The NHS bodies alleged that deception of the European Patent Office and the courts had delayed generic competition and increased their costs. Even assuming the allegations were true, could they sue for the tort of causing loss by unlawful means when those institutions did not deal with them?
The dispute
The Secretary of State for Health and the NHS Business Services Authority fund medicines dispensed by the NHS in England. They also claimed as successors to the rights of action of NHS bodies that had since been abolished. They sued companies in the Servier group for damages and interest in excess of £200 million.
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Servier obtained a European patent, including a UK designation, over a crystalline form of a salt of perindopril. It defended the patent in opposition proceedings and sought to enforce it in the English courts.
In July 2007 Pumfrey J held that the United Kingdom designation was invalid because it lacked novelty or, alternatively, was obvious over another patent. The Court of Appeal upheld that decision in May 2008. In 2009 the European Patent Office’s Technical Board of Appeal revoked the patent.
The claimants alleged that, in obtaining, defending and enforcing the patent, the third respondent had deceived the European Patent Office and the English courts. They said that representations about novelty and lack of obviousness were known to be false, or were made with reckless indifference to their truth. Servier denied the allegations, but they were assumed to be true for the strike-out application. The claimants said that generic manufacturers therefore entered the market later than they otherwise would have done, so prices remained higher and the NHS paid more. The relevant third parties were the patent office and the English courts. There were no dealings between them and the claimants.
The dealing requirement
The claim was for the tort of causing loss by unlawful means. Lord Hamblen took Lord Hoffmann’s description in OBG Ltd v Allan as his starting point: the tort 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. The issue was whether the tort also requires those acts to have affected the third party’s freedom to deal with the claimant. The parties called this the dealing requirement. It was common ground that, if the requirement is necessary, Roth J had properly struck the claim out.
On 2 August 2017 Roth J struck out the claim. He held that the ratio of Lord Hoffmann’s statement of the elements of the tort included the dealing requirement, and that the majority’s concern to keep the tort within careful limits supported that view. He also pointed to the breadth of the liability which the claimants’ case would create, potentially covering United Kingdom health authorities, generic competitors, private medical insurers and, subject to jurisdiction, foreign health authorities and insurers. He considered that allowing a common law claim of this kind would circumvent the statutory patent regime. On 12 July 2019 the Court of Appeal, Sir Terence Etherton MR, Longmore and McCombe LJJ, dismissed the appeal. It held that the dealing requirement was an essential ingredient in all cases, that OBG was binding on the point, and that it would have followed the majority even if not bound to do so.
Why the requirement was binding
Lord Hamblen, with whom Lord Reed, Lord Hodge, Lord Lloyd-Jones, Lord Briggs and Lord Kitchin agreed, held that the dealing requirement is part of the ratio of OBG. The House of Lords had set out to clarify the ingredients of the economic torts. Lord Hoffmann identified the rationale of this tort with Lord Lindley’s explanation in Quinn v Leathem, which focuses on wrongful interference with a person’s liberty to deal with others. His definition of unlawful means excluded acts which may be unlawful against a third party but do not affect that third party’s freedom to deal with the claimant. He explained RCA Corpn v Pollard, Isaac Oren v Red Box Toy Factory Ltd and Lonrho Ltd v Shell Petroleum Co Ltd (No 2) on the basis that no relevant dealings had been affected. Lord Walker, Baroness Hale and Lord Brown understood and endorsed that limit.
The Court rejected the argument that the majority had stated the requirement only for the appeals then before them. The purpose of OBG was to define the tort. It also rejected the submission that the point was not ratio because the appeal in Douglas v Hello! Ltd succeeded on breach of confidence. Lord Hoffmann had addressed the unlawful means claim separately and had made clear that it would fail because nothing had interfered with the Douglases’ liberty to deal with OK!.
Why the Court would not depart from OBG
The claimants asked the Supreme Court to depart from OBG. They argued that it should be enough for a defendant to use a third party as the necessary link between unlawful conduct and loss. This would dispense with the need for interference with the third party’s freedom to deal with the claimant.
Lord Hamblen held that this was not an appropriate case for departing from a relatively recent House of Lords decision. There was some academic criticism, but no real examples of OBG causing difficulty, uncertainty or injustice, or impeding the development of the law. Two of the claimants’ hypothetical examples depended on extending the tort beyond economic loss. That issue did not arise: the claim was for economic loss, and the tort has historically been confined to economic interests. Lord Hamblen also noted that, as the respondents pointed out, the claimant in those examples was likely to have a claim for malicious falsehood and possibly other torts. This case was different again. The alleged lie concerned Servier’s own purported invention, not the claimants or anyone with whom they dealt. Lord Hamblen considered that any damage to the claimants would, in the term used by Lord Lindley, be remote.
The majority in OBG had deliberately used a narrow meaning of unlawful means, including the dealing requirement, to keep the tort within bounds. They had rejected causation as an adequate control and had adopted a broad test of intention, under which harm is intended if it is a means to an end such as enrichment. Removing only the dealing requirement would undermine that balance. The causal chain alleged here was remote: deceit of the patent office or a court, grant of a patent or injunction, generic manufacturers staying out of the market, no competitive reduction in price, and only then higher payments by the NHS. The dealing requirement marks the required connection in a straightforward way and reduces the risk of liability to an indeterminate range of claimants, the risk Roth J had identified.
Lord Sales
Lord Sales agreed that the dealing requirement is part of the ratio of OBG and that no sufficient reason had been shown for departing from it. He added that Revenue and Customs Comrs v Total Network SL has raised questions about how this tort fits with conspiracy to injure by unlawful means, and about related questions of intimidation and accessory liability. He reserved his opinion on those questions, while agreeing that this appeal was not an appropriate case in which to resolve them.
Verdict: The Supreme Court unanimously dismissed the appeal. The dealing requirement was binding and the Court declined to depart from it. The unlawful means claim remained struck out. The Court made no finding that Servier had deceived anyone.
Source: Secretary of State for Health and another v Servier Laboratories Ltd and others [2021] UKSC 24
