INTRODUCTION

In July this year, the House of Lords delivered a judgment which could have far-reaching implications for professionals and others engaged in the construction industry. The case, Henderson and Others -V- Merrett Syndicates ([19941 3 AER 506) ,did not concern the construction industry but the Lloyds insurance market. The House of Lords had to consider the position of professionals and quasi-professionals providing services to others, and to analyse the current state of the law.

Prior to the Henderson judgment, many had thought that the Courts were moving to restrict the scope and application of duties in tort, as evidenced by the decision of Murphy -V- Brentwood District Council in 1991. Also in 1986 the Privy Council in the Tai Hing case had indicated that where a contractual relationship existed usually no tortious relationship could exist. However, in the Tai Hing case the question considered by the Privy Council was, strictly, whether a tortious duty of care could be established which was more extensive than that which was provided for under the relevant contract.

It is important, therefore, to look briefly at the factual matrix of the Henderson case.

THE FACTS

Names at Lloyds invest in syndicates. The Names are not allowed to invest directly and must use agents to manage their affairs. The Names enter into an underwriting agency agreement with the Names. If those agents employed by the Names manage the syndicates that the Names invest in, the agents are colloquially termed 'direct' agents. Names may, however, invest in syndicates which are not managed by their own agents but by other agents. In those circumstances, the agents with whom the Names have a direct contractual relationship enter into a sub-agency agreement with the 'indirect' agents.

Many Names suffered heavy losses at Lloyds, alleging that they received bad advice from their agents about which syndicates to join, and that the sub-agents were negligent in underwriting decisions made on their behalf of the syndicates. None of those allegations have so far been proven and the House of Lords decided only whether or not the claims were possible.

The Names had good practical reasons for pursuing claims in tort -if the claims were limited to contractual claims, many would have been time-barred.

THE DECISION

The House of Lords found unanimously for the Names. The principal judgment of the House was given by Lord Goff who had no doubt that where a person (in this case, the indirect agents) assumes responsibility to perform (quasi) professional services for another who relies on those services, the relationship between the parties is itself sufficient to give rise to a duty on the part of the person providing the services to exercise reasonable skill and care. It makes no difference whether or not there is a contract between the parties. If, however, there is a contract, then a concurrent duty of care in tort may be owed by the party providing the service to the other, independent of the contractual relationship.

THE IMPLICATIONS OF THE DECISION

Individuals or firms who are retained under contract to provide professional or quasi-professional services on a construction project may owe a concurrent duty in tort to the person whom they advise. This will be the case unless the contract expressly or impliedly excludes that tortious duty. The benefits to the employer will lie in the greater limitation periods in respect of the tortious claim rather than in respect of any claim under the contract. Although the recent cases are about people who give 'advice', it could also be argued that a contractor, along with duties under his contract, owes duties in tort to his client. The employer relies on the contractor to 'do a good lob'. All the more so in design and build contracts where reliance on the services is more likely to be established.
But what of the further ramifications? Arguably, professionals retained by an employer to provide services in relation to a construction project may be forced to accept that not only will the client rely on their services, but a funding agency or party to whom the building might ultimately be sold or let, will also be relying on the services provided.

Sub-contractors may similarly owe duties to an employer where, as is usual, the employer will directly, or indirectly through the contractor or other professionals, rely on the sub-contractor's service', or the product of those services

The question of a sub contractor 5 liabilities direct to the employer remains to be resolved. Although Henderson suggested that by setting up a contract chain the sub-contractor will not assume a responsibility in tort direct to the employer, in many cases the sub-contractor will have given a direct warranty to the employer. There seems, therefore, no reason to doubt that in principle a duty of care in tort can exist side by side with the warranty. Similarly, and to the extent that the subcontractor provides design skills (in itself a vexed question), then that sub-contractor (domesticated or nominated) may to the extent of the provision of those services owe duties of care in tort to the employer.

CONCLUSION

The Henderson case seeks to lay down a general principle. In the context of a construction project, tortious duties concurrent with contractual duties may exist between the parties to the contract, unless they are excluded. Precisely what will constitute professional or quasi professional services is not entirely certain, but parties providing those services are likely to owe duties of care to anyone who is reasonably likely to rely on the services or the product of the services.

In a construction context, the number of persons with whom a professional or quasi professional is likely to place such a reliance, may be extensive. At a time when the construction industry was reconciling itself to the difficulties in establishing claims in tort, entrenched in the Murphy decision, the House of Lords in Henderson may have reopened the flood gates. Claims in contract which might recently become time-barred may be revisited so that advice can be taken on whether or not a claim in tort may be established.