Narrow Interpretation of Economic Loss Tort

A panel of seven Justices of the Supreme Court today unanimously dismissed an appeal by the Secretary of State for Health against a Court of Appeal decision which upheld a decision of Roth J to strike out the claim: Secretary of State for Health and another v Servier Laboratories [2019] EWCA Civ 1160 Lord Reed (President), Lord Hodge (Deputy President), Lord Lloyd-Jones, Lord Briggs, Lord Kitchin, Lord Sales, Lord Hamblen

The case concerned the economic tort of causing loss by unlawful means which consisted of acts intended to cause loss to the claimant by interfering with the freedom of a third party in a way which was unlawful and which was intended to cause loss to the claimant.

The issues were (i) whether 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) and (ii) whether the leading case of OBG Ltd v Allan [2007][1] should be departed from.

Giving the main judgment of the court, Lord Hamblen said that the general context to the decision in OBG was that it was seen by the House of Lords as an opportunity to clarify and give coherent shape to the law relating to economic torts, and Lord Hoffmann’s explanation of the essential elements of the unlawful means tort needed to be considered in that context.  It was meant to clarify the law going forward and served a definitional purpose.

The central purpose was to keep the tort within reasonable bounds, not only to stop the notion of unlawful means getting out of hand but also to reflect the policy consideration that this was an area of economic activity the regulation of which the courts recognised should be left largely to Parliament.

Lord Hoffmann considered that the best way to keep the tort within reasonable bounds was through giving a narrow rather than a wide meaning to unlawful means.

That restrictive policy towards economic torts in OBG was reflected not only in its decision as to the elements of the unlawful means tort, but also in its decision on inducing breach of contract and on conversion.

As to the first issue, the dealing requirement was part of the ratio of OBG.  It was consistent with Lord Hoffmann’s rationale of the unlawful means tort and with his definition and was consistent with the authorities in which liability for unlawful means tort had been established.

It also  reflected Lord Hoffmann’s concern that the tort be kept within reasonable bounds and that a narrow meaning be given to unlawful means.  It was not in dispute that the other members of the majority understood Lord Hoffmann’s definition of the tort to include a dealing requirement and they endorsed it.

Furthermore, OBG had been understood to impose a dealing requirement by the courts both in this country and elsewhere in the Commonwealth.

On the second issue, 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, and the appellants were not able to point to any injustice which called for a remedy.

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