The dealing requirement: an essential element of the tort of causing loss by unlawful means

Secretary of State for Health and another v Servier Laboratories Ltd and others [2021] UKSC 24

In Secretary of State for Health and another v Servier Laboratories Ltd and others, 1 the Supreme Court confirmed that an essential element of the tort of causing loss by unlawful means (the "unlawful means tort") is that the unlawful means in question should have affected a third party's freedom to deal with the claimant (the "dealing requirement"). It was held that the dealing requirement was a part of the ratio of the seminal House of Lords decision in OBG Ltd v Allan2 and there was no good or sufficient reason raised to justify a departure from that decision.

The Supreme Court's judgment identifies the policy decision made in OBG with respect to the dealing requirement—highlighting its role as a control mechanism to prevent the unlawful means tort from becoming too expansive and creating potentially indeterminate liability. In turn, Servier raised questions as to whether an alternative control mechanism should be introduced, and whether the approach set down in OBG is here to stay.

Background

Servier concerned a patent relating to "perindopril", a medicinal product used for the treatment of cardiovascular diseases. In 2004, Les Laboratoires Servier SAS ("LLS") was granted a patent for the alpha crystalline form of the perindopril salt (the "947 Patent") by the European Patent Office ("EPO"). Servier Laboratories Limited ("SLL"), the first respondent, was the exclusive licensee under the UK designation of the 947 Patent. In the years that followed, LLS and SLL defended and enforced the UK designation of the 947 Patent in proceedings before the English courts, including by obtaining injunctions against other pharmaceutical companies. However, in 2007 the English court held that the UK designation of the 947 Patent was invalid due to its lack of novelty (or alternatively, it being obvious over another existing patent). In 2008, the Court of Appeal upheld this decision, and in 2009, the EPO revoked the 947 Patent.

The Secretary of State for Health and the NHS Business Services Authority, who fund the cost of medicine dispensed by the NHS, and who were successors in title to the rights of action of various NHS bodies that have since been abolished, were the appellants and claimants in the proceedings. The basis of the appellants' unlawful means tort claim was that in obtaining, defending and enforcing the patent, LLS used unlawful means by practising deceit on the EPO and the courts (the relevant third parties) regarding the novelty and lack of obviousness of the 947 Patent, with the intention of profiting at the claimants' expense. The appellants alleged that manufacturers of a more generic form of perindopril were delayed in entering the market as a result of the respondents' deceit, and as such, the appellants had to pay higher prices for the product.

The unlawful means tort claim was struck-out at first instance. The deceit, although denied by the defendants, was assumed to be true for the sake of the strike-out application, with the Court rejecting the claim on the basis that the dealing requirement is an essential element of the tort, and there had been no dealings between the claimants and the EPO or the English courts with which the defendants could have interfered. The subsequent appeal was also dismissed.

The appellants' case before the Supreme Court was that (i) the dealing requirement should not be treated as a part of the ratio of OBG, and (ii) alternatively, the Court should depart from OBG on the basis that the dealing requirement is an undesirable and unnecessary addition to the essential elements of the tort.

OBG

The Supreme Court's finding in Servier that the dealing requirement was a part of the ratio of OBG seems fairly uncontroversial.

It is true that Lord Hoffmann's initial summary of the tort in OBG did not include a reference to the dealing requirement:

"The essence of the tort therefore appears to be (a) a wrongful interference with the actions of a third party in which the claimant has an economic interest and (b) an intention thereby to cause loss to the claimant."

However, within a few paragraphs, Lord Hoffmann clarified his view that the 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's leading speech in Servier, which had unanimous support, noted that while the authorities prior to OBG did not explicitly hold that the dealing requirement was an essential element of the tort, the purpose of OBG was to clarify and define its requisite elements. Lord Hamblen identified a number of other reasons for finding that the dealing requirement was a part of OBG's ratio, including that:

  • Lord Hoffmann had explained and justified the dealing requirement through his analysis of previous unlawful means tort cases.
  • The dealing requirement was consistent with existing authorities in which liability for the unlawful means tort had been established.
  • The other members of the majority in OBG had understood that Lord Hoffmann's definition of the tort included the dealing requirement.
  • The dealing requirement is consistent with and reflects Lord Hoffmann's concern that the tort should be kept within reasonable bounds.

The final point noted above also proved to be one of the key considerations in the Supreme Court's decision that there was no good or sufficient reason shown in Servier to justify a departure from OBG's decision regarding the dealing requirement.

Alternative approaches

The appellants argued that the dealing requirement was an undesirable addition to the tort as it failed to cater for cases where a defendant may strike at a claimant in a situation where the claimant's interest in the third party's actions derives from something other than commercial or labour relations. The appellants also considered the dealing requirement to be an unnecessary element in the unlawful means tort, putting forward the following alternative approaches that the Court could take (although these were not accepted):

  1. Reject the dealing requirement in favour of the requirement that the defendant's conduct must interfere with actions of the relevant third party in which the claimant has an interest.
  2. Re-define the tort as requiring a defendant to deliberately employ means that the law prohibits (whether or not civilly actionable) with the intention of harming the claimant.
  3. Re-define the tort as requiring a defendant to employ means that are unlawful, in the sense that they are actionable by the third party, or would be if the third party suffered loss, with the intention of harming the claimant.

The first option presented by the appellants is particularly notable as it suggests that the other elements of the tort, as currently defined, would be sufficient in performing a limiting role without recourse to the dealing requirement. The appellants emphasised the "instrumentality requirement" in this respect, describing this as the need for the third party's conduct to form a necessary link in the causal chain between the defendant's conduct and the harm suffered by the claimant, with the result that the defendant uses the third party as an instrument to strike at the claimant.

This argument was rejected on the basis that factual causation would not operate as an appropriate control mechanism—there could be uncertainty as to what would constitute a sufficient causal relationship, potentially leading to claimants establishing remote connections between the unlawful means used and the damage sustained. By contrast, the dealing requirement sets a very clear line.

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