Supreme Court decision on the meaning of deliberate concealment: Canada Square Operations Ltd v Potter

On 15 November 2023, the Supreme Court (SC) handed down judgment in the test case of Canada Square v Potter¹ which considers the meaning of deliberate concealment and deliberate commission of breach of duty for the purposes of extending the usual limitation period. The Court found that all that is required for deliberate concealment is that the defendant keeps the facts secret from the claimant such that they don’t know they have a claim. It is of no relevance that the defendant is not under an obligation to reveal the information. This decision is of great importance not only for several Payment Protection Insurance (PPI) cases which have been waiting in the wings to establish whether they have been brought in time, but also more generally for any case which relies on the ground of deliberate concealment to extend the limitation period.

 

Background

In July 2006, Mrs Potter took out a loan with Canada Square together with a PPI policy. Mrs Potter was not told that over 95% of the premium for the PPI Policy was paid to Canada Square as its commission. In December 2018, Mrs Potter issued a claim against Canada Square, to recover the sums that she had paid under the policy on the basis that the failure to disclose rendered the relationship unfair under section 140A of the Consumer Credit Act (CCA). Canada Square argued that the claim had been brought too late under the Limitation Act 1980 (Act) as the six year limitation period had long expired. Mrs Potter argued in turn that time did not begin to run until she found out about the commission in 2018, as it had been deliberately concealed, and relied upon the exceptions set out in s32 of the Act.

Under Section 32(1)(b) of the Act, limitation does not start to run where any fact relevant to the claimant's right of action has been ‘deliberately concealed’ by the defendant. Section 32(2) says that ‘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.’ Mrs Potter argued that both exceptions to the usual six year rule applied.

The County Court agreed that s32 of the Act applied, and following appeals by Canada Square, the High Court and Court of Appeal (CoA) also agreed, with the latter holding that both 32(1)(b) and 32(2) operated to postpone the six year period.

 

Judgment

The SC unanimously dismissed Canada Square’s appeal. A fact is ‘concealed’ if it is withheld and kept secret from the claimant, either by taking active steps or failing to disclose it, whether there is an obligation to disclose it or not. In a departure from previous CoA authority, the claimant does not need to show that there was a moral or social duty to reveal the fact – issues which the SC held are not objectively justiciable. Further, it is not necessary for a claimant to show that the defendant knew the fact was relevant for the claimant’s cause of action.

A concealment is ‘deliberate’ if the defendant ensures that the claimant does not know the fact in question, such that the claimant does not know to bring the claim. All that is required is for the defendant to knowingly intend to conceal the fact. However, in a departure from the CoA’s reasoning, the SC found that this does not extend to a reckless intention.

The SC did reject the argument that there had been a deliberate commission of a breach of duty by Canada Square. The SC disagreed with the CoA that it is enough to be reckless as to the risk of committing that breach of duty. It had not been shown that Canada Square intended its failure to disclose to cause their relationship to be unfair under section 140A of the CCA. The appeal was therefore allowed on that ground. However, given the finding that there had been a deliberate concealment of a fact necessary to bring the claim, this did not change the outcome.

On the facts in question, the existence and amount of commission were facts relevant to Mrs Potter’s case and she could not plead without knowing them. Canada Square consciously withheld the information from Mrs Potter and she could not with diligence have found out the information. Accordingly, her claim was found not to be time barred and Canada Square cannot rely on a limitation defence.

 

The future of undisclosed commission cases and deliberate concealment

As Potter was a test case, several PPI commission claims will now proceed through the courts on the basis they are not time barred. Claimants are expected to argue that the commission information was knowingly withheld such that s32 can be relied on to get around the 6 year limitation period.

However, the decision in Potter comes 9 years after the seminal decision in Plevin², and 6 years after the proactive Plevin mailings that lenders were required to send to potentially eligible customers or former customers, informing them that they may be entitled to bring a complaint based on the level of commission associated with their PPI policy. In Potter, Canada Square did not suggest that Mrs Potter could with reasonable diligence have discovered the concealment any earlier, the effect of which (had that argument been run and accepted by the Court) being that time would have started to run for limitation purposes from the time Ms Potter could, with reasonable diligence, have discovered that fact.

In the light of foregoing well-publicised impact of Plevin and latterly pro-active mailings, it remains open to any lender now faced with a claim which sought to rely on the decision in Potter to postpone limitation, to argue that the claimant could, with reasonable diligence, have discovered the facts necessary to bring their claim over 6 years ago. This would mean that a limitation defence, in circumstances where the credit agreement ended over 6 years ago, could still be viable.

 

What will be the impact on other types of undisclosed commission cases?

Potter can be seen as a definitive decision regarding limitation periods for non-disclosure of commissions in a PPI mis-sale scenario. However, the decision is of wider significance to undisclosed commission claims generally. The decision of the CoA in Wood/Pengelly³ which addressed the concept of fully-secret and half-secret disclosures of commission in the context of mortgages and mortgage broker arrangements, has seen claimant firms pursuing customer remedies relating to the non-disclosure of commission arrangements in other scenarios, for example: motor finance, mortgage finance and energy broker arrangements. It is likely that those firms will seek to apply the principles in Potter to such claims as they seek to defeat any limitation defence. We expect the courts will be kept busy on this issue for some time yet.

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¹[2023] UKSC 41
²Plevin v Paragon Personal Finance Ltd [2014] UKSC 61
³Wood v Commercial First Business Ltd & ors and Business Mortgage Finance 4 plc v Pengelly [2021] EWCA Civ 471