When can "deliberate concealment" postpone limitation periods?

The Court of Appeal has explored the meaning of "deliberate concealment" in Canada Square Operations Ltd v Potter(1) and has held that there need not be "active steps of concealment" for the start of a limitation period to be delayed under s.32(1)(b) Limitation Act 1980.

Facts

Ms Potter entered into a loan agreement with Canada Square for £16,953 in July 2006. Canada Square suggested that Ms Potter buy a PPI policy to ensure the loan was repaid in the event she could no longer make the payments herself. They acted as intermediary in arranging the policy on Ms Potter's behalf. The "payment protection premium lent" was £3,824 and, given that this sum was added to the loan, interest was charged on this amount at the same rate as for the rest of the loan. Ms Potter completed all payments due and the loan agreement came to an end in March 2010.

In fact, only around £182.50 (4.7%) of the £3,824 paid represented the actual premium. The rest was Canada Square's commission on the sale of the policy. Ms Potter had, therefore, paid interest on Canada Square's substantial commission.

In April 2018, Ms Potter brought a claim, alleging that Canada Square's non-disclosure of the very high commission made their relationship "unfair" within the meaning of s.140A Consumer Credit Act 1974. Canada Square argued that Ms Potter's claim, bought nearly 12 years after the loan was entered into, was time-barred. However, Ms Potter argued that the relevant limitation period started to run when she discovered the truth about the amount of the commission, in/around November 2018. She argued that Canada Square had deliberately concealed a fact relevant to her right of action (under s.32(1)(b)) and Canada Square deliberately commissioned a breach of duty where it was unlikely to be discovered for some time (in relation to s.32(2) Limitation Act 1980).

Ms Potter won at first instance and, after a subsequent appeal was dismissed, Canada Square appealed to the Court of Appeal on the following issues:

1. whether the creation of an "unfair relationship" under s.140A is a "breach of duty" for the purposes of s.32(2);
2. whether s.32(1)(b) can apply in circumstances where there is no active concealment. If so, whether this is limited to when there is a free-standing legal duty to disclose;
3. the meaning of "deliberate" in s.32(1)(b) and s.32(2).

Court of Appeal decision

The Court of Appeal dismissed the appeal, considering the following:

Whether the creation of an "unfair relationship" under s.140A is a "breach of duty" for the purposes of s.32(2)

Canada Square's creation of an unfair relationship was a breach of duty under the meaning of s.32(2). Legal wrongdoing of any kind which gives rise to a right of action is sufficient for s.32(2).

Whether s.32(1)(b) can apply in circumstances where there is no active concealment. If so, is this limited to when there is a free-standing legal duty to disclose?

The Court decided that s.32(1)(b) was not limited to circumstances where active concealment had occurred. Further, it held that s.32(1)(b) did not only apply in the absence of active concealment where there was a free-standing legal duty of disclosure. The correct question to ask is not whether there is a contractual obligation to disclose, but rather whether there was enough of an obligation to disclose, to mean that a failure to disclose amounted to a concealment for the purposes of s.32(1)(b).

The Court further overruled the finding at the previous appeal that Ms Potter could only rely on s.32(2) and not s.32(1)(b) because Canada Square's conduct could not act as both the basis of her cause of action under the Consumer Credit Act 1974 and also the basis by which the limitation period is postponed under s.32(1)(b). The Court asked "why as a matter of principle the claimant should be in a worse position when seeking to establish concealment of a fact when the right of action turns on that very act of concealment, than he is where concealment is not an element in the right of action".

Applied the facts, the Court decided that Canada Square owed a duty to Ms Potter to disclose the commission to her and their failure to do so amounted to concealment of that commission within the meaning of s.32(1)(b).

The meaning of "deliberate" in s.32(2) and s.32(1)(b)

The Court defined "deliberate" by identifying the "necessary mental element" for the purposes of s.32(2) and s.32(1)(b). There were four possible options:

1. subjective knowledge or actual awareness within Canada Square;
2. subjective knowledge which includes wilful blindness;
3. recklessness with both a subjective and objective element(2); or
4. recklessness with a subjective element only.

For the purposes of s.32(2), Canada Square must have had the "necessary mental element" in respect of the fact that their conduct gave rise to a breach of duty. For s.32(1)(b), Canada Square must have had the "necessary mental element" in respect of whether they realised they should have told Ms Potter about the commission but decided not to. After analysis of case law relating to the old Limitation Act 1939 and materials relating to the enactment of the Limitation Act 1980, the court decided that the relevant "necessary mental element" was c) above.

Applied to the facts, the Court formulated the relevant tests as follows:

1.  s.32(2) - Canada Square realised that there was a risk that their failure to disclose the fact and extent of the commission resulted in their relationship with Ms Potter being unfair within the meaning of s.140A, and it was not reasonable for them to take that risk of creating an unfair relationship.
2. s.32(1)(b) - Canada Square realised that there was a risk that they had a duty to tell Ms Potter about the commission charge, such that their failure to do so meant that they deliberately concealed that fact from her.

Comment

The Court of Appeal's decision is significant in clarifying that for s.32(1)(b) to apply there need not be "active steps of concealment" and the conduct giving rise to the cause of action need not be separate to the act of concealment. Additionally, the Court has shed light on the meaning of "deliberate concealment" under both s.32(2) and s.32(1)(b); "deliberate" does not require a claimant to prove actual knowledge on the part of a defendant and so the burden on claimants is easier to overcome.