Paul de la Piquerie analyses the recent interesting Court of Appeal decision in Canada Square Operations Limited v Potter  EWCA Civ 339. The decision looks at the meaning and application of section 32 of the Limitation Act 1980. In this article Paul looks at the facts of the case and whether this now opens the floodgates to a raft of new claims which appeared, previously, to have long been time-barred.
- Canada Square Operations Limited v Potter  EWCA Civ 339 is an interesting recent decision of the Court of Appeal (Sir Julian Flaux CHC, Rose and Males LJ) on the meaning and application of section 32 of the Limitation Act 1980 (“the 1980 Act”). There are five key points that arise out of it. Two of them may well have the result that cases which previously fairly clearly appeared to be time-barred under the 1980 Act might, in fact, not be.
The relevant law
- The relevant parts of section 32 of the 1980 Act are sections 32(1)(b) and 32(2) which provide:
“32 Postponement of limitation period in case of fraud, concealment or mistake.E+W
(1) 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-…
(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. …
(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.”
- Section 140A of the Consumer Credit Act 1974 (“the 1974 Act”) provides:
“140A Unfair relationships between creditors and debtorsU.K.
(1)The court may make an order under section 140B in connection with a credit agreement if it determines that the relationship between the creditor and the debtor arising out of the agreement (or the agreement taken with any related agreement) is unfair to the debtor because of one or more of the following—
(a) any of the terms of the agreement or of any related agreement;
(b) the way in which the creditor has exercised or enforced any of his rights under the agreement or any related agreement
(c) any other thing done (or not done) by, or on behalf of, the creditor (either before or after the making of the agreement or any related agreement).”
The facts of the case
- On 26 July 2006 the Respondent took out a regulated fixed loan from the Appellant. At the same time the Appellant suggested that the Respondent take out payment protection insurance with a third-party insurer. The Appellant arranged this for the Respondent. It cost the Respondent £3,834 and was added to the loan so that the total cost of it (including interest payments) to her was £4,545.
- What the Appellant did not tell the Respondent was that only 4.7% of the sum paid by her was the actual premium paid to the third party for the insurance. The rest was a commission which the Appellant kept for arranging the policy.
- The Respondent paid off the loan on 8 March 2010.
- The Respondent then discovered the commission payment. On 14 December 2018 she issued proceedings seeking repayment of the sum spent by her on the PPI relying upon section 140A of the 1974 Act.
- The Appellant admitted that it had not told the Respondent that it would receive commission but argued that the Claim was time-barred because it had been brought more than six years after the relationship between the parties had ended.
- The Respondent relied upon section 32 of the 1980 Act and argued that time started to run for limitation purposes from the point in time at which she had found out about the commission. She said that the reasons were a) the Appellant had deliberately concealed facts relevant to her cause of action under section 32(1)(b), namely the receipt of commission and/or the amount thereof, and b) that the same was a deliberate breach of duty under section 32(2).
- Firstly, the Court of Appeal upheld the decision that the Appellant’s failure to inform the Respondent of the commission rendered the relationship between the parties unfair under section 140A of the 1974 Act. The Court relied upon the decision of the Supreme Court in Plevin v Paragon Personal Finance Ltd & Another  UKSC 61.
- The Court then turned, secondly, to the question whether the 1980 Act should be interpreted “restrictively”, as the Appellant argued, on the basis that it is an exception to the running of time and the Courts should not encourage or facilitate the trial of stale actions. That argument was quickly rejected; the section seeks to balance the competing interests of a) protecting would-be Defendants from stale claims on the one hand, and b) allowing Claimants to overcome the statutory restrictions where the facts permit on the other hand. There is no reason, or need, to interpret the 1980 Act in a way that prefers one over the other (para.29).
- Thirdly, the Court addressed the question what is meant by ‘breach of duty’ in section 32(2) of the 1980 Act. Specifically, was it necessary for the Respondent (or any Claimant) to establish that the ‘duty’ in question was an actual free-standing legal duty or obligation such as, for example, an express or implied contractual duty to reveal or disclose some fact? Or could the word refer to some ‘lesser’ non-legal requirement? The Appellant argued that the answer was the former and that there had been no contractual or other legal ‘duty’ on the Appellant to tell the Respondent about the commission.
- Having examined previous, apparently contradictory, decisions on the point the Court determined that the duty does not have to be some legally recognised duty (per Males LJ at paras 75 – 77):
“75. Section 32(1)(b) does not refer to a duty to disclose, it refers only to concealment. Inherent in the concept of ‘concealing’ something is the existence of some obligation to disclose it. To construe section 32(1)(b) as being satisfied only if there is a pre-existing legal duty to disclose seems to me to add an unwarranted and unhelpful gloss on the clear words of the statute. For the purposes of the Act that obligation need only be one arising from a combination of utility and morality…
- I can see no reason why Parliament should require the court to undertake a detailed analysis of implied contractual terms between the parties or the precise scope of the tortious duties of care owed by the defendant when considering whether section 32(1)(b) is satisfied…The focus should instead be on the conduct which is alleged to amount to the concealment and on an analysis of whether the defendant was, at that point, under a sufficient obligation to disclose for the failure to disclose to amount to concealment as at that date.
