Henderson v Merrett Syndicates Ltd [1994] 3 All ER 506 (HL)

Facts

• The case concerned the collapse of the Lloyd's insurance market, where investors known as "Names" suffered financial losses.
• "Names" participated in underwriting syndicates managed by professional agents, known as managing agents.
• The "Names" alleged that managing agents had breached their duty of care in handling underwriting activities, contributing to their significant losses in the late 1980s.
• The managing agents held dual roles as both contractual agents and providers of professional underwriting services.
• The "Names" claimed reliance on the skill and judgment of the managing agents.
• Legal proceedings focused on whether a duty of care in tort could coexist with contractual obligations in these professional relationships.

Issues

1. Whether a duty of care in tort can coexist with and arise independently from contractual obligations between professionals and their clients.
2. Whether the existence of a contractual relationship precludes the imposition of a concurrent tortious duty of care in cases of professional negligence.
3. Under what circumstances professionals assume responsibility, giving rise to a tortious duty of care alongside contractual duties.

Decision

• The House of Lords held that a duty of care in tort can coexist with contractual obligations, confirming the principle of concurrent liability.
• It was determined that the existence of a contract does not preclude liability in tort where professionals have assumed responsibility and there is foreseeable, reasonable reliance by the client.
• The judgment recognized that managing agents' roles and the reliance placed upon them by "Names" gave rise to a duty of care in tort.
• The "Names" could pursue claims in negligence even where contractual remedies existed.
• The court emphasized that the duty of care in tort could arise independently of contractual terms.

Legal Principles

• Confirmed concurrent liability in both tort and contract in professional relationships.
• Extended the Hedley Byrne principle to include scenarios with direct contractual relationships, provided the necessary elements for a duty of care in tort are satisfied.
• Clarified that assumption of responsibility by the professional and reasonable, foreseeable reliance by the client are key to establishing a duty of care in tort.
• Recognized that the professional nature of the relationship and the natural reliance on skill and judgment can justify tortious liability independent of the contract.

Conclusion

The House of Lords in Henderson v Merrett Syndicates affirmed that a duty of care in tort can exist concurrently with contractual obligations, significantly shaping professional liability by allowing claimants to pursue remedies in both tort and contract when reliance and an assumption of responsibility are established.