Facts
Decision
Comment


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

Facts

In July 2006 Ms Potter entered into a loan agreement with Canada Square for £16,953. Canada Square suggested that Potter buy a payment protection insurance policy to ensure repayment of the loan in the event that she could no longer make the payments herself. Canada Square acted as an intermediary in arranging the policy on 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. Potter completed all payments due and the loan agreement ended in March 2010.

However, only approximately £182.50 (4.7%) of the £3,824 paid represented the actual premium. The rest of the paid amount was Canada Square's commission on the sale of the policy. Therefore, Potter had paid interest on Canada Square's substantial commission.

In April 2018 Potter brought a claim alleging that Canada Square's non-disclosure of the high commission made their relationship 'unfair' within the meaning of Section 140A of the Consumer Credit Act 1974. Canada Square argued that Potter's claim, brought nearly 12 years after the loan had been entered into, was time barred. However, Potter argued that the relevant limitation period had started to run when she discovered the truth about the amount of the commission (approximately November 2018). She argued that Canada Square had deliberately:

  • concealed a fact relevant to her right of action (under Section 32(1)(b)) of the Limitation Act); and
  • commissioned a breach of duty where it was unlikely to be discovered for some time (in relation to Section 32(2) of the Limitation Act).

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

  • whether the creation of an unfair relationship under Section 140A of the Consumer Credit Act is a breach of duty for the purposes of Section 32(2) of the Limitation Act (first issue);
  • whether Section 32(1)(b) of the Limitation Act can be applied 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 (second issue); and
  • the meaning of 'deliberate' in Sections 32(1)(b) and 32(2) of the Limitation Act (third issue).

Decision

The Court of Appeal dismissed the appeal.

First issue
The court held that Canada Square's creation of an unfair relationship was a breach of duty under the meaning of Section 32(2) of the Limitation Act. Legal wrongdoing of any kind which gives rise to a right of action is sufficient for Section 32(2).

Second issue
The court decided that Section 32(1)(b) of the Limitation Act is not limited to circumstances where active concealment has occurred. Further, it held that Section 32(1)(b) does not apply only in the absence of active concealment where there is 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 is enough of an obligation to disclose to mean that a failure to do so amounts to 'concealment' for the purposes of Section 32(1)(b).

The court further overruled the finding at the previous appeal that Potter could rely only on Section 32(2) of the Limitation Act and not Section 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 and the basis by which the limitation period had been postponed under Section 32(1)(b) of the Limitation Act. The court queried:

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.

The court, having applied the facts, decided that Canada Square had had a duty to disclose the commission to Potter and that its failure to do so amounted to concealment of that commission within the meaning of Section 32(1)(b) of the Limitation Act.

Third issue
The court defined 'deliberate' by identifying the "necessary mental element" for the purposes of Sections 32(2) and 32(1)(b) of the Limitation Act. There were four possible options:

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

For the purposes of Section 32(2) of the Limitation Act, Canada Square must have had the "necessary mental element" in respect of the fact that its conduct gave rise to a breach of duty. For Section 32(1)(b), Canada Square must have had the "necessary mental element" in respect of whether it realised that it should have told 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 "recklessness with both a subjective and objective element".

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

  • Section 32(2) of the Limitation Act 1980 – Canada Square had realised that there was a risk that its failure to disclose the fact and extent of the commission had resulted in its relationship with Potter being 'unfair' within the meaning of Section 140A of the Limitation Act, and it had not been reasonable for it to take that risk of creating an unfair relationship.
  • Section 32(1)(b) of the Limitation Act 1980 – Canada Square had realised that there was a risk that it had a duty to tell Potter about the commission charge such that its failure to do so meant that it had deliberately concealed that fact from her.

Comment

The Court of Appeal's decision is significant in clarifying that for Section 32(1)(b) of the Limitation Act 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. In addition, the court has shed light on the meaning of 'deliberate concealment' under both Sections 32(2) and 32(1)(b) of the Limitation Act. '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.

For further information on this topic please contact Lucy Baughan or Daniel Hemming 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.

Endnotes

(1) [2021] EWCA Civ 339.

(2) R v G [2003] UKHL 50 [2004] AC 1034.