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High Court shields database state from blame
No comeback on stigma of invented £254,000 bad debt
An entrepreneur whose fledgling business was ruined by a false entry in a court database has had his claim for compensation rejected by a High Court judge.
The decision could set a broad and troubling precedent, because Mr Justice Bill Blair QC - brother of the former PM Tony Blair - ruled that the civil service cannot be found liable for the damage caused by its record keeping mistakes.
The case was brought by Andre Power, from Benfleet in Essex, against the Ministry of Justice, which is responsible for HM Courts Service. It was prompted by the failure of Chi-qi.com, a world music download service and social network Mr Power set up with a business partner in 2006.
After sinking tens of thousands of his own money into the venture, Mr Power fell three months - or about £5,000 - behind on his mortgage payments and was taken to Southend County Court by his lender in July 2007. He settled the debt in full before it came before a judge.
An unknown official at Southend County Court nevertheless registered a County Court Judgement (CCJ) against his name for £254,000, the full value of the mortgage.
Commenting on the error, Phil Booth, the national coordinator of the campaign group NO2ID, said: "In the database state, it's the citizen who takes all the risk and suffers the consequences - even when he or she has done nothing wrong. My sympathies go to Mr Power. I fear he's not the first and he definitely won't be the last."
Completely unaware of the heavy black mark against his name, Mr Power continued developing Chi-qi.com. He and his partner began to seek a £250,000 investment to fund a full launch.
Despite his successful record of launching and running new businesses, the pair struggled for 13 months to get financial backing. Eventually they accepted £50,000 from two investors in August 2008 to keep the venture afloat.
At the last minute however, one of the investors pulled out, citing a credit check with Experian, which sucks up data from County Court databases. It revealed the £254,000 CCJ against Mr Power. It was the first he had heard of it.
It then took three months for Southend County Court to issue a clearance certificate admitting its error. When the certificate arrived, Mr Power was aghast to find it was made out to only £5,000, rather than the full £254,000 bad debt wrongly registered to his name.
Still, by now the certificate was academic, at least in terms of his business prospects. Without investment Mr Power and his partner had been forced to close the company operating Chi-qi.com and transfer its goodwill assets to a shell company.
A circuit judge has since corrected the record properly, and ruled that the CCJ should never have been registered. It has been removed from court records and Mr Power's credit history.
An initial claim for compensation to Southend County Court was immediately rejected. In March this year Mr Power faced government lawyers at an initial hearing before Master Foster, who found in favour of the government's argument that a legal precedent meant the case should be struck off.
However, because Mr Power had only five minutes to prepare to counter the Ministry of Justice argument, he was immediately granted leave to appeal at the High Court.