04 February 2015
A spelling error in recording a company’s winding up order has cost the agency around £9m after it was sued for ruining a business.
Companies House was sued for recording that Taylor & Sons based in Cardiff, Wales was in liquidation and was found guilty of negligence by the High Court.
The actual company being wound up was Taylor & Son based in Manchester, however the government agency inserted an erroneous ‘s’ at the end of the company name when registering the company as in liquidation.
The High Court found that Companies House had been negligent – it owes a duty of care in negligence to each company on the Register and that it can be held liable for mistakes it makes relating to those companies.
However, the Court added that the government agency was only liable for mistakes made in-house, and is not responsible for verifying third party information it receives.
Following the distribution of its newsletter, creditors and suppliers began to pull out of deals and financing of the Cardiff-based company, leading to the collapse of the 124-year old engineering firm. Two months after the error was made, Taylor & Sons was in administration.
Despite Companies House rectifying the mistake within three days, it failed to notify its distribution list, which includes suppliers, credit agencies and investors, that it had made an error. As a result, news of Taylor & Sons’ liquidation continued to circulate.
Speaking to Governance + Compliance, Matthew Walker, associate in the dispute regulation department at Burges Salmon LLP said: ‘This is an important decision as it establishes the principle, which many probably suspected was the case, that Companies House can in the right circumstances be liable for errors on the Register of Companies.
‘The mistake that led to Taylor & Sons’ administration appears, thankfully, to have been a rare oversight. Nonetheless the Court’s decision ensures that such mistakes will not go uncompensated.’