Supreme Court Decision on Limitation

The Supreme Court has recently handed down its judgment in Canada Square Operations Ltd (Appellant) -v- Potter (Respondent) [2023] UKSC 41.

The case is an important one as it has clarified the issue of the effect of deliberate concealment of commission payments (or other facts) for limitation purposes. Any extensions/postponement to the running of a limitation period is usually advantageous to claimant parties and of concern to defendants in any litigation relating to historic acts or events.

Whilst, directly relevant to PPI claims, the case is of more widespread importance in respect of any deliberately concealed facts by a potential defendant seeking to raise limitation issues.

Background

In 2006 the claimant, Ms Potter, entered into a loan agreement with Canada Square Operations Ltd, then known as Egg Banking plc (Defendant). The agreement was a pre-printed standard form prepared by the Defendant and signed by both parties, and was a credit agreement within the meaning of the Consumer Credit Act 1974 as amended (‘the 1974 Act’). It stated that the total amount of credit was £20,787.24, made up of a cash amount of £16,953.00 and a payment protection premium of £3,834.24. The premium related to the claimant’s purchase of a payment protection insurance policy (‘the PPI policy’). The loan was repayable in instalments over a period of 54 months.  As well as being a commercial lender, the Defendant was also an insurance intermediary. Over 95% of the amount described in the agreement as the PPI premium constituted the Defendant’s commission on the PPI policy. The sum paid to the insurer was only £182.50. The Defendant did not inform Ms Potter that it would receive or retain commission on the policy (commission was paid at a rate of >95% of the PPI premium). Ms Potter completed the payments under the agreement early, and the agreement came to an end on 8 March 2010.

In 2018 Ms Potter complained to the Defendant that the PPI policy had been mis-sold to her. She received compensation in accordance with a redress scheme established by the Financial Conduct Authority for the mis-selling of PPI policies. She subsequently consulted solicitors and proceedings were issued against the Defendant, seeking recovery of the sums paid by her, under the terms of the PPI Policy. The Defendant argued that the claim was statute barred, as the limitation period of 6 years imposed by section 9 of the Limitation Act 1980, had expired. Ms Potter sought to rely on section 32 of the Limitation Act 1980, arguing that the six year limitation period did not begin to run until she had discovered the commission being paid to the Defendant and that only took place in 2018.

At first instance, the County Court decided that section 32 of the Limitation Act 1980 applied and gave judgment in Ms Potter’s favour. The Defendant appealed, unsuccessfully, to both the High Court and to the Court of Appeal and ultimately to the Supreme Court.

Legal Issues

In 2014 the Supreme Court had ruled in the case of Plevin -v- Paragon Personal Finance Ltd [2014] UKSC 61; [2014] 1 WLR 4222 (‘Plevin’) that the non-disclosure of a very high commission charged to a borrower made the relationship between the creditor and borrower ‘unfair’ within the meaning of section 140A of the 1974 Act, with the consequence that the borrower could seek a remedial order under section 140B to recover sums paid. This formed the basis for Ms Potter’s claim. In 2018, the issue then was whether her claim was statute-barred under the Limitation Act, proceedings having been commenced some 12 years after the loan agreement was entered into.

This appeal raised fundamental questions concerning section 32(1)(b) and section 32(2) of the Limitation Act 1980 (‘the 1980 Act’). Section 32(1)(b) postpones the commencement of the ordinary limitation period where ‘any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant’. Section 32(2) provides that, for the purposes of section 32(1), ‘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 effect of both provisions is that that where there is deliberate concealment of facts by a defendant, the commencement date for the normal limitation period within which a claimant must bring a claim is postponed.

Judgment

In a 54 page judgment, the Supreme Court dismissed the Defendant’s appeal and in so doing, in its judgment clarified the terms ‘deliberately concealed’ in section 32(1)(b) and ‘deliberate commission of a breach of duty’ in section 32(2).

On the meaning of ‘deliberately’, the Supreme Court held that the Defendant’s concealment of a relevant fact will be deliberate only if the Defendant intended to conceal that fact. Deliberately does does not mean recklessly. Lord Reed in the Supreme Court stated “If 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… if the defendant is not sued earlier, he has only himself to blame.”

In relation to the meaning of ‘concealed’, the Supreme Court held that a fact will have been concealed where the defendant has kept it secret from the claimant, either by taking active steps to hide it or by failing to disclose it. A common sense approach was taken, Lord Reed delivering the judgment stating: “A person who hides something can properly be described as concealing it, whether there is an obligation to disclose it or not… The position seems to me to be the same, as a matter of ordinary English, where concealment takes the form of the withholding of information with the intention of keeping it secret.” The only requirement is that the defendant deliberately ensures that a claimant does not know about the fact in question and so cannot bring proceedings.

The Supreme Court found that the existence and amount of the commission were facts which were relevant to Ms Potter’s right of action under section 140A of the 1974 Act, since she could not plead her claim without knowing those facts. It found that the Defendant had deliberately concealed those facts from her by consciously deciding not to disclose the commission to her. Ms Potter did not discover the concealment until November 2018, shortly before commencing the proceedings. It was accepted that she could not with reasonable diligence have discovered the concealment any earlier. Accordingly, it was held that the requirements of section 32(1)(b) were met.

In respect of section 32(2) it was reiterated that it must be shown that ‘the defendant knew he was committing a breach of duty, or intended to commit the breach of duty’. It was conceded that that test could not be met in the present case - 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 had not been established that the Defendant knew or intended that the non-disclosure would have that effect. Accordingly, although its failure to disclose the commission gave rise to Ms Potter’s right of action, and could therefore be regarded as a breach of duty for the purposes of section 32(2), it could not be shown that the Defendant knew that it was committing a breach of duty or intended to do so.  The Supreme Court also clarified that reckless conduct is insufficient to satisfy Section 32.

Ms Potter succeeding with the section 32(i)(b) argument was sufficient to have the appeal dismissed.

Commentary

The Supreme Court judgment is straightforward. It has provided welcome clarification on the meaning of the words ‘conceal’ and ‘deliberate’, and confirmed that the ordinary meaning of the words will prevail unless there is a good reason to depart from them.

Ms Potter’s case was, as the Supreme Court acknowledged, a test case, and some 26,000 similar cases may now be brought as this issue has been clarified. This is the position even though British banks have already paid around £40 billion in compensation to customers for mis-selling PPI policies, most of which were sold in the period between 1990 and 2010 and may re-open an issue the Banks thought had been dealt with.

It is likely that the decision which permits claims to be brought over a loan dating back to 2006, more than 17 years ago, will send shockwaves through the banking industry. It has the effect of permitting other claims which may gave otherwise considered to have been statute-barred to be commenced and allow potential claimants to seek redress for mis-sold PPI policies. The decision may also have more widespread ramifications for other claims where concealment is an issue.

For further information on this topic, please contact Sharon Williamson and Moya Clifford.