What have you got to hide? The Supreme Court revisits concealment in the context of limitation
Market Insight 16 November 2023 16 November 2023
UK & Europe
Insurance & Reinsurance
In Canada Square Operations v Potter  UKSC 41, the Supreme Court found that a claim for PPI-related compensation was not statute-barred and can be brought, despite relating to a loan made over 18 years before proceedings were issued, on grounds of deliberate concealment.
The judgment is potentially significant for a number of banks and credit institutions in the context of PPI claims as it serves as a test case for over 26,000 other actions. It is also notable more generally for litigation involving historic claims given the guidance given by the Court on the requirements for “concealment” and the meaning of “deliberate” in the context of section 32 of the Limitation Act 1980 (the Act).
The claim relates to a loan taken out in 2006 by Mrs Potter from Canada Square Operations Limited, then known as Egg Banking Plc. The agreement was a credit agreement within the meaning of the Consumer Credit Act 1974 (the 1974 Act). That loan included a PPI premium, over 95% of which was made up of Canada Square’s undisclosed commission on the placement of that policy.
In April 2018, Mrs Potter complained to Canada Square that the PPI policy had been mis-sold to her, and subsequently received compensation for this in accordance with the FCA’s redress scheme. In November 2018, Mrs Potter consulted solicitors who advised her that Canada Square was likely to have received substantial commission and that Canada Square’s failure to disclose that substantial commission rendered the relationship between them “unfair” within the meaning of section 140A of the 1974 Act. She was therefore entitled to apply for the remedial orders set out in section 140B.
Mrs Potter issued proceedings in the County Court in December 2018. By the time of trial the only issue between the parties was the question of limitation, and in particular whether either section 32(1)(b) or 32(2) of the Act could extend the limitation period, which would otherwise have passed by the time Mrs Potter issued her claim (on the basis that the credit agreement had ended in 2010 and the usual limitation period is 6 year). Those sections of the Act provide, insofar as material to the claim, that:
“32(1) …where in the case of any action for which a period of limitation is prescribed by this Act…
(b) any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant…the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it…
32(2) For the purposes of subsection (1) above, 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.”
Mrs Potter succeeded in the County Court, and on appeal to both the High Court and Court of Appeal, prior to Canada Square’s appeal (and her cross-appeal) to the Supreme Court.
The Supreme Court’s decision
In this appeal, the Supreme Court is asked to clarify the meaning of the phrases "deliberately concealed" in section 32(1)(b) and "deliberate commission of a breach of duty" in section 32(2), so as to determine whether Mrs Potter's claim against Canada Square was issued too late and was therefore time barred.
The Supreme Court ultimately held, like the courts below it, that Mrs Potter’s claim could proceed and was not time-barred. However, its reasoning differed from the Court of Appeal’s. Following a lengthy analysis of the law, the Supreme Court has expressly disapproved a line of cases upon which the Court of Appeal had relied, clarified the meaning of “conceal” and “deliberate” and stated when the courts may depart from the ordinary meaning of the words used and consult materials and laws before the statute under consideration came into effect.
The Court of Appeal had followed the approach to section 32(1)(b) which had been established by the judgments in Williams v Fanshaw Porter & Hazelhurst  EWCA Civ 157 and AIC Ltd v ITS Testing Services (UK) Ltd (“The Kriti Palm”)  EWCA Civ 1601. The Supreme Court found these judgments, and the Court of Appeal’s reasoning based on their flawed premises, strayed from the ordinary meaning of the words in the provision itself. Citing with approval the judgments of Sheldon v RHM Outhwaite (Underwriting Agencies)  AC 102 and Cave v Robinson Jarvis & Rolf  UKHL 18, section 32(1)(b) requires:
- A fact relevant to the claimant’s right of action;
- The concealment of that fact from the claimant by the defendant, either by a positive act of concealment or by withholding of the relevant information; and
- An intention on the part of the defendant to conceal the facts or facts in question.
As to the first criteria, this must refer to the right of action asserted by the claimant in the proceedings before the court and must relate to a fact without which the cause of action is incomplete. Here, that was that the secret commission rendered the relationship “unfair” under the 1974 Act which entitled the claimant to seek a remediation order.
