Safeway Stores Ltd & Ors v Twigger & Ors

The ex turpi causa rule is flexible and policy-based. An unlawful act engages it only where the conduct is sufficiently serious and involves moral turpitude or moral reprehensibility. An undertaking’s liability for anti-competitive conduct does not necessarily make the conduct its personal or primary wrongdoing. Where liability arises through ordinary agency principles, the undertaking may have a claim against employees or agents responsible for the infringement. The Competition Act 1998 does not exclude common-law duties owed by directors and employees to their employer. A claim for recovery of a competition penalty may therefore proceed where the claimant has a real prospect of showing that it was not personally at fault and that the rule does not apply.

The claimant companies sought damages and equitable compensation from former employees and directors. The principal loss claimed was the anticipated penalty which the Office of Fair Trading proposed to impose following admissions that the claimants had infringed the Chapter I prohibition in the Competition Act 1998 by exchanging commercially sensitive pricing information with other businesses.

The defendants applied for summary judgment under Part 24 of the Civil Procedure Rules, alternatively strike-out under Part 3.4(2). They argued that the claim was barred by ex turpi causa and was fundamentally inconsistent with the statutory competition regime. The central issues were whether the alleged infringement was sufficiently serious, whether it was the claimants’ personal wrongdoing, and whether the common-law claims were excluded by Parliament’s competition legislation.

1. The applications were dismissed. The claimants had a real prospect of defeating both the ex turpi causa defence and the argument that the claims were inconsistent with the competition regime.

2. The maxim ex turpi causa non oritur actio expresses a flexible public policy rather than an inflexible rule. In a non-criminal case, conduct must involve moral turpitude or moral reprehensibility before the policy is engaged. Anti-competitive conduct infringing the Chapter I prohibition was sufficiently serious in principle. The OFT penalty was analogous to a fine because it served punitive and deterrent purposes.

3. The relevant question was whether the claimants’ liability was personal or primary, rather than merely liability imposed through agency or vicarious liability. The Competition Act attributed infringement to the undertaking for the purposes of the OFT’s enforcement jurisdiction, but did not determine the separate question whether the undertaking could claim against its employees.

4. On the pleaded case, the defendants had acted as employees or directors in the course of their employment. The alleged conduct was therefore arguably attributable under ordinary agency principles. It was not established on the summary applications that any defendant was the claimants’ directing mind and will, or that the conduct had been approved under the companies’ primary rules of attribution.

5. The fines authorities did not compel a different result. Recovery of a fine or penalty is not necessarily barred where the claimant was not negligent or otherwise personally at fault. The claimants had a real prospect of establishing that their liability was not direct or primary and that they were not personally responsible for the wrongdoing.

6. The claimants also had an arguable alternative case based on the adverse-interest or Hampshire Land principle. On the pleaded allegations that the defendants concealed the initiatives and conspired against the claimants, the principle might apply to conduct as well as knowledge and might extend beyond fraud to breaches of duty. Its application depended on evidence and could not properly be determined summarily.

7. The Competition Act 1998 and Enterprise Act 2002 regulated undertakings and created particular sanctions, but did not exclude ordinary contractual, fiduciary and tortious duties owed by employees and directors. The claim involved established common-law causes of action, not a new competition-law remedy. Passing a penalty to the individuals whose breaches caused it would not frustrate the statutory regime.