In Canada Square Operations Limited v Potter  EWCA Civ 339, in relation to a claim for mis-sold payment protection insurance (‘PPI’), the Court of Appeal has provided clarity on the interpretation of s.32 of the Limitation Act 1980 (‘LA 1980’). Section 32 operates to disapply the primary limitation period where a fact relevant to the claimant’s cause of action has been deliberately concealed from him/her by the defendant.
The Judgment clarifies there need not be a free-standing contractual, tortious or fiduciary duty to disclose for concealment to be made out under s.32(1)(b). And for concealment to be ‘deliberate’ both under s.32(1)(b) and s.32(2), the correct test is recklessness, involving both a subjective and objective element.
The case is judicial authority for the proposition that failure to disclose PPI-commission may amount to deliberate concealment for the purposes of s.32. It confirms a debtor’s right to seek redress in the courts for creditors’ non-disclosure in PPI contracts, notwithstanding that the deadline to complain to providers or the Financial Ombudsman Service has now passed. The Judgment’s significance comes from its wide scope: it should apply to a number consumer relationships where there has been deliberate concealment of a relevant fact making that relationship ‘unfair’.
In July 2006, Mrs Potter took out a regulated fixed-sum loan with Canada Square, and Canada Square suggested that Mrs Potter purchase PPI in addition. Whilst Mrs Potter was given the ‘key financial information’, she wasn’t told that Canada Square received a commission from the insurer that amounted to over 95% of the premiums paid.
On facts similar to the index case, in November 2014, the Supreme Court held that non-disclosure of a very high commission charged to a borrower made the relationship between the creditor and the borrower ‘unfair’ within the meaning of s.140A of the Consumer Credit Act 1974 (Plevin v Paragon Personal Finance Limited  UKSC 61).
Accordingly, Mrs Potter complained to Canada Square that PPI had been mis-sold to her. Canada Square paid some compensation; however, it did not cover the entirety of Mrs Potter’s loss and she brought a claim to recover the balance of the premiums paid. In its Defence, Canada Square admitted it had not disclosed the fact of its commission but averred that Mrs Potter’s claim was time barred under s.9(1) LA 1980, it being more than 6 years since the relationship between the parties ended.
First Instance and First Appeal
By the time the claim was heard at first instance in August 2019, the sole issue was whether Mrs Potter’s claim was statute barred. Mrs Potter relied on two aspects of s.32 in response. First, she argued that Canada Square’s deliberate concealment of the level of commission amounted to a concealment of facts relevant to her cause of action, within the meaning of s.32(1)(b) (such that limitation would not start to run until Mrs Potter discovered the concealment or could with reasonable diligence have discovered it).
Further or alternatively, Mrs Potter argued that, in receiving the commission from the insurer without Mrs Potter’s knowledge, Canada Square committed a deliberate breach of duty, where in the circumstances it was unlikely to be discovered for some time, within the meaning of s.32(2). In turn, it was argued this amounted to a deliberate concealment of the facts involved in that breach of duty for the purposes of s.32(1)(b).
At first instance, Recorder Rosen QC held that Mrs Potter’s claim was not time barred and gave judgment for her, having accepted that Mrs Potter did not become aware of the commission until in or around November 2018. Canada Square then appealed to the High Court, where the appeal was heard by Mr Justice Jay.
In dismissing the appeal, Mr Justice Jay held that, as there was no free-standing legal duty to disclose, Mrs Potter could not rely on s.32(1)(b) by itself (AIC Ltd v ITS Testing Services (UK) Ltd (The Kriti Palm)  EWCA Civ 1601 followed). He did however find the requirements of s.32(2) were made out, Canada Square being blameworthy in the context of their deliberate decision not to do something in circumstances where it was obvious the existence of the commission would not be discovered for some time.
Court of Appeal
Canada Square appealed again, arguing that Mr Justice Jay was wrong to hold that Mrs Potter could rely on s.32(2). Mrs Potter served a Respondent’s notice arguing that Mr Justice Jay was wrong to conclude she could not rely on s.32(1)(b).
Did the creation of an unfair relationship within the meaning of s.140A amount to a breach of duty for the purposes of s.32(2)?
Ground 1 of Canada Square’s appeal asserted that there was no legal duty or obligation on them to disclose the commission under general law or under s.140A. In dismissing that ground, the Court considered Mr Justice Jay had been right to hold that the creation of an unfair relationship by Canada Square was a breach of duty on which Mrs Potter could rely for s.32(2) purposes. Lady Justice Rose clarified that the structure and statutory purpose of s.32 indicated that breach of duty was not to be given a narrow meaning.
Was there a concealment?
The parties agreed there was no ‘active concealment’ by Canada Square; the concealment alleged was the failure to disclose to Mrs Potter the existence and scale of the commission. Canada Square argued that s.32(1)(b) could only be relied upon where the defendant actively concealed the relevant fact.
In dismissing that argument, Lady Justice Rose held that s.32(1)(b) only referred to concealment (not a duty to disclose) and an obligation to disclose is inherent in the concept of concealment. She noted: ‘To construe s.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’ (§75). The Court also considered the majority judgments in The Kriti Palm but held that for a ‘duty to disclose’ to exist, there does not have to be a free-standing contractual, tortious or fiduciary duty.
In holding the Respondent’s notice as correct, Lady Justice Rose stated the obligations to act fairly imposed on Canada Square by s.140A were sufficient to mean that their failure to disclose the commission amounted to a concealment of that commission within the meaning of s.32(1)(b).
The meaning of deliberate
The Court of Appeal accepted that ‘deliberate’ did not have a clear, natural meaning in the context of s.32 (§94) and that case law construing the word ‘deliberate’ was inconclusive (§106). With that in mind, the Court reflected on the case law of s.26 of the 1939 Act, which established that recklessness was a sufficient mental element in the meaning of ‘deliberate’. Accordingly, Lady Justice Rose held that the correct test for the meaning of ‘deliberate’ under s.32 was recklessness involving both a subjective and objective element.
Was Canada Square’s concealment deliberate?
In dismissing Grounds 3 and 4, which focused on the application of the recklessness test, the Court of Appeal held that Canada Square must have appreciated that if it decided not to tell Mrs Potter about the level of commission there was a risk that the credit relationship would be regarded as unfair.
It was held that Canada Square must have also realised there was a risk that it ought to disclose the commission to Mrs Potter because to do otherwise would conceal from her a fact that was relevant to her right of action against it under s.140A. Accordingly, there was no reason why a reasonable person, apprehending the risk that Canada Square must have apprehended, would have decided not to disclose the commission to Mrs Potter.
Appeal dismissed. Lady Justice Rose held that Mrs Potter could defeat the primary limitation period by reliance on s.32(1)(b), Canada Square having deliberately concealed from her a fact relevant to her right of action under s.140A. Further or alternatively, it was held that Mrs Potter could rely on s.32(1)(b) as expanded by s.32(2), because Canada Square deliberately committed a breach of their duty under s.140A, in circumstances where that breach was unlikely to be discovered for some time.