Safeway v Twigger: Court of Appeal Prohibits Company From Recovering Fine From Its Former Directors and Officers

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On 21 December 2010, the Court of Appeal struck out a claim brought by a company against 11 of its former directors and employees seeking to recover a fine (on the basis these persons breached their duties to the company) levied against it by the Office of Fair Trading (OFT) for breaches of the Competition Act 1998.

This judgment is of particular interest to directors and officers and their insurers as it potentially limits their exposure to claims by companies seeking to recover certain types of fines and penalties that are levied against them.

The Court of Appeal’s findings

In 2007, Safeway admitted certain breaches of the Competition Act 1998 arising out of an exchange of pricing information for dairy products with other supermarkets and dairy producers that led to the price of dairy products increasing. The OFT subsequently informed Safeway that it would impose a substantial penalty against it (subject to a discount reflecting Safeway’s co-operation). Although the amount of the penalty has yet to be decided, it could be in excess of £10 million.

In September 2008, Safeway brought a claim against 11 of its former directors and employees asserting that, as a result of their participation in/facilitation of the anti-competitive behavior, they were in breach of their employment contracts/duties and/or negligent.

It appears to have been recognized in the proceedings that the intention of the claim was to seek to open up Safeway’s D&O insurance policy to recover the penalty imposed and costs incurred by Safeway in connection with the OFT’s investigation.

The former directors and employees applied to strike out the claim against them on the basis of the ex turpi causa principle.

Please see full article below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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