High Court denies director's bid to stay in office after cartel disqualification

29 February 2024

The High Court has refused an application by a director to remain in post after being disqualified by the CMA for his role in an illegal demolition cartel. 

As the CMA continues to pursue director disqualifications with more rigor, this is a notable judgment as it is one of the few cases where the CMA has pursued director disqualification orders or undertakings for breaches of competition law, and where the court has considered an application for leave to act under section 17 of the Company Directors Disqualification Act 1986 (CDDA). The judgment also illustrates the Court's approach to balancing the public and private interests involved, and the factors that may influence its decision to grant or refuse leave – in this case concluding the public interests outweighed the private interests of the individual and the business, even where the Court acknowledged that “there is a likelihood that [the] exclusion from…office will cause significant if not catastrophic harm”. 

The case concerns an application by Mr Brown, the former managing director of Brown and Mason Group Limited (BMG), for permission to continue to act as a director of BMG and its holding company, NRLB Limited (NRLB), despite having given a disqualification undertaking to the CMA for a period of seven years. The undertaking was given further to the CMA’s decision in March 2023, finding that Brown and Mason Limited, the predecessor of BMG, had participated in cover bidding, price fixing and compensation payments with its competitors in the demolition and asbestos-removal sector. 

Despite admitting his conduct as a director contributed to serious breaches of competition law, and offering an undertaking, Mr Brown made an application pursuant to section 17 of the CDDA asking the Court to grant him leave to continue to act as a director of BMG and NRLB. In such an application, the onus is on the applicant, to persuade the Court that, in all the circumstances, the applicant should be allowed to act as a director. 

While the Court has unfettered discretion to grant permission, it is required to balance the public interest in maintaining the deterrent and protective purposes of the disqualification regime against the individual and business interests. The court refused Mr Brown's application finding that his conduct was a paradigm example of serious and dishonest cartel activity that harmed the public and the economy. The Court found that granting him permission to remain a director would undermine the public benefits of the regime. The Court also found that, despite the unchallenged evidence of Mr Brown's importance to the companies and the likely harm to BMG and its stakeholders, it was not impossible for Mr Brown to act as a consultant or for BMG to find a suitable replacement for him. The Court did, however, recognise that an immediate cessation of Brown's services would do undue harm to BMG and those who deal with it, and extended the run off period for him to cease acting as a director.