The recent Supreme Court decision in Canada Square Operations Ltd v Potter  UKSC 41 is likely to impact claimants beyond PPI claims who intend to rely on the ground of deliberate concealment to extend the limitation period in fraud claims.
The Supreme Court clarified the meaning of the phrase "deliberately concealed" in the context of section 32(1)(b) of the Limitation Act 1980 (the Limitation Act) – an extension to the usual 6-year limitation period. The Supreme Court provided much needed clarity and unanimously held that what is required in order to extend the limitation period under section 32(1)(b) of the Limitation Act – as explained by Lord Scott in Cave v Robinson Jarvis & Rolf  UKHL 18 – is: (a) a fact relevant to the claimant's cause of action; (b) the concealment of that fact by the defendant (either by taking active steps to hide it or by failing to disclose it); and (c) an intention on the part of the defendant to conceal that fact. Importantly, section 32(1)(b) of the Limitation Act does not contain a requirement that the concealment of the relevant fact must be in breach of either an existing legal duty, or a duty arising from a combination of utility and morality.
In relation to section 32(2) of the Limitation Act, the Supreme Court re-affirmed that intention is crucial: the defendant must know it is committing a breach of duty or intends to commit the breach of duty. Deliberate intention does not include "reckless" and nor does it include a defendant's awareness that it is exposed to a claim.
On 26 July 2006, Mrs Potter entered into a credit agreement with Canada Square. The agreement was a credit agreement under the Consumer Credit Act 1974 (1974 Act). Mrs Potter had also purchased a PPI policy to cover repayments under the loan. Over 95% of the PPI was paid to Canada Square as commission on the PPI policy. Canada Square did not inform Mrs Potter it would receive or retain commission on the PPI policy that she had bought until November 2018.
Mrs Potter commenced proceedings against Canada Square on the basis that its failure to disclose the substantial commission rendered the relationship between them "unfair" within the meaning of section 140A of the 1974 Act. Canada Square argued that Mrs Potter's claim was time barred under section 9 of the Limitation Act. Relying on section 32(1)(b) and section 32(2) of the Limitation Act, Mrs Potter argued that her claim was not time barred because the limitation period did not start to run until she found out about the commission after taking legal advice in November 2018. Canada Square's appeals to the High Court and Court of Appeal were unsuccessful.
Section 32, Legislation Act 1980
S.32 (1): Subject to [...] below, where in the case of any action for which a period of limitation is prescribed by this Act, either—
(a) the action is based upon the fraud of the defendant; or
(b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant;
[...]the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.
S.32 (2): For the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.
A claimant who wishes to rely on section 32(1)(b) to defeat a limitation defence must prove that a fact relevant to the claimant's right of action was deliberately concealed from them by the defendant. The Supreme Court held that:
- A fact is concealed if the defendant has kept it secret from the claimant, either by taking active steps to hide it or by failing to disclose it. The claimant does not need to show that the defendant was under a legal, moral or social duty to disclose the fact, nor do they need to show that the defendant knew the fact was relevant to the claimant's right of action;
- The defendant's concealment of a relevant fact will be deliberate if the defendant intended to conceal the fact in question. The Supreme Court rejected the Court of Appeal's finding that "deliberately" can also mean "recklessly" in this context.
The Supreme Court held that the existence and amount of the commission were facts Mrs Potter needed to know in order to bring her claim under section 140A of the 1974 Act.
The Supreme Court also rejected the reasoning of the Court of Appeal in Williams v Fanshaw Porter & Hazelhurst  EWCA Civ 157 and AIC Ltd v ITS Testing Services (UK) Ltd (The Kriti Palm)  EWCA Civ 1601 which read section 32(1)(b) of the Limitation Act as containing a requirement that the concealment of the relevant fact must be in breach of either an existing legal duty, or a duty arising from a combination of utility and morality.
Although section 140A was not in force at the time that the PPI Policy was entered, Canada Square continued to withhold the information from Mrs Potter following the introduction of section 140A in respect of pre-existing agreements. Thereafter, the credit agreement remained in force and the commission continued to be paid to Canada Square. Mrs Potter did not discover the existence (or value) of the commission until November 2018, shortly before commencing proceedings. The Supreme Court accordingly agreed that Mrs Potter could not have with reasonable diligence discovered the commission any earlier. The requirements of section 32(1)(b) of the Limitation Act were therefore met and Mrs Potter's claim against Canada Square was not time barred.
See here for a case analysis in which the court held a similar claim based on concealment was time-barred and not protected under section 32(1)(b) given the irrelevance of the allegedly concealed facts to the claimant's right to bring an action.
In relation to section 32(2) of the Limitation Act, the Supreme Court held (and reapplied existing authority) that it must be shown that "the defendant knew he was committing a breach of duty or intended to commit the breach of duty".
The Supreme Court held that a claimant who wishes to rely on section 32(2) must show that the defendant knew it was committing a breach of duty or intended to commit a breach of duty. It rejected the submission that "deliberate" included reckless. The words "deliberately" and "concealed" must be given their ordinary meanings. The Supreme Court found that "deliberate commission of a breach of duty" are clear words in English: they mean that the defendant knows it is committing a breach of duty.
The test was not met in the present case. Although Canada Square had deliberately decided not to disclose the commission and must have been aware that there was a risk that by doing so, it was making its relationship with Mrs Potter unfair within the meaning of section 140A of the 1974 Act, it has not been shown that Canada Square knew or intended that the nondisclosure would have that effect.
Accordingly, the Supreme Court disagreed with the reasoning of the Court of Appeal but not the outcome. The Court of Appeal was correct to hold that Canada Square was deprived of a limitation defence by the operation of section 32(1)(b) of the Limitation Act, although wrongly held that the defendant was also deprived of such a defence by the operation of section 32(2). Regardless, Mrs Potter's claim was not time barred and Canada Square's appeal was dismissed.
- Fraud / secondary liability claims: by removing the requirement for the defendant to be under a duty to disclose the relevant facts (as previously established in Williams and The Kriti Palm), the Supreme Court has widened the scope for the application of section 32(1)(b). This makes it easier for claimants bringing claims and who seek to rely on deliberate concealment to extend the usual 6-year limitation period. This will be of utility to claimants who may not be able to rely on section 32(1)(a) because (i) their claim in fraud is not yet fully developed / made out; and / or (ii) they have non-fraud claims against the defendant (e.g. procuring a breach of contract).
- Intention: In contrast, by rejecting that 'deliberately' could include 'recklessly' (both in the context of a 'deliberate concealment' and 'deliberate concealment of a breach of duty') the Supreme Court has narrowed the potential application of sections 32(1)(b) and 32(2). This return to the ordinary and natural meaning of the words will provide particular comfort to professionals and their insurers who will not be held to account for the pure recklessness of their or their employees' actions resulting in a breach of duty.
- PPI claims: Mrs Potter's claim was a test case – given the favourable decision by the Supreme Court, PPI commission claims based on materially similar facts may proceed through the courts on the basis they are not time barred. However, Mrs Potter's claim was issued in 2018. Banks may draw the distinction between Mrs Potter's claim and those claims issued from 2020 onwards (i.e. 6 years following the Plevin v Paragon Personal Finance Limited  UKSC 61 judgment regarding undisclosed PPI commissions). Banks will also likely point to the media coverage of the PPI scandal in the early 2010s as a basis that claimants could have with reasonable diligence discovered the concealment earlier.
With thanks to Nisha Patel for her assistance in preparing this post.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.