A. Introduction
The UK Supreme Court recently in Secretary of State for Health & Anor v Servier Laboratories Ltd & Ors [2021] UKSC 24 (“Servier Laboratories“) ruled that for an unlawful means tort, it is necessary to prove that the unlawful means have affected the third party’s freedom to deal with the claimant. The UK Supreme Court has referred to this element as the “dealing requirement“.
B. The Unlawful Means Tort
The tort of causing loss by unlawful means, or commonly known as the unlawful means tort, is one of the “economic torts”. Another type of economic tort is the tort of inducing breach of contract. Traditionally, there has been a confusion on the ingredients of these two separate torts.
Comparison between the Unlawful Means Tort and the Tort of Inducing Breach of Contract
Lord Hoffman when delivering the House of Lords judgment in OBG Ltd v Allan [2007] UKHL 21 (“OBG“), identified the four main differences between the tort of unlawful means and the tort of inducing breach of contract. They are as follows.
First, primary vs accessory liability. The unlawful means tort is a tort of primary liability, not requiring a wrongful act by anyone else. On the other hand, the tort of inducing breach of contract creates an accessory liability, dependent upon the primary wrongful act of the contracting party.
Second, degree of unlawfulness. The unlawful means tort requires the use of means which are unlawful under some other rule. On the other hand, the tort of inducing breach of contract requires only the degree of participation in the breach of contract which satisfies the general requirements of accessory liability for the wrongful act of another person.
Third, existence of contractual relations. The liability of unlawful means tort does not depend upon the existence of contractual relations. It is sufficient that the intended consequence of the wrongful act is damage in any form, for instance, claimant’s economic expectations. On the other hand, for tort of inducing breach of contract, the breach of contract is of the essence.
Fourth, different degree of intention. The unlawful means tort does not require an intention to cause a breach of contract or interfere with contractual rights. This is because damage to economic expectations is sufficient to found a claim. On the other hand, the tort of inducing breach of contract requires an intention to cause a breach of contract. The lack of intention to cause damage is irrelevant.
Elements of the Unlawful Means Tort and Tort of Inducing Breach of Contract
Lord Hoffman in OBG then proceeded to address the different elements of the two torts. In relation to the tort of inducing breach of contract, Lord Hoffman stated that its key elements were (i) knowledge that a breach of contract was being induced; (ii) intention to procure a breach of contract as an end or as a means to an end, but not merely as a foreseeable consequence; and (iii) an actual breach of contract.
On the unlawful means tort, Lord Hoffman stated that its key elements were (i) a wrongful interference with the actions of a third party in which the claimant has an economic interest; and (ii) an intention thereby to cause loss to the claimant.
Key Statement by Lord Hoffman in OBG
Lord Hoffman, at paragraph 51 of OBG, set out what ‘unlawful means’ consists of. This is the paragraph which the Supreme Court in Servier Laboratories had to consider when assessing whether or not the dealing requirement is essential in an unlawful means tort. Paragraph 51 of OBG reads as follows:
"Unlawful means therefore 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. It does not in my opinion include acts which may be unlawful against a third party but which do not affect his freedom to deal with the claimant."
C. Background Facts in Servier Laboratories
In Servier Laboratories, the appellants were the funders of the cost of drugs dispensed by the NHS in England and were also the successors in title to the rights of action of various NHS bodies. The respondents developed and manufactured the medicinal product perindopril. The relevant third parties are the European Patent Office (“EPO“) and the English courts.
In 2001, the respondents applied to the EPO for a patent in respect of the alpha crystalline form of the tert-butylamine salt of perindopril. The patent was granted in 2004.
The issue of the validity of the UK designation of the patent went to trial and in July 2007, it was held invalid since it lacked novelty, or alternatively was obvious over another existing patent. The Court of Appeal upheld this decision in 2008. In 2009, the EPO Technical Board of Appeal revoked the patent.
The appellants contend that the respondents practised deceit on the EPO and/or the courts, with the intention of profiting at the expense of the appellants. The appellants contend that as a result of this deceit, the manufacturers of generic perindopril did not enter the market as early as they otherwise would have done. This would have driven down the price of perindopril and this delayed entry into the market meant that the appellants had to pay a higher price for the perindopril.
The appellants’ cause of action against the respondents lies in the unlawful means tort. However, there were no dealings between the appellants and the EPO and/or the English courts as the third parties.
The appellants claimed against the respondents damages and interest in excess of 200 million pounds.
