On 20th March 2020, Jay J. handed-down his decision in Canada Square Operations Ltd v Potter  EWHC 672 (QB). He dismissed the lender’s appeal against a finding that s. 32 of the Limitation Act 1980 (“LA”) applied to an unfair relationship (“UR”) claim brought under s. 140A of the Consumer Credit Act 1974 (“CCA”) so as to extend the relevant limitation period.
The full judgment is available here: Canada Square v Potter
Mrs Potter alleged an UR arising from non-disclosure of commissions earned by Canada Square Operations Ltd (“Canada Square”) in relation to a PPI policy taken by her in conjunction with a regulated fixed-sum loan agreement. The commissions amounted to some 94.25% of the PPI premium. The loan and PPI were both entered into on 26th July 2006. The parties’ relationship came to an end in March 2010 when the loan was repaid in full. Thereafter, proceedings were issued by Mrs Potter just under nine years later, in January 2019, by which she sought repayment of the undisclosed premiums pursuant to s. 140B(1) CCA.
It appears to have been agreed between the parties that the non-disclosure of commissions gave rise to an UR and that the claim was brought outside the applicable six-year limitation period. However, Mrs Potter prayed-in-aid s. 32 LA to extend that primary period.
Section 32(1)(b) provides that if “any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant” then limitation shall not begin to run until the fact has been discovered or could have been “with reasonable diligence.” Further, s. 32(2) provides that, for the purposes of sub-s. (1), “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.” Thus, Mrs Potter alleged that Canada Square’s non-disclosure was a “deliberate… breach of duty” for the purposes of s. 32(2), such that she could not with reasonable diligence have discovered the commissions prior to November 2018.
At first instance, Mr Recorder Rosen QC found that Canada Square’s non-disclosure of the PPI commissions was deliberate. Further, that it involved a “breach of duty” in the wider sense envisaged by s. 32(2) LA since, as at July 2006, Canada Square must have known it was acting unfairly in withholding the fact that it was receiving commission in conjunction with the sale of the PPI. As such, he concluded that the limitation period had not started to run until around November 2018 and the claim was in time.
The rival submissions
Canada Square appealed on two grounds. Namely, that the Recorder was wrong in law: (i) to find that disclosure of the fact or amount of the commissions constituted a relevant “duty” for the purposes of s. 32 LA (“Ground 1”); and (ii) to infer that it must be taken to have known that its failure to make such disclosure was a breach of duty (“Ground 2”).
On Ground 1 Canada Square argued that its non-disclosure was not “deliberate” in the sense of an active concealment, for the purposes of s. 32(1)(b). Rather, it was a paradigm case of a mere “omission to disclosure.” Further, s. 32(2) LA was inapplicable to Mrs Potter’s claim since Plevin v Paragon Personal Finance  1 WLR 4222 expressly stated that the UR provisions were not predicated on any legal duty to disclose. As to Ground 2, Canada Square submitted that “deliberateness” requires the requisite mental element, i.e. sufficient knowledge of the breach in question. It could not have known that its failure to disclose commissions to Mrs Potter would breach s. 140A CCA since the relevant provision did not come into force until 6th April 2007.
Further, Mrs Potter served a Respondent’s Notice seeking to uphold the Recorder’s decision on two further bases. First, even if there was no breach of duty, a fact relevant to her cause of action was nonetheless deliberately withheld. Secondly, the fact of the commissions was a fact which should have been disclosed in the ordinary course of the parties’ relationship.
In particular, it was argued that “breach of duty” in s. 32(2) must be read as the obverse of “right of action” in s. 32(1). Thus, if s. 140A constituted the “right of action”, the facts giving rise to it (i.e. the non-disclosure) must be a “breach of duty” for the purposes of sub-s. (2). Further, as to the fact that s. 140A did not come into force until some 9 months after the PPI sale, it was submitted that Canada Square was under a continuing duty and its failure to disclose thereafter was therefore a “deliberate” breach. In relation to s. 32(2) LA, it was submitted on behalf of Mrs Potter that a “duty” for the purposes of the LA was conceptually distinction from the “legal duty” referred to in Plevin.
