In the Matter of The Competition and Markets Authority v Michael Christopher Martin  EWHC 1751 (Ch)
The Competition and Markets Authority (CMA) applied under the Company Directors Disqualification Act 1986 s.9A(10) for the disqualification of the defendant (M) as a director of an estate agency.
The CMA had found that M's agency was one of six in the Burnham-on-Sea area of Somerset which had participated in a cartel to fix a minimum level of commission fees for the provision of residential estate agency services, contrary to the prohibition in the Competition Act 1998 Pt I s.2(1). M accepted that one of the two conditions for disqualification set out in s.9A of the 1986 Act was met: his agency had committed a breach of competition law by engaging in infringing conduct. However, he denied that the second condition was met, namely that his conduct was such that it made him unfit to be concerned in the management of a company. Emphasising his record of good character and good business conduct, he argued that he neither knew of nor was involved in the cartel agreement; that he was unaware of the close-knit relationship between the participating estate agents; and that he was not an estate agent and was not involved in day-to-day running of the business. The CMA claimed that he was either responsible for his agency's participation in the cartel or had failed to take steps to prevent it. It relied principally on minutes of meetings between M and agency employees, and email correspondence in which the agreement was discussed.
Legal principles - The central question was whether M's conduct as a director contributed to the breach of competition law. The court had to ask itself whether his conduct, viewed cumulatively and taking into account any extenuating circumstances, had fallen below the standards of probity and competence appropriate for persons fit to be directors of companies, Grayan Building Services Ltd (In Liquidation), Re  Ch. 241 followed and Structural Concrete Ltd, Re  6 WLUK 526 applied (see paras 11-15 of judgment).
Conduct - Although good character was not, of itself, a defence, it assisted M in terms of credibility and suggested that he was less likely than otherwise to have allowed the agency to become involved in an anti-competitive agreement. It was also relevant that he had chosen to give evidence and subject himself to cross-examination. However, the evidence relied on by the CMA established his knowledge of, and involvement in, the breach of competition law. His own evidence was undermined by his cherry-picking of material from the documentation to support his defence; his preference for arguing his case over giving evidence of what he remembered; his minimisation of his role in, and knowledge of, the business; and his lack of engagement with the fact that, on his own evidence, he was directly involved with the subject of commission. On the balance of probabilities, he knew that the agency's employees were negotiating a cartel agreement. That knowledge meant that his failure to inform the board, or to take all possible steps to prevent the formation and implementation of such an agreement, amounted to misconduct. A director in possession of such knowledge had to take all reasonable steps to ensure that the company did not enter into an anti-competitive agreement, and M's failure to do so meant that he breached his duties as a director (paras 26-27, 31, 94-98).
Fitness to be concerned in management - Although M was not directly involved in the cartel activity, his conduct fell below the standards of probity and competence required of directors, making him unfit to be concerned in the management of a company. There were no extenuating circumstances (paras 99-100).
Disqualification - Section 9A(1) provided that the court "must" make a disqualification order following a finding of unfitness. The language of the subsection was unambiguous and mandatory and, on its traditional construction, "must" meant "must". Although ECHR art.8 was engaged on the basis that a disqualification order interfered with a person's professional life and reputation, the rights conferred by art.8 were qualified, and their restriction was justified and proportionate. Disqualification aimed to protect the public from misconduct, to act as a deterrent, and to maintain or improve standards of corporate management. Each of those aims was legitimate and capable of justifying the restrictions imposed by a disqualification order, and Parliament enjoyed a wide margin of appreciation when choosing the means of enforcing them. On the traditional construction of "must" in s.9A, proportionality was achieved by the exercise of the court's discretion in terms of the period of disqualification, and by the court's power to grant leave to act, whereupon it would balance the individual's art.8 rights against the aims of disqualification for the benefit of the public (paras 102, 110).
Outcome - Taking a broad-brush approach within the parameters of the brackets identified in Sevenoaks Stationers (Retail) Ltd, Re  Ch. 164 and the guidance given in Westmid Packing Services Ltd (No.2), Re  2 All E.R. 124, M would be disqualified for seven years, Sevenoaks and Westmid followed. His conduct fell into the middle rather than the higher of the three Sevenoaks brackets: although he knew of the cartel and took no steps to stop it, he was not at the forefront of its organisation and implementation; he had been a director for many years and was of previous good character, and he had now retired by reason of ill health (paras 111-112, 116-122).