Directors, Officers and Employees not Liable for Penalties Imposed by OFT investigation

The Court of Appeal has today unanimously ruled that a corporate undertaking, upon which the OFT had imposed a penalty for breaches of competition law, could not sue its former directors, officers or employees for damages equivalent to that penalty or the costs of the OFT investigation that the claimant had had to bear. The Court of Appeal held that such liabilities were intended, under the relevant statutory scheme of the Competition Act 1998, to be personal to the corporate undertaking and any claim against its directors or employees was barred by the maxim 'ex turpi causa' (i.e. a claimant cannot recover for the consequences of his own criminal or quasi criminal act). As a consequence, the claimants' claims were struck out.

This decision reverses a first instance judgment of the Commercial Court which had held that such a claim was arguable and so should proceed to trial.

The judgment will be welcomed by those individuals occupying senior management positions (and, indeed, less senior positions) in industry and other potentially interested parties such as individuals' D&O insurers.

CMS Cameron McKenna LLP acted for 10 of the 11 defendants in the case.

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Full Article

The Court of Appeal has today unanimously ruled that a corporate undertaking, upon which the OFT had imposed a penalty for breaches of competition law, could not sue its former directors, officers or employees for damages equivalent to that penalty or the costs of the OFT investigation that the claimant had had to bear. The Court of Appeal held that such liabilities were intended, under the relevant statutory scheme of the Competition Act 1998, to be personal to the corporate undertaking and any claim against its directors or employees was barred by the maxim 'ex turpi causa' (i.e. a claimant cannot recover for the consequences of his own criminal or quasi criminal act). As a consequence, the claimants' claims were struck out.

This decision reverses a first instance judgment of the Commercial Court which had held that such a claim was arguable and so should proceed to trial.

The principal question

The backdrop for this claim is the OFT's ongoing dairy investigation.

The Court of Appeal's judgment considers whether, when an undertaking, such as Safeway in this case, infringes provisions of the Competition Act 1998 relating to anti-competitive activities and is duly penalised by the Office of Fair Trading ('OFT'), that undertaking can recover the amount of such penalties as damages from its directors or employees who were themselves (allegedly) responsible for the infringement?

Safeway argued that it could recover these sums. The defendants, on an application to strike out the claims (and thus on assumed facts) argued that any such claim was barred...