Perhaps surprisingly, until very recently it was unprecedented that a case raised the duty of Companies House to take reasonable care to record information correctly when making entries on the Register of Companies (the Register).
However, in Sebry -v- Companies House and the Registrar of Companies, the High Court has found Companies House to be liable at common law for a company’s descent into insolvency after it made a typographical error resulting in erroneously marking a company as in liquidation on the Register.
On 28 January 2009, a winding up order under the Insolvency Act 1986 was made against Taylor and Son Limited. The order itself did not, nor did the relevant forms received by Companies House, contain the company’s registration number.
Regrettably, Companies House fell at the first hurdle by failing to adhere to internal procedure which should have led to the order being rejected by reason of the absent company number. More regrettable still, upon registration of the order, the addition of the letter ‘s’ at the end of the word ‘Son’ meant that Companies House registered the order against the similarly named, yet entirely different company, Taylor and Sons Limited (the Company).
In the three days that it took for Companies House to rectify the transposition error, rumours of the company’s solvency were widely circulated and creditors and suppliers began to act on the information, eventually resulting in the long standing engineering firm being forced into administration in April 2009.
The High Court rejected the argument that Companies House owes a statutory duty to the public at large as to accuracy in maintenance of the Register. However, the court found that Companies House had breached a duty of care which it owes to each company on the Register to take reasonable care when making entries. The claimant proved that the failings of Companies House to record accurately the information provided to it was the direct cause of the company’s collapse into liquidation. As a result, Companies House had breached this duty of care and was found to be liable in negligence to Mr Sebry, being the company’s managing director, and the person to whom the right of action had been assigned by the administrators.
Although novel, the duty imposed is notably narrow. There is no burden placed on Companies House to verify information provided to it by third parties and it is not considered to hold responsibility for ensuring the information supplied to it is accurate – only that what is given to it for placing on the Register is done so accurately.
Although damages are yet to be asserted, it is understood that the claim has been valued at around £9 million.
It is unusual to see Companies House held liable in negligence for an administrative error, namely because statistically the number of clerical errors made by the body is extremely low and presumably those made do not amount to such dire consequences as befell Taylor and Sons Limited.
Above all, the case serves as a harsh reminder of the importance of the use of a company’s unique registration number, along with its name. The registration number of a company should always be used in identifying companies and most certainly so in important legal correspondence and any correspondence with Companies House.
A lesson learned the hard way, but certainly an interesting application of common law negligence to a public body.
See Philip Davison Sebry -V- (1) Companies House (2) Registrar of Companies  EWHC 115 (QB).