Supreme Court, deliberate concealment and limitation periods

On 15 November 2023, the Supreme Court rejected the final appeal from a commercial lender on the interpretation of section 32 of the Limitation Act 1980 on postponement of the commencement of the limitation period in the case of fraud, concealment or mistake in Canada Square Operations Ltd v Potter [2023] UKSC 41.

Delivering the unanimous decision of the Supreme Court, Lord Reed analysed the development of the law on limitation and found that case law on section 32 of the Limitation Act 1980 (the Act) had “travelled a long way from the statutory language”. Applying the original statutory language, it was held that there had been straight forward, deliberate, concealment of facts relevant to a cause of action such that section 32(1)(b) of the Act operated to postpone the commencement of the relevant limitation period, but the defendant’s conduct did not amount to a deliberate breach of duty for the purposes of section 32(2) of the Act.

Background

In 2006, the claimant, Mrs Potter, took a loan out to which the Consumer Credit Act 1974 (CAA) applied.  The loan consisted of a sum of £16,953 and a payment protection premium of £3,834.24.  Only £182.50 of the premium went to the Insurer, with the balance being retained by the defendant, then Egg Banking, in their role as insurance intermediary.  The loan was repaid early in 2010.  In 2018, following the decision in Plevin v Paragon Personal Finance Ltd [2014] UKSC 61 allowing claims to be made for compensation under section 140A CCA for “unfair” commissions, the claimant took advantage of a PPI redress scheme and was paid compensation. 

On taking legal advice on the discrepancy between the modest compensation and significant commission retained by the defendant, the claimant initiated legal proceedings to seek the balance of the commission under section 140A CCA.  The defendant denied the claim on the sole basis that it had been brought outside the 6-year limitation period for such claims. The claimant relied on sections 32(1)(b) and 32(2) of the Act, arguing that the commencement of the limitation period was postponed until she became aware of the “unfair” commission in 2018.  The County Court agreed with the claimant and gave judgment in her favour.  The appeals by the defendant to the High Court and Court of Appeal were rejected.

Questions before the Supreme Court

Section 32(1)(b) provides that the commencement of a limitation period will be postponed until the discovery of a concealment where any fact relevant to the cause of action has been deliberately concealed from the claimant by the defendant.

Section 32(2) provides that the deliberate commission of a breach of duty in circumstances where it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty for the purposes of section 32(1)(b).

The questions to be addressed were:

1. In relation to section 32(1)(b):
   1. whether a duty of disclosure was necessary for non-disclosure to amount to concealment; and,
   2. whether reckless non-disclosure was sufficient for a finding of deliberate concealment.
2. In relation to section 32(2) whether reckless conduct was sufficient for breach of duty.

Section 32(1)(b) and duty of disclosure and reckless concealment

Lord Reed reviewed the development of the law of limitation and postponement of the commencement of limitation periods for fraud, concealment or mistake, noting that the Act was a consolidating Act providing a clean starting point on this point and that the relevant sections should be interpreted applying the ordinary meaning of the words use in them. 

In considering the meaning of concealment under the Act, he rejected the notion that there needed to be an obligation, whether legal, moral, or social, favouring the ordinary meaning of conceal, which he took to be to keep something secret, whether actively or by omission.  Neither was it necessary for the defendant to know that the relevant fact concealed was material to a cause of action, just that the relevant fact was concealed.  Lord Reed summarised that section 32(1)(b) requires:

• A fact relevant to a cause of action;
• Concealment of that fact by the defendant either by a positive act of concealment or the withholding of information; and,
• Intention to conceal that fact.

The Supreme Court rejected the Court of Appeal’s finding that, when determining whether a relevant fact has been deliberately concealed, “deliberately” can also mean “recklessly”, finding instead that “deliberate” requires an intention to conceal, or a decision not to inform.  The deliberate decision, taken in this case by the defendant, was their decision not to inform the claimant of the existence and amount of their commission, without which she was unable to plead her case under section 140 of the CCA.

Although section 140A was not in force when the defendant initially decided not to disclose the commission, they had continued to withhold disclosure after it came into force. The claimant did not discover the concealment until November 2018. In the circumstances, the requirements of section 32(1)(b) had been met and the limitation period had not begun until November 2018; she had therefore issued proceedings in time.

Section 32(2) and reckless conduct

In finding that reckless conduct was a different legal concept to the deliberate commission of a breach of duty, the Supreme Court held that there had not been a deliberate breach of a duty in this case for the purposes of section 32(2).  It had not been shown that the defendant knew, or intended that, its failure to disclose the commission would render their relationship with the claimant “unfair” within the meaning of section 140A of the CCA.

An instructive example of the operation of the two Limitation Act sections was provided by the judgment.  For an example of section 32(1)(b) deliberate concealment, a builder was described who knowingly conceals from a purchaser that the foundations of the building being acquired were defective, either by covering up (a positive act) or not informing the purchaser (omission).  For an example of section 32(2) deliberate commission of a breach of duty unlikely to be discovered, a builder was described who knowingly constructed a defective foundation knowing it would be covered up and concealed from the purchaser.

Comment

This decision opens the gates for 26,000 similar claims allowing a significant post-script to the saga of PPI claims, the majority of which were previously thought to have been statute barred.

The Supreme Court’s careful analysis of the statute, stripping away the unnecessary additional layers of interpretation by the lower courts, provides clarity on how this section of the Limitation Act should be applied, as well as, potentially, other consolidating statutes. Confirmation that concealment for the purposes of s.32 does not require there to have been a pre-existing duty to disclose widens the scope for claims, although the rejection of the notion that “reckless” concealment is sufficient has the opposite effect.