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The court granted permission for the applicants to continue to act as directors of, and be involved in the management of, certain companies within the Fourfront Group. The applicants offered disqualification undertakings following an investigation by the Competition and Markets Authority (CMA) which found breaches of competition law within the group. The CMA is increasingly flexing its muscles in this area, with nine of the 12 competition disqualifications that have been obtained by the CMA having been secured in the last year, and this was the first application for permission to act as a director following a competition disqualification. Written by Christopher Buckley, barrister at Radcliffe Chambers, who appeared for the claimants.
Re Fourfront Group Ltd and others  EWHC 3318 (Ch)
This was the first occasion on which the court considered competition disqualifications.
The relevant sections (ss 9A-9E) were inserted into the Company Directors Disqualification Act 1986 (CDDA 1986) in 2003, but the first disqualification was not obtained by the CMA until December 2006. The CMA is now looking to make greater use of its power to apply for disqualification orders/accept disqualification undertakings and has obtained 12 disqualifications, including nine in the last year, all by way of undertaking.
In terms of how the court will approach applications for permission to act in competition cases the following is of note:
In July 2019, the CMA accepted disqualification undertakings from the applicants in accordance with CDDA 1986, s 9B for one year and six months and two years and nine months. The disqualifications arose out of an investigation by the CMA into competition breaches in the design, construction and fit-out services sector. The Fourfront Group, which consists of five active companies (three operational companies and two holding companies), reached a settlement with the CMA in early 2019, admitting a number of breaches of the prohibition in section 2 of the Competition Act 1998 in the form of cover bidding. The applicants, who were directors of various companies within the group, later offered disqualification undertakings arising from their contribution to the infringements.
The CMA agreed that the undertakings would not take effect for 70 days to enable an application for permission to act pursuant to CDDA 1986, s 17 to be made. Within said 70-day period, Mr Davies applied for permission to continue as a director of one of the operational companies and Mr Stamatis applied for permission to continue as a director of the two holding companies and to be involved in the management of, but not a director of, the three operational companies.
The applications were opposed by the CMA on the grounds that:
The court granted the permission sought on the conditions suggested by the applicants.
The judge agreed that the court’s approach in competition cases should be similar to that governing any other application under CDDA 1986, s 17, but that the court would have a particular focus on whether the giving of leave posed a risk of a future competition law breach. One notable difference was that any competition disqualification based on cover bidding or similar necessarily involved deception, regardless of the disqualification period (in run of the mill disqualification cases, a lower bracket period would almost always be imposed for a minor or ‘technical’ wrong), and that required the court to keep public protection in the forefront of its mind.
As regards the applications themselves:
in so far as was necessary, need on the part of the relevant companies was made out
the judge considered that the short periods meant that the risk of repeat behavior was only for a short time and, in the circumstances, was small. In particular he relied on the steps that had been taken by the Fourfront Group to improve compliance and reduce the likelihood of a repeat, including the appointment of an experienced solicitor as a non-executive director to oversee compliance within the group (the judge regarded such appointment as crucial)
Date of judgment: 5 December 2019
Christopher Buckley is a barrister at Radcliffe Chambers, who appeared for the claimants in Re Fourfront Group Ltd. If you have any questions about membership of LexisPSL’s Case Analysis Expert Panels, please contact firstname.lastname@example.org.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
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