As to the second and third criteria, the Supreme Court disagreed with the Court of Appeal’s approach that a duty of disclosure was inherent in the meaning of “concealment”. The word “conceal”, as a matter of ordinary English, means withholding of information with the intention of keeping it secret. This intentionality underlines the explicit emphasis placed by Parliament on the requirement of the relevant fact to have been “deliberately concealed”. Whether or not a defendant is subject to a duty of disclosure can only be seen as a factor in evidencing whether there was a deliberate concealment; it is not a necessary ingredient.
There is no requirement under section 32(1)(b) for concealment to “be in breach of either a legal duty, or a duty arising from a combination of utility and morality”, as had been expounded by the Court of Appeal. All that is required is that the “defendant deliberately ensures that the claimant does not know about the facts in question and therefore cannot bring proceedings within the ordinary time limit”. As to the meaning of “deliberately”, the Supreme Court expressly rejected the Court of Appeal’s contention that “deliberately” can mean “recklessly” – their ordinary dictionary meanings are quite distinct and all that is required for section 32(1)(b) is that the defendant must have considered whether to inform the claimant of the relevant fact and decided not to. In those circumstances: “[i]f the defendant has concealed a fact from the claimant, and has done so deliberately, that is to say knowingly, then he has the means to start the limitation period running by disclosing the fact. If he does not do so, but chooses to keep the claimant in ignorance of a fact which she requires to know in order to plead her claim, then it is just that the defendant should be deprived of a limitation defence.”
Much like the decision in respect of section 32(1)(b), a reckless breach of a duty of disclosure is not the same as a deliberate breach of that duty for the purposes of section 32(2), as had been held by the Court of Appeal. The ordinary meaning of “deliberate” is something done consciously or intentionally, whereas “reckless” means without thought or care for the consequences of an action. These meanings are quite distinct and not synonymous. This was supported in legal contexts as well – case law and legislation – of which the Supreme Court gave many examples.
Further, the meaning of “deliberate” in the phrase “deliberate commission of a breach of duty” in section 32(2) is “neither ambiguous nor obscure” and the Supreme Court cautioned against courts relying on pre-statute laws and parliamentary materials, as the Court of Appeal had done, unless specific conditions are met. These were laid down in Pepper v Hart  AC 593 which held that reference to parliamentary materials would be permitted where:
- Legislation is ambiguous or obscure, or leads to an absurdity;
- The material relied upon consists of one or more statements by a Minister or other promoter of the bill together if necessary with such other parliamentary material as is necessary to understand such statements and their effect; and
- The statements relied upon are clear.
These conditions were not met in the present case.
In conclusion on section 32(2), “deliberate” does not include “reckless”. Nor does it include awareness that the defendant is exposed to a claim. All that is required is that the defendant knows it is deliberately or knowingly committing a breach of duty.
Application to the facts
Applying this all to the facts of the case, the existence and amount of the commission were facts which were relevant to the claimant’s right of action under section 140A of the 1974 Act. The Supreme Court noted that despite section 140A not being in force when the decision to conceal was originally made, the defendant continued to withhold the information after it came into force during the currency of the credit agreement. As the claimant discovered the concealment in November 2018, the claim was in time under section 32(1)(b).
However, the test under section 32(2) could not be met: “although the defendant deliberately decided not to disclose the commission, and must have been aware that there was a risk that by doing so it was making its relationship with the claimant unfair within the meaning of section 140A of the 1974 Act, it has not been shown that it knew or intended that the non-disclosure would have that effect. Accordingly, although its failure to disclose the commission gave rise to the claimant’s right of action, and can therefore be regarded as a breach of duty for the purposes of section 32(2), it cannot be shown that the defendant knew that it was committing a breach of duty or intended to do so.”
As the Supreme Court noted, some 26,000 similar claims are on foot and, as a result of this judgment, may now be considered to be in time, allowing claimants to seek redress for their mis-sold PPI policies. The decision also has a wider application to all defendants in litigation arising from historic acts. On the one hand, the absence of any specific legal or moral duty of disclosure makes section 32(1)(b) far less challenging for claimants to satisfy. Conversely, the decision that recklessness is inadequate to satisfy section 32 may make it more difficult for claimants to establish that a defendant’s conduct meets the necessary threshold.
More broadly, the Supreme Court’s clarification of the meaning of the words “conceal” and “deliberate” is welcome, as is the confirmation that the ordinary meaning of the words will generally prevail unless there is clear reason to depart from them.