A Fine Way of Fixing It: Civil Liability for Breaches of the Commerce Act 1986

Abstract

Civil action brought by a company seeking to recover a statutory penalty from its employees is an untouched aspect of competition law in New Zealand under the Commerce Act 1986 (“the Act”). The Act’s purpose is to promote competition in the market for the long-term benefit of consumers. Part 2 of the Act, which deals with restrictive trade practices, proscribes certain forms of cartel conduct, and the Court may order any person, whether corporation or individual, who engages in such conduct to pay a pecuniary penalty to the Crown.The Court frequently employs the penalty provisions to punish guilty parties, though in the past the use of corporate penalties has taken precedence over individual penalties. Nevertheless, even in cases where the Court has not imposed individual sanctions, no company has ever attempted to sue its employees to recover the cost of its own penalty under the Act. This was also the case in the United Kingdom, at least until the Court of Appeal decided Safeway Stores Ltd v Twigger (“Safeway”).In Safeway, the claimant company admitted liability for engaging in cartel conduct proscribed by the Competition Act 1998 (“Competition Act”). The Office of Fair Trading (“OFT”) indicated Safeway’s penalty would be in excess of £10 million. In a bid to recover the cost of the penalty, Safeway took action against 11 of its former directors and employees. However, in December 2010, the Court of Appeal dismissed Safeway’s claim on the grounds that it was barred by the public policy underlying the legal maxim ex turpi causa non oritur actio (“ex turpi causa”).The purpose of this paper is to analyse Safeway’s reasoning to determine whether the New Zealand courts would take a similar approach to this type of scenario under the Act.