Canada Square Operations Ltd (Appellant) v Potter (Respondent)

LORD REED (with whom Lord Hodge, Lord Kitchin, Lord Sales and Lord Lloyd-Jones agree):

1. This appeal raises fundamental questions concerning section 32(1)(b) and section 32(2) of the Limitation Act 1980 (“the 1980 Act”). Section 32(1)(b) postpones the commencement of the ordinary limitation period where “any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant”. Section 32(2) provides that, for the purposes of section 32(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”.

1. The questions raised in the appeal concern the meaning of the phrases “deliberately concealed”, in section 32(1)(b), and “deliberate commission of a breach of duty”, in section 32(2).

1. The facts

1. On 26 July 2006 the claimant, Mrs Potter, entered into a loan agreement with the defendant, Canada Square Operations Ltd, then known as Egg Banking plc. The agreement was constituted by a pre-printed standard form prepared by the defendant and signed by both parties, and was a credit agreement within the meaning of the Consumer Credit Act 1974 as amended (“the 1974 Act”). It stated that the total amount of credit was £20,787.24, comprising a cash amount of £16,953.00 and a payment protection premium of £3,834.24. That premium related to the claimant’s purchase of a payment protection insurance policy (“the PPI policy”). The loan was repayable in instalments over a period of 54 months.

1. As well as being a commercial lender, the defendant was also an insurance intermediary. Over 95% of the amount described in the agreement as the payment protection premium constituted the defendant’s commission on the PPI policy. The sum paid to the insurer was only £182.50. The defendant did not inform the claimant that it would receive or retain commission on the policy.

1. The claimant completed the payments under the agreement early, and the agreement came to an end on 8 March 2010.

1. In November 2014 this court gave judgment in the case of Plevin v Paragon Personal Finance Ltd [2014] UKSC 61; [2014] 1 WLR 4222 (“Plevin”). It held, on facts similar to those of the present case, that the non-disclosure of a very high commission charged to a borrower made the relationship between the creditor and borrower “unfair” within the meaning of section 140A of the 1974 Act, with the consequence that the borrower could seek a remedial order under section 140B.

1. In April 2018 the claimant complained to the defendant that the PPI policy had been mis-sold to her. She received compensation in accordance with the redress scheme established by the Financial Conduct Authority for the mis-selling of PPI policies. In November 2018 she consulted solicitors and was advised that the amounts she had paid were likely to have included substantial commission.

1. The proceedings

1. The County Court

1. On 14 December 2018 the claimant began proceedings in the County Court in which she sought to recover the amounts she had paid to the defendant in respect of the PPI policy under deduction of the compensation she had received, together with interest. She brought the claim on the basis that the relationship between her and the defendant was “unfair” in terms of section 140A of the 1974 Act, with the result that she was entitled to make an application under that section for the remedial orders set out in section 140B. In its defence, the defendant admitted that it had not disclosed the fact that it would receive commission in respect of the policy, but averred that the claim was time-barred under section 9(1) of the 1980 Act, which provides that an action to recover any sum recoverable by virtue of any enactment shall not be brought after the expiration of six years from the date on which the cause of action accrued. In her reply, the claimant relied on section 32 of the 1980 Act as postponing the start of the limitation period until she found out about the commission. The case proceeded as a small claim. Its having now reached the Supreme Court reflects the fact that it is a test case, there being said to be approximately 26,000 active claims of a similar nature.

1. By the time of the trial, the only issue in dispute was whether the claim was time-barred or whether time should be extended under section 32(1)(b) of the 1980 Act, read by itself or together with section 32(2). The defendant led no evidence at the trial, and did not challenge the claimant’s evidence.

1. Recorder Rosen QC held that section 32 applied, and entered judgment for the claimant. He accepted her evidence that she did not become aware of the commission until she received legal advice in about November 2018. He considered that it was obvious that the defendant’s non-disclosure of its commission was deliberate: “[a]s a sophisticated creditor, the decision as to what commission to charge and not disclose must have been considered and at a high level. There is no evidence from the defendant to gainsay such inferences” (para 24). He also stated that the non-disclosure “was intentional or at least reckless” (para 26), seemingly implying that he interpreted “deliberate” in section 32 of the 1980 Act as covering things done either intentionally or recklessly. He found that the non-disclosure involved a breach of duty on the part of the defendant in what he described as “the wider sense applicable to section 32 of the 1980 Act” (para 27). He considered that as at the date of the agreement, and subsequently, the defendant must have known that it was acting unfairly in the sense explained in Plevin in failing to disclose the existence and amount of the commission.

1. The recorder rejected the defendant’s argument that it could not have known of the unfairness or that it involved breaches of duty by it, because of industry practice, the absence of any regulatory disclosure requirements, or the decision of the Court of Appeal in Harrison v Black Horse Ltd [2011] EWCA Civ 1128; [2012] Lloyd’s Rep IR 521, subsequently overruled in Plevin. He considered that if the defendant did not disclose the commission on the inception of the loan, it should at least have done so when sections 140A to 140D of the 1974 Act came into force, and all the more so when the law was settled in Plevin.

1. The High Court

1. Two grounds of appeal were advanced to the High Court:

   1. The recorder was wrong in law to find that the defendant was under a relevant duty for the purposes of section 32 to disclose the existence or extent of the commission retained by it pursuant to the PPI policy.

   1. The recorder was wrong in law to infer from the evidence before him that the defendant must be taken to have known that its failure to disclose the extent of the commission it retained was a breach of duty for the purposes of section 32.

1. Jay J dismissed the defendant’s appeal: [2020] EWHC 672; [2020] 4 All ER 1114. He accepted that section 32(1)(b) of the 1980 Act did not apply. He considered that the decision of the Court of Appeal in AIC Ltd v ITS Testing Services (UK) Ltd (The Kriti Palm) [2006] EWCA Civ 1601; [2007] 1 All ER (Comm) 667 (“The Kriti Palm”) established that, absent active concealment, section 32(1)(b) operated only where a duty to disclose arose under the general law. There was no such duty in the circumstances of the present case.

1. On the other hand, Jay J accepted that section 32(2) applied. The decision of the Court of Appeal in Giles v Rhind (No 2) [2008] EWCA Civ 118; [2009] Ch 191 established that “breach of duty” in section 32(2) was the obverse of “right of action” in section 32(1)(b). It covered legal wrongdoing of any kind which gave rise to a right of action, rather than being confined to a breach of duty in a contractual, tortious, equitable or fiduciary sense. In the present case, since the non-disclosure of the commission gave rise to the statutory right of action conferred by sections 140A to 140D of the 1974 Act, it was also a breach of duty for the purposes of section 32(2).

1. As to the characterisation of the breach of duty as deliberate, Jay J accepted that there was no deliberate breach of duty prior to the commencement of section 140A in April 2007. However, the breach of duty continued between April 2007 and March 2010, when the agreement came to an end. In relation to that period, he considered that the defendant’s decision not to disclose the commission, in the knowledge that there was a risk that non-disclosure would be held to render its relationship with the claimant unfair for the purposes of section 140A, amounted to a “deliberate” breach of duty for the purpose of section 32(2).

