The Civil Division of the Court of Appeal handed down judgment in the case of Safeway Stores Limited and Others v Twigger and Others [2010] EWCA Civ 1472 on 21st December 2010. The Court was asked to address one issue: whether an undertaking which has infringed provisions of the Competition Act 1998 relating to anti-competitive activity can recover any penalties from any directors or employees actually responsible for the infringement.

Following an inquiry by the Office of Fair Trading (OFT) launched in January 2005, the appellants, a number of supermarkets and dairy processors, admitted to having infringed the prohibitions contained in section 2 of the Competition Act 1998 through the repeated exchange of commercially sensitive retail pricing intentions, and the OFT indicated that it would impose a penalty under section 36 of the Act. It was the appellants’ case that in participating, facilitating and/or failing to report the initiatives, each of the defendants was in breach of his or her contract of employment and/or fiduciary duties and this had caused the appellants to suffer loss and damages, chiefly through exposure to the OFT penalty, but also to costs arising from the investigation.

The High Court had found in favour of the respondents that the contraventions of the Competition Act were sufficiently serious to trigger the maxim ex turpi causa; one cannot recover for damage which is the consequence of one’s own wrongful act, and that a penalty under section 36 of the Act was akin to a fine. The question for the Court of Appeal was whether this maxim could be applied to preclude recovery of a penalty from the very employees and directors whose conduct had created the liability. The Court found that liability was not vicarious in nature, but personal to the undertaking having infringed, and thus it was immaterial whether the respondents were the “directing mind and will” of the company. Furthermore, the principle whereby acts of an agent in breach of his duty to his principal, and which result in harm to that principal cannot be attributed to that principal, could not apply. It was important that consistency between criminal and civil liability be maintained, and the statutory scheme itself had attributed responsibility to the appellants.

Finally, Lord Justice Longmore, delivering the leading judgment, held that while orders for costs before discontinuance remain in effect, this is qualified by Part 38 of the Civil Procedure Rules which provides that the defendant may apply to have the notice set aside, and a discontinuance could not preclude the court from making any such order it thinks appropriate to the costs of the appeal.

The appeal was therefore allowed and summary judgment granted.