Court Refuses Director's Application Despite Competition Law Breach; Balances Public Interest

Citation: [2024] EWHC 206 (Ch)
Judgment on

Introduction

In the matter of Nicholas Terry Brown v Competition and Markets Authority, the High Court of Justice Business and Property Courts of England and Wales delivered a judgment concerning an individual’s application for permission to act as a director despite an existing director disqualification undertaking (CDU). The case touches upon the legal principles surrounding director disqualifications under the Company Directors Disqualification Act 1986 (CDDA), particularly within the context of breaches of competition law, and highlights the balance between individual interest and the public interest in maintaining the effectiveness of the competition enforcement regime.

Key Facts

Nicholas Brown, the director of Brown and Mason Group Limited (BMG) and NRLB Limited, faced a seven-year disqualification under the CDDA due to his role in anti-competitive practices, including cover bidding and the submission of false invoices. Brown offered a disqualification undertaking but sought permission to act as a director for BMG and NRLB. The application was opposed by the Competition and Markets Authority (CMA), citing concerns about the risk of further breaches of competition law and the detrimental impact on the deterrence effect of director disqualifications.

The court applied several key principles to reach its decision:

  1. Unfitness to Manage: Under s.9A(4) and s.9B(7) CDDA, an individual may be disqualified if their conduct as a director contributed to a breach of competition law, rendering them unfit to be involved in the management of a company.

  2. Application for Leave: Under s.17 CDDA, the court has an unfettered discretion to grant leave for an individual under disqualification to act as a director, provided that it is appropriate to do so by balancing all relevant factors, as established in Rwamba v Secretary of State for BEIS [2020] EWHC 2778 (Ch).

  3. Deterrence: Deterrence is a key aspect of the disqualification regime, and the court must consider how granting leave to act may affect this deterrent effect on both the specific individual and the wider director community.

  4. Public Perception: Public perception, particularly as informed by a fair understanding of the regime’s purpose and the specific case, can influence the court’s consideration of the implications of granting leave.

  5. Need: A significant element is the company’s ‘need’ for the disqualified individual’s services as a director, which includes considerations of the individual’s unique role within the company and the impact of their removal on the company’s operations.

  6. Proportionality: The court considers balancing the seriousness of the disconduct leading to disqualification against the need for the disqualified individual to act as a director, ensuring that the protection of the public remains paramount.

Outcomes

The court refused Mr. Brown’s application in respect of BMG, citing the importance of preserving the general deterrent impact of the disqualification regime and the serious nature of his conduct. However, recognizing the potential harm the immediate cessation of Brown’s directorship could cause to BMG and its stakeholders, the court granted an extension of permission for Brown to act as a director for both BMG and NRLB until 28 July 2024, subject to conditions.

Conclusion

This judgment reaffirms the integral role of the director disqualification regime in maintaining competition law compliance and the significant weight the courts place on the deterrent effect of such disqualifications. While acknowledging the specific needs of a company and potential consequences of a director’s disqualification, the courts exercise careful scrutiny to ensure that public interest prevails in maintaining the integrity of the competitive markets. The decision in Nicholas Terry Brown v Competition and Markets Authority demonstrates a meticulous application of legal principles to balance individual and public interests in the realm of director disqualifications linked to competition law infringements.

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