The High Court found that when considering the postponement of a limitation period for the purposes of section 32(1) of the Limitation Act 1980, the timeframe within which a claimant could have discovered a fraud with "reasonable diligence" includes the period before the claimant suffers a loss.(1)


The case arose out of an investment in European Care Group (ECG) by the European Real Estate Debt Fund (the Fund). European Real Estate Debt Fund (Cayman) Limited (in liquidation) (the claimant) was the assignee of the Fund.

ECG was founded by the first defendant, Mr Treon, in 2000. ECG was advised for many years by the second defendant, financial advisory firm RP&C International Limited (which subsequently changed its name to Arundel Group Limited), particularly by Dr Srinivas, the third defendant.

In 2010, ECG decided to issue a series of loan notes in an attempt to raise $50 million. ECG appointed the second defendant as placement agents and the third defendant as the person responsible for liaising with new investors.

On 24 June 2011, the Fund made its principal investment in ECG in the amount of £11 million. Prior to the Fund's investment, from approximately January 2011 onwards, the Fund's advisers had engaged in numerous discussions with the first and third defendants about the investment and ECG's business and prospects.

The Fund's advisers discovered that certain financial information about ECG's business and prospects that had been provided by the defendants was false and misleading. They confronted the first defendant at a meeting in March 2012. Later that month, the first defendant was removed as a director of ECG. ECG's new management subsequently invited the Fund to make a further investment and the Fund invested another £4.25 million in July 2012.

In 2014, ECG went into administration and the Fund lost the entire value of its investment.

The claimant alleged that the defendants fraudulently misrepresented the recent financial performance and future prospects of the business, which had been relied upon and subsequently induced the Fund's investment in ECG.

The Fund's assignee issued a claim on 16 October 2017, and sought to rely on section 32(1) of the Limitation Act to seek to postpone the start of the limitation period. The defendants argued that the claim was statute barred as it was brought more than six years after the Fund's investment in ECG.


Although the High Court noted that it would have found for the claimant on most of the claims, it held that the claims were statute barred.

The Court considered section 32(1) of the Limitation Act, which provides the following:

Subject to subsections (3) and (4A) below, where in the case of any action for which a period of limitation is prescribed by this Act, either –

(a) the action is based upon the fraud of the defendant; or

(b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; or

(c) the action is for relief from the consequences of a mistake;

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. References in this subsection to the defendant include references to the defendant's agent and toany person through whom the defendant claims and his agent.

The Court further referred to the judgment in OT Computers Limited v Infineon Technologies AF [(2021) EWCA Civ 501], noting the following in particular:

  • The state of knowledge that a claimant must have in order for it to have discovered the concealment (fraud in this case) has mostly been regarded as the knowledge sufficient in order to enable it to bring a claim.
  • There will be cases where the discovery of relevant facts involves a process that takes place over a period during which a claimant that exercises reasonable due diligence could have discovered enough to plead the claim or embark on the preliminaries before issuing proceedings.
  • The question was whether or not the claimant could, with reasonable due diligence, have discovered the fraud sooner (the standard for this was not to be judged against the six-year limitation period; instead, the test was how a person carrying on a business of the relevant kind would act if they had adequate but not unlimited staff and resources, and were motivated by a reasonable but not excessive sense of urgency).
  • The burden of proof was on the claimant to establish that they could not have discovered the fraud without exceptional measures that they could not reasonably have been expected to take.

The Court noted that section 32(1) becomes relevant only once there is a complete cause of action, as that is the point where the limitation period would commence. That said, the Court must examine all of the facts and should not artificially restrict itself to events or circumstances that arose only after the cause of action accrued.

The principal question when determining whether section 32(1) could be relied upon was whether the claimant either had, or could have, reasonably discovered the fraud without taking exceptional measures. This may well turn on events that occurred before as well as after the loss was suffered.

Applying these principles to the facts of the case, the Court expressed that it expected that the Fund's advisers, who were experienced in analysing and assessing financial and accounting information, would have undertaken due diligence before arranging an investment. The Court held that it was clear to the Fund's advisers that the financial information provided by ECG prior to the Fund's investment was incomplete. The Court further found that the financial information that had been provided prior to the investment would have caused a reasonably diligent investor to ask further questions and demand additional information. Finally, the Court found that if the Fund's advisers (or the putative reasonable investor) had asked further questions and made information requests regarding the financial information that had been provided, they would have discovered sufficient facts to enable the Fund to plead a statement of claim.

In the light of the above, the Court concluded that the claimant had failed to satisfy the requirements of section 32(1), and that the claim was statute barred.


In the context of section 32(1) of the Limitation Act, it is clear from this decision that the Court's enquiry as to whether the claimant could have discovered a fraud with reasonable diligence extends to the period before the claimant suffered a loss.

It is the responsibility of the claimant to gather sufficient evidence and material to demonstrate and convince the court that, without exceptional measures, it would not have been possible to discover the fraud. The court will then consider the circumstances arising both before and after the action accrued, particularly considering whether it would have been reasonable for the claimant to undertake certain due diligence.

The decision is a caution to victims of fraud that seek to rely on section 32(1) to extend the primary limitation period for a fraud claim. As Mr Justice Miles said in paragraph 775 of his judgment:

the special statutory postponement of the limitation period . . . is not available to all victims of fraud, however careless they may be in attending to and asserting their rights. If a claimant could reasonably have discovered the fraud by virtue of events and circumstances occurring before it actually suffered a loss, there is no principled rationale for allowing it the indulgence of more than the normal six years' period to bring its claim.

For further information on this topic please contact Jonathan Cary or Carolin Mester at RPC by telephone (+44 20 3060 6000) or email ([email protected] or [email protected]). The RPC website can be accessed at www.rpc.co.uk.


(1) European Real Estate Debt Fund v Treon [2021] EWHC 2866 (Ch).