Jan 28, 2015

Companies House Blunder Could Cost the Government £9million

A 124-year-old family business was ruined with the loss of over 250 jobs within two months because of a typographical error at the UK government's registry of companies, Companies House.

Welsh engineers 'Taylor & Sons', which was established in 1875, got a shock in February 2009 when Companies House recorded the company as having gone into liquidation when, in fact, it had not. However, 'Taylor & Son' had. Note the difference — one had an 's' and the other didn't. While the mistake was spotted and corrected three days later, by this time it had done irreparable damage.

The former managing director and co-owner of Taylor & Sons, Philip Davison-Sebry, brought a claim for damages for negligence and breach of statutory duty against The Registrar of Companies and Companies House, which he claimed destroyed the business with the incorrect spelling. The High Court agreed and found Companies House liable for the demise of the business, which could leave taxpayers with a circa. £9million damages bill (damages are to be assessed at a later date).

What is vital to note is that even though the mistake had been corrected, the false information had already been sold by Companies House to other organisations, including credit lenders/referencing agencies, which led to credit being withdrawn and suppliers and customers deserting the beleaguered company.

Commenting Mr Davison-Sebry said "We lost all our credibility as all our suppliers thought we were in liquidation. It was like a snowball effect." He continued, "I was on holiday in the Maldives when I got a message to urgently contact Corus, one of our major clients. They said they weren't happy at all I was on holiday at a time like this."

"They said we were in liquidation and that the credit agencies had told them. I rang the office to find out what was going on – it was like Armageddon."

Despite pleas with its clients and suppliers that it was a case of mistaken identity, it was too late, the damage already having been done. Taylor & Sons loss of custom included losing its best customer, Tata Steel, which was worth £400,000 a month to the company, as well as a potential £3million contract with the Royal National Lifeboat Institute.

At the time of the mistake, Taylor & Sons had employed 250 people. Two months after the typo, it went into administration.

After a four year legal battle, Mr Davison-Sebry has emerged victorious. Mr Justice Edis sitting it the High Court ruled that Companies House was legally responsible for Taylor & Sons' catastrophic loss of business and ultimate collapse.

The administrative slip-up was the only one of its kind ever recorded at Companies House and Mr Justice Edis said: "That can only be because it was easy to avoid."

Mr Davison-Sebry said he was "absolutely delighted" by the ruling.

A copy of the full judgment is available at: http://www.bailii.org/ew/cases/EWHC/QB/2015/115.html

Company Names Generally

One function of the Registrar of Companies is to ensure that no two companies are registered with an identical name. Every Companies House employee who works with the register (and everyone else whose work involves the technical side of corporate existence) knows that avoidance of this requires utmost care. This is one reason why each company on the register has not only a unique name, but also a unique number.

Our previous news article entitled 'Changes to Business Names and 'Sensitive' Words' (see http://mcdanielslaw.com/changes-to-business-names-and-sensitive-words-regulations/) discusses recent changes in the law in this area and gives further insight into how people looking to register a new company or change an existing company's name can select a name will not be rejected by Companies House.

If you require any further information on registering a company or changing its name do not hesitate to contact us at www.mcdanielslaw.com/service/contact or on 0191 281 4000.

Posted by: in: Case Law, Companies, Contract, News, Regulatory

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