LIABILITY OF REGISTRAR OF COMPANIES IN NEGLIGENCE
Clive Freedman QC leading Neil Mendoza, and instructed by Neil Jamieson of Clyde & Co, has succeeded in establishing a duty of care against the Registrar of Companies in a high profile case. A company which had been in existence since 1900 was driven into administration within 7 weeks of a mistaken entry by the Registrar that the company was in liquidation. The mistake was to confuse a trading company Taylor & Sons Limited with another wholly unrelated company in liquidation, namely Taylor & Son Limited, and to enter the liquidation in the name of the wrong company. The former company, with the extra “s” in its name, was not in liquidation, but the effect of this publication was to affect the willingness of its customers and suppliers to continue to do business with it. In a trial of preliminary issues, Mr Justice Edis concluded that that there was no reason other than the mistaken entry for the Company going into administration.
The case is of most interest in its analysis of whether there was a duty of care in negligence owed by the Registrar to a trading company to exercise reasonable skill and care not to enter falsely in the register that it had gone into liquidation.
The Judge tested the conclusions by reference to whether there was an assumption of responsibility, the three stage analysis in Caparo (foreseeability, proximity and whether it was fair, just and reasonable) and an incremental analysis of precedent law. The obvious foreseeability of serious harm resulting from an incorrect listing, as well as the proximity owed to a single identifiable company, gave rise to a special relationship justifying such a duty. In the Judge’s estimation:
“….balancing the harm actually done to the Company in this case against the potential adverse impact upon Companies House it is clear that the balance favours the loss falling on Companies House rather than the Company.” (para 112)
The Judge noted that when the Registrar undertakes to alter the status of a company, which it is his duty to keep, he assumes a responsibility to that company to take reasonable care in doing so. Given that no consultation took place with the Company, which had no way of protecting itself against errors, a degree of trust was placed in the Registrar. He considered that:
“Given that the system of registration is compulsory… it does not seem unjust to impose liability on those who benefit from the system (the public) for harm done by its faulty operation.” (para 112)
To view the judgment please click here.
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