1. The Court of Appeal

1. Three issues were raised before the Court of Appeal. The first was whether the creation of an unfair relationship within the meaning of section 140A of the 1974 Act amounted to a “breach of duty” for the purposes of section 32(2) of the 1980 Act. The second was whether the defendant’s failure to disclose the commission amounted to the “concealment” of that fact within the meaning of section 32(1)(b). The third was whether any concealment, under section 32(1)(b), or breach of duty, under section 32(2), was “deliberate” within the meaning of those provisions.

1. The court dismissed the defendant’s appeal: [2021] EWCA Civ 339; [2022] QB 1. The principal judgment was given by Rose LJ. Males LJ agreed with her judgment, subject to some penetrating criticism of the way in which the law on section 32(1)(b) had developed. Sir Julian Flaux C agreed with both judgments. It will be necessary to consider the judgments in detail in the discussion below. They can however be summarised as follows.

1. In relation to the first issue identified above, Rose LJ agreed with the judge that, applying Giles v Rhind (No 2), the creation of an unfair relationship was a breach of duty, sufficient to engage section 32(2).

1. In relation to the second issue, it was common ground that the existence and amount of the commission were facts relevant to the claimant’s right of action for the purposes of section 32(1)(b). Rose LJ considered that section 32(1)(b) could be engaged either by a positive act of concealment of a relevant fact or by a withholding of relevant information about that fact, where there was a duty to disclose it “in Limitation Act terms”. In her view, the majority judgments in The Kriti Palm established that there was no requirement to show a free-standing contractual, tortious or fiduciary duty to disclose. The obligation to act fairly imposed on the defendant by section 140A of the 1974 Act was sufficient to mean that its failure to disclose the commission amounted to concealment of it within the meaning of section 32(1)(b). Accordingly, subject to the third issue, concerning the mental element, the judge had been wrong to hold that the claimant could not rely on that provision.

1. In relation to the third issue, it was common ground that the word “deliberate” connotes the same mental element for both section 32(1)(b) and section 32(2). The parties identified four potential candidates for the mental element required. The first was the defendant’s subjective knowledge or actual awareness that it was committing a wrongful act. The second was subjective knowledge in a wider sense which included wilful blindness. The claimant accepted (and continues to accept) that she could not meet either of those tests. The third was recklessness with both a subjective and an objective element: that is to say, recklessness as described by Lord Bingham of Cornhill at para 41 of R v G [2003] UKHL 50; [2004] 1 AC 1034, in the context of section 1 of the Criminal Damage Act 1971:

   “A person acts recklessly within the meaning of section 1 of the Criminal Damage Act 1971 with respect to - (i) a circumstance when he is aware of a risk that it exists or will exist; (ii) a result when he is aware of a risk that it will occur; and it is, in the circumstances known to him, unreasonable to take the risk.”

The fourth was recklessness in a purely subjective sense (ie the R v G test, with the modification that the person must have been aware that it was unreasonable to take the risk). It was common ground that the claimant could only succeed if recklessness in one of the two latter senses established the necessary mental element.

1. Rose LJ considered that although “deliberate” was a common English word, there was not a natural meaning which gave an answer to the issue before the court. The case law construing “deliberate” was not conclusive as to whether recklessness would suffice. It was both permissible and necessary to consider the pre-1980 Act case law and the Parliamentary materials leading to the Limitation Amendment Act 1980 (the Act preceding the consolidation effected by the 1980 Act). The pre-1980 case law on the precursor provision (section 26(b) of the Limitation Act 1939 (“the 1939 Act”)) established that recklessness was sufficient to establish the requisite mental element under that section. The Parliamentary materials showed that the test under section 32 was not intended to be more difficult for a claimant to overcome. This was consistent with the obiter observations of Mance LJ in Williams v Fanshaw Porter & Hazelhurst (a firm) [2004] EWCA Civ 157; [2004] 1 WLR 3185 (“Williams”). Interpreting “deliberate” as including “reckless” best met the Parliamentary objective.

1. Construing recklessness in accordance with the decision of the House of Lords in R v G, the claimant could rely on section 32(1)(b) if she could show that the defendant realised that there was a risk that it had a duty to tell her about the commission, such that its failure to do so meant that it deliberately concealed that fact. She could rely on section 32(2) if she could show that the defendant realised that there was a risk that its failure to disclose the commission would make the relationship unfair and it was not objectively reasonable for it to take that risk.

1. A review of the regulatory material supported the decisions below that the defendant must, subjectively, have been aware that there was a risk that non-disclosure would make the parties’ relationship unfair, and that it was not objectively reasonable for it to have taken that risk. The claimant could therefore rely on both section 32(1)(b) and section 32(2).

1. Males LJ added that the court was constrained by authority, but otherwise the courts could and should adopt what he described as the straightforward approach. The defendant’s decision not to disclose the commission was plainly deliberate. The effect of section 140A of the 1974 Act, as analysed in Plevin, was that it would have been reasonable to expect the defendant to disclose the commission to the claimant in the interests of fairness. Accordingly, the defendant “deliberately concealed” the commission within the meaning of section 32(1)(b). On that straightforward approach it was unnecessary for the claimant to establish a separate duty to disclose or that the defendant had a further requisite mental element in relation to whether it was under a duty to disclose or whether the commission was relevant to a cause of action against it. However, Males LJ accepted that authority did not permit the Court of Appeal to adopt that approach.

1. Males LJ also noted that it was common ground that the defendant’s failure to disclose the commission was not a case of “active” concealment, but only of non-disclosure. He did not think that this was correct. In his view, the defendant committed an act, rather than an omission to act, when not disclosing the commission. Its decision not to disclose could only be implemented by instructing its salesmen and account managers not to disclose the commission, and by preparing its documentation in a way which ensured that there was no mention of commission.

1. The appeal to this court

1. The appeal in relation to section 32(1)(b)

1. In relation to section 32(1)(b), the defendant does not appeal against the Court of Appeal’s conclusion that it was reckless in the R v G sense as to whether it was under a duty in terms of the 1980 Act to tell the claimant about the commission: in other words, that it realised that there was a risk that it ought to disclose the commission, because to do otherwise would conceal from her a fact which was relevant to her right of action under section 140A of the 1974 Act, and that it was objectively unreasonable for it to take that risk. The defendant’s grounds of appeal in relation to section 32(1)(b) are as follows:

   1. The Court of Appeal erred in law in finding that a duty of disclosure “in Limitation Act terms” was sufficient for the purpose of making a finding of concealment under section 32(1)(b). The court should have found that “concealment” required a legal duty to make disclosure, and that the defendant was under no such duty.

   1. The Court of Appeal erred in law in finding that it was sufficient, for the purpose of finding “deliberate concealment”, that the defendant was reckless as to (a) whether it was under a duty to disclose the commission and (b) whether the commission was relevant to a cause of action against it. The court should have found that it was necessary to show actual knowledge of both elements, or alternatively actual knowledge or wilful blindness, in order to establish “deliberate concealment” in this context.

