In The Zephyr 1, discussed in a previous issue2, Hobhouse, J., held a firm of Lloyd’s brokers liable in negligence to reinsurance underwriters who had signed a slip in reliance on an indication, given by the member of the firm presenting it, that he would take steps to procure that the slip “signed down”, viz. would procure further signatures to reduce the nominal exposure of those to whom the assurance was given. The brokers were acting as agents of the underwriters to be reinsured (the “all risks” underwriters) and hence not in an agency relationship with the reinsuring underwriters. Hobhouse, J., specifically rejected the notion of an independent contract between the brokers and the reinsuring underwriters that in return for the signature the broker would use best endeavours, and found a liability on an “assumpsit duty” in tort.

The case was recently taken to appeal in respect of the decisions in favour of two underwriting syndicates who had not received specific signing down indications, but who were held by the judge nevertheless to have relied on implied indications, partly derived from a signature already on the slip. The appeal was allowed in these cases3.

This does not of itself affect the law laid down at first instance regarding the duty of care owed by the brokers to those to whom they had given specific assurances. But Mustill, L.J., expressed serious doubts as to whether such liability truly lay in tort. He suggested that the true fault of the broker lay in a continuing failure to perform a positive undertaking, which was to use reasonable endeavours to procure further signatures. He would have been willing to find a contractual obligation in this case as regards those to whom specific assurances were given. But he was of the opinion that had there been no contractual obligation, any duty in tort would have been in respect of a gratuitous promise, and that tort actions should not lie solely for breach of such a promise.

If this is correct (and the relevant passages require and repay careful study) this reasoning sets a limit to one of the channels where the law of tort may be thought to be extending into the contractual sphere. As such it can be regarded as going with other recent cases suggesting limits on tort actions in such situations, such as Tai Hing Cotton Mill Ltd. v. Liu Chong Hing Bank Ltd.4 and The Aliakmon 5; and indeed with other recent cases which more generally suggest caution in the area of tort actions for economic loss caused by negligence, such as The Mineral Transporter 6 and Muirhead v. Industrial Tank Specialities Ltd.7