The Limitation Act 1980 sets out the time limits for bringing different kinds of legal claims. S 32(1)(b) postpones the commencement of the ordinary limitation period by providing that where any fact relevant to the claimant's right of action has been "deliberately concealed" by the defendant, the period of limitation will not begin to run until the discovery of the concealment. S32(2) then goes on to provide that:
"… 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."
Accordingly, a claimant looking to circumnavigate limitation by reference to issues of cover-up had options: alleging one or both of deliberate concealment by the defendant of facts relevant to the cause of action, or deliberate commission of breach of duty in circumstances in which it was unlikely to be discovered for some time.
On 26 July 2006, Mrs Potter entered into a loan agreement with Canada Square which was a credit agreement within the meaning of the Consumer Credit Act 1974 ("CCA"). The total amount of credit was £20,787.24 – a loan of £16,953.00 and a payment protection premium of £3,834.24. Mrs Potter completed the payments under the agreement early, and the agreement came to an end on 8 March 2010.
Mrs Potter had, at the same time as the loan, taken out a payment protection insurance policy (“the PPI policy”) arranged by Canada Square. Canada Square received over 95% of the premium as commission with only £182.50 being paid to the Insurer. Canada Square did not inform Mrs Potter that it was receiving a commission.
In April 2018, Mrs Potter complained to Canada Square that the PPI policy had been mis-sold and she received compensation under a redress scheme. In November 2018 she consulted solicitors and was advised that the amounts she had paid were likely to have included substantial commission.
On 14 December 2018, she issued proceedings to recover the amounts she had paid to Canada Square in respect of the PPI policy (less the compensation received). She argued that the non-disclosure of the commission rendered her relationship with Canada Square "unfair" (as provided by s140A of the CCA) and that she was therefore entitled to remedial orders under s140B.
Canada Square defended the claim on the basis that the proceedings were issued more than six years after the cause of action accrued and were therefore out of time. Mrs Potter sought to rely on s32 of the Limitation Act to postpone the commencement of the limitation period until she took legal advice and found out about the commission.
In the County Court, it was held that s32 applied, and judgment was entered for Mrs Potter. Canada Square's appeals to the High Court and Court of Appeal were unsuccessful. The Court of Appeal held that Mrs Potter could rely on both s32(1)(b) and s32(2) to postpone the commencement of the limitation period. In particular, the Court of Appeal held that a reckless breach of duty was sufficient to postpone the limitation period. Canada Square appealed.
Delivering the unanimous judgment of the Supreme Court dismissing the appeal, Lord Reed considered the application of both s32(1)(b) and s32(2).
Was a fact relevant to the right of action "deliberately concealed" for the purposes of s32(1)(b)?
Looking first at the meaning of "concealed", Lord Reed held that the ordinary meaning of "to conceal" was to keep something secret by taking active steps to hide it or by failing to disclose it. Conscious withholding would suffice.
Departing from earlier case law, Lord Reed held that there was no inherent requirement in the concept of concealment that the defendant was under an obligation to disclose the facts. There was no requirement that the concealment must be in breach of a legal, moral or social obligation. Further, the defendant did not need to know that the fact was relevant to the cause of action. It was sufficient that the defendant deliberately ensured that the claimant did not know about the facts and therefore could not bring the proceedings within the ordinary time limit.
Lord Reed considered that a fact would be "deliberately" concealed if the intended result of the act or omission was the concealment of the fact from the claimant. The defendant must have considered whether to inform the claimant of the relevant fact and decided not to. Lord Reed rejected the contention that "deliberately" could include "recklessly" in this context.
The existence and amount of the commission were facts which were relevant to Mrs Potter's right of action under s140A of CCA as she could not plead her claim without knowing them. Canada Square consciously decided not to disclose the commission to her and therefore "deliberately concealed" those facts from her.
Although s140A was not in force when that decision was taken, Canada Square continued to withhold the information after it came into force and when the credit agreement remained in force and the commission continued to be paid. The concealment was not discovered until November 2018. Accordingly, the requirements of s32(1)(b) were met, commencement of the limitation period was delayed, and the proceedings were issued in time.
Was there a "deliberate" commission of a breach of duty for the purposes of s32(2)?
Canada Square had not appealed the Court of Appeal's finding that the creation of an unfair relationship within the meaning of s140A CCA amounted to a breach of duty for the purposes of s32(2), and therefore the appeal centred on whether the breach of duty was deliberate.
The Supreme Court held that "deliberate" in s32(2) did not include "reckless"; the words had different meanings and were different legal concepts. Nor did it include awareness that the defendant was exposed to a claim. It simply meant that the defendant knew it was committing a breach of duty or intended to commit the breach of duty.
It was conceded that this test was not met. Although Canada Square 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 the claimant "unfair", it had not been shown that Canada Square knew or intended that the nondisclosure would have that effect.
Accordingly, although the failure to disclose the commission gave rise to Mrs Potter’s right of action, and could therefore be regarded as a breach of duty for the purposes of s32(2), it could not be shown that Canada Square knew that it was committing a breach of duty or intended to do so. Canada Square's breach of duty was not "deliberate" and Mrs Potter could not rely on s32(2) to extend the limitation period.
The decision marks a return to the ordinary and natural meaning of the words used in s32, stripping back the nuances and embellishments introduced by case law. It is to be hoped that the clarification provided by this decision will make the wording easier to apply in future cases.
By removing the need for there to a legal duty to disclose the facts, or a duty arising from "a combination of utility and morality" (an uncertain and difficult test to apply in practice), the Supreme Court has widened the scope for the application of s32(1)(b).
For some professions, this may not have much impact in practice in professional negligence cases as a court would likely have found that there was some sort of duty to disclose in any event. The existence of a duty to disclose may nevertheless still have evidential significance in determining whether the concealment was deliberate.
In contrast, by confirming that a reckless breach of duty will not suffice to meet the requirements of s32(2), the Supreme Court has narrowed the potential application of s32(2). The Supreme Court relied on the ordinary meaning of the words. "Deliberate" means "done consciously and intentionally", whereas "reckless" means "without thought or care for the consequences of an action".
Professionals (and other kinds of business who are often defendants to claims) will welcome the Supreme Court's rejection of Mrs Potter's argument that it would suffice for the purposes on s32(2) if the defendant engaged in conduct which it knew would leave it exposed to a claim. Professionals will often know that they are exposed to claims because their work necessarily involves the taking of risks.
Allowing this argument would have resulted in indefinite exposure to stale claims. There is a long history to the troubled development of the law in this regard, and weakening of the test has threatened a weakening of the limitation rules generally. Experience unfortunately shows that claims continue to be contemplated and sometimes brought late, and it is thus important for those facing them that there is no easy workaround and that the right balance is struck between the interests of the claimant and those of the defendant.
The decision is in accordance with the Privy Council decision in Primeo Fund (in Official Liquidation) v Bank of Bermuda (Cayman) Ltd and another, handed down on the same day, which involved similar wording. The Privy Council held that recklessness as to whether a breach of duty had been committed was distinct from a "deliberate" commission of a breach of duty.
The Canada Square decision will have an immediate impact. The case was a test case, with approximately 26,000 active claims of a similar nature awaiting its result.
The return to a simple and literal construction of s32 of Limitation Act 1980, and the clarification that the meaning of deliberate does not include reckless, will be welcomed by professionals and their Insurers.