Company insolvency – winding up order – wrongly made – Registrar of Companies – duty of care – statutory duty – special relationship
Mr Sebry (a former director) sued as an assignee from administrators of the company, Taylor & Sons Ltd, that had traded since 1900. It had encountered financial difficulties but was carrying out a restructuring successfully. A winding up order was made against Taylor & Son Ltd, an unrelated company.
The Registrar of Companies registered the order against Taylor & Sons Ltd. Although the error was corrected the same day on online records, records sent to customers of subscription services had to be rectified manually. Word spread and suppliers and the bank refused to allow the company credit. One of the preliminary issues was whether the Registrar owed a duty of care under statute or common law.
Edis J held that a statutory duty which gave rise to a claim for damages actionable at the suit of anyone who suffered economic loss would not be imposed because it would create a very wide duty.
However, a common law duty of care can be designed to restrict the class of potential claimants. When entering a winding up order, the Registrar owed a duty to take reasonable care to ensure that the order was not registered against the wrong company. The duty was owed to the company and not others, such as suppliers who had cancelled valuable contracts with the company.
The judge considered the various tests. In applying the assumption of responsibility test he followed White v Jones [1995] 2 AC 207 and Ministry of Housing and Local Government v Sharp [1970] 2 QB 223. The three fold test in Caparo v Dickman [1990] 2 AC 605 and analogy and incrementalism produced the same results. Among the factors that influenced the judge were that the company would otherwise be without a remedy, it was not difficult to avoid such errors, staff did not have to exercise any judgment or discretion, the negligence duty reinforced the Registrar’s statutory obligations and balancing harm to the company against potential adverse impact on the Registrar clearly favoured the company.
A rare case makes good law: such errors are extremely rare and procedures have apparently been tightened further, however this case is an interesting example of the difficulties that can be suffered by companies when simple statutory processes go wrong.