1. The claimant raises three grounds, in addition to those given by the Court of Appeal, on which she maintains that its decision in relation to section 32(1)(b) should be upheld:

   1. This court, being free to depart from Court of Appeal authority, should adopt what Males LJ described as “the straightforward approach”. The defendant’s decision not to disclose the commission was plainly deliberate, as held by the recorder and the judge. Further, the effect of section 140A of the 1974 Act was that it would have been reasonable to expect the defendant to disclose the commission to the respondent in the interests of fairness. Accordingly, the defendant “deliberately concealed” the commission within the meaning of section 32(1)(b). It is not necessary for the claimant to establish a separate duty to disclose or that the defendant had a further requisite mental element in relation to (a) whether it was under a duty to disclose or (b) whether the commission was relevant to a cause of action against it.

   1. The defendant committed an act, rather than an omission to act, when not disclosing the commission. Steps were taken by its management to ensure that its agents did not disclose the commission. This is therefore a case of active concealment rather than non-disclosure. On this basis also, the court does not need to identify any “duty to disclose.”

   1. The defendant knew that it was under a duty to disclose and/or knew that the commission was relevant to a cause of action against it after the judgment in Plevin was handed down. It nevertheless decided not to inform the claimant about the commission, thereby concealing from her the information that would enable her to bring a claim. The claimant is entitled to rely on section 32(1)(b) after the end of the loan agreement. The recorder was right to find that disclosure should have taken place after the law was settled in Plevin. The defendant’s failure to do so means that it cannot enjoy limitation protection now.

1. The appeal in relation to section 32(2)

1. In relation to section 32(2) of the 1980 Act, the defendant does not appeal against the Court of Appeal’s conclusion that the creation of an unfair relationship within the meaning of section 140A of the 1974 Act amounted to a breach of duty for the purposes of section 32(2). Nor does it appeal against the Court of Appeal’s finding that it was reckless in the R v G sense as to whether it was in breach of duty: in other words, that it was aware of the risk that non-disclosure of the existence and amount of the commission would make the credit relationship unfair within the meaning of section 140A, and that it was objectively unreasonable for it to take that risk. The defendant’s ground of appeal, in relation to section 32(2), is that the Court of Appeal erred in law in finding that conduct which was reckless was sufficient for the purpose of showing the “deliberate commission” of a breach of duty within the meaning of section 32(2).

1. The claimant raises an alternative ground, in addition to those given by the Court of Appeal, on which she maintains that its decision in relation to section 32(2) should be upheld. That ground proceeds from the fact that it may be impossible to be certain whether conduct constitutes a breach of duty until the issue has been judicially determined. For that reason, it is contended that section 32(2) cannot require the defendant to know that its conduct is in breach of duty. It must be sufficient that the defendant knows that its conduct could give rise to a claim against it, which might or might not prove to be well-founded. That condition is satisfied in the present case, since the defendant knew that there was a risk that its non-disclosure of the commission would make its relationship with the claimant legally unfair, and therefore the subject of a potential claim. As a fall-back position, the claimant argues that it is sufficient to meet the “deliberate commission” requirement of section 32(2) that it was unreasonable for the defendant to engage in the conduct in question, knowing that it gave rise to a potential claim against it.

1. Section 140A of the Consumer Credit Act 1974

1. Before considering the law of limitation, it is necessary to provide a brief explanation of section 140A of the 1974 Act. The section provides, so far as material:

   1. The court may make an order under section 140B in connection with a credit agreement if it determines that the relationship between the creditor and the debtor arising out of the agreement (or the agreement taken with any related agreement) is unfair to the debtor because of one or more of the following -

   1. any of the terms of the agreement or of any related agreement;

   1. the way in which the creditor has exercised or enforced any of his rights under the agreement or any related agreement;

   1. any other thing done (or not done) by, or on behalf of the creditor (either before or after the making of the agreement or any related agreement).

      …

   1. A determination may be made under this section in relation to a relationship notwithstanding that the relationship may have ended.”

In the present case, it is section 140A(1)(c) which is relevant, the “thing … not done” by the defendant being the disclosure of the existence and amount of the commission.

1. Section 140B(1) sets out the orders which may be made under that section. They include requiring the creditor to repay sums paid by the debtor. Section 140B(2) provides that an order under that section may be made inter alia on an application by the debtor. Such applications, in England and Wales, must be made to the County Court: section 140B(4)(a).

1. Sections 140A to 140D were inserted into the 1974 Act by sections 19 to 21 of the Consumer Credit Act 2006 with effect from 6 April 2007. Paragraph 14 of Schedule 3 to the 2006 Act provides, so far as material, that the court may make an order under section 140B in connection with a credit agreement made before the commencement of section 20 of the 2006 Act (which inserted section 140B), but only on an application under section 140B(2) made on or after 6 April 2008.

1. Section 140A does not impose a legal duty upon creditors. In the case of Plevin, cited in para 6 above, Lord Sumption, with whom the other members of the court agreed, explained (para 17):

   “Section 140A … does not impose any obligation and is not concerned with the question whether the creditor or anyone else is in breach of a duty. It is concerned with the question whether the creditor’s relationship with the debtor was unfair. It may be unfair for a variety of reasons, which do not have to involve a breach of duty.”

   “Paragon [the creditor] owed no legal duty to Mrs Plevin [the debtor] under the ICOB Rules [the statutory rules imposing obligations on insurers and insurance intermediaries] to disclose the commissions and, not being her agent or adviser, they owed no such duty under the general law either. However, as I have already pointed out, the question which arises under section 140A(1)(c) is not whether there was a legal duty to disclose the commissions. It is whether the unfairness arising from their non-disclosure was due to something done or not done by Paragon.”

In relation to the disclosure of commission, in particular, Lord Sumption stated (para 19):

1. Lord Sumption went on to consider the circumstances in which a failure to act (in that case, as in the present case, a failure to disclose commission) could render the relationship unfair (para 19):

   “… the Act treats the creditor as being responsible for the unfairness which results from his inaction, even if that responsibility falls short of a legal duty. What is it that engages that responsibility? … the creditor must normally be regarded as responsible for an omission making his relationship with the debtor unfair if he fails to take such steps as (i) it would be reasonable to expect the creditor or someone acting on his behalf to take in the interests of fairness, and (ii) would have removed the source of that unfairness or mitigated its consequences so that the relationship as a whole can no longer be regarded as unfair.”

1. The legal background to section 32(1)(b) and section 32(2) of the 1980 Act

1. As will appear, there is a question as to whether it is permissible to take account of the law prior to the 1980 Act as an aid to the interpretation of the provisions in issue in the present case. However, as the submissions of the claimant, the reasoning of the Court of Appeal and some previous decisions of the Court of Appeal which it will be necessary to consider are all based on the view that recourse to the prior law is both necessary and appropriate, it is convenient to set out its principal features at this stage. That will include some discussion of authorities. It is also helpful in any event to understand the background to the enactment of the 1980 Act, and the mischief which it was intended to address.

