Full case report

Sebry v (1) Companies House and (2) The Registrar of Companies

Reference [2015] EWHC 115 (QB)
Court High Court (Queen’s Bench Division)

Judge Edis J

Date of Judgment 26 Jan 2015


Summary

Negligence – breach of statutory duty – duty of care – breach of duty – causation


Facts

C, the Managing Director of Taylor and Sons Limited (“the Company”), brought a claim against the Ds for damages for negligence and breach of statutory duty.  On 28 January 2009 the High Court made a winding up order against Taylor and Son Ltd. On 20 February 2009 the Ds’ computer system was amended by registration of the order against the Comnpany. The Ds therefore described C’s company as being in liquidation when it was not. This had a disastrous effect on C’s company, which went into administration in April 2009.

C claimed that the Ds owed a statutory and/or common law duty to any company on the register, and in respect of which information was being entered or recorded, to take reasonable care and skill so as to ensure that incorrect information was not entered on the register relating to that company. In particular, the Registrar owed a duty of care to a trading company to exercise reasonable skill and care not to enter falsely in the register that it had gone into liquidation.


Issue

  1. Whether the Ds owed C a duty of care under statute or common law in the terms alleged in the Claimant’s Particulars of Claim.
  2. Whether the Ds breached any such duty (this point was conceded by the Ds).
  3. Whether the Ds’ breach of duty caused C to enter administration.

Held

1.    There was no such statutory duty. The Companies Act 2006 regulates the keeping of the Register and imposes duties on the Registrar for that purpose.  The Register publishes information which is available to the whole world, because it is available on the internet.  Whereas the common law of negligence has control mechanisms designed to restrict the class of person who can claim damages for economic loss, the imposition of a statutory duty would gave rise to a claim for damages at the suit of anyone who suffered economic loss by reason of any breach of the statutory duty. Parliament could not have intended to impose such a wide duty on the Ds.

There was, however, a common law duty of care. Unless the common law provided a remedy C would have no remedy. The error was not difficult to avoid .  There was no good reason not to impose a duty. Balancing the harm actually done to C against the potential adverse impact upon the Ds the balance favoured the loss falling on the Ds. The ultimate effect of imposing the duty was likely to be to improve the accuracy of the Register – which is plainly in the public interest. Therefore there was a ‘special relationship’ between the Ds and the Company when the order was entered into the system (following White v Jones [1995] 2 AC 207). There was an assumption of responsibility by the Ds. The harm was obviously foreseeable. Proximity was clear in that the duty was only owed to one individual company whose identity was readily discoverable by the Ds. It was fair, just and reasonable to impose a duty of care on the company. The imposition of the duty was not entirely novel – it could be described as ‘incremental’ based on previous case law.

2.    The Ds conceded that if a duty existed it had been breached.

3.    The reason why the Company had gone into administration was the error by the Ds’ employee. The entry of the order on the Register had resulted in the Company’s creditors demanding immediate payment of sums owed, giving rise to a cash shortage and an inability to obtain supplies and generate income. There was no evidence of any other precipitating factor, and the suggestion made by the Ds that actions of others or of the Company in addressing the consequences of the error were new causes which broke the chain of causation between the error and the administration were without foundation.


Comment

This case is an example of the possibility of using negligence as an alternative cause of action to defamation when there are circumstances in which a duty of care arguably exists. The discussion of causation may also be useful as a comparison when considering the issue of causation of special losses for the purposes of defamation actions (particularly in claims where section 1(2) of the Defamation Act 2013 applies and the claimant needs to show serious financial loss in order to establish the cause of action).


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Instructing Solicitors

Clyde and Co for the Claimant; Treasury Solicitor for the Defendants