It has recently been decided by the High Court that Companies House and the Registrar of Companies (who is the Chief Executive of Companies House) owes a duty of care to companies whose records are to be amended and must take reasonable care not to record them incorrectly.
This decision comes as a result of a typographical error. In 2009, Companies House recorded information on the company register stating that Taylor & Sons Ltd had been wound up. In fact, Companies House had meant to record the winding up order against Taylor & Son Ltd, not Taylor & Sons Ltd. As a result, the 124 year old family business, Taylor & Sons Ltd, suffered cancelled orders, lost contracts and suppliers immediately withdrew credit. The managing director of Taylor & Sons Ltd was accused by creditors of escaping the jurisdiction when the news of the ‘liquidation’ broke when in fact, he was on holiday.
The mistake was corrected by Companies House three days later but by then, Taylor & Sons Ltd had been damaged irretrievably. They were unable to recover from this, subsequently went into administration and were finally dissolved in 2014. The former managing director brought action on behalf of the company against Companies House and the Registrar of Companies. It was established that the error stemmed from the absence of a company number on the Court Order winding up Taylor & Son Ltd. The staff at Companies House did not reject the documents for this omission, which was held to be the correct procedure to follow.
The High Court held that the Registrar of Companies has a common law duty of care to all companies to record accurate information. However, it was decided that the duty of care does not extend to verifying the information itself when received from third parties, only to ensure that the information is recorded accurately. The liability for Companies House is likely to be some £8.8m and it remains to be seen whether Companies House fees are hiked in the near future to cover the losses.