The facts
1. On 26 July 2006, the claimant, Mrs Potter, entered into a loan agreement with the defendant, Canada Square Operations Ltd. The loan agreement was a credit agreement within the meaning of the Consumer Credit Act 1974 (the “CCA”). At the same time, the claimant had taken out a payment protection insurance policy (“PPI”). The total amount due under the loan was £20,787.24, which comprised a cash payment of £16,953 and a premium payment of £3,834.24. Of the premium payment, the sum paid to the insurer only amounted to £182.50. The defendant did not inform the claimant that it would receive commission for the sale of the PPI policy.
2. In April 2018, the claimant complained to the defendant that the PPI policy had been mis-sold to her. The claimant received compensation in line with the redress scheme established by the Financial Conduct Authority for the mis-selling of PPI policies. In November 2018, the claimant was made aware by her solicitors that the premium payments that she had made would likely have included substantial commission, which had not been disclosed to her.
3. In December 2018, the claimant commenced proceedings in the County Court in which she sought to recover the amounts paid to the defendant in respect of the PPI policy, less the compensation that had already been received. The claim was brought on the basis that the relationship between the claimant and the defendant was unfair within the meaning of section 140A of the CCA, it having been established in Plevin v. Paragon Personal Finance Ltd [2014] UKSC 61 that the nondisclosure of a very high commission charged to a borrower made the relationship between the creditor and the borrower unfair within the meaning of section 140A of the CCA.
4. It was conceded by the defendant that it had not disclosed the commission it would receive but took the position that the claim was time-barred under section 9(1) of the Limitation Act, which provides that “any action to recover any sum recoverable by virtue of any enactment shall not be brought after the expiration of six years from the date on which the cause of action accrued”. The only issue in dispute by the time of trial was whether the limitation period for the claim in question should be extended under section 32(1)(b) and/or section 32(2) of the Limitation Act.
The Court of Appeal approach
5. According to the Court of Appeal, “inherent in the concept of ‘concealing’ something, is the existence of some obligation to disclose it”. Recognising that such an interpretation of the word “concealed” would lead to a very narrow and restrictive interpretation of section 32(1)(b) of the Limitation Act, the Court of Appeal explained that a legal obligation of disclosure was not required and, for the purpose of the Act, the “obligation need only be one arising from a combination of utility and morality”. As for the word “deliberately”, the Court of Appeal concluded that it must also include recklessness; it followed that the defendant must have known there was a risk that non-disclosure would make the parties’ relationship unfair within the meaning of section 140A of the CCA and it was not objectively reasonable for it to have taken that risk. On that basis, the claimant succeeded under section 32(1)(b) of the Limitation Act.
6. As for section 32(2) of the Limitation Act, the Court of Appeal determined that the defendant had acted in breach of a duty owed under section 140A of the CCA. Construing “deliberate” again as including recklessness, it concluded that the breach of duty had been deliberate. The claimant therefore also succeeded under section 32(2) of the Limitation Act.
Section 32(1)(b) of the Limitation Act – the meaning of the word “concealed”
7. The Supreme Court disapproved of the Court of Appeal’s reasoning as to the meaning of the word “concealed” and held that:
a. There is no need to add to the meaning of the word “concealed” an obligation to disclose the thing that is being concealed. The word “conceal” means to keep something secret “either by taking active steps to hide it or by failing to disclose it”. To illustrate the point, Lord Reed referred to the scenario of how an elderly lady who was afraid of burglars might conceal her pearls before going to bed, without also having an obligation that she should leave them in plain sight.
b. The Court of Appeal’s departure from the ordinary meaning of “concealment” had the effect of considerably cutting down the apparent scope of section 32(1)(b), which was already confined by the requirement that the concealment must be deliberate.
c. As for the “obligation” the Court of Appeal had decided was inherent within “concealment”, the courts were courts of law and not of moral or social norms, and there were no “defined or agreed standards of utility or morality…which would enable judges to establish such obligations objectively or predictably”.