1. The pre-1939 law

1. As Lord Camden explained in Smith v Clay (1767) 3 Bro CC 639 (Note), a court of equity always refused its aid to stale demands. However, as it had no legislative authority, it could not define an exact time bar. But once Parliament enacted statutes of limitation in respect of common law actions, from 1623 onwards, courts of equity adopted those rules and applied them to similar cases in equity. Nevertheless, courts of equity permitted actions to proceed after the expiry of the statutory limitation period where the plaintiff’s cause of action was founded on or concealed by the fraud of the defendant: Booth v Earl of Warrington (1714) 4 Bro PC 163. For these purposes, there could be no “fraud” unless the defendant had been aware of the facts alleged to have been concealed. In cases of “concealed fraud”, so understood, it was felt to be against conscience that the defendant should be able to rely on the statute to defeat the plaintiff’s claim. This doctrine received limited statutory recognition in section 26 of the Real Property Limitation Act 1833, under which the right to bring a suit in equity for the recovery of land or rent of which the plaintiff or his predecessors were deprived by “concealed fraud” was deemed to have accrued “at and not before the time at which such fraud shall or with reasonable diligence might have been first known or discovered”.

1. Bulli Coal Mining Co v Osborne [1899] AC 351 developed the law further. It concerned a claim in an insolvency in respect of the value of coal which a company had deliberately removed from the claimants’ land by means of underground workings, knowing that the coal did not belong to them. It was argued on behalf of the company that since there had not been any active concealment of the removal of the coal, it followed that the limitation period ran. That argument was rejected. Lord James of Hereford explained that it was a fraud to rob one’s neighbour furtively of his property (pp 362-363). It had always been a principle of equity that no length of time was a bar to relief in the case of fraud, in the absence of laches on the part of the person defrauded. Therefore, he said, there was “no room for the application of the statute in the case of concealed fraud, so long as the party defrauded remains in ignorance without any fault of his own” (p 363). The contention that active concealment was essential was rejected in the light of the circumstances of the case (pp 363-364):

   “The contention on behalf of the appellants that the statute is a bar unless the wrongdoer is proved to have taken active measures in order to prevent detection is opposed to common sense as well as to the principles of equity. Two men, acting independently, steal a neighbour’s coal. One is so clumsy in his operations, or so incautious, that he has to do something more in order to conceal his fraud. The other chooses his opportunity so wisely, and acts so warily, that he can safely calculate on not being found out for many a long day. Why is the one to go scot-free at the end of a limited period rather than the other? It would be something of a mockery for courts of equity to denounce fraud as ‘a secret thing,’ and to profess to punish it sooner or later, and then to hold out a reward for the cunning that makes detection difficult or remote.”

Lord James also made it clear that the position would be different where the underground trespass was done under an innocent mistake (p 364).

1. The Report of the Law Revision Committee

1. In 1934 the Law Revision Committee was invited to consider various aspects of the law of limitation, including the scope of the rules on concealed fraud. It reported in 1936: Fifth Interim Report (Statutes of Limitation), Cmd 5334. In relation to concealed fraud, it explained that the doctrine encompassed cases where “[ei]ther the cause of action may spring from the fraud of the defendant or else the existence of a cause of action untainted in its origin by fraud may have been concealed from the plaintiff by the fraudulent conduct of the defendant”. The committee’s concern was that the extent of the area within which this equitable doctrine operated, following the fusion of law and equity, was a matter of doubt and controversy. It recommended “that in all cases to which the Statutes of Limitation apply or are applied by analogy, where a cause of action is founded on fraud, committed by the defendant or his agent, or some person through whom he claims, or where a cause of action unconnected with fraud is fraudulently concealed from the plaintiff by the defendant or his agent, or someone through whom he claims, the right of the plaintiff to sue shall be deemed to have first accrued at the time when he discovered such fraud or could with reasonable diligence have discovered it” (para 22).

1. The Limitation Act 1939

1. That report was the foundation of the 1939 Act, which substantially implemented the committee’s recommendations, with some modifications. Section 26 was headed “Postponement of limitation period in case of fraud or mistake”. It provided, so far as material:

   1. the action is based upon the fraud of the defendant or his agent or of any person through whom he claims or his agent, or

   1. the right of action is concealed by the fraud of any such person as aforesaid, or

   1. 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 or the mistake, as the case may be, or could with reasonable diligence have discovered it”.

   “Where, in the case of any action for which a period of limitation is prescribed by this Act, either -

The material provision for present purposes was subsection (b).

1. Authorities on the 1939 Act

1. Following the enactment of section 26 of the 1939 Act, the doctrine of concealed fraud was developed in a number of cases. Two are particularly relied on in the present case.

1. Beaman v ARTS Ltd

1. The first is Beaman v ARTS Ltd [1949] 1 KB 550, which concerned the defendants’ conversion of the plaintiff’s property, of which they were bailees. She had deposited her belongings with them for safe custody before travelling overseas. In 1940 they decided to close down their business. In order to do so as quickly as possible, they gave away the plaintiff’s belongings to the Salvation Army, apart from one item which their employee kept for himself. They did so without the plaintiff’s knowledge or consent. When she discovered what had happened, and brought proceedings for damages, the defendants pleaded that the action was time-barred. In reply, the plaintiff relied on section 26(a) and (b) of the 1939 Act. The Court of Appeal concluded that the action was not based on fraud, so that section 26(a) had no application, but that, applying Bulli Coal Mining Co v Osborne, the plaintiff’s right of action had been concealed by fraud, so that section 26(b) applied and the action was not time-barred.

1. Lord Greene MR considered that section 26(a) applied only where fraud was a necessary allegation in order to constitute the cause of action (p 558); a construction which excluded claims based on conversion. In relation to section 26(b), Lord Greene noted that no active concealment of a fraudulent nature, subsequent to the conversion, was relied upon. However, he stated (p 559):

   “… there may, in my opinion, be fraudulent concealment of a cause of action which is not subsequent to the act which gives rise to the cause of action; it may acquire its character as such from the very manner in which that act is performed.”

Bulli Coal Mining Co v Osborne was cited as an illustration. The instant case was another where fraudulent concealment was “implicit in the technique adopted in committing the tort” (p 560). The defendants “must have known that the bailor was reposing confidence in them” (p 561), and “must have known that by reason of that confidence there would be no reason for her to inquire whether or not they were being unfaithful to it” (p 562).

1. Much reference has been made in the present case to passages in Lord Greene’s judgment in which he referred to recklessness. It should be noted at the outset that there was no argument directed to recklessness in relation to section 26(b), so far as appears from the report; that Lord Greene did not define what he meant by recklessness; that he did not explain the relevance of recklessness to his analysis; and that recklessness was not mentioned in the judgments of the other members of the court. The matter arose in the context of a discussion of the judgment of the trial judge, Denning J. He had held that section 26(a) was not confined to cases where fraud was an essential ingredient of the cause of action; but he also held that it did not apply on the facts of the case, because the defendants had acted from honest motives. He further held that section 26(b) applied only where there was fraudulent concealment subsequent to the commission of a breach of duty.

