Clarity and simplicity for the law on limitation in “concealment” cases
Limitation periods reflect the uncontroversial principle that a defendant should not be exposed to a claim which the claimant has unreasonably delayed in pursuing.
However, what should happen to the limitation period where the defendant is responsible for the claimant’s delay, having concealed the facts underlying the cause of action? This is the issue which is addressed by ss. 32(1)(b) and (2) of the Limitation Act 1980, and which was considered by the Supreme Court in its recent judgment in Canada Square Operations Limited v Potter.
The decision emphasises the need to give the words of s. 32 their ordinary meaning, resulting in an expansion of the scope of s. 32(1)(b) and a narrowing of the scope of s. 32(2). Despite the changes in the interpretation of the provisions, it appears likely that the effects of the decision in practice will likely be relatively limited, with most cases still being likely to be decided as they would have been under the previous caselaw. The Supreme Court’s judgment nevertheless provides welcome clarification on the tests to be applied, and will simplify an area of law which has historically been subject to an array of inconsistent and complex decisions.
Factual and legal background
In 2006, Mrs Potter took out a loan with Canada Square. This was accompanied by a PPI insurance policy. Canada Square did not inform Mrs Potter that over 95% of the cost of the policy was commission payable to them.
In 2014, the Supreme Court handed down judgment in Plevin v Paragon Finance, holding that a party’s failure to disclose commission in this way rendered the parties’ relationship “unfair” under the Consumer Credit Act 1974, such that the other party was entitled to recover the amounts paid.
In 2018, Mrs Potter issued a claim against Canada Square in reliance on the Supreme Court’s decision in Plevin. Canada Square defended the claim on the basis that it was time barred, the relevant relationship having ended over six years before the claim was issued. In reply, Mrs Potter sought to rely on s. 32(1)(b) and 32(2) of the Limitation Act. As to these:
- S. 32(1)(b) postpones the commencement of the limitation period where “any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant” until “the plaintiff has discovered the […] concealment […] or could with reasonable diligence have discovered it”.
- S. 32(2) provides that for these purposes “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”.
The Supreme Court’s judgment
The Supreme Court was required to consider the meaning of the phrases “deliberately concealed” in s. 32(1)(b) and “deliberate commission of a breach of duty” in s. 32(2).
“Concealed”
The Court began by considering the meaning of the word “concealed” in s. 32(1)(b). In a series of previous decisions, the Court of Appeal had held that insofar as the concealment relied on was a withholding of information (as opposed to taking active steps to conceal), the claimant would need to show that the defendant was subject to a duty to disclose the relevant information. This duty did not need to be a legal duty, but rather could be one “arising from a combination of utility and morality”.
The Supreme Court held that this was the wrong approach, noting that it had no basis in the statutory language; a party could perfectly well be said to conceal something which it had no duty to disclose (the Court used the example of an elderly lady hiding her pearls from a burglar). Further, applying this gloss to the statutory language would lead to unwelcome uncertainty and complexity insofar as it would require the Courts to decide in what circumstances a duty in “utility and morality” arose.
The Court also rejected previous Court of Appeal dicta suggesting that concealment required the defendant to know that the facts withheld were relevant to the claimant’s right of action; instead it was sufficient simply that they had withheld the information.
“Deliberately” concealed
The Supreme Court next considered the meaning of “deliberately” concealed in s. 32(1)(b). In this context, having decided (as noted above) that withholding of information would only amount to concealment where there was a duty to disclose, the Court of Appeal had held (on the basis of pre and post-Limitation Act case law, and statutory materials preceding the Limitation Act) that deliberate concealment could exist not only where the defendant had not disclosed a fact which they knew they had a duty to disclose, but also where they had been reckless as to whether they had such a duty.
Given that the Supreme Court had decided that concealment did not require any duty to disclose, it likewise rejected the Court of Appeal’s conclusions regarding recklessness, which were premised on such a duty being required. Looking at the matter afresh, and having also considered the meaning of the word in the context of s. 32(2) (to which most of the previous caselaw was directed – see below), the Court concluded that “deliberately” should bear its ordinary meaning; deliberate concealment therefore required a defendant to intend to withhold the relevant facts from the claimant.
“Deliberate” commission of a breach of duty
Following the Court of Appeal’s decision, it was undisputed that the existence of an unfair relationship under the Consumer Credit Act would give rise to a breach of duty for the purposes of s. 32(2), notwithstanding that the Act was couched in terms of an unfair relationship rather than any breach of duty.
The issue was therefore what mental state the word “deliberate” required on the part of the defendant when committing the relevant breach of duty (on the facts, when performing the act which rendered the relationship unfair i.e., failing to disclose the commission). In this regard, the Court of Appeal had relied on a combination of pre and post-Limitation Act caselaw as well as the parliamentary materials which preceded the Act (as noted above) to decide that the test was met if a defendant was reckless as to whether his actions were in breach of duty; actual knowledge of the breach was not required. For these purposes, the Court of Appeal gave recklessness the meaning given to it in the seminal criminal case of R v G; in order to be reckless, a defendant would need to be subjectively aware they were at risk of breaching the duty, in circumstances where it was objectively unreasonable to take that risk.
The Supreme Court was not persuaded by this analysis, noting that in its view the previous case law did not establish that recklessness was sufficient. The Court also indicated that, in circumstances where the relevant words of the Limitation Act were ordinary words of English with a clear meaning, it was impermissible to rely on the statutory materials which had preceded the act as an aid to interpretation. In what it stated was a return to the ordinary meaning of the statutory words, the Court concluded that deliberate commission of a breach of duty required the defendant to know they were committing a breach of duty.
Decision on the facts
In light of its conclusions, the Cout concluded that Canada Square had deliberately concealed facts underlying Mrs Potter’s right of action from her for the purposes of s. 32(1)(b), having intentionally withheld the amount of the commission. However, Canada Square had not deliberately committed a breach of duty for the purposes of s. 32(2), having been unaware that its failure to disclose the commission would render its relationship with Mrs Potter unfair. The Supreme Court’s decision brings greater clarity and simplicity to the law, by holding that: Following the Supreme Court’s judgment, s. 31(1)(b) is broader in scope, while s. 32(2) is narrower. Whether the new law is favourable to claimants or defendants will vary on a case by case basis, although as a general rule it seems likely that in most cases the result will be the same as previously. Specifically, it appears likely a defendant who withholds information relevant to a right of action for the purposes of s. 32(1)(b) (such that they satisfy the new test) will usually also be acting immorally and with an awareness that the facts are relevant to the right of action (as required under the old test); similarly, for the purposes of s. 32(2), a defendant who is aware that they are at risk of breaching a duty of care in circumstances where it is objectively unreasonable to take that risk (as required by the old test) appears likely to know that they are acting in breach of duty (such that they satisfy the new test). In any event, limitation issues appear likely to be simpler for parties to plead and for the Courts to determine in light of the Supreme Court’s judgment. As was the position under previous caselaw, claimants will frequently be well advised to rely on both limbs of s. 32 in the alternative, with success under either limb being enough to deprive the defendant of its limitation defence. Conclusion
