September 27, 2021
The respondent, Servier Laboratories Ltd, was the owner of a European patent relating to medical drugs. In 2008, the Court of Appeal upheld a challenge to the patent and the patent was then revoked by the EPO Technical Board of Appeal. The Secretary of State for Health (the NHS) claimed damages from Servier based on the unlawful means tort because, the NHS alleged, Servier had obtained the patent from the EPO and subsequently defended it in both the EPO and English courts on the basis of representations as to novelty that it knew to be false or that were made with reckless indifference to their truth. That was said to have caused economic loss to the NHS, as it has not been able to buy cheaper drugs.
The High Court struck out the NHS’s unlawful means tort claim and the Court of Appeal dismissed its appeal. Both courts held that the House of Lords in OBG Ltd v Allan  1 AC 1 had concluded that a necessary element of the unlawful means tort was that the unlawful means should have affected the third party’s freedom to deal with the claimant (the Dealing Requirement). As neither the EPO nor the courts had dealt with the NHS, the courts were both bound by OBG.
The NHS appealed to the Supreme Court, contending that the Dealing Requirement should not be treated as forming part of the ratio of OBG and therefore the courts below were wrong to consider themselves bound by it. Alternatively, it argued that the Supreme Court should depart from OBG and dispense with the Dealing Requirement.
The Supreme Court agreed with the conclusions of the courts below that the Dealing Requirement was part of the ratio of OBG (in which Lord Hoffmann had given the lead judgment) because:
- it was consistent with Lord Hoffmann’s explanation of the rationale of the unlawful means tort, which is to preserve a person’s liberty to deal with others;
- it was clear from Lord Hoffmann’s speech that he regarded the Dealing Requirement as an essential element of the tort;
- Lord Hoffmann had explained and justified the Dealing Requirement through his analysis of several key authorities, all of which he had explained by reference to there being no dealings between the claimant and the third party;
- the Dealing Requirement was consistent with the authorities in which liability for the unlawful means tort had been established, which all involved dealings;
- the Dealing Requirement was consistent with the concern in OBG that the tort be kept within reasonable bounds;
- it was apparent that the other members of the House of Lords had understood Lord Hoffmann’s definition of the tort to include a Dealing Requirement and had endorsed it on that basis; and
- OBG has been understood to impose a Dealing Requirement by the courts both in this country and elsewhere in the Commonwealth.
As for the NHS’s alternative argument, the NHS contended that the Dealing Requirement was an undesirable and unnecessary addition to the essential elements of the unlawful means tort. It was undesirable because it narrowly restricted the interest protected by the tort to the claimant’s economic interest in the third party’s freedom to deal or trade with the claimant. It was unnecessary because the other elements of the tort were adequate, both to explain the existing authorities, and to keep the tort within reasonable bounds. The NHS advanced three alternative approaches as to how the tort could be “refashioned”.
Lord Hamblen found that the NHS was unable to show that this was an appropriate case for the Supreme Court to depart from OBG in accordance with the 1966 Practice Statement  1 WLR 1234. The NHS pointed to some academic criticism of the decisions in OBG, but did not provide any real-life examples of it causing difficulties, creating uncertainty or impeding the development of the law.
As to the NHS’s proposals for refashioning the law, Lord Hamblen found that it had not shown that they were safe and appropriate.
The first alternative, which involved leaving the law as stated in OBG but without the Dealing Requirement, would dispense with the control mechanism that the House of Lords had considered to be both necessary and desirable. Lord Hamblen said that the Dealing Requirement performed the valuable function of delineating the degree of connection that is required between the unlawful means used and the damage suffered. This was particularly important where a tort permitted recovery for pure economic loss and by persons other than the immediate victim of the wrongful act. The Dealing Requirement also minimised the danger of there being indeterminate liability to a wide range of claimants, he said.
The second alternative involved adopting the alternative formulation of the unlawful means proposed in an academic article. As the NHS had not challenged the test of intention in OBG, this was not an appropriate case in which to consider the possibility of adopting that reformulation. Insofar as the NHS argued that only part of this approach should be adopted, Lord Hamblen said that it was incoherent and unsustainable, as the reformulation ought to be considered in its entirety, not on a pick and choose basis.
The NHS’s third alternative, which was based on a decision of the Canadian Supreme Court, was a more extreme version of its first alternative, Lord Hamblen said. As he had rejected the first alternative, this third alternative also had to be rejected.
In summary, Lord Hamblen found that the Dealing Requirement was part of the ratio of OBG and no good or sufficient reason had been shown why the Court should depart from the relatively recent decision of the House of Lords in OBG in accordance with the 1966 Practice Statement. The appeal was dismissed. (Secretary of State for Health v Servier Laboratories Ltd  UKSC 24 (2 July 2021) — to read the judgment in full, click here).