1. It was in the course of a discussion of Denning J’s finding that the defendants had acted from honest motives that Lord Greene referred to recklessness. He considered that, in accepting the defendants’ evidence that they had acted in good faith, Denning J had misled himself “into accepting the protestations of the defendants’ witnesses at their face value” (p 561). If the defendants formed the opinion that it would be beneficial to the plaintiff to give away her property, as they claimed, “that belief was entertained with a recklessness which I can only attribute to self-deception” (p 561). If they believed that it was impossible to communicate with her because of wartime conditions, as they claimed, “the truth … is that [they], in [their] haste to disembarrass the defendants of a trust, which was at the moment inconvenient to perform, quite recklessly made an assumption which [they] thought would assist them in achieving that object without giving any honest consideration to the question whether that assumption was true or false” (p 562). The “dominating influence which was weighing with the defendants was … the desire to obtain the commercial benefit of disembarrassing themselves of an obligation which would impede the closing down of the business” (p 564). That fact “explains … the recklessness with which they formed their conclusions” (p 565). They “recklessly … assumed … that the plaintiff had not troubled about her goods, and that large storage charges had mounted up and would continue to mount up which the plaintiff would be unable to pay” (ibid); and they “recklessly formed the opinion that the goods were valueless” (ibid), which even if true “they must have known … could afford no justification for disregarding their obligations” (p 566; emphasis added). All this they did “when they must have known that the plaintiff … would be relying on them to be faithful to their trust” (ibid; emphasis added). Lord Greene concluded (ibid):

   “I am of opinion that the conduct of the defendants, by the very manner in which they converted the plaintiff's chattels in breach of the confidence reposed in them, and in circumstances calculated to keep her in ignorance of the wrong that they had committed amounted to a fraudulent concealment of the cause of action.”

1. It appears from these extracts that Lord Greene considered that the defendants had knowingly acted in breach of their duties as bailees, and, by making no attempt to communicate with the plaintiff, in circumstances where to their knowledge she was reposing confidence in them to perform their duties, had ensured that she remained in ignorance of what they had done. That amounted to fraudulent concealment, following Bulli Coal Mining Co v Osborne. So far as I can judge, the defendants’ recklessness in making self-deceiving assumptions to justify their breach of their duties as bailees does not appear to have been an element in the reasoning which led to Lord Greene’s conclusion that there had been fraudulent concealment. It appears that he was going through the evidence which led Denning J to accept that the defendants had acted with an honest motive, and explaining why he rejected that conclusion. But he also made it clear that an honest motive did not matter in any event, as had earlier been decided in In re McCallum [1901] 1 Ch 143, stating that “[n]o amount of self-deception can make a dishonest action other than dishonest; nor does an action which is essentially dishonest become blameless because it is committed with a good motive” (p 561). It also appears that what Lord Greene meant by “recklessness” went beyond taking a risk in circumstances in which a reasonable person would not have taken the risk. The language used by Lord Greene is suggestive of conscious wrongdoing, or at least wilful blindness.

1. King v Victor Parsons & Co

1. Several reported cases in the 1960s and 1970s concerned the application of section 26(b) of the 1939 Act to claims brought in respect of the construction of houses with defective foundations. One problem in such cases was that the defective nature of the foundations was not apparent until damage appeared, possibly many years later, by which time the ordinary limitation period might have expired. The approach adopted by the courts was to treat situations where the builder or developer was aware of the defective nature of the foundations and kept silent about it as involving concealed fraud: see, for example, Applegate v Moss [1971] 1 QB 406.

1. In the present case, reliance has been placed on a passage in the judgment of Lord Denning MR in another case of this kind, King v Victor Parsons & Co [1973] 1 WLR 29, 33-34:

   “The word ‘fraud’ here [viz in section 26(b) of the 1939 Act] is not used in the common law sense. It is used in the equitable sense to denote conduct by the defendant or his agent such that it would be ‘against conscience’ for him to avail himself of the lapse of time. The cases show that, if a man knowingly commits a wrong (such as digging underground another man’s coal); or a breach of contract (such as putting in bad foundations to a house), in such circumstances that it is unlikely to be found out for many a long day, he cannot rely on the Statute of Limitations as a bar to the claim: see Bulli Coal Mining Co v Osborne [1899] AC 351 and Applegate v Moss [1971] 1 QB 406. In order to show that he ‘concealed’ the right of action ‘by fraud’, it is not necessary to show that he took active steps to conceal his wrong-doing or breach of contract. It is sufficient that he knowingly committed it and did not tell the owner anything about it. He did the wrong or committed the breach secretly. By saying nothing he keeps it secret. He conceals the right of action...To this word ‘knowingly’ there must be added ‘recklessly’: see Beaman v. ARTS Ltd [1949] 1 KB 550, 565-566. Like the man who turns a blind eye. He is aware that what he is doing may well be a wrong, or a breach of contract, but he takes the risk of it being so. He refrains from further inquiry lest it should prove to be correct: and says nothing about it. The court will not allow him to get away with conduct of that kind. It may be that he has no dishonest motive: but that does not matter. He has kept the plaintiff out of the knowledge of his right of action: and that is enough: see Kitchen vRoyal Air Force Association [1958] 1 WLR 563. If the defendant was, however, quite unaware that he was committing a wrong or a breach of contract, it would be different. So if by an honest blunder he unwittingly commits a wrong (by digging another man’s coal), or a breach of contract (by putting in an insufficient foundation) then he could avail himself of the Statute of Limitations.” (emphasis in original)

1. It is to be noted that Lord Denning referred in that passage to a person who acted “recklessly ... like the man who turns a blind eye … He refrains from further inquiry lest it should prove to be correct”. A person who turned a blind eye, or refrained from further inquiry lest awareness of a risk should prove to be correct, was said to be in the same position as a person who acted knowingly. That would be in accordance with the wider principle according to which equity sometimes attributes constructive notice (eg of a defect in an agent’s authority, or in the title of a transferor of property) to persons who are wilfully blind. When Lord Denning went on to apply the law to the facts, he noted that the developers had disregarded the advice of their architects as to the type of foundations that were necessary, and knew that there was a risk of subsidence, but let the purchaser think that the foundations were properly constructed. Lord Denning described that as “a reckless disregard of their obligations” (p 35). No doubt it was, but it was also a conscious breach of contract, as the other members of the court concluded (pp 37-38 and 42; there was an implied contractual term that the foundations were “proper and workmanlike and … reasonably fit for the dwelling”: p 35).

1. As is apparent from these authorities, the way in which the courts construed section 26 of the 1939 Act strained the language of the provision. In Tito v Waddell (No 2) [1977] Ch 106, 245 Sir Robert Megarry V-C commented that “as the authorities stand, it can be said that in the ordinary use of language, not only does ‘fraud’ not mean ‘fraud’ but also ‘concealed’ does not mean ‘concealed’, since any unconscionable failure to reveal is enough.”

1. The Report of the Law Reform Committee

1. The law of limitation was reviewed by the Law Reform Committee in its 21^st Report (Final Report on Limitation of Actions), Cmnd 6923 (1977). Its principal concern in this area was the impact upon section 26 of the 1939 Act of cases concerned with latent damage to buildings and other structures, and in particular with the point in time at which a cause of action arose, following Sparham-Souter v Town and Country Developments (Essex) Ltd [1976] QB 858 and Anns v Merton London Borough Council [1978] AC 728.It put forward three possible approaches, the first of which was “adherence to the ‘concealed fraud’ principle, involving the retention of section 26, reformulated so as to express its true legal purport as decided by the courts” (para 2.21). The other two approaches were not taken forward and need not be examined.

