Companies House “Typo” Costs Millions.

The most shocking case – to me –  which has been in the Civil Court news in the last month is that of Sebry -v- Companies House [the Registrar of Companies].

It is a graphic illustration of the fact that all of us who own or work for Limited Companies are at the mercy of Companies House.

I have noticed personally over the last ten years or so a definite decline in the reliability of the information which Companies House has provided to me about my clients and I have seen evidence of mistakes recently which I had never seen in previous decades.

The particular case relates to two Companies called “Taylor & Son Limited” [from Manchester area incorporated 2004] and “Taylor & Sons Limited” [established in 1890 and incorporated in 1900 practicing in Cardiff].

The Manchester Company was ordered into liquidation by the Chancery Court in January 2009.

The Court Order was notified to Companies House by Insolvency Practitioners who [lazily] did not quote the unique Number of that Company.

Then Companies House, through a combination of carelessness and failure to comply with its own procedures, responded by placing information on the Companies House Registers to the effect that the other Company Taylor & Sons Limited, had been placed into insolvency.

This is despite the fact that the first Company was adjacent to the second Company in an alphabetical list of Companies – which one would have thought would make it obvious to the Civil Servant concerned [Philip Davies] that there was risk of confusion, thereby imposing a high duty of carefulness in checking which Company was actually the subject of the order – compounded by the fact that the in-house printed job “User Manual” for Mr Davies stated that he should reject any such applications for registration which did not give the Company number. Problem – No-one bothered to use the manual!

A Company can never change its number – and it could theoretically change its name daily. If the application for registration had shown the number of the insolvent Company which was 05044596 there was really no likelihood that Mr Davies would have entered an Order against the Cardiff Company whose number is 00067032. The number was not quoted, Mr Davies failed to reject the application for lack of the number as his standing guidance required him to do and due to carelessness made the mistake.

As a reading of the Court judgment published this year shows, the mistake was actually later compounded because when the Cardiff Company was notified what had happened it made representations to Companies House on the date the Registration was made which resulted in an assurance that matters would be sorted out immediately.

In fact the incorrect Registration was not removed until 23rd February 2009 three days after being first registered.

In the world as it is now, within those three days the false information was not only available to everyone in the world with internet connection but was also actively pushed out into the world by the Companies House – for money.

Three bulk products, the Daily Directory Update, the Daily Liquidation Update and the Times Critical Daily Update buy this stuff. They are subscription services supplying Experian, Dunn & Bradstreet, Equifax, Jordans and many others.

The task with which Companies House was faced when it realised its mistake was equivalent to contacting personally every person with a computer using these services. In essence an impossible job – the false information had flown around the world.

Shortly after Companies House had told everyone that Taylor & Sons Limited was insolvent  it lost its ongoing contact with the steel giant Corus [now Tata] and lost three major new engineering projects which had been expected.

It is almost as if Companies House was employing fortune tellers – in February 2009 they had registered information to show that Taylor & Sons Limited was insolvent – by April 2009 the Company went into administration!

It had lost its most valuable customers – who had been given the false news – and then its Bank had withdrawn credit facilities.

The Company therefore had to close and to dismiss its workforce – a workforce of around 250 people lost their jobs because of the carelessness of a Civil Servant and they lost their jobs at the height of a recession.

The judgment of Mr Justice Edis can be read on this link

I commend it, [if it is not impertinent of me as a mere Notary Public to do so] as a model of clarity. Indeed I wonder whether I cannot detect in the very detached style and reasoned wording of the extremely thorough judgment [which paragraph by paragraph clangs shut one by one any windows of hope for the Companies House case] a tang of outrage, contempt and distain for the position and arguments of Companies House in this case. No doubt I am reading it through the filter of my own views.

The Judge was meticulous in slamming shut the door in respect of the argument of Companies House who raised issues for the Court to decide:-
First whether they have a duty of care to Mr Sebry’s Company at all,
Second whether their carelessness had actually breached any such duty of care [in fairness this point was abandoned by Companies House before the trial] and
Thirdly whether it was the actual breach of duty that caused the Company to enter administration – inviting the Court to consider the possibility that the Company might have gone bust anyway.

The conclusion of the Judge’s speech is poetically short – the Judge holds that “the Registrar of Companies House owes a duty of care in Common Law when entering a winding up Order on the Register to take reasonable care that the Order is not registered against the wrong Company”. “The duty extends to taking reasonable care to enter the Order on the record of the Company named in the Order and not of any other Company”. “It does not extend to checking information supplied by third parties. It extends only to entering that information accurately on the Register”.

At any rate after an ordeal which might have driven a lesser man to his grave it appears that Mr Sebry’s Company will be able to claim damages from Companies House in a figure that is expected to run in to the top end of seven figures. Millions and Millions of pounds.

There is no such happy ending in prospect for the 250 workers, or their families or dependents.

One presumes that Mr Davies has at least tendered his resignation, though there is no confirmation of that in the Court reports.