Henderson v Merrett Syndicates [1994] 3 All ER 506

Key points

  • There can be concurrent liability in both tort and contract for the provision of professional services
  • Terms of contract can exclude or regulate tort liability

Facts

  • Cs, investors (known as “names”) in Lloyds Insurance Syndicates brought actions against Ds, the managing agents (underwriters) of the syndicates, for substantial losses

Issues

  1. Whether the existence of a contract between the parties prevented the existence of a concurrent duty in tort
  2. Whether syndicate managers owed a duty of care to the Names

Held (House of Lords)

  • Ds were liable in negligence as they owed a duty of care to Cs

Lord Goff of Chieveley

  • The Hedley Byrne principle extends to provision of services
  • When C entrusts D with the conduct of his affairs, C can be held to have relied on D to exercise due skill and care in such conduct
  • There is no need to explain why it is ‘fair, just and reasonable’ to impose liability for economic loss once case is identified as falling within Hedley Byrne

Lord Browne-Wilkinson

  • Managing directors have duty of care, liable for lack of care in their management
  • The existence of contract does not exclude a general duty of care, much like how it does not exclude fiduciary duties
  • A contract can however modify a duty of care

Commentary

  • An argument made against the ruling is that the claim was opportunistic since the Cs could have sued on contract, but it was more favourable to sue on tort due to limitation rules