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Published on December 4, 2023
Canada Square Operations Ltd v Potter –  Supreme Court provides clarity on limitation periods in fraud context  

Introduction

Section 32 of the Limitation Act 1980 provides for the postponement of the limitation period in cases of fraud, concealment or mistake, and is therefore a useful and important tool for potential claimants.  To rely on these sections, key facts must be “deliberately concealed”, a phrase which has been increasingly scrutinised and developed in Court of Appeal judgments for nearly 20 years. However, Lord Reed recently departed from the “embellishments” on the statute in a unanimous judgment, and returned to the ordinary meaning of the words in the statute. He also heavily criticised the previous judgments for straying from their obligations of statutory interpretation. By removing additional complexity, the Supreme Court’s judgment will provide welcome clarity on a previously unduly complex area of law.

The facts of the case are not examined here, as the legal analysis can be understood without them, but for any particularly interested reader, the full judgment is available.

Section 32 Limitation Act 1980

Section 32 of the Limitation Act states:

  1. Subject to subsections (3), (4A) and (4B) below, where in the case of any action for which a period of limitation is prescribed by this Act, either—
    1. the action is based upon the fraud of the defendant; or
    2. any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant; or
    3. the action is for relief from the consequences of a mistake;
    the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.
  2. For the purposes of subsection (1) above, 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 effect of these sections is that, if a claimant wants to allege that a concealment has taken place in a way that would engage section 32, it must prove one or both of the following:

  1. that one or more facts relevant to his potential claim has been “deliberately concealed” by the defendant (s.32(1)(b));
  2. that the defendant deliberately breached a duty in circumstances where the breach was unlikely to be discovered for some time.

Canada Square: the interpretations of “deliberate” and “conceal”

In Canada Square, the Supreme Court considered the application of both s.32(1)(b) and s.32(2):

Was a fact (which was relevant to the right of action) “deliberately concealed” per s.32(1)(b)?

When considering this question, the Supreme Court considered the meanings of “conceal” and “deliberate” individually, before considering the concept of “deliberate concealment”.

“Conceal

The Supreme Court stated that “conceal” was to be given its ordinary meaning; i.e., the defendant took active steps to hide it, or failed to disclose it. As a result of this straightforward interpretation, there was no requirement for the defendant to either (i) be under an obligation – whether legal, moral, or social – to disclose the fact, nor (ii) know that the fact could be relevant to a cause of action. Lord Reed summarised his findings here as “it is sufficient, and accords with the purpose of section 32, that the defendant deliberately ensures that the claimant does not know about the facts in question and therefore cannot bring proceedings within the ordinary time limit”.

“Deliberate”

The Court of Appeal had found that it would be sufficient to show that the defendant had been “reckless” as to its breach of duty. However, Lord Reed rejected this, referring to Lord Scott’s judgment in Cave v Robinson, Jarvis & Rolf [2002] UKHL 18 [2003] 1 A.C. 384 (discussed further below), holding that a fact would be “deliberately” concealed if the intended result of the act or omission was the concealment of the fact from the claimant. Recklessness is a separate legal concept, and the words “reckless” and “deliberate” have different meanings.

“Deliberately concealed” for the purpose of s.32(1)(b)

Was there a “deliberate” breach of duty, per s.32(2)?

On the same basis as above, Lord Reed found again that “deliberate” does not include “reckless”. As “deliberate” is a clear English word, a deliberate breach of duty requires knowledge that the defendant “knows he is committing a breach of duty”. It is not a requirement that the defendant knew he would be exposed to a claim as a result of his actions; it was sufficient that the defendant knew it was committing a breach of duty, or intended to do so.

Lord Reed’s criticism of previous case law

”Embellishment” of the statute

During his judgment, Lord Reed frequently referred favourably to Cave v Robinson, Jarvis & Rolf, a case which also concerned “deliberate concealment” under s.32(2). Especially key was Lord Scott’s finding in Cave that “the plain words of the statutory requirements, ‘deliberately concealed’ and ‘deliberate commission of a breach of duty’ need no embellishment” (a statement which Lord Reed recommends is “taken to heart”). This was followed by an in-depth criticism of the Court of Appeal’s treatment of such cases:

Despite the guidance given by the House of Lords in Sheldon (Sheldon v RHM Outhwaite (Underwriting Agencies) Ltd [1996] A.C. 102) and Cave, the case of Williams (Williams v Fanshaw Porter & Hazelhurst (a firm) [2004] EWCA Civ 157; [2004] 1 WLR 3185) […] began a process in which the Court of Appeal has moved progressively further away from the clear language of the provisions; a process which continued in The Kriti Palm and culminated in the present case.”

The “embellishments” created in Williams and The Kriti Palm particularly under fire in Lord Reed’s judgment were:

  1. The extension of the “duty to disclose” to include scenarios where the defendant “would ordinarily have disclosed in the normal course of his relationship with the claimant” but fails to do so, as there is no such requirement in the statutory wording.
  2. Finding that for a claim under s.32(1)(b) to succeed, a concealment is not enough; there has to be a duty to disclose the facts (whether legal, or arising from a combination of “utility and morality”).
  3. The finding that recklessness could be a basis for a claim under either s.32(1)(b) and/or s.32(2).
  4. The suggestion that the defendant must know (or be reckless as to whether) the concealed fact was relevant to the claimant’s cause of action.

Pepper v Hart

Lord Reed also criticised Rose LJ’s use of Parliamentary materials in the Court of Appeal judgment in this case (Pepper v Hart [1993] AC 593, 634).  In her finding that “deliberate” could be construed as “reckless” in relation to s.32(2), Rose LJ cited the old law of concealed fraud which stated that a reckless breach of duty was sufficient to prevent the limitation period from running. Her basis for doing so was that, during the Parliamentary materials relating to the Limitation Amendment Act 1980, the Lord Chancellor made a comment that the purpose of “the new clause” – seemingly, the proposed section 26(2)(b) (which later became s.32(1)(b) – was to restate the law “more or less” as it was, and that “it is not intended that the new section should be in any way more restrictive than the present law”.

Pepper v Hart established the three conditions which must be met in order to rely on Parliamentary materials. The first condition – that there must be within the statute an issue as to “the construction of legislation which is ambiguous or obscure or the literal meaning of which leads to an absurdity” – was not met, as there is no obscurity nor ambiguity in “deliberate”. The third condition – that the Parliamentary material “clearly discloses the mischief aimed at or the legislative intention lying behind the ambiguous or obscure words” – was also not met; the Lord Chancellor’s comments did not address the meaning of the word “deliberate”, not the legislative intention lying behind that word.

Lord Reed also noted that Rose LJ’s reliance on the old law was also inappropriate, as it was made clear by the House of Lords in Sheldon and Cave that it is impermissible to rely on the 1939 Act and the cases applying it where the meaning of the current legislation is clear: “the word “deliberate” has a clear meaning in the context of section 32(2), as was decided in Cave”.

Summary

Overall, Lord Reed rejected the “elaborate and confusing” analyses of Williams and The Kriti Palm, which had been applied in the Court of Appeal’s judgment in Canada Square, and returned to the simplicity of Lord Scott’s application of the ordinary meaning of the words in the statute.  Canada Square therefore marks a change in the law, departing from a complex and uncertain chain of case law.  Now, what is required for a claim under s.32(1)(b) and s.32(2) of the Limitation Act 1980 is: (1) a fact relevant to the claimant’s cause of action; (2) the concealment of that fact by the defendant, either by a positive act of concealment or by withholding of the relevant information; and (3) an intention on the part of the defendant to conceal the fact in question.

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