Mr Justice Jay has dismissed the appeal of Canada Square Operations Ltd (formally Egg Banking PLC) against a first instance decision granting compensation for undisclosed commission received by the lender under mis-sold payment protection insurance (“PPI”) for the period 2006 to 2010. In doing so, the primary limitation period for claiming against the lender was dis-applied, meaning that the claim brought in 2019 was considered to be in time, and not statute barred.

The key legal provisions

S.32 of the Limitation Act (the “1980 Act”) operates to extend the standard 6 year limitation period for claims to be brought in cases of deliberate fraud, concealment or mistake.

Section 32(1)(b) of the 1980 Act 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.” 

Points of interest

This judgment provides judicial authority that failure on behalf of a lender to disclose PPI commission may amount to deliberate concealment for the purposes of the 1980 Act, thereby extending the 6 year limitation period.

This case was not about the taking of active steps, but rather the lender’s non-disclosure of steps taken. In refusing the appeal, the High Court held that the lender’s failure to disclose was a breach of its duty to act fairly, and one that could not have been discovered for some time. The Court was not persuaded by the lender’s arguments that an act of omission, or non-disclosure, could not establish the ‘deliberate’ conduct required for s.32 of the 1980 Act. Although the lender had not taken any positive action to conceal information, in omitting to disclose their commission payments, the lender had taken a conscious decision of non-disclosure. This omission amounted to deliberate concealment, thereby triggering s.32 of the 1980 Act, and extending time.

Although decided in the context of a PPI claim, professional advisers generally should take heed of the Court’s refusal in this respect to draw a distinction between positive acts and omissions. The key component is whether one has made a conscious, deliberate decision to either act or not act; it is in these circumstances that s.32 may potentially be engaged.

The decision is also illustrative of the High Court’s broad approach to determining what may constitute a breach of duty in this context. The narrow interpretation, requiring this to be identified in a contractual, tortious, equitable or fiduciary sense, was rejected. What mattered was whether there was a “legal wrongdoing of any kind” which could give “rise to of right of action”.

Whilst it is unlikely that lenders will welcome the decision of Mr Justice Jay, it does provide some helpful clarity on an area of “general importance” as regards the application of s.32 in this context, which, until now, has been at large with conflicting decisions of the lower courts.

However, Mr Justice Jay did highlight the failure of the lender to call any evidence to rebut the point that it had taken a conscious decision not to disclose its PPI commission. In the absence of any evidence, no more favourable inferences could be drawn on the deliberateness or otherwise of the lender’s conduct. This may prove to be a future point of distinction if other, similar, cases come before the Courts. When assessing the risk of non-disclosure / omission of an act, consideration may also be given to the context in which the omission is made. This context may be determinative as to the degree of blameworthiness / unconscionable conduct viewed to have taken place.

It remains to be seen whether the higher Courts are prepared to uphold this approach or whether a distinction may be made in future litigation on the specific facts of any given case. Currently, it is potentially another means by which debtors may seek compensation from lenders for failure to disclose related PPI commission, notwithstanding the Financial Conduct Authority’s deadline of 29 August 2020 by which to make such claims.

Background

On 26 July 2006, Mrs Potter entered into a regulated fixed-sum loan agreement with Canada Square Operations Ltd, then Egg Banking PLC. At the same time, she also entered into a PPI policy. Unbeknownst to Mrs Potter, however, was that the lender had received commission from the insurer that amounted to nearly 95% of the premiums paid.

The parties’ relationship ended in March 2010. In April 2018, as part of the broader PPI claims landscape, a complaint was made on Mrs Potter’s behalf that the PPI policy had been mis-sold. Canada Square paid compensation for the mis-selling of the PPI policy on the basis that the relationship between the parties was unfair for the purposes of section 140A of the Consumer Credit Act 1974 (the “1974 Act”) and that Mrs Potter was not made aware of this until 2018. The compensation, however, did not cover the entirety of her loss. In January 2019, nine years after the contract ended, a claim was brought to recover the balance of the premiums, plus contractual and statutory interest (the quantum of the claim being subsequently agreed at £7.953.53).

The parties accepted that the relationship between the parties was “unfair” for the purposes of the 1974 Act, and that Mrs Potter was not aware of the commission until 2018. It was further acknowledged that Mrs Potter was attempting to bring the claim outside the applicable standard 6 year limitation period. To this end, Mrs Potter sought to rely on s.32 of the 1980 Act by which to extend the period, and thereby extend time for her claim.

The Recorder, reading s.32(1)(b) and s.32(2) of the 1980 Act together, concluded that the lender’s non-disclosure had been deliberate. He accepted Mrs Potter’s evidence that she was not aware of the commission until November 2018, and that she could not with reasonable diligence have ascertained the position earlier. On this basis the primary limitation period for bringing the claim was disapplied.

The appeal

Canada Square appealed against this decision on the basis that, for the purposes of s.32 of the 1980 Act, it was wrong in law: (i) to find that it was under a relevant duty to disclose the existence or extent of the commission retained by it pursuant to the PPI policy (“Ground 1”); and (ii) to infer from the evidence that it must be taken to have known that its failure to disclose the extent of the commission it retained was a breach of duty (“Ground 2”).

Both grounds of appeal were dismissed.

Ground 1:

• Canada Square submitted that its non-disclosure could not be an active concealment for the purposes of s.32(1)(b). Instead, this was a paradigm case of an “omission to disclosure”. Furthermore, s.32(2) was inapplicable to Mrs Potter’s claim since Plevin v Paragon Personal Finance [2014] 1 WLR 4222 expressly provided that the unfair relations provisions (for the purpose of sections 140A-C of the Consumer Credit Act 1974) were not predicated on any legal duty to disclose.

• Held: the unfair relationship that arose from the lender’s continued non-disclosure of the commission it received constituted a ‘breach of duty’ for the purpose of s.32(2) of the Limitation Act. Construction of this term did not require breach of duty to be identified in a contractual, tortious, equitable or fiduciary sense; following Giles v Rhind [2008] EWCA Civ 118, [2009] Ch. 191, [2008] 2 WLUK 720 it should be interpreted more widely so to cover “legal wrongdoing of any kind, giving rise to a right of action”. Further, for that purpose, no distinction should be drawn between acts and omissions.

Ground 2:

• Canada Square argued that for any breach of duty to be “deliberate”, the requisite mental element was required; in other words, it would have to have had sufficient knowledge of the breach in question. This was not possible, as the relevant provisions under the 1974 Act did not come into force until April 2007.
• Held: Canada Square must have known of the requirement to act fairly by April 2007 and made a conscious decision not to disclose the commission to Mrs Potter. This was not a case of negligence or inadvertent error. Further, in the absence of any evidence from 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).