How Companies House spelling error crushed owner-managed firm

29 January 2015 -

High Court hits government agency with £9m fine for triggering shutdown of family business that had run for more than a century

Jermaine Haughton

The boss of a Welsh engineering firm that was forced to close down after Companies House mistakenly recorded it as liquidated has won a major compensation claim. Philip Davison-Sebry began proceedings against the government agency in 2009, when it recorded and processed details stating that his business, Taylor & Sons Ltd, had been wound up.

That, though, was the result of an error, whereby a Companies House clerk had added a rogue “s” to the business name and identified the wrong firm. The outfit that Davison-Sebry’s company was mixed up with was the Manchester-based Taylor and Son, liquidated six years earlier. As a result of the mistake, just two months on from the filing of the incorrect details the 124-year-old firm – which had supplied military equipment during two world wars – entered administration. Through no fault of their own, 250 workers were made redundant.

Davison-Sebry – who learned of the mistake at his wife’s 50th birthday party – filed a claim for negligence and breach of statutory duty against Companies House in November last year. In his judgment yesterday, Justice Edis censured Companies House, Taylor & Sons’ legal team successfully showed throughout the case that the firm’s credit agencies and around 3,000 suppliers had revoked their services after seeing the official notice stating that the business had folded. Compensation was ordered at a whopping £8.8 million.

Finding that Companies House had failed in its duty of care, Edis concluded: “To say that [care] was also owed to every other company on the Register is only to say that a hospital owes a duty to each patient which it treats, and may come to owe duties to many thousands of people in the course of a year. That is of course true, but not a reason for denying that the hospital ever owes any duty.”

Edis also criticised the agency’s systems for not providing Taylor & Sons with an opportunity to respond to and challenge the mistake: “Given that the system of registration is compulsory … it does not seem unjust to impose liability on those who benefit from the system [eg, the public] for harm done by its faulty operation.”

As well as demonstrating the virtues of company bosses pursuing justice for damages done to their firms, the case reflects the delicate nature of relationships that business leaders must maintain with regulators, lawmakers, clients and other external parties for day-to-day survival.

For more lessons in leadership, sign up to this forthcoming event from CMI and Management Today.