Section 32(1)(b) of the Limitation Act – the meaning of the word “deliberately”
8. It was accepted by the claimant before the Court of Appeal that she could not show that the defendant knew (either actually or constructively on the basis of wilful blindness) that it was under a duty to disclose the fact and amount of the commission it received. However, the Court of Appeal considered that it would be sufficient to establish that the defendant was reckless as to its breach of a duty of disclosure.
9. The Supreme Court again disagreed and held that “deliberately” in the context of this provision of the Limitation Act did not incorporate the concept of recklessness. The Supreme Court held that the word “deliberate” means something “done consciously and intentionally”, distinct from recklessness, which means something done “without thought or care for the consequences of an action”. On this basis, the Supreme Court held that in order for the defendant to have acted “deliberately”, it must have considered whether to inform the claimant of the relevant fact and decided not to do so.
10. It follows from the Supreme Court’s decision that in order for section 32(1)(b) to apply, a claimant is required to show (i) a fact relevant to the claimant’s right of action, (ii) the concealment of that fact from the claimant by the defendant – either by a positive act of concealment or by the withholding of relevant information – and (iii) an intention on the part of the defendant to conceal the fact in question.
Section 32(2) of the Limitation Act
11. In support of the conclusion that recklessness was sufficient for the purpose of section 32(2) of the Limitation Act, the Court of Appeal reasoned that, in many situations, the existence of a legal wrongdoing could only be known with certainty once a Court had determined that a wrong had been committed and, therefore, it should be sufficient for the purpose of section 32(2) that the defendant appreciated that there was a “real risk that its conduct would amount to a legal wrong in circumstances where it was not reasonable for it to take that risk”.
12. The Supreme Court disagreed with that analysis, confirming again that the word “deliberate” did not also encompass “recklessness” and explained that if the Court of Appeal’s analysis was accepted, it would deprive professional people of any effective limitation defence. For example, a professional person accused of negligence would be deprived of any effective limitation defence unless they could show they were not negligent (i.e., until the issue of whether there had been a legal wrongdoing had been finally determined). Aside from the fact that there was no reason to depart from the ordinary meaning of the words used in the statute, the Supreme Court explained that the effect of the Court of Appeal’s judgment would be that professional people would have no protection against claims for an indefinite period in the future, which undermined the whole purpose of the Limitation Act.
13. The Supreme Court therefore held that, in order for section 32(2) to apply, a claimant must show that the defendant knew they were committing a breach of duty.
Use of parliamentary materials to aid interpretation
14. The Supreme Court reaffirmed that it would only be appropriate for a court to look at parliamentary materials to aid statutory interpretation if one of the three principles in Pepper v. Hart applied (i.e., if it was necessary to (a) confirm the meaning of a provision as conveyed by the text, its object and purpose; (b) determine a meaning where the provision is ambiguous or obscure; or (c) determine the meaning where the ordinary meaning is manifestly absurd or unreasonable). In this case, the Supreme Court decided again that it did not need to look beyond the ordinary meaning of the language used.
Application of the law in Canada Square v. Potter
15. In respect of section 32(1)(b) of the Limitation Act, the Supreme Court held that the claimant could not plead its claim without knowing of the existence of the commission and that the defendant deliberately concealed that fact from the claimant by consciously deciding not to disclose the commission to her. The claimant was therefore able to rely on section 32(1)(b) of the Limitation Act to deprive the defendant of a limitation defence.
16. In respect of section 32(2) of the Limitation Act, the Supreme Court held that while the failure to disclose the commission gave rise to the claimant’s right of action and could therefore be regarded as a breach of duty for the purpose of section 32(2) of the Limitation Act, it could not be shown that the defendant knew that it was committing a breach of duty or intended to do so. The claimant was therefore not able to rely on section 32(1)(b) of the Limitation Act to deprive the defendant of a limitation defence.
17. It is worth noting that the Supreme Court did not consider the question of whether the claimant “could with reasonable diligence have discovered” the fact concealed by the defendant because there was no suggestion that she could have discovered it at an earlier stage than she did. It is likely that defendants in future cases will place focus on this question as they seek to find an alternative way of narrowing the application of section 32(1)(b) of the Limitation Act.
In-depth 2023-269
