Supreme Court clarifies deliberate concealment gateway for postponing limitation

In a significant and much-anticipated judgment, the Supreme Court has clarified the elements that a claimant must establish in order to rely on the "deliberate concealment" gateway in section 32(1)(b) of the Limitation Act 1980 (the Act) and postpone the start of the limitation period: Canada Square Operations Ltd v Potter [2023] UKSC 41.

Section 32(1)(b) of the Act provides that, where any fact relevant to a claimant’s right of action has been deliberately concealed by the defendant, limitation does not begin to run until the claimant has discovered the concealment (or could with reasonable diligence have discovered it).

The Supreme Court unanimously upheld the Court of Appeal's ruling that the claimant could rely on s.32(1)(b) to avoid her claim for recovery of sums paid under a PPI policy being time-barred (see our blog post on the Court of Appeal decision here). However, the judgment given by the president of the Supreme Court, Lord Reed (with whom the remainder of the panel unanimously agreed), departed significantly from the Court of Appeal's reasoning. In particular, he emphasised the importance of giving the phrases "deliberate concealment" in s.32(1)(b) and "deliberate commission of a breach of duty" in s.32(2) their ordinary meaning.

The Supreme Court summarised the necessary elements for s.32(1)(b) of the Act to be engaged as follows:

• a fact relevant to the claimant's right of action (being a fact without which the cause of action is incomplete);
• the concealment of that fact from her by the defendant, either by a positive act of concealment or by a withholding of the relevant information; and
• an intention on the part of the defendant to conceal the fact or facts in questions.

Importantly, the Supreme Court rejected the suggestion that a fact will not be "concealed" for the purpose of s.32(1)(b) of the Act unless the defendant had a legal duty to disclose the relevant fact (although it noted that the existence of such a duty may be relevant to the question of whether any concealment was deliberate). It also stated expressly that the provision will not be engaged if the defendant's concealment is merely reckless and not deliberate, highlighting that, as a matter of the ordinary use of language, the adjectives “deliberate” and “reckless” have different meanings.

In addition to providing helpful clarification of an important feature of the law on limitation, the Supreme Court's judgment will be of particular interest given the status of Canada Square as a test case for a large number of prospective PPI-related claims that are likely to see claimants seeking to rely on s.32 to extend the limitation period.

We consider the decision in more detail below.

Background

In 2006, the claimant, Mrs Potter, entered into a loan agreement with Canada Square, then known as Egg Banking plc. Mrs Potter took out a PPI policy through Canada Square (which was also an insurance intermediary) to cover repayments on the loan. Although Canada Square did not inform Mrs Potter that it would receive commission on the PPI policy, it in fact retained more than 95% of the premium as commission. The loan agreement came to an end in 2010.

The Supreme Court later held (in Plevin v Paragon Personal Finance Ltd [2014] UKSC 61) that non-disclosure of high levels of commission charged to a borrower could make the relationship between creditor and borrower unfair and entitle the borrower to seek compensation under sections 140A and 140B of the Consumer Credit Act 1974.

In 2018, Mrs Potter began County Court proceedings to recover the amounts she had paid in respect of the PPI policy. When Canada Square asserted that the six-year limitation period from the date on which the cause of action accrued had expired, the claimant sought to rely on s.32 to argue that limitation did not begin running until she learned about the commission. The County Court found in Mrs Potter's favour, as did the High Court and Court of Appeal respectively on appeal (although with some differences in reasoning).

Grounds of appeal

A number of grounds of appeal were advanced by both parties when the case came before the Supreme Court, which the court approached as two fundamental questions:

• in what circumstances will a defendant be found to have "deliberately concealed" a fact relevant to the cause of action for the purposes of engaging s.32(1)(b); and
• what amounts to a "deliberate commission of a breach of duty" for the purposes of s.32(2).

Decision

The Supreme Court held that the claim was not time-barred, on the basis that the defendant was deprived of a limitation defence by the operation of s.32(1)(b) of the Act (but not by the operation of s.32(2)). The Supreme Court's analysis of each of these provisions is considered separately below.

Section 32(1)(b)

The Supreme Court held that each element of the statutory provision should be given its ordinary meaning. It therefore rejected the Court of Appeal's finding that, in order to have "concealed" a fact, the defendant must have been under a legal duty to disclose that fact and known or been reckless as to the relevance of that fact to the claimant's cause of action (although it noted that the existence of such a duty may be relevant to the question of whether any concealment was deliberate). In particular, the Supreme Court rejected the Court of Appeal's finding that the required duty may arise from "a combination of utility and morality" (rather than as a matter of law). Rather, it adopted the ordinary English meaning of "concealed" as "to keep something secret, either by taking active steps to hide it, or by failing to disclose it". A person who hides something can properly be described as concealing it, whether there is an obligation to disclose it or not. No "active" concealment is therefore necessary.

Similarly, the court found that the inclusion of "deliberately" in s.32(1)(b) required that the concealment of the fact must have been the defendant's "intended result" and that the defendant must therefore "have considered whether to inform the claimant of the relevant fact and decided not to". It did not agree with the Court of Appeal's ruling that the section may be engaged if the defendant's concealment is reckless.

The court explained that the fact must be relevant to the right of action asserted in those proceedings and that it was not relevant whether the claim was well-founded or not, as that was a matter to be determined once limitation questions had been resolved. It also endorsed and applied the requirement found by the High Court in Arcadia Group Brands Ltd v Visa Inc [2015] EWCA Civ 833 that the fact must be one "without which the cause of action is incomplete".

In closing, Lord Reed summarised the Supreme Court's interpretation of the necessary elements for s.32(1)(b) to be engaged as follows:

• a fact relevant to the claimant's right of action;
• the concealment of that fact from her by the defendant, either by a positive act of concealment or by a withholding of the relevant information; and
• an intention on the part of the defendant to conceal the fact or facts in questions.

Notably, the court declined to comment on the second limb of s.32(1) – when the claimant could have discovered the concealment with reasonable diligence – as it was not in issue on the facts. Defendants seeking to argue that a claimant could have discovered a fact that the defendant is found to have deliberately concealed is likely to be a feature of the post-Canada Square case law.

Section 32(2)

Section 32(2) of the Act expands on the s.31(1)(b) gateway by providing 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".

The issue before the Supreme Court was the meaning of "deliberate". The Court of Appeal found that "deliberate commission" could include "recklessness", a conclusion which relied heavily on parliamentary materials and case law which predated the Act. Lord Reed was critical of this approach and again favoured giving the provision its ordinary meaning. "Deliberate" is defined in the Concise Oxford Dictionary as "done consciously and intentionally", and it therefore followed that s.32(2) is engaged only if the defendant "knew [they were] committing a breach of duty, or intended to commit the breach of duty". Recklessness or mere awareness on the defendant's part that its actions could expose it to a claim were held not to be sufficient to postpone the running of time.

Effect on limitation defence

Applying its findings to the facts of the case, the Supreme Court found that Mrs Potter could avail herself of an extension to the limitation period under s.32(1)(b) of the Act, as Canada Square had deliberately concealed the existence and amount of its commission from her by "consciously deciding not to disclose the commission to her".

However, the court overruled the Court of Appeal's finding that the claimant could also rely on s.32(2) of the Act. Canada Square's failure to disclose the commission gave rise to Mrs Potter's cause of action against it and therefore amounted to a breach of duty within the meaning of the section, but it could not be shown that Canada Square knew that non-disclosure was a breach or that it intended to breach its duty.