- I therefore consider that the majority judgments in The Kriti Palm establish that the ‘duty to disclose’ referred to by Park J at  and by Brooke LJ at  of Williams does not have to be a free-standing contractual, tortious or fiduciary duty.”
- Fourthly, the Court addressed the question what is meant by ‘concealed’ in section 32(1)(b). Contrary to the Appellant’s submissions, the Court held that in circumstances where the Appellant owed a duty to the Respondent to reveal the commission a simple failure to do so amounted to ‘concealment’.
- Fifthly, relatedly, the Court addressed the meaning of the word ‘deliberate’ in section 32. What mental culpability did the Respondent have to establish that the Appellant had? For example, (and to take an extreme one), did the Respondent have to establish that the Appellant actually knew that the failure to disclose the commission was a ‘breach of duty’ under section 32 of the 1980 Act?
- The Court held that if the Respondent could establish that the Appellant was ‘reckless’ in deciding not to disclose the commission to the Respondent then that could suffice to establish that the concealment was deliberate. The test for recklessness is the test set out by Lord Bingham in the criminal case R v G and anor  UKHL 50, and contains both a subjective and an objective element (para.87 of Canada Square):
“…the correct test was that a person acts recklessly with respect to a circumstance when he is aware of a risk that it exists or will exist and it is, in the circumstances, known to him, unreasonable to take the risk. A person acts recklessly with respect to a result when he is aware of the risk that it will occur and it is, in the circumstances known to him, unreasonable to take that risk”.
- The result was that the Appellant’s conduct amounted to deliberate concealment of the commission if the Respondent could establish that the Appellant realised that there was a risk that their failure to disclose the commission resulted in their relationship being unfair under section 140A of the 1974 Act and that it was not reasonable for the Appellant to take that risk. In other words, it was not necessary for the Respondent to prove that the Appellant actually had realised that the non-disclosure was a ‘breach of duty’ or gave rise to liability under section 140A of the 1974 Act.
- The Court found that the Respondent made out the test above. The Court did so, in the absence of evidence from the Appellant, by inference, on the basis that the prevailing market trend at the time was toward tougher regulation of the selling of such products, and related products, so that it cannot logically have escaped the Appellant’s attention that what they did might give rise to liability. On the facts of the case there was then no excuse for the Appellant then taking that risk.
- The Respondent therefore won the appeal.
- The third and fifth points above are the most interesting.
- The third point creates considerable potential uncertainty for litigants. One can see how the manner in which it is applied will depend upon the views of the individual Judge in question as to what satisfies the tests of “utility and morality”. Adopting the lender-borrower dynamic of this case, one could see that a set of facts which one Judge might regard as an obviously morally unacceptable course of conduct leading to the unfair exploitation of a vulnerable consumer by a powerful industry player, might simply be regarded by another Judge as the sort of standard industry practice without which the system could not effectively function and which the borrower would be naïve not to suspect or ask about.
- What role does, or should, the regulation of the industry play in the Judge’s determination of whether “utility and morality” impose a duty for the purposes of section 32 of the 1980 Act? Is it always the case that a lender who breaches regulations will have breached a duty? Does it matter whether the borrower had a lawyer acting for them or whether, for example, they had taken out a similar loan before?
- What is the position of joint contractual venturers? Is the duty of good faith which apparently may now exist between such persons exactly co-extensive with whatever duty may or may not exist under section 32 of the 1980 Act? What of opposed contracting parties?; it has now been confirmed that it is possible that they may owe each other a ‘duty’ for the purposes of section 32 of the 1980 Act even if they owe no other express or implied contractual obligation in the same terms to each other. So, to what extent does A now have to tell B that A might be in breach of a contract between A and B? It is an idea which will come as unwelcome news to many contracting parties and which; to be cynical, few would comply with. Are the floodgates about therefore to open to a raft of new cases which appeared, previously, to have long been time-barred?
- The fifth point is also interesting. The Court’s willingness to draw the inference that the Appellant had the necessary mental element in the absence of any evidence is notable. In reality of course it would have perhaps have been illogical not to draw the inference because if an absence of evidence meant that the inference could not be drawn then the result would be that a Defendant might be able to defeat a section 32 argument simply by deliberately failing to call any such evidence. But the result is that in the future if a Defendant wishes to advance an argument based on section 32 of the 1980 Act then it would be prudent (assuming it has a reasonable case) to positively adduce evidence as to its thought process and reasoning. For entities such as institutional lenders (as in this case) that could potentially be a publicised and embarrassing process.