03/03/2015

The negligence of the ASIC equivalent in Britain has resulted in a £9 million payout to a company incorrectly listed as wound-up (Sebry v Companies House & The Registrar of Companies [2015] EWHC 115 (QB)).

The liability arose because Companies House (an agency of the UK Government which receives and publishes information about companies and maintains a public data base on companies as ASIC does for Australia) received information that a particular company was in liquidation but recorded that information against a different company's name.  

The innocent company became subject to severe liquidity pressures as trade credit ceased to be provided and existing creditors demanded immediate payment of debts.  Within days the company was struggling, within a week the liquidity position of the company was intolerable and a decision was made to wind up the company and within 6 weeks the relevant court orders had been made.

While Companies House was told almost immediately about its error and amended its register it did not correct or retract information which had been previously supplied to a number of commercial information agents.  It seems very few people inspect the official website of Companies House but many receive emails from commercial information providers.  Companies House, having sold the incorrect information for its own commercial purposes (in accordance with its standard commercialisation precedents), did not undertake any efforts to retract or correct the previously supplied information.  

The Court held that Companies House owed a duty of care to the innocent company not to publish incorrect information which was likely to cause economic harm to that Company.

Companies House raised several defences in response to the litigation: that it only received information from third parties and published that information without independent verification; that the litigation floodgates would be opened if it were to be found liable; and that Companies House was performing a statutory duty and a breach of that statutory duty does not give rise to civil liability.

The Court accepted that Companies House only published information it received from third parties but nonetheless held that the company information provided by Companies House was relied upon as being the "official" information about the company.  In relation to the floodgates argument, the Court held that not every incorrect piece of information would give rise to liability.  The Court also held that the relevant legislation provided no immunity for Companies House.

The Court considered whether other persons would have a claim against Companies House, such as employees or suppliers.  While the Court did not have to decide those issues (as only the Company sued), there was the suggestion that those secondary effects of the incorrect information would not give rise to a duty of care as there would not be sufficient proximity between the actions of Companies House and those secondary effects.

Given the particular fact situation and the novelty of the claim, this is likely to be a landmark case, particularly if there is an appeal.

As a matter of interest, the plaintiff in the case was Mr Philip Sebry, the former managing director of the Company.  The administrators of the Company had assigned any cause of action the Company had against Companies House to Mr Sebry.  Presumably, the administrators either did not have the means to finance the litigation or considered the prospect of success too remote to justify the cost and effort.  The £9 million result showed they were mistaken.

For further information, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222.