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Insolvency Law

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Guildhall Chambers , 03 MAR 2015

Sebry v (1) Companies House (2) Registrar of Companies [2015] EWHC 115 (QB)

Sebry v (1) Companies House (2) Registrar of Companies [2015] EWHC 115 (QB)
(Queen’s Bench Division, Edis J, 26 January 2015)

The Registrar of Companies had a common law duty of care, when entering a winding-up order on the companies register, to take reasonable care to ensure that the order was not registered against the wrong company.

The court was required to determine preliminary issues in a claim for negligence and breach of statutory duty against the defendant Registrar of Companies. The claimant was the former managing director of a company called Taylor and Sons Limited. The company was a steel fabricator. It was a well-respected and substantial business. In 2009 a winding-up order was made against an unrelated company, Taylor and Son Limited, and sent to the registrar. The order did not contain a company number. The registrar inadvertently amended the registration details of the claimant’s company, as its name was very similar, showing it to be in liquidation. The company’s accountant noticed the mistake and contacted the registrar, who rectified public online records later the same day but was unable to correct subscription services for several weeks. The company’s suppliers and creditors, including the company’s bank, became aware of the false entry on the register and suspended the company’s credit. The company subsequently went into administration.

The court was required to determine whether:

1. the registrar owed the company a duty of care under the Companies Act 2006 to exercise reasonable care and skill so as to ensure that incorrect information was not entered on to the register;
2. the registrar owed the company a duty of care under common law;
3. the registrar’s breach of duty had caused the company to enter administration.

The preliminary issues were determined in favour of claimant.

1. The court was not satisfied that there was a cause of action for damages for breach of statutory duty against the registrar in relation to his functions under the 2006 Act. The Act regulated the keeping of the register and imposed duties on the registrar for that purpose. The register published information which was available to the whole world, because it was available on the internet. The common law of negligence had control mechanisms designed to restrict the class of person who could claim damages for economic loss. However, the imposition of a statutory duty giving rise to a claim for damages at the suit of anyone who suffered economic loss by reason of any act or omission in breach of the statutory duty would create a very wide duty indeed. There was nothing in the Act to justify a finding that that was the intention of Parliament (para 106).
2. If a person did an act which was capable of causing harm to a particular person if done carelessly, he would have assumed responsibility to that person in respect of that task (following White v Jones [1995] 2 A.C. 207). In determining whether an assumption of responsibility and duty of care existed, the court took the following factors into account:


(a) unless a remedy was provided by the common law of negligence, a company damaged by carelessness in these circumstances would have no remedy;
(b) it was not difficult for the registrar’s staff to avoid errors of the instant type;
(c) there were no public policy reasons for denying a duty of care;
(d) the statutory duty or contractual relationship between the company and the registrar did not limit the nature and extent of the responsibility;
(e) balancing the harm done to the company against the potential adverse impact on the registrar, it was clear that the balance favoured the loss falling on the registrar rather than the company;
(f) it was likely that the imposition of a duty would improve the accuracy of the register, which was plainly in the public interest. It was fair, just and reasonable to impose a duty of care upon the registrar.

A special relationship between the registrar and the company arose because it was foreseeable that if a company was wrongly said to be in liquidation, it would suffer serious harm. The nature of the exercise also supported the existence of such a relationship. The company was not consulted before an entry was made and had no opportunity to protest that the entry, if made, would be a mistake. Foreseeability and proximity had therefore been established, (following Caparo Industries Plc v Dickman [1990] 2 A.C. 605). Accordingly, the registrar owed a duty of care when entering a winding-up order on the register to take reasonable care to ensure that the order was not registered against the wrong company. The duty was owed to any company which was not in liquidation but which was wrongly recorded on the register as having been wound up by order of the court. The duty extended to take reasonable care to enter the order on the record of the company named in the order, and not any other company. It did not extend to checking information supplied by third parties, but only to entering that information accurately on the register (paras 108-118).
3. The registrar’s error had been a disaster for the company. The rumour of insolvency spread and the suppliers’ immediate reaction was to refuse further credit to the company. Prior to the error, the suppliers had been trading on ordinary 30-day credit terms, and actually affording longer periods of credit than that. The company’s main customer terminated the company’s contract because of its concerns about the company’s future, which were fuelled by rumours resulting from the error. The bank refused to lend further money to the company. The claimant had proved that the reason the company went into administration was the error made by the registrar (paras 37, 39, 47-48).
3. The registrar’s error had been a disaster for the company. The rumour of insolvency spread and the suppliers’ immediate reaction was to refuse further credit to the company. Prior to the error, the suppliers had been trading on ordinary 30-day credit terms, and actually affording longer periods of credit than that. The company’s main customer terminated the company’s contract because of its concerns about the company’s future, which were fuelled by rumours resulting from the error. The bank refused to lend further money to the company. The claimant had proved that the reason the company went into administration was the error made by the registrar (paras 37, 39, 47-48).
Guildhall Chambers
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