On 2 July 2021, a seven-judge panel of the UK Supreme Court handed down its judgment in Secretary of State for Health v Servier Laboratories Ltd[1] (“Servier”). The appeal concerned the tort of causing loss by unlawful means (the “unlawful means tort”). This is one of a number of economic torts under English law.

The relevance of these torts as part of the claimant toolkit in cross-border commercial litigation in particular has become evident in recent years. Many disputes from Russia and the CIS rely heavily on economic torts, typically involving the related tort of conspiracy to injure by using unlawful means (the “unlawful means conspiracy tort”). Servier will be of interest in that context as well.

To summarise the Supreme Court’s decision, it maintained the previous landmark decision of the House of Lords in OBG Ltd v Allan[2] (“OBG”), in particular affirming the “dealing requirement” for the unlawful means tort. In doing so, the Supreme Court followed the general policy in OBG of keeping this tort and other economic torts within their proper bounds.

Notably, the Supreme Court did not reconsider the approach to the more typical barriers to this type of claim – proof of intention to cause loss and of unlawful means. OBG remains the leading authority on both those requirements. The former is not as readily amenable to determination on a strike-out application (i.e. on the pleadings, without full factual evidence), while the latter is an area ripe for dispute given the need to show an actionable wrong.

Background

The dispute in Servier arose in the pharmaceutical context and, unusually, involved the Secretary of State for Health and NHS Business Services Authority bringing a claim on behalf of the National Health Service (“NHS”) against Servier Laboratories Ltd and other defendants. The defendants had developed and manufactured perindopril erbumine used in the treatment of cardiovascular diseases, including the treatment of high blood pressure.

The sums in dispute were in excess of £200 million and would have no doubt involved a complex and costly trial. The Supreme Court’s decision puts an end to that claim at a relatively early stage, by upholding the High Court’s decision on 2 August 2017 to strike out the unlawful means tort claim against Servier.

The essential issue on the strike-out application and appeal before the Supreme Court was whether a necessary element of the unlawful means tort is that the unlawful means should have affected the third party’s freedom to deal with the claimant – the so-called “dealing requirement”. Importantly, on the facts, it was common ground that the relevant third parties in Servier had no dealings with the NHS and that, if the dealing requirement is a necessary element of this tort, then the claim was properly struck out by Roth J in the High Court.

The factual premise of the claim was that, as alleged on behalf of the NHS, in obtaining, defending and enforcing a patent, the third defendant practised deceit on the European Patent Office and/or the English courts, with the intention of profiting at the expense of the NHS. The appeal proceeded on the assumption that the factual allegations could be proven true and therefore turned on the legal issue as to the “dealing requirement”.

Decision

In a carefully reasoned and elegant judgment delivered by Lord Hamblen, supplemented by a concurring judgment from Lord Sales, the Supreme Court explored in detail the parameters of the ratio of the House of Lords’ decision in OBG and the wider rationale for the statement of the requirements for this tort and related economic torts in OBG.

The key factors that led the Supreme Court in Servier to affirm the “dealing requirement” for the unlawful means tort were (see paras 63–71):

1. Consistency with Lord Hoffmann’s explanation of the rationale of the unlawful means tort, as articulated in OBG, namely to preserve a person’s liberty to deal with others.
2. Lord Hoffmann’s judgment in OBG regarded the dealing requirement as an essential element of the tort.
3. Recognising the dealing requirement in all cases is consistent with the authorities in which liability for the unlawful means tort has been established, all of which involved dealings with the claimant(s).
4. The dealing requirement is consistent with the concern that the tort be kept within reasonable bounds and that a narrow meaning be given to unlawful means.
5. Lord Hoffmann’s definition of the tort involving a dealing requirement had been supported by other members of the majority in OBG.
6. OBG had been understood to impose a dealing requirement by the English courts and other Commonwealth courts, notably New Zealand, Singapore, Australia and Canada.

A large part of the Supreme Court’s decision was also taken up with consideration of whether there were sound policy reasons for departing from OBG, noting the high hurdle that applies under the 1966 Practice Statement[3]. Lord Hamblen considered this in detail (at paras 82–99). Two observations are worth highlighting:

1. It was said the dealing requirement “performs the valuable function of delineating the degree of connection which is required between the unlawful means used and the damage suffered” and that this is “particularly important in relation to a tort which permits recovery for pure economic loss and, moreover, by persons other than the immediate victim of the wrongful act”: para 94.
2. “The dealing requirement also minimises the danger of there being indeterminate liability to a wide range of claimants”: para 95.

Comment

First and foremost, Servier is a useful and detailed reminder of the origins and proper bounds of the unlawful means tort and related economic torts. That said, the decision should not necessarily be viewed as a narrowing. If anything, it confirms the general understanding of the requirements of the unlawful means tort, both in England and other Commonwealth jurisdictions.

Historically, these types of cases arose from business competition. In OBG, Lord Hoffmann (at para 56) referred to the rationale being “to enforce basic standards of civilised behaviour in economic competition, between traders or between employers and labour”. With that in mind, the decision on the facts of Servier should be unsurprising.

Had the Supreme Court dispensed with the dealing requirement, Servier could have been exposed to claims not just on behalf of the NHS but a large number of other potential claimants. Lord Hamblen referred to “the various UK Health Authorities, generic competitors, private medical insurers, foreign health authorities and indeed individuals who had to pay more for perindopril” (see para 95).

Of wider relevance is the overall conception of this area of law. To draw together key themes:

1. The unlawful means tort requires its own free-standing requirements as a way of properly limiting its ambit. The same is true of the unlawful means conspiracy tort, with its further requirements of (i) agreement or combination and (ii) acting in concert.
2. Importantly, Servier was not concerned with accessory liability in the form of the tort of inducing or procuring breach of contract (also known as the Lumley v Gye[4] tort). It adopted the clear distinction between these two economic torts explained in OBG. The unlawful means tort is a tort of primary liability, whereas inducing breach of breach of contract turns on being an accessory to a proven breach of contract and related loss.
3. Certain aspects of all these economic torts are inherently fact-sensitive in nature and therefore unlikely to be suitable for determination on a strike-out or summary judgment application. The dealing requirement is an exception in that the presence or absence of relevant dealings can be ascertained on relatively limited facts, which are less likely to be in dispute than questions of intention, unlawful means or causation of loss.
4. The upshot is that these torts, while difficult to prove at trial, remain a useful tool in strategic litigation, in particular where the claimant seeks freezing injunctions and other interim relief, including for disclosure as part of wider asset recovery proceedings.

Further developments as to both the unlawful means tort and unlawful means conspiracy tort will no doubt follow. Servier will likely be a notable chapter in this continuing saga.

[1]             [2021] UKSC 24.

[2]             [2007] UKHL 21; [2008] 1 AC 1.

[3]             Practice Statement (Judicial Precedent) [1966] 1 WLR 1234.

[4]             (1853) 2 El & Bl 216; 118 ER 749.