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What’s in a name? Companies House found liable in £8.8m negligence spelling mistake case

Companies House has today (26 January) lost a major argument at the High Court after a Cardiff businessman argued a blunder over a single letter on a document caused his 124-year old business Taylor and Sons’ to go into administration.

Heard during November last year, businessman Phil Davison-Sebry filed a claim for negligence and breach of statutory duty against Companies House, which acts as the UK’s registrar of companies and is an executive agency and trading fund of the government.

Representing the claimant was 7 KBW‘s Clive Freedman QC and Selborne Chambers’ Neil Mendoza who were instructed by Clyde & Co partner Neil Jamieson, while One Crown Office Row duo Paul Rees QC and Neil Sheldon were instructed by the Treasury Solicitor for Companies House.

According to the claimant, the company had traded successfully for many years including supplying military equipment during both World Wars. It was a well-respected and substantial business which retained its family connection to the Taylor family until just a few weeks before the administration. However, in February 2009, the agency recorded the business as being wound up, when it was in fact another company, Taylor & Son Ltd, as a result of a spelling mistake with the letter ‘S’. It was claimed the mistake led to the firm – which employed 250 people – going into administration.

Justice Edis held that the consequence of this publication was to affect the willingness of Taylor and Sons’ customers and suppliers to continue to do business with it. In a trial of preliminary issues, Justice Edis, concluded that that there was no reason other than the mistaken entry for the company going into administration.

The case assessed whether there was a duty of care in negligence owed by the registrar to a trading company to ‘exercise reasonable skill and care not to enter falsely in the register that it had gone into liquidation’.

Justice Edis said that ‘….balancing the harm actually done to the company in this case against the potential adverse impact upon Companies House it is clear that the balance favours the loss falling on Companies House rather than the company.’

‘To say that it was also owed to every other company on the Register is only to say that a hospital owes a duty to each patient which it treats, and may come to owe duties to many thousands of people in the course of a year. That is of course true, but not a reason for denying that the hospital ever owes any duty.’

He added: ‘Given that the system of registration is compulsory… it does not seem unjust to impose liability on those who benefit from the system (the public) for harm done by its faulty operation’.