1. In relation to the “concealed fraud” approach, the committee explained at para 2.22 that its essential feature was that “it operates on some degree of blameworthiness on the part of the defendant beyond his mere failure to comply with his legal obligations; the traditional expression is ‘unconscionable conduct’”. It observed that if that were thought to be the best approach, it would not be difficult “to reformulate section 26 in a way which, while incorporating the feature of unconscionability, reproduces in a more readily intelligible form the construction placed on that section by the courts”. In that regard, the committee observed that both the title and the wording of section 26 were misleading in that “it (i) is not limited to fraud in the common law sense; (ii) embraces recklessness; and (iii) is not limited to cases of active concealment” (para 2.23).

1. The committee then put forward a suggested reformulation which “attempted to cure these defects” (para 2.24). However, the committee’s draft bears no resemblance to the amended section 26 which was subsequently enacted in the Limitation Amendment Act 1980 and re-enacted as part of the consolidation effected by the 1980 Act. So far as material, the committee’s draft provided:

   1. the action is based on a deliberate or reckless breach of duty (whether or not arising under a contract); or

   1. the right of action is concealed by the dishonest conduct of [the defendant or his agent or any person through whom he claims or his agent];

      the period of limitation shall not begin to run until the plaintiff has discovered … the right of action … or could with reasonable diligence have discovered it.”

   “… where, in the case of any action for which a period of limitation is prescribed by this Act -

   …

The proposed test was therefore whether the right of action was based on a deliberate or reckless breach of duty, or was concealed by dishonest conduct: not, as subsequently enacted, whether a relevant fact was deliberately concealed, or whether a breach of duty was deliberately committed in circumstances where it was unlikely to be discovered for some time. The committee rejected the idea of a provision to the latter effect as being unrealistic and unduly complex (para 2.25).

1. The Limitation Amendment Act 1980

1. In the event, the Limitation Amendment Act 1980 adopted an approach which gave effect to the spirit of the committee’s recommendation in so far as it dispensed with the language of fraud and was not limited to cases of active concealment. On the other hand, it made no reference to recklessness, and it made specific provision for a breach of duty committed in circumstances where it was unlikely to be discovered for some time.

1. The long title of the Act described it as an Act “to amend the law with respect to the limitation of actions”. The first group of sections, headed “Miscellaneous amendments of Limitation Act 1939”, included section 7, which substituted for section 26 of the 1939 Act an amended version. It was that amended version of section 26 which was re-enacted by section 32 of the 1980 Act, as part of the consolidation effected by that Act.

1. The Limitation Act 1980

1. The 1980 Act is described in its long title as an Act to consolidate the Limitation Acts 1939 to 1980. Part I sets out the ordinary time limits for different classes of actions. In particular, section 9(1) provides that an action to recover any sum recoverable by virtue of any enactment shall not be brought after the expiration of six years from the date on which the cause of action accrued. Part II is concerned with the extension or exclusion of ordinary time limits. It includes section 32, which provides, so far as material:

   1. … 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

   1. any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; or

   1. 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.

      …

   1. 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.”

1. Section 38 is the interpretation section. It provides, so far as material:

   1. … ‘action’ includes any proceeding in a court of law …

   1. References in Part II of this Act to a right of action shall include references to -

   1. a cause of action”.

1. The development of the law on section 32(1)(b) and section 32(2) of the 1980 Act

1. It is necessary next to consider how the law on section 32(1)(b) and section 32(2) has developed through the principal authorities.

1. Sheldon v RHM Outhwaite (Underwriting Agencies) Ltd

1. The case of Sheldon v RHM Outhwaite (Underwriting Agencies) Ltd [1996] AC 102 (“Sheldon”) is an important starting point because of its emphasis on giving the language of section 32(1)(b) its ordinary meaning, rather than reading it as a continuation of the pre-1980 law.

1. The case concerned the question whether, and if so how, section 32(1)(b) applied where the deliberate concealment of a relevant fact occurred after the limitation period had already begun to run. That is not an issue which arises in the present case, but the guidance given by the House of Lords to the correct approach to the construction of section 32 is in point. The defendants argued that section 32 was the statutory successor of section 26(b) of the 1939 Act, which in turn was a statutory enactment of the equitable doctrine of concealed fraud. Both parties relied on cases decided prior to 1980, some of which assumed that the concealment of facts after the limitation period had begun to run was capable of constituting concealment by fraud, and others of which contained dicta suggesting the contrary.

1. Lord Keith of Kinkel stated at p 140 that the issue must be decided upon an examination of section 32 itself, taken in its context, particularly since the 1980 Act was a consolidation statute. He commented that “[r]ecourse to the antecedents of a consolidation statute should only be had when there is a real difficulty or ambiguity incapable of being resolved by classical methods of construction: Farrell v Alexander [1977] AC 59, 73, per Lord Wilberforce”.

1. Lord Browne-Wilkinson, with whom Lord Keith agreed, roundly rejected the argument that section 32 should be construed on the basis that it was the statutory successor of section 26(b) of the 1939 Act, and therefore of the equitable principle of concealed fraud. That, he said at p 144, was “not a legitimate approach to the construction of section 32”. Like Lord Keith, he noted (ibid) that the 1980 Act was a consolidating Act, and said that “unless there is an ambiguity, it is not permissible to construe consolidating Acts in the light of their statutory history.” He went on at p 145 to explain that, even if it were legitimate to look at the legislative history, the immediate predecessor of section 32 of the 1980 Act was not section 26 of the 1939 Act but section 7 of the Limitation Amendment Act 1980, which had deleted all references to concealment by fraud from section 26 and substituted the concept of deliberate concealment of relevant facts. This had been “done deliberately because of the confused effect and misleading terminology of the old equitable doctrine of concealed fraud”. He concluded on this point (ibid):

   “In my judgment it is inconsistent with the plain Parliamentary intention lying behind the amendment of the Act of 1939 to continue to construe the Act of 1980 as if it were still a statutory enactment of the equitable doctrine of concealed fraud. The Act of 1980 is not.”

1. Lord Browne-Wilkinson went on to observe that section 32(1)(b) was not ambiguous (ibid):

   “On the plain meaning of the words any deliberate concealment of relevant facts falls within section 32(1)(b) with the consequence that, in applying the statutory time limits, time does not start to run until the concealment is discovered. The onus lies on the defendants to show a compelling reason to limit the generality of the words used.”

1. Cave v Robinson Jarvis & Rolf

1. The case of Cave v Robinson Jarvis & Rolf [2002] UKHL 18; [2003] 1 AC 384 (“Cave”) concerned a claim brought against solicitors for alleged negligence in drafting a deed and in failing to register it. In response to a defence that the action was time-barred, the claimant argued that the negligent drafting of the deed constituted the deliberate commission of a breach of duty in circumstances in which the breach of duty was unlikely to be discovered for some time, so that section 32(2) applied. The two members of the Appellate Committee who gave substantial speeches, Lord Millett and Lord Scott of Foscote, adopted different approaches to section 32, which bore in particular on their interpretation of section 32(1)(b), but were in agreement as to the meaning of “deliberate” in section 32(2). Lord Mackay of Clashfern and Lord Hobhouse of Woodborough agreed with both speeches; Lord Slynn of Hadley expressed agreement only with Lord Scott; neither Lord Millett nor Lord Scott expressed agreement with each other.

