Re A Company (No 007466 of 2003); Company Number 1389920 v Registrar of Companies

19 January 2004. PETER LEAVER QC handed down the following judgment.

Introduction

1 There is before the court an application in relation to the accounts of a company to which I shall refer in this judgment as “Company A”. The application has been listed, pursuant to the order of Mrs Registrar Derrett made on 25 November 2003, as “In the matter of a Company No 1389920”.

2 The application before the court is principally for an order permitting Company A to file revised accounts in substitution for the accounts and reports for the year to 30 September 2002, which were filed with the Registrar of Companies on 30 July 2003.

3 The facts which give rise to this application can be briefly stated. Company A is one of two defendants in proceedings which are now being carried on in the Technology and Construction Court (“the TCC proceedings”), having been transferred to that court from the Commercial Court by order of Colman J made on 18 July 2003.

4 In the TCC proceedings the claimants are claiming damages for breach of a contract to supply gas meters. The claimants contend that the gas meters supplied by the defendants were defective, and claim damages in the region of £25m. The defendants deny that they are or were in breach of contract, and make a CPRPt 20 claim against the claimants for breach of an implied term of the contract and/or for breach of duty.

5 The defence and Part 20 claim were served on the claimants on 28 March 2003. On 27 May 2003 the claimants made a CPRPt 36 offer to settle the claim, and on 21 July 2003, shortly after Colman J's order, the defendants made their own Part 36 offer, and made a payment into court.

6 Company A's accounts were due to be filed by 31 July 2003. They were duly filed on that day. One of the notes to the accounts which were filed contained two sentences (“the offending sentences”) which referred to Company A's contingent liability in the proceedings, and to the Part 36 offer which had been made by the claimants to settle the claim. The evidence is that the note was included after discussion between Company A's auditors and directors, but without taking any legal advice.

7 On 18 November 2003 the claimants' solicitors wrote to Company A's solicitors saying that they had undertaken company searches of both Company A and the other defendant in the TCC proceedings, and had seen the note in Company A's accounts. In effect, the claimants' solicitors demanded that revised accounts should be filed from which the offending sentences had been removed and in which no reference was made to the Part 36 offer.

8 Company A's solicitors requested permission from the registrar to file revised accounts omitting the offending sentences referring to the Part 36 offer. They were told that it would be necessary for them to make an application to the court for permission. It is common ground that if the registrar had refused permission, it would have been necessary for Company A to apply for permission to review judicially that refusal. However, no point was taken on behalf of the registrar about the form of the present proceedings.

9 As I have stated above, the principal issue on this application is whether Company A should be given permission to file revised accounts omitting the offending sentences. In fact, there are five different forms of relief sought on the claim form, but it is common ground that the whole application stands or falls on the decision as to whether permission should be granted to file revised accounts, from which the offending sentences have been deleted. It is, therefore, to that issue that I now turn.

Revising accounts

10 The right to prepare revised accounts (or a revised directors' report) is provided by section 245 of the Companies Act 1985, as inserted by section 12 of the Companies Act 1989. The right arises “if it appears to the directors of a company that any annual accounts of the company, or any directors' report, did not comply with the requirements” of the 1985 Act.

11 Section 245(2) stipulates that where copies of the previous accounts or report have been laid before the company in general meeting or delivered to the registrar, the revisions shall be confined to the correction of those respects in which the previous accounts or report did not comply with the requirements of the 1985 Act, and the making of any necessary consequential...