D. Key Issues in Servier Laboratories
There are two key issues in Servier Laboratories.
First Issue: Is the Dealing Requirement Part of the Ratio in OBG?
The first key issue was whether the dealing requirement forms part of the ratio to OBG. To this, the Supreme Court said yes for the following reasons.
First, the dealing requirement is consistent with the rationale of unlawful means tort, which focuses on a person’s liberty or right to deal with others, or wrongful interferences with the liberty to deal.
Second, although Lord Hoffman did not specifically refer to the dealing requirement as one of the elements in para 47 of OBG, he referred to the dealing requirement when explaining what unlawful means consist of, in para 51 of OBG.
Third, the dealing requirement is consistent with and reflects Lord Hoffman’s concern that the tort should be kept within reasonable bounds and that a narrow meaning be given to unlawful means.
Fourth, other members of the majority in OBG understood Lord Hoffman’s definition of the unlawful means tort to include a dealing requirement and they endorsed it.
Fifth, case law in the UK and in other Commonwealth countries subsequent to OBG has applied the dealing requirement as part of the unlawful means tort. Academic commentators also share the view that the dealing requirement is part and parcel of the unlawful means tort.
Second Issue: Should OBG be Departed From?
The second key issue was whether OBG should be departed from.
To succeed in this argument, the appellants need to show that the decision in OBG is 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. This, the Supreme Court said, is a fundamental difficulty for the appellants to show.
The appellants contend that the dealing requirement is undesirable and unnecessary for the unlawful means tort.
It is said to be undesirable because it narrowly restricts the interest protected by the unlawful means tort to only the claimant’s economic interest in the third party’s freedom to deal or trade with the claimant. It fails to cater for the possibility that a defendant may strike at a claimant, not through the claimant’s customers, suppliers, employers or employees, but by other equally damaging means.
It is said to be unnecessary because other elements of the tort are adequate to keep the tort within reasonable bounds. For instance, the defendant must have engaged in conduct that harms the claimant directly, by interfering with the actions of a third party, in which actions the claimant has an interest. This, the appellants contend, forms the causal link between the defendant’s conduct and the harm suffered by the claimant, as a result of the defendant using the third party as an instrument to strike at the claimant.
The appellants then proposed three alternative approaches on how the unlawful means tort can and should be refashioned.
First, to reject the dealing requirement as an element of the unlawful means tort. Instead, the requirement is that the defendant’s conduct must interfere with the actions of the relevant third party in which the claimant has an interest. The Supreme Court in Server Laboratories rejected this approach as it was expressly rejected in OBG. Both Lord Hoffman and Lord Walker stated in OBG that causation could not provide an adequate control mechanism.
Second, to reject the dealing requirement as part and parcel of a redefinition of the tort. Instead, the dealing requirement is made out wherever a defendant deliberately employs means prohibited by law (whether or not civilly actionable), with the intention of harming the claimant. The Supreme Court in Server Laboratories rejected this approach as it is incoherent and unsustainable. This is because this second approach suggests that the liability of unlawful means tort is dependent on whether the defendant has done something which is wrongful for reasons which have nothing to do with the damage inflicted on the claimant.
Third, to reject the dealing requirement as part and parcel of a redefinition of the tort. Instead, the dealing requirement is made out wherever a defendant deliberately employs unlawful means (actionable by a third party, or would be, if the third party had suffered loss), with the intention of harming the claimant. The Supreme Court in Server Laboratories rejected this approach as it is not supported either by authorities or the rationale for imposing liability under the unlawful means tort. This, the Supreme Court said, is in fact a more extreme version of the first approach.
Upon considering the alternative approaches proposed by the appellants, the Supreme Court held that this is not an appropriate case for departure from OBG. Although the appellants can point to some academic criticism of the decision in OBG, the Supreme Court said that the appellants have not provided any real life examples of it causing difficulties, creating uncertainty or impeding the development of the law.
E. Conclusion
It is now clear that the dealing requirement is an essential element of the unlawful means tort. This dealing requirement is critical to confine the tort within a narrow ambit and to minimise the danger of there being indeterminate liability to a wide range of claimants. For instance, if the dealing requirement is held not to be an element of the unlawful means tort by the Supreme Court in Servier Laboratories, it would then follow that other potential claimants, like the UK Health authorities, generic competitors, private medical insurers, foreign health authorities and individuals who had to pay more for perindopril, could bring a claim against the respondents.
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