Ltd v MHA Auchlochan.

Harbro Group Ltd bought some land.  Under the purchase contract, the sellers agreed to construct an access road to the land, but there was delay in completing the road and Harbro claimed they were in breach of contract.