Many mis-sold PPI and undisclosed commission claims are barred by the 6-year limitation period under the Limitation Act 1982. However, the recent Court of Appeal judgment Canada Square Operations Limited v Potter [2021] EWCA Civ 339, extends the time period in which such claims can be brought and should, therefore, increase the number of cases which can rely on section 32 of the Limitation Act 1982.
Section 32 of The Limitation Act 1982 (“The Act”)
Generally speaking, section 32 of The Act operates to disapply the primary limitation period in the case of fraud (section 32(1)(a)), concealment (section 32(1)(b)) or mistake (section 32(1)(c)).
In Canada Square Operations Limited v Potter, the Court of Appeal has provided clarity on the interpretation of s.32 of the Limitation Act 1980 (‘LA 1980’).
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). In addition, 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.
This case and the clarification is significant because of its wide scope – namely that it should apply to a number consumer relationships where there has been deliberate concealment of a relevant fact making that relationship ‘unfair’.
Facts of the case
In 2006 Mrs. Potter entered into a loan for £16,953.00 including a PPI premium of £3,834.24. 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 PPI premium paid.
Mrs Potter complained to Canada Square that the 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.
Canada Square argued that her claim was time barred under section 9(1) of the Limitation Act(LA) 1980 because the action had been brought more than 6 years after the relationship ended.
The Claimant argued that she could rely on both section 32(1)(b) and section 32(2) LA 1980 to disapply primary limitation.
Section 32(1)(b)
Under section 31(1)(b), the limitation period is postponed where “any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant.”
What is ‘concealment’?
In the case of Potter, the parties agreed there was not an active concealment, but rather that the defendant failed to disclose the existence and scale of the commission.
The question, therefore, was does this ‘passive’ concealment amount to ‘concealment’ for the purposes of The Act? And this question can be broken down into three core issues that the court needed to consider:
- Can s32(1)(b) apply where there is no active concealment but only a failure to disclose?
- The court answered in the affirmative. Not only active steps of concealment are sufficient to satisfy section 32(1)(b).
- If yes, does it only apply where the defendant was under a free-standing legal duty to disclose the fact?
- The court ruled it does not. Regardless of contractual position, there was enough of an obligation to disclose which meant a failure to disclose amounted to a concealment for the purposes of section 32(1)(b). Inherent in ‘concealing’ is an obligation to disclose it.
- Was the defendant subject to a duty to disclose the existence and amount of the commission, and was this duty sufficient enough to amount to a concealment.
- Yes. Obligations to act fairly under section 140A of the Consumer Credit Act 1974 were sufficient to mean that their failure to disclose the commission amounted to a concealment within the meaning of section 32(1)(b).
Section 32(2)
In addition to the above questions surrounding concealment, it is also necessary for a Claimant to prove that the Defendant had deliberately concealment the existence and the amount of the commission.
The limitation period is postponed where a “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.”
The next question for the Court of Appeal in Potter was whether the concealment by Canada Square was deliberate.
- Under section 32(2) it was not enough for Mrs Potter to show that Canada Square just deliberately chose not to disclose the level of commission, and that as a matter of law that gave rise to an unfair relationship contrary to section 140A
- Rather, it must be shown that the Defendant realised that they should have told her about the commission and decided not to tell the Claimant.
- In these circumstances, the Court held that ‘deliberate’ could potentially mean reckless.
- The unfair relationship, under section 140A of the Consumer Credit Act, was a breach of duty for the purposes of section 32(2).
Therefore:
- Mrs Potter could rely on section 32(1)(b), if she could show that the Canada Square realised that there was a risk that they had a duty to tell her about the commission charge, such that their failure to do so meant that they deliberately concealed that fact from her.
- Mrs Potter could also rely on section 32(2), if she could show that Canada Square realised that there was a risk that their failure to disclose the fact and extent of the commission resulted in their relationship with her being unfair within the meaning of section 140A, and it was not reasonable for them to take that risk of creating an unfair relationship.
- There is no need to show actual knowledge that the failure to disclose the commission made their relationship unfair for the purposes of relying on section 32(1)(b) or section 32(2).
The above findings meant that Mrs Potter could rely on section 32(1)(b) and avoid the ordinary 6 year limitation period. The Court of Appeal upheld that the Defendant had deliberately concealed from her the existence and extent of the commission they received – giving her a right of action under section 140A of the CCA.
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.
What this means?
Prior to this Court of Appeal decision, many consumers were time barred from bringing their claim for mis-sold PPI and undisclosed commission under the normal 6-year limitation period.
The judgment is a welcome relief for those seeking clarity on the interpretation of s32 of the Limitation Act and cases of a similar nature will ultimately turn on the discoverability of the concealment and the period of limitation for the purposes of s140A will run from the date of that discovery.
How we can help
Jamieson Alexander are helping a large number of clients with their undisclosed commission claims, and our team of banking and finance specialist have a process in place to help ensure that you do not need to incur further costs and distress due to the lender’s actions. We are working with several barristers, Third Party funders and After-the-Event insurers to assist with these claims.
If you would like to discuss any of the above or would like our help, please contact George Butler on 0330 460 6097 or george@jamiesonalexander.co.uk, or the Head of Banking & Finance Litigation at Jamieson Alexander Anastasia Ttofis on 0330 460 6090 or anastasia@jamiesonalexander.co.uk