1. Lord Millett’s starting point was that “[c]oncealment and non-disclosure are different concepts” (para 21). Lord Scott disagreed, stating that “deliberate concealment for section 32(1)(b) purposes may be brought about by an act or an omission”, and that the claimant must “show that some fact relevant to his right of action has been concealed from him either by a positive act of concealment or by a withholding of relevant information” (para 60).

1. I agree with Lord Scott. As a matter of ordinary English, the verb “to conceal” means to keep something secret, either by taking active steps to hide it, or by failing to disclose it. The primary definition of the word in the Oxford English Dictionary is “to keep (information, intentions, feelings, etc) from the knowledge of others; to keep secret from(formerly also to) others; to refrain from disclosing or divulging”. The fact that concealment can take the form of the conscious withholding of information is illustrated by Lord Denning’s remark in King v Victor Parsons & Co (para 47 above) that the wrongdoer in a case such as that“[b]y saying nothing … conceals the right of action”.

1. However, proceeding on the basis that concealment and non-disclosure were distinct, Lord Millett treated section 32(1)(b) as being concerned with cases of active concealment, and section 32(2) as covering situations where active concealment was not required and where non-disclosure was therefore sufficient. In such cases, the defendant was deprived of a limitation defence only where the wrongdoing was deliberate and took place in circumstances where it was unlikely to be discovered for some time: see paras 23-25 of his speech. Lord Millett found a historical basis for that analysis in the pre-1980 law of concealed fraud, on the view that a distinction could be drawn between cases involving concealment in the ordinary sense of the word and cases, such as Bulli Coal Mining Co v Osborne, where it was sufficient that a breach of duty was deliberately committed in circumstances in which it was unlikely to be discovered for some time.

1. Lord Scott again disagreed, as I shall explain shortly. In my view he was right to do so. Lord Millett was correct in regarding section 32(2) as historically rooted in cases such as Bulli Coal Mining Co v Osborne, where a breach of duty was deliberately committed in circumstances in which it was unlikely to be discovered for some time. But that does not imply that the 1980 Act draws a binary distinction between cases involving active concealment and cases of non-disclosure, falling respectively under section 32(1)(b) and section 32(2). As Lord Scott accepted, a plain reading of section 32(1)(b) encompasses both concealment by taking positive steps and concealment by non-disclosure. Furthermore, a given situation may fall within the scope of both section 32(1)(b) and section 32(2). For example, in a case concerned with defective foundations, of the kind with which the courts and the Law Reform Committee were much concerned in the period leading up to the enactment of the Limitation Amendment Act 1980, both provisions might be relevant. If a builder knowingly concealed from the purchaser of a house the fact that the foundations were defective, either by positive steps (such as by covering up the bad work, so that there was no opportunity for examination) or by non-disclosure (such as by failing to tell the purchaser about the problem), that would constitute the deliberate concealment of a fact which was relevant to the claimant’s right of action against the builder (assuming such a right of action to exist), falling within section 32(1)(b). If the builder knowingly constructed the foundations in a defective manner, in circumstances where the work would then be covered up without examination, that would constitute the deliberate commission of a breach of duty in circumstances in which the defect was unlikely to be discovered for some time, falling within section 32(2). Depending on the evidence available, one provision or the other might be easier for the claimant to rely on.

1. Lord Scott explained this point very clearly (para 60):

   “A claimant who proposes to invoke section 32(1)(b) in order to defeat a Limitation Act defence must prove the facts necessary to bring the case within the paragraph. He can do so if he can show that some fact relevant to his right of action has been concealed from him either by a positive act of concealment or by a withholding of relevant information, but, in either case, with the intention of concealing the fact or facts in question.”

   “In many cases the requisite proof of intention might be quite difficult to provide. The standard of proof would be the usual balance of probabilities standard and inferences could of course be drawn from suitable primary facts but, none the less, proof of intention, particularly where an omission rather than a positive act is relied on, is often very difficult.”

   “Subsection (2), however, provides an alternative route. The claimant need not concentrate on the allegedly concealed facts but can instead concentrate on the commission of the breach of duty. If the claimant can show that the defendant knew he was committing a breach of duty, or intended to commit the breach of duty - I can discern no difference between the two formulations; each would constitute, in my opinion, a deliberate commission of the breach - then, if the circumstances are such that the claimant is unlikely to discover for some time that the breach of duty has been committed, the facts involved in the breach are taken to have been deliberately concealed for subsection (1)(b) purposes.”

However, he went on:

This was where section 32(2) came in:

1. In the event, later cases have followed Lord Scott in treating “concealed” within the meaning of section 32(1)(b) as encompassing both active concealment and concealment by non-disclosure.

1. Lord Scott gave clear guidance as to the meaning of “deliberate” (as in “deliberately concealed” and “deliberate commission of a breach of duty”). In relation to section 32(1)(b), he agreed with counsel’s submission that in order for a fact to be “deliberately concealed” for the purposes of that provision “the concealment must be an intended concealment” (para 59). Whether the concealment took the form of positive steps to conceal or the withholding of information, “in either case, the result of the act or omission, ie, the concealment, must be an intended result” (para 60).

1. In relation to section 32(2), he emphasised that the words “deliberate commission of a breach of duty” were clear words of English (para 58). Deliberate commission of a breach of duty was to be contrasted with the commission of a breach of duty which was not deliberate, ie “a breach of duty that the actor was not aware he was committing” (ibid). He added at para 61 that the clear words of section 32(2) showed that Parliament had made a distinction “between the case where the actor knows he is committing a breach of duty and the case where he does not”.

1. Lord Millett appears to have taken the same view, stating in relation to section 32(2) (para 24):

   “It is only where the defendant is aware of his own deliberate wrongdoing that it is appropriate to penalise him for failing to disclose it.”

The implication is that Lord Millett also understood the word “deliberate” in section 32(2) as requiring that the defendant had consciously committed a breach of duty.

1. It is also relevant to note the support given by Lord Scottto reading the provisions without relying on the legislative history. He said at para 46 that the importance of the Sheldon case was “that it insists that if the language of section 32 is clear, effect must be given to that language without regard to the section’s legislative history”. Following that approach, he stated at para 58 that “[u]nless there is some ambiguity in the statutory language, recourse to legislative history is unnecessary and impermissible”. In words which should in my view be taken to heart, he said (para 65):

   “The plain words of the statutory requirements, ‘deliberately concealed’ and ‘deliberate commission of a breach of duty’ need no embellishment.”

1. It is relevant in this context also to consider the reasoning which the claimant advances in support of her additional grounds for supporting the Court of Appeal’s decision. She argues that it may be impossible to know whether conduct is in breach of duty until a court has adjudicated upon the issue. It must be enough, to constitute “deliberate commission of a breach of duty”, that the defendant engaged in conduct which it knew would leave it exposed to a claim against it. That is said to be the position in the present case, since the Court of Appeal found that the defendant realised that there was a risk that its conduct rendered its relationship with the claimant unfair within the meaning of section 140A of the 1974 Act.