Jay J. accepted that sub-ss. (1)(b) and (2) overlap but are not duplicative. The former is concerned with a defendant taking “active steps” to conceal a fact relevant to the claimant’s cause of action. As such, Mrs Potter’s case was not “paradigm” but, rather, one of mere inaction [para 28]. By contrast, s. 32(2) LA was “in the nature of a deeming provision” for the purposes of sub-s. (1); the terms “breach of duty” and “right of action” in those provisions “must be the two sides of the same coin” [para 29].
Applying the Court of Appeal’s decision in The Kriti Palm  2 CLC 223, Jay J. considered that s. 32(1)(b) applied only where there was a “duty to disclose”, which “must be envisaged as a legal duty” as opposed to some other kind of “Limitation Act duty”. In the present case, he concluded that there was “nothing in the relationship between the parties which might enable any duty to disclose to be spelled out” [para 33].
Accordingly, the appeal turned entirely on the true meaning of “breach of duty” in sub-s. (2) [para 39]. In that regard, Jay J. relied on Giles v Rhind (No 2)  Ch 191 to conclude that the provision “should be interpreted more widely so as to cover ‘legal wrongdoing of any kind, giving rise to a cause of action.’” Thus, Canada Square’s failure to disclose commissions so as to give rise to an UR under s. 140A constituted a “breach of duty” for that purpose [para 43]. Further, for that purpose, no distinction should be drawn between acts and omissions [para 44].
He tested his conclusion on that point by returning to the “paradigm case” of active concealment under s. 32(1)(b). In that regard he held that the effect of sub-s. (2) is “to treat a deliberate commission of a breach of duty… as a deliberate concealment of any fact involved in that breach…” Thus, there was no room for Canada Square’s argument that the words “breach of duty” in s. 32(2) required a breach of some “underlying obligation pre-existing or separate from any cause of action, statutory or otherwise…” [para 48].
In relation to Canada Square’s Ground 2, i.e. whether breach was “deliberate”, Jay J. considered that Mrs Potter’s case faced considerable difficulties in relation to the period prior to the coming into force of the UR provisions. He therefore concentrated upon the period between 6th April 2007 and the conclusion of the relationship in 2010 [para 51]. He clearly had some hesitation in adopting the Recorder’s robust approach to Canada Square’s failure to disclosure during that period. In particular, he noted that even Harrison v Black Horse Ltd  CTLC 1, the first substantial decision on PPI commission, had not been decided until some months after the parties’ relationship concluded [para 53].
Therefore, Jay J. framed the question as whether it could be properly inferred that Canada Square reasonably understood the UR provisions of the CCA to not require disclosure of commissions [para 55]. He noted that, although Cave v Robinson Jarvis & Rolf (a firm)  1 AC 384 concluded that s. 32(2) required a defendant to realise that his act involved a breach of duty, Giles v Rhind (No 2) had the effect that that would be the case if the defendant was merely “reckless” as to the legal consequences of his act [para 64].
In the context of s. 140A CCA, Canada Square must have known of the requirement to act fairly by April 2007 and to have decided to continue in its relationship with Mrs Potter without disclosing the commissions received. In that respect it acted “deliberately”. Further, in the absence of any evidence from the Canada Square to the contrary, no more favourable inferences could be drawn. Thus, there had been a “deliberate commission of a breach of duty” under s. 32(2) and the appeal would be dismissed.
As noted by Jay J. the application of s. 32 LA in this context has been at large for a number of years with various first instance County Court decisions in both directions. Potter’s case brings a degree of clarity to the issue, albeit one which is unlikely to be welcomed by lenders facing PPI claims which were previously thought to be statute-barred. Subject to any further appeal, the only point which perhaps remains open is the extent to which a lender may be able to rebut the presumption that it acted deliberately under s. 32(2) by adducing evidence on the point.
Summary by Thomas Samuels