SAFEWAY STORES LTD V TWIGGER

[2010] EWHC 11 (Comm), Queen's Bench Division, Commercial Court, Mr Justice Flaux, 15 January 2010

Tort - Ex turpi causa - Claim by employer against employees for indemnity for fines imposed for breach of Competition Act 1998 - Whether claim barred by ex turpi causa principle - Whether claim barred by Competition Act 1998.

This was an application for summary judgment based on assumed facts. Safeway sought damages from ex-employees and ex-directors, following an inquiry by the Office of Fair Trading under the chapter I prohibition in the Competition Act 1998 into information changes for the price of milk which led to price-fixing by supermarkets including Safeway. A settlement was reached with the OFT in which breaches were conceded, and the likely penalty was in excess of £10 million. Safeway argued that each of the defendants was in breach of employment contracts and fiduciary duties in causing Safeway to participate in price-fixing. The defendants argued that Safeway had participated in the illegality, so that the ex turpi causa principle precluded recovery, and that the claim was contrary to the philosophy of the Competition Act 1998. Flaux J held that Safeway's claim should not be struck out for either of these reasons. (1) As to ex turpi causa, the defence could be made out only if the illegality was sufficiently serious, in that it involved moral turpitude or moral reprehensibility, and was committed by Safeway. Infringement of the chapter I prohibition satisfied the first of these conditions, but not the second - Safeway was not itself primarily or personally liable because none of the defendants constituted the controlling mind or will of Safeway. Flaux J also felt that it was arguable that fraudulent conduct was not to be imputed to a principal. (2) Recovery was not inconsistent with the competition regime.