Skeletons in the closet: Supreme Court clarifies the meaning of "deliberate concealment" in the context of the Limitation Act 1980

02 February 2024

Introduction

The Supreme Court's judgment in Canada Square Operations Ltd v Potter [2023] UKSC 41 provides welcome clarity on the meaning of "deliberate concealment" in the context of s32 Limitation Act 1980 (the "Act").

The Supreme Court's judgment, which overturns previous appellate authority, provides that a fact will have been "concealed" if the Defendant has kept it secret from a Claimant, either by taking active steps to hide it or by failing to disclose it, whether or not in breach of a duty to share the fact with the Claimant. Such concealment will have happened "deliberately", in the Supreme Court's view, if a Defendant (or their agent) intended to conceal the relevant fact. It is important to note that, in making this finding, the Supreme Court expressly rejected the Jay J's finding on appeal that the term "deliberately" also meant recklessly in this context.

Summary of the relevant legislation

Section 32(1)(b) of the Act postpones the commencement of the limitation period where any fact relevant to a 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 by the Claimant.

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

Key takeaways

The Supreme Court's literal interpretation of the words "deliberate" and "concealment" provides welcome clarity both within the context of unfair commission claims, and more generally, when considering time limits under the Act. It also represents a return to a literalist approach to construction of section 32 of the Act and a move away from preceding case law which had taken a broader approach to the interpretation thereof, including by Jay J on appeal in the instant proceedings. This is likely to be welcomed by both professionals and insurers. In the context of PPI mis-selling claims more specifically, the judgment is likely to permit a very significant number of further claims to be pursued that would otherwise have been time-barred; it is estimated there are over 20,000 claims which may now be pursued. Of course, the Supreme Court's findings are not limited to claims arising from mis-sold PPI; it will be equally applicable to claims arising from other transactions where commission structures are involved (e.g. vehicle finance, or mortgage finance).

Background

In July 2006, Mrs Potter entered into a loan agreement with Canada Square Operations Ltd ("Canada Square"), which was a credit agreement within the meaning of the Consumer Credit Act 1974 (the "CCA"). Mrs Potter also took out a linked PPI policy to cover repayments under the loan. Canada Square ultimately received over 95% of the premium in respect of the PPI policy in commission, with only £182.50 being paid to the insurer. Canada Square did not inform Mrs Potter of the commission structure at the time the PPI policy was taken out. Mrs Potter only found out about it in 2018.

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 December 2018, Mrs Potter brought proceedings against Canada Square to recover the amounts she had paid to Canada Square in respect of the PPI policy (less the compensation received) on the grounds that non-disclosure of the commission meant her relationship with Canada Square was "unfair" for the purposes of the CCA.

Canada Square defended Mrs Potter's claim on the basis that it was time-barred pursuant to section 9 of the Act (i.e., that it was issued more than six years after the cause of action accrued). In response, Mrs Potter argued that by virtue of section 32 of the Act the limitation period had been postponed until she found out about the fact of the undisclosed commission in 2018.

Judgments to date

At first instance, the Court agreed with Mrs Potter's argument that section 32 of the Act applied. Thereafter, this decision was upheld on appeal before the High Court. In the latter case, Jay J held that Mrs Potter could rely on both section 32(1)(b) and 32(2) of the Act to postpone the commencement of the limitation period. Notably, Jay J held that a reckless breach of duty was sufficient to postpone the limitation period under the Act. Canada Square subsequently appealed to the Supreme Court.

The Supreme Court's decision

The Supreme Court¹ determined that:

A fact will have been "concealed" if the Defendant has failed to disclose it, whether or not it did so in breach of a legal duty, or a duty arising from a combination of utility and morality. This decision represents a departure from previous appellate authority, including Jay J's decision on appeal in the instant proceedings;
Concealment of a fact relevant to a Claimant's case will be "deliberate" if the Defendant intentionally concealed that fact. Canada Square made the conscious decision not to disclose the commission to Mrs Potter, amounting to a deliberate concealment². However, the Supreme Court rejected Jay J's finding on appeal that a "deliberate" concealment can also include one that is reckless; and
The Defendant need not know that the fact which is deliberately concealed is, in fact, relevant to the Claimant's right of action.³

The Supreme Court also determined that, although the creation of an unfair relationship for the purposes of the CCA would amount to a breach of duty for the purposes of section 32(2) of the Act, if the Defendant knows it is committing, or intended to commit, a breach of duty (again, recklessness being insufficient for these purposes), it could not be shown that Canada Square did, in fact, know or intend that its concealment would create an unfair relationship. The Supreme Court found that there was no evidence that Canada Square was aware of the legal test for unfairness under the CCA, or that it deliberately set out to create an unfair relationship by concealing the commission. Therefore, the Claimant could not rely on section 32(2) of the Act to postpone the limitation period, but only on section 32(1)(b) of the Act, which applied on the facts.

¹ The leading judgment being provided by Lady Justice Rose with whom Lord Justices Sales and Flaux agreed.

² At [171] Lord Sales notes: "The bank's decision not to disclose the commission was plainly deliberate. The bank thought about disclosing but decided not to do so. It is obvious that a decision was made at a senior level within the bank that the extraordinary level of commission should not be disclosed to customers; that salesmen and account managers were instructed accordingly; that documentation was prepared in a way which ensured that there was no mention of commission, let alone its amount; that the bank knew that disclosure of the commission would cause enormous customer dissatisfaction (and, in the case of new business, would mean that the customer would be unlikely to proceed); and that the bank's decision not to disclose was made in order to safeguard this very lucrative business. Any other view defies common sense."

³ At [176] Lord Sales notes: "it is not necessary that the defendant should know that the fact is relevant or even that the claimant has a right of action. It is sufficient, and accords with the purpose of section 32, that the defendant deliberately ensures that the claimant does not know about the fact in question and therefore cannot bring proceedings within the primary limitation period."