Nicholas Terry Brown v Competition and Markets Authority

The court considered an application under section 17 of the Company Directors Disqualification Act 1986 for leave to act despite a disqualification undertaking given under section 9B of that Act following admissions that the applicant's predecessor company had infringed the Chapter 1 prohibitions of the Competition Act 1998. Key principles were applied: the court's section 17 discretion is unfettered but requires balancing the public protection and deterrent purposes of disqualification against the applicant's and the company's need for the applicant's services; the seriousness of the misconduct (notably cover bidding, price-fixing conduct and concealment by false invoicing) and the risk to the general deterrent are central considerations.

Applying those principles the judge found that, although the company (BMG) had substantially upgraded its compliance regime and the applicant had advanced cogent commercial reasons to remain as a director, the gravity and deceptive character of the admitted conduct and the public interest in deterrence outweighed the case for full permission for the duration of the undertaking. The application for full leave in respect of BMG was refused, but a limited transitional permission for a one-year run-off period (until 28 July 2024) was granted for both BMG and its holding company NRLB, with the previously imposed stringent conditions to continue during that period.

Background and parties. The Competition and Markets Authority investigated cartel-type conduct in the demolition and asbestos-removal sector. Brown and Mason (now succeeded economically by Brown and Mason Group Limited, 'BMG') admitted breaches of the Chapter 1 prohibitions of the Competition Act 1998 in relation to cover bidding and price-fixing conduct; BMG accepted a regulatory settlement and a penalty of £2,400,000. The CMA gave notice under s.9C CDDA of its intention to apply for a disqualification order and the applicant, Nicholas Brown, provided a section 9B disqualification undertaking. He then applied under s.17 CDDA for the court's leave to act as a director of BMG and its holding company NRLB.

Procedural posture. Interim permission to act was granted by Deputy ICC Judge Shekerdemian KC. The substantive application was heard in the High Court by ICC Judge Prentis on 19 September and 10 October 2023. The CMA opposed the grant of leave.

Issues framed by the court. The court framed the issues as: (i) the correct approach under s.17 where a disqualification arises from competition law breaches under section 9B; (ii) the weight to be given to the seriousness and dishonest character of the admitted conduct (cover bidding and related false invoicing); (iii) the public interest in deterrence and protection; (iv) whether the applicant's and the company's need for his services justified granting leave; and (v) whether conditions and enhanced compliance systems sufficiently mitigate the risk of repetition.

Evidence and findings of fact. The schedule to the undertaking contained detailed admissions that Brown and Mason engaged in cover bidding and fixed elements of tender prices in 2013 and 2014 and that Mr Brown was centrally involved in agreeing and enforcing compensation payments, including by arranging false invoices. The CMA relied on those admissions, on the seriousness and deceit involved, and on public deterrence considerations. The applicant and numerous company witnesses gave unchallenged evidence that Mr Brown has long-standing, specialist technical, commercial and stakeholder relationships (including with insurers, a major metal recycler and Santander) and that his absence as a director would significantly harm BMG's ability to win and perform work. BMG had implemented substantial compliance reforms (including external legal advice, training, a named competition compliance officer and an independent non-executive director overseeing compliance).

Court’s reasoning. The court applied the established section 17 principles: the discretion is unfettered; the onus is on the applicant; the court balances need against public protection and deterrence; and dishonesty can be a powerful factor against granting leave. The judge accepted the company’s improved compliance systems and that an immediate cessation of Mr Brown’s directorship would cause significant commercial harm in the short term. Nevertheless, because the admitted conduct involved deception (cover bidding and false invoicing), the public protection and deterrent functions of disqualification weighed heavily against granting full leave for the disqualification period. The court concluded that a full grant of leave would unduly undermine the deterrent effect of the competition disqualification regime, but that some limited transition time was appropriate to avoid immediate serious harm to the business. Accordingly, the application for permission for the full period was refused in respect of BMG; the court granted a limited extension until 23:59 on 28 July 2024 for both BMG and NRLB, with the previously agreed conditions to remain in force for that period.

Practical note. The judge emphasised that where confidentiality orders are maintained they must be specifically justified given the public interest in transparency of such applications, and that conditions limiting the applicant's solo involvement in tendering and client contact are appropriate protections while permission exists.

The application for leave under section 17 CDDA was refused as to the grant of full permission for the disqualification period in respect of Brown and Mason Group Limited (the claim for full leave is dismissed). The court held that the admitted cover-bidding, price-fixing conduct and concealment by false invoicing were sufficiently serious and deceptive that the public protection and deterrent purposes of disqualification outweighed the applicant’s and the company’s need. However, recognising the likely short-term harm to the company from an immediate cessation of the applicant’s role, the court permitted a limited transitional run-off: permission to act was extended for both BMG and NRLB until 23:59 on 28 July 2024, subject to the detailed conditions already imposed on the interim permission.