1. This is effectively the same argument as the one accepted by Rose LJ. There is no difference in substance between the defendant’s knowing that there is a real risk that conduct will amount to a legal wrong and its knowing that conduct will expose it to a claim. The word “risk” has disappeared, but it is subsumed in the concept of exposure to a claim, ie being at risk of a claim in respect of an arguable legal wrong. That is reflected in the claimant’s reliance in the present case on the defendant’s awareness that there was a risk that its conduct rendered its relationship with the claimant unfair, in order to demonstrate that the defendant knew that its conduct would expose it to a claim.

1. I am not persuaded by the argument. In the first place, the dicta in FII Test Claimants are not in point. They concerned the conclusion of the House of Lords in an earlier case that a mistake of law was not discoverable, for the purposes of section 32(1)(c) of the 1980 Act, until the law had been authoritatively determined by a final court. On that basis, where a novel claim was based on a mistake of law it followed that the limitation period for the bringing of the claim could not begin to run until the claim was finally decided, with the consequence that the claim could never be time-barred. The court concluded that such an approach was illogical and frustrated the purpose of the legislation.

1. There is no true analogy between that problem and the present case. There is no question of section 32(2) having the effect that a claim to which it applies can never be time-barred. The most that can be said is that there are liable to be cases where the application of section 32(2) cannot be determined as a preliminary issue. (That said, Cave was decided on a preliminary issue; Giles v Rhind (No 2) was decided on an application for permission to amend; and Kotonou v Reeves was decided on a preliminary issue.) That is not a logical paradox. Nor does it appear to have caused practical problems: in Grace v Black Horse Ltd and Primeo (and in the pre-1980 cases concerned with deliberate breaches of duty committed in circumstances in which they were unlikely to be discovered for some time, such as Bulli Coal Mining Co v Osborne, Beaman v ARTS Ltd and Applegate v Moss) the issue of limitation was determined after trial, without any practical problem being remarked upon.

1. The difference between the present case and FII Test Claimants reflects the fact that, whereas section 32(1)(c), which was in issue in the latter case, is focused on the claimant’s state of knowledge of an ingredient of its claim at a given point in time, section 32(2) is focused on the circumstances in which the breach of duty on which the claim is based is alleged to have been committed. The claimant’s state of knowledge about the ingredients of its claim can usually be determined without considering the merits of the claim. Determining whether the alleged breach of duty was committed knowingly, and in circumstances in which it was unlikely to be discovered for some time, is more likely to require an investigation of the facts surrounding the alleged breach of duty.

1. In reality, the construction favoured by the claimant and accepted by the Court of Appeal would be more likely to result in practical problems. They can be illustrated by recalling the circumstances of Cave. As I have explained, the House of Lords decided that a negligent breach of duty, committed in circumstances in which it was unlikely to be discovered for some time, did not fall within the scope of section 32(2) of the 1980 Act and therefore did not postpone the running of the limitation period – notwithstanding that, as a consequence, the plaintiff might find that his action was time-barred before he had had a reasonable opportunity to bring it. Lord Millett explained at para 15 why that result was considered to be justified, notwithstanding its consequences for the plaintiff. Referring to an earlier case in which the Court of Appeal had reached the contrary conclusion, he said:

   “The effect of Brocklesby v Armitage & Guest [[2002] 1 WLR 598] is to deprive a professional man, charged with having given negligent advice and who denies that his advice was wrong let alone negligent, of any effective limitation defence. However stale the claim, he must defend the action on the merits, for he will not have the benefit of a limitation defence unless he can show that he was not negligent. This subverts the whole purpose of the Limitation Acts … In the absence of any intentional wrongdoing on his part, it is neither just nor consistent with the policy of the Limitation Acts to expose a professional man to a claim for negligence long after he has retired from practice and has ceased to be covered by indemnity insurance.”

1. The same would be true if it sufficed, to deprive a defendant of a limitation defence, that it knew that it was exposed to a claim, as the claimant proposes. Professional people and others often know that they are exposed to claims, because their work necessarily involves the taking of risks. For example, surgeons operating on their patients are aware of the risk that the surgery may have an adverse outcome. Lawyers advising on difficult points of law are aware of the risk that their advice may prove to be mistaken. They, like the surgeons, know only too well that they are exposed to claims. That is the reason why surgeons, lawyers and other professionals take out professional indemnity insurance. However, if the test proposed by the claimant were to be applied, people such as these would have no protection against claims for the indefinite future. The implications for many professions and other kinds of business would be drastic, with indefinite exposure to stale claims long after indemnity insurance had expired. The 1980 Act would have failed to serve its purpose of protecting defendants from having to litigate stale claims. The addition of an element of objective unreasonableness, as proposed by the claimant in her fall-back position, and by the Court of Appeal in its proposal that the objective element of the R v G test should be adopted, mitigates this effect, but only to a degree.

1. Conclusions in relation to section 32(2)

1. For all these reasons, the reasoning of the Court of Appeal in relation to section 32(2) cannot be accepted. “Deliberate”, in section 32(2), does not include “reckless”. Nor does it include awareness that the defendant is exposed to a claim. As Lord Scott said in Cave at para 58, the words “deliberate commission of a breach of duty” are clear words of English. They mean, as he added at para 61, that the defendant “knows he is committing a breach of duty”.

1. The application of the law to the facts

1. Once one returns to the plain language of the provisions, their application to the facts is relatively straightforward. So far as section 32(1)(b) is concerned, the existence and amount of the commission were facts which were relevant to the claimant’s right of action under section 140A of the 1974 Act, interpreting “relevant” in accordance with Arcadia Group Brands Ltd v Visa Inc, since she could not plead her claim without knowing those facts. The defendant deliberately concealed those facts from her, as the recorder held, by consciously deciding not to disclose the commission to her. Although section 140A was not in force when that decision was initially taken, with the result that the facts concealed were not relevant to a right of action at that time, the defendant continued to withhold the information from her after section 140A was brought into force in respect of pre-existing agreements (see para 32 above), while the credit agreement remained in force and the commission continued to be paid. The claimant did not discover the concealment until November 2018, shortly before commencing these proceedings. It is not suggested that she could with reasonable diligence have discovered the concealment any earlier. The requirements of section 32(1)(b) are accordingly met.

1. So far as section 32(2) is concerned, it follows from Cave, as has been explained, that it must be shown that “the defendant knew he was committing a breach of duty, or intended to commit the breach of duty” (as Lord Scott said at para 60). It is conceded that that test cannot be met in the circumstances of the present case. The basis of the concession, as I understand it, is that although the defendant deliberately decided not to disclose the commission, and must have been aware that there was a risk that by doing so it was making its relationship with the claimant unfair within the meaning of section 140A of the 1974 Act, it has not been shown that it knew or intended that the non-disclosure would have that effect. Accordingly, although its failure to disclose the commission gave rise to the claimant’s right of action, and can therefore be regarded as a breach of duty for the purposes of section 32(2), it cannot be shown that the defendant knew that it was committing a breach of duty or intended to do so.

1. Conclusion

1. Although I find myself in respectful disagreement with the reasoning of the Court of Appeal, I conclude that it was correct to hold that the defendant was deprived of a limitation defence by the operation of section 32(1)(b) of the 1980 Act, although it wrongly held that the defendant was also deprived of such a defence by the operation of section 32(2). It follows that the claim is not time-barred and that the defendant’s appeal should be dismissed.