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CA Judgment in ‘Potter’: PPI and Limitation

The Court of Appeal handed down judgment this morning in Canada Square Operations Ltd v Potter [2021] EWCA Civ 339.

Background

On 26 July 2006 Mrs Potter (“C”) had entered into a regulated loan for £16,953.00 (the “Loan”) with Egg Banking plc (which later changed its name to Canada Square Operations Ltd) (“D”). The PPI premium was £3,834.24 and the commission was some 95.24%. The total amount payable in respect of the PPI (inclusive of associated contractual interest) was £4,545.00. C redeemed the Loan early, in March 2010.

In 2018 C submitted a complaint and D issued her with some limited redress. C issued proceedings in January 2019 seeking additional sums. The question was whether the claim was time-barred, as it was issued more than six years after redemption of the Loan.

C relied upon the ‘deliberate concealment’ postponement provisions in section 32 of the Limitation Act 1980 (the “1980 Act”). C relied on two limbs within section 32:

  • s32(1)(b): where D has “deliberately concealed” the existence/amount of commission, time does not begin to run until C could, with reasonable diligence, have discovered it;
  • s32(2): for the purposes of (1)(b), “deliberate” commission of a “breach of duty” in circumstances where it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.

D adduced no evidence at trial.

The lead judgment in the CA was delivered by Rose LJ. D’s appeal was dismissed and C was held entitled to rely upon the s32 postponement provisions.

General Points

LJ Rose rejected D’s submission that section 32(1)(b) and (2) should both be interpreted restrictively ([29]-[30]). The 1980 Act strikes a balance between the competing aims of protecting defendants from stale claims and permitting claimants to overcome time limits in certain circumstances.

The CA rejected D’s submission that only “active” steps of concealment sufficed to satisfy s32(1)(b) [67].

Decision Not to Disclose

The High Court below had relied on a finding that D had intentionally decided not to disclose commission for obvious commercial reasons ([28] of the judgment below). D did not contest this finding in the CA [139].

Existence of Duty/Obligation to Disclose

At the date of execution (26 July 2006), the ‘unfair relationship’ provisions of the Consumer Credit Act 1974 (the “CCA”) had not yet been enacted. Nonetheless, once they were enacted on 6 April 2007, they had retroactive effect to existing agreements from April 2008 (subject to the transitional provisions, which did not render this Loan out of scope).

D pointed to the words “breach of duty” in subsection 32(2). D argued that there was no legal “duty” on it to disclose commission under the ‘unfair relationship’ provisions in CCA s140A. Non-disclosure may be “part of a multi-factorial assessment” of whether the relationship was unfair, but that is different from there being a duty [56].

The CA rejected D’s argument, applying Giles v Rhind (No 2) [2008] EWCA Civ 118, where the Court had interpreted “breach of duty” expansively, to catch “legal wrongdoing of any kind” [62].

As correctly interpreted, Buxton LJ in AIC Ltd v ITS Testing Services (UK) Ltd: The Kriti Palm [2006] EWCA Civ 1601 did not decide there was a “contractual obligation” to disclose the results of the re-tests. Rather, he held that, regardless of the contractual position, there was “enough of an obligation” to disclose to mean non-disclosure amounted to “concealment” [74].

In any event, unlike s32(2), s32(1)(b) does not refer to a “duty”; it refers only to “concealment”. Inherent in the concept of “concealing” something is the existence of some “obligation” to disclose it. To construe s32(1)(b) as being satisfied only if there is a pre-existing legal duty to disclose adds an unwarranted gloss to the statute [75].

For the purposes of the 1980 Act, that “obligation” need only be one arising from a “combination of utility and morality” (adopting Rix LJ’s phrase in The Kriti Palm) [75]. The Court need not undertake a detailed analysis of implied contractual terms or the scope of tortious duties of care when considering whether s32(1)(b) applied. To do so might entail consideration of a time (contract formation) before the concealment occurred. The focus should be on the conduct alleged to amount to the concealment and on whether the defendant was, at that point, under a “sufficient obligation to disclose” for its failure to amount to concealment [76]. There need be no free-standing legal duty to disclose [77].

D’s next argument was that it was impermissible for the same conduct (non-disclosure) to serve both as the foundation for C’s cause of action under s140A and as the basis for her reliance on s32 [79]. However, Rose LJ said there was no reason in principle why a claimant should be in a worse position for limitation purposes where concealment was also an element of the cause of action [83].

The CA also rejected D’s submission that its concealment was only operative at the date of execution, as it was at that point C lost the opportunity to shop around. The concealment was continuous – the unfairness did not solely derive from C’s inability to make an informed decision about the purchase. The unfairness lies additionally in the fact that there were ongoing payments well in excess of the ‘net cost’ of the policy, which C had to finance on credit [83].

D should have disclosed the commission “at least after April 2008”, when the ‘unfair relationship’ provisions came into force [83].

Knowledge of Breach of Duty/ ‘Deliberate’

The mental element was necessary to both s32(1)(b) and s32(2): the Court must be satisfied D realised they should have told C about the commission, but decided not to tell her [85].

Although ‘deliberate’ is a common English word, it does not have a clear ‘natural’ meaning [94].

Recklessness is a sufficient mental element; C need not establish actual knowledge that non-disclosure generated an ‘unfair relationship’ [137]-[138].

C may rely on s32(2) if she can show that D realised there was a risk that D’s non-disclosure generated an ‘unfair relationship’ and it was not reasonable for D to take that risk [137].

Alternatively, C may rely on s32(1)(b) if she can show D realised there was a risk that they had a duty to disclose, such that D’s non-disclosure meant there was deliberate concealment [137].

D said it only had the requisite knowledge when the Supreme Court handed down its judgment in Plevin v Paragon Personal Finance Ltd [2014] UKSC 61, which was in November 2014.

The CA found that D was unable to claim on these facts that it relied on the favourable decision in Harrison v Black Horse Ltd in deciding not to disclose, since the trial judgment in Harrison (July 2010) post-dated redemption of the Loan (March 2010) [145]. The CA referred to the FSA’s review of the ICOB rules in March 2007, which concluded there was significant risk of consumer detriment, the OFT’s Guidance 854 on the ‘unfair relationship’ provisions, published in May 2008 and the Competition Commission Report into PPI in January 2009. Rose LJ accepted that commission non-disclosure “was not among the most serious of the unfair practices reviewed in these publications and that comprised what became known as the ‘PPI mis-selling scandal’ [156].

Nonetheless, for D to suggest that the Supreme Court’s judgment in Plevin came to them as a bolt of lightning out of a clear sky was very far from a fair portrayal of what took place [157]. D must, subjectively, have been aware that there was a risk that commission non-disclosure generated unfairness. It was not reasonable, objectively, for D to take that risk [158]-[160].

Relationship between s32(1)(b) and (2)

Subsection 32(2) was intended to extend the scope of s32(1)(b) to provide an alternative, and in some cases easier, means of establishing the facts necessary to bring the case within s32(1)(b). The potential application of s32(2) should not operate to close out the possibility of s32(1)(b) applying if the claimant can otherwise bring himself within (1)(b) [83].

Reasonable Diligence

It was not argued by D that C could have discovered the commission with reasonable diligence more than six years prior to issue (i.e. prior to January 2013). It appears that this was because this point was not fully run at trial and therefore D was stuck with the trial judge’s finding of fact that C could not have discovered the commission with reasonable diligence until November 2018.

Judgment available here: Canada Square v Potter CA.

Summary by Ruth Bala