Competition Markets Authority v Martin

The Competition and Markets Authority (CMA) applied under section 9A(10) of the Company Directors Disqualification Act 1986 for the disqualification of Mr Michael Christopher Martin arising from a finding by the CMA that Gary Berryman Estate Agents Ltd and associated undertakings had participated in a cartel fixing minimum commission fees in breach of section 2(1) of the Competition Act 1998. The court held that the statutory First Condition (that an undertaking of which the defendant was a director committed a breach of competition law) was satisfied by the CMA Decision. On the Second Condition the court found that Mr Martin had actual knowledge of, and/or contributed to, the breach because of contemporaneous minutes and emails (notably the 22 January 2014 minute, the emails of 22 January and 4 February 2014 and the 15 May 2014 minute) and his subsequent conduct; his explanations were rejected on credibility grounds. The court rejected a submission that section 9A must be read down to incorporate an Article 8 European Convention on Human Rights proportionality requirement, holding that the statutory scheme, including the ability to apply for leave under section 17, provided the compatible mechanism. A disqualification order was therefore made, the judge fixing a period of seven years. Costs were ordered and an interim payment of 100,000 was directed.

This was a first instance claim brought by the Competition and Markets Authority under section 9A of the Company Directors Disqualification Act 1986 seeking a disqualification order against Mr Michael Christopher Martin for conduct as a director related to a breach of competition law. The underlying CMA Decision (31 May 2017) found that a group of Burnham-on-Sea estate agents, including Gary Berryman Estate Agents Ltd, had agreed and implemented minimum commission fees in breach of section 2(1) of the Competition Act 1998.

Background and parties:

• The claimant: the Competition and Markets Authority.
• The defendant: Mr Michael Christopher Martin, a director of Gary Berryman Estate Agents Ltd, The Property Group (2010) Limited and Warne Investments Limited during the relevant period.

Nature of the application: The CMA applied for a disqualification order under section 9A(10) CDDA alleging the First Condition (an undertaking of which the defendant was a director committed a breach of competition law) and the Second Condition (the defendant's conduct as a director makes him unfit to be concerned in the management of a company) were satisfied.

Issues framed:

1. Whether the First Condition was established (i.e. the relevant company committed a competition law breach);
2. Whether the Second Condition was established under section 9A(5) by conduct contributing to the breach, or by having reasonable grounds to suspect and failing to take steps, or by ought-to-have-known standards;
3. Whether section 9A must be read so as to incorporate a proportionality (Article 8 ECHR) requirement; and
4. If the statutory conditions were satisfied, what period of disqualification was appropriate.

Key evidential findings and reasoning:

• The court accepted the CMA Decision that the relevant undertakings engaged in an agreement or concerted practice fixing minimum commission fees; the First Condition was therefore satisfied.
• The court evaluated the Direct Evidence: the minute of the meeting on 22 January 2014 (which recorded that Mr Hutchinson had met other local agents to try to reach a mutual agreement and that a further meeting would be arranged), an email from Mr Hutchinson on 22 January 2014 explicitly stating an aim to drive fees up to specified minimums, a 4 February 2014 email reporting that an agreement had been brokered and the 15 May 2014 minute referencing a meeting where not all agents were holding to an agreed 1.5% fee.
• The judge rejected Mr Martin's explanations that he did not read or understand the significance of these communications, finding his evidence unreliable in several respects (selective use of contemporaneous documents, shifting explanations, and apparent post-justificatory reconstruction). On the balance of probabilities the judge found that Mr Martin knew of the proposed agreement and of its implementation and failed to take reasonable steps to prevent or end Berrymans' participation; his conduct therefore constituted misconduct and made him unfit.
• On the Article 8/HRA point, the court held that sections 6 and 9A should be given their traditional mandatory meaning; Article 8 is engaged but the statutory scheme (including the ability to apply for leave under section 17) provides a compatible, proportionate mechanism. The court therefore declined to read additional words into section 9A to create a pre-order proportionality test.

Disposition and remedy: A disqualification order was made for seven years. The court applied the usual approach to assessment of period (bracket approach), accepted mitigation (good character, ill-health/retirement, steps taken after the CMA inspection) but concluded the misconduct was serious and warranted a middle-bracket disqualification. Costs were ordered to follow the event and an interim payment of 100,000 was directed.

First, the court held that the CMA had established the First Condition: Berrymans and associated undertakings had engaged in an unlawful agreement or concerted practice fixing minimum commission fees in breach of section 2(1) of the Competition Act 1998. Second, the court held that Mr Martin's conduct as a director made him unfit because contemporaneous minutes and emails established his knowledge of the proposed and implemented cartel and he failed to take reasonable steps to prevent or end Berrymans' participation. Third, the court rejected the submission that section 9A must be read to include a pre-order proportionality test under Article 8 ECHR, holding that the statutory scheme (including the leave mechanism under section 17) provided a compatible means of protecting Convention rights. Accordingly, the court made a disqualification order for seven years and directed costs with an interim payment of 100,000.