Competition disqualification—first application for permission to act following disqualification (Re Fourfront Group Ltd and others)

Competition disqualification—first application for permission to act following disqualification (Re Fourfront Group Ltd and others)

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 [2019] EWHC 3318 (Ch)

What are the practical implications of this case?

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:

  • it appears the court will be more cautious in competition cases. As noted below, the judge observed that the competition breach involved dishonesty. He also noted that while the bracket into which the disqualification period falls is a convenient shorthand, it is the seriousness of the conduct that should be considered rather than the period of disqualification per se  
  • the correct starting point is the schedule of unfitness. The judge did not have regard to either (i) the factors the applicants sought to highlight to demonstrate the low risk they posed, or (ii) the pre-undertaking correspondence and primary materials put in evidence by the CMA  
  • the court had little trouble in accepting that there was a need for the applicants to continue in their roles, notwithstanding the opposition from the CMA  
  • the judge rejected the CMA’s argument that the application should be refused on the basis that allowing the applicants to continue in their roles would undermine the general deterrent effect of the competition disqualification regime

What was the background?

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 applicants could not demonstrate a need for them to continue in their roles  
  • for them to be granted permission to continue would undermine the general deterrent effect

What did the court decide?

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 financial position of the companies militated against granting permission, but the judge was satisfied that steps were being taken to address it  
  • 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)

Case details 

  • Court: High Court (Business & Property Courts), Companies Court  
  • Judge: Deputy Insolvency and Companies Court Judge Baister  
  • 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 caseanalysis@lexisnexis.co.uk.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

Related Articles:
Latest Articles:
About the author:

Zahra started working as a paralegal at Lexis Nexis in Banking and Insolvency teams in April 2019. Zahra graduated with a 2.1 honours in a BA French and Spanish, completed the GDL at BPP University and is seeking some experience before commencing the LPC. She has undertaken voluntary work for law firms in London, Argentina and Colombia.