Court of Appeal Strikes Out Claim to Recover Competition Law Fines from Executives

The Court of Appeal has struck out a claim by Safeway to recoup an OFT cartel fine from its former executives.

The case arose from an OFT investigation into collusion between supermarkets and dairy processors in relation to the retail prices of certain dairy products. In 2007, the OFT announced that it had entered into 'early resolution agreements' with several of the parties to the case including Safeway, which involved Safeway admitting its involvement in the infringement in return for a reduction in penalty fine (from around £16.5m to £10.7m).

Safeway, (which was acquired by Morrisons in 2004) subsequently brought a claim to recoup the amount of the OFT fine (as well as costs relating to the legal fees and the OFT investigation) from certain former directors and employees. The former directors and employees applied for the case to be struck out; however, in a preliminary ruling, the High Court held that Safeway had at least an arguable case and that the matter should proceed to trial. That decision was then appealed to the Court of Appeal.

The Court of Appeal handed down its judgment on 21 December (Safeway Stores Limited v Twigger). At issue was the 'not easy' question of whether an undertaking fined for breaching the Competition Act 1998 can recover its penalty from the directors or employees who were responsible for the infringing conduct.

The Court confirmed that where liability of a company for a breach is 'personal', the ex turpi causa maxim applies (i.e. a claimant is prohibited from pursuing a cause of action arising in connection with its own illegal act (including Competition Act infringements)).

In this instance, the Court of Appeal judges were unequivocal that liability for a fine under the Competition Act 1998 is 'personal' to the corporate entity found to have intentionally or negligently breached the Act. There is no element of vicarious...