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03 Feb 2022

The boundaries of causing loss by unlawful means: Secretary of State for Health v Servier

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In Secretary of State for Health and another v Servier Laboratories Ltd and ors [2021] UKSC 24, the Supreme Court confirmed that the tort of causing loss by unlawful means requires the unlawful means deployed by the defendant to have interfered with a third party's freedom to deal with the claimant specifically. The decision is a restatement and clarification of the House of Lords decision in OBG Ltd v Allan1, and, in particular, the lead judgment of Lord Hoffmann which identified the 'dealing requirement' as an essential component of the tort in order to keep its scope within reasonable bounds.

Background

Servier obtained a UK patent for a drug "perindopril", upheld by the European Patent Office ("EPO"). It defended the validity of the UK patent in English court proceedings, obtaining an interim injunction preventing the sale of generic perindopril. Subsequently, the patent was held invalid on the basis it lacked novelty (with the decision upheld on appeal). In 2009, the EPO revoked the patent.

The NHS claimed that in obtaining, defending and enforcing its patent, Servier had deliberately deceived (the unlawful means) the EPO and/or the English courts (the third parties) with the intention of profiting at the expense of the NHS. Further, but for this deceit, the NHS claimed other manufacturers of generic perindopril would have entered the market sooner and driven down the price the NHS had to pay.

Servier applied to strike out the NHS's claim. For the purposes of the application, the allegations were assumed to be true (notwithstanding that Servier disputed the basis of the claim).

The claim was struck out at first instance on the basis that following OBG Ltd v Allan, the unlawful means must have interfered with a third party's ability to deal with the claimant. It was common ground that here, it had not (the NHS had not dealt with the EPO or the courts). The decision was upheld by the Court of Appeal and was referred to the Supreme Court to determine whether:

  1. OBG established a requirement that the unlawful means deployed by the defendant must have affected the third party's freedom to deal with the claimant specifically (the "dealing requirement"); or, alternatively,
     
  2. to the extent that the dealing requirement did form part of the ratio of OBG, the Supreme Court should depart from it.

The dealing requirement

The Supreme Court upheld the decisions of the courts below and confirmed that the dealing requirement is an essential element of the tort of causing loss by unlawful means following OBG. The leading judgment was delivered by Lord Hamblen, with whom the other Justices agreed (and Lord Sales delivered a short concurring judgment).

In reaching his decision, Lord Hamblen referred to the majority judgments in OBG and, in particular, that of Lord Hoffmann, and identified from those judgments several reasons that the dealing requirement was a condition to establishing the tort:

  1. Lord Hoffmann, in OBG, stated the rationale of the tort to be wrongful interferences with a person's "liberty to deal" with others. As such, the dealing requirement was consistent with the rationale of the unlawful means tort as identified in OBG.
     
  2. Lord Hamblen referred to a passage from Lord Hoffmann's judgment in OBG where he explained that unlawful means consists of "acts intended to cause loss to the claimant by interfering with the freedom of a third party in a way which is unlawful as against that third party and which is intended to cause loss to the claimant." Lord Hoffmann then added that unlawful means does not include "acts which may be unlawful against a third party but which do not affect his freedom to deal with the claimant." Lord Hamblen considered this second passage to be part of the definition of unlawful means, which qualified the first quoted passage.
     
  3. The dealing requirement was consistent with the pre-OBG authorities in which liability for unlawful means had been established.
     
  4. The dealing requirement is consistent with and reflects Lord Hoffmann's concern that the tort be kept within reasonable bounds and that a narrow meaning be given to unlawful means.
     
  5. The other members of the majority in OBG understood Lord Hoffmann's definition of the tort to include a dealing requirement and they endorsed that requirement.
     
  6. OBG has been understood to impose a dealing requirement by the courts both in England and Wales and elsewhere in the Commonwealth, as well as by academic commentators.

The Supreme Court rejected the NHS's submission that, insofar as the majority in OBG had found that there was a dealing requirement, it was only on the facts of those appeals and not of general application. Lord Hamblen noted that the House of Lords had clearly seen their purpose as bringing clarity to the law, defining the elements of the unlawful means tort, and so the judgments were of wider application beyond the facts of the case.

Departing from OBG

A fundamental difficulty faced by the NHS was in establishing that the application was an appropriate case for the Supreme Court to depart from OBG. Lord Hamblen emphasised that the Supreme Court would be circumspect before accepting an invitation to depart from a previous decision in order to protect the role and certainty of precedent. It would only do so where previous decisions were generally thought to be impeding the proper development of the law or to have led to results which were unjust or contrary to public policy.

Whilst the NHS could point to some academic criticism of the decision in OBG, it could not provide any real-life examples of it causing difficulties, creating uncertainty or impeding the development of the law. As such, the alternative formulations of the tort submitted by the NHS were rejected by Lord Hamblen.

Proposed alternatives to the dealing requirement

The NHS proposed three alternatives to the dealing requirement. The Supreme Court rejected these because, fundamentally, they each expanded rather than limited liability in the tort. This was found to be contrary to the policy endorsed by previous authority and this was not an appropriate case in which to challenge that policy. Specifically:

  1. The first alternative was to replace the dealing requirement with a condition that the defendant's conduct 'interfere with actions of the relevant third party in which the claimant has an interest'. This was rejected because it could result in indeterminate liability to a wide range of claimants. The dealing requirement performs a "valuable function" in determining the degree of connection required between the unlawful means used and the damage suffered. This is particularly important given that the tort permits recovery for pure economic loss and by persons other than the immediate victim of the wrongful act.
     
  2. The second alternative involved redefining the tort to cover situations where a defendant deliberately employs means that the law prohibits, whether or not civilly actionable, with the intention of harming the claimant. This was rejected because, without the delimiting factor of the dealing requirement, the tort would operate too broadly. OBG had rejected a narrow and specific test of intention in favour of a wider test that includes intending harm as a means to an end, such as enrichment. This was not an appropriate case to revisit that test and it would not have assisted the NHS in the present case in any event, as it had not pleaded a more specific claim that Servier intended to cause it harm.
     
  3. The final proposal, namely redefining the tort to be made out wherever a defendant employs means that are unlawful (in that they are actionable by a third party) with the intention of harming the claimant, was rejected as a 'more extreme version' of the first alternative.

Conclusion

The decision confirms the criteria which must be satisfied in the tort of causing loss by unlawful means. In particular, it establishes that the dealing requirement remains an essential element of the tort. Lord Hamblen's judgment relies heavily on the same policy basis underpinning OBG, highlighting the practical purpose served by the dealing requirement in limiting the scope of potential claims for economic torts. For now, it remains essential for claimants to demonstrate that the unlawful means have restricted a third party's freedom to deal with them specifically. Absent a good reason (for an example an injustice which cannot otherwise be remedied), it seems unlikely that the boundaries of this tort will be further expanded in the near future.

 

1 [2007] UKHL 21

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