15/11/2023

Clarifying the Limitation Act 1980: Canada Square v Potter

The UK Supreme Court has handed down judgment in Canada Square Operations Ltd v Potter [2023] UKSC 41 (15 November 2023). The following case note has been prepared by Charles Kimmins KC, Sean Snook and Fiona Whiteside, who appeared for the appellant (instructed by Hogan Lovells International, London).

Background

1. The appeal to the Supreme Court concerned the meaning of the phrases “deliberately concealed” in section 32(1)(b), and “deliberate commission of a breach of duty”, in section 32(2) of the Limitation Act 1980 (“the Act”).
2. In Sheldon v Outhwaite (decided as long ago as 1996), the House of Lords had given authoritative guidance that the meaning of section 32 should be determined by reference to the ordinary meaning of the language used, without recourse to prior statutory provisions or case law as guides to interpretation: the 1980 Act was a consolidation statute and in any event, the language posed no difficulty or ambiguity which was incapable of being resolved by classical methods of construction.
3. That guidance was endorsed and reiterated in Cave v. Robinson. In the words of Lord Scott (at [65]): “The plain words of the statutory requirements, ‘deliberately concealed’ and ‘deliberate commission of a breach of duty’ need no embellishment”.
4. Despite that guidance, later decisions of the Court of Appeal had moved progressively further away from the clear language of the provisions, culminating in the present dispute.
5. The Supreme Court’s decision has now reversed that process and returns the position under both sections to one based on the simple and straightforward language of section 32.

The Court of Appeal decision

6. Taking the sections in turn, for 32(1)(b), the Court of Appeal’s decision – [2021] EWCA Civ 339; [2022] QB 1 – was premised on the basis that it was inherent in the concept of ‘concealment’ that the defendant was under an obligation to disclose the relevant facts to the claimant, and that this obligation was to be found in a duty that arose purely for the purpose of applying section 32(1)(b) and which need only be one arising from a combination of “utility and morality”. The Court of Appeal construed ‘deliberately’ as encompassing recklessness and therefore concluded that the defendant had deliberately concealed the commission because it must have known that there was a risk that non-disclosure would make the parties’ relationship unfair within the meaning of section 140A and it was not objectively reasonable for it to have taken that risk. Therefore, the claimant succeeded under section 32(1)(b).
7. For section 32(2), the Court of Appeal concluded that the defendant had acted in breach of a duty owed by it under section 140A and, again construing “deliberate” as encompassing recklessness, concluded that the defendant’s breach of duty had been deliberate. For these reasons, the claimant also succeeded under section 32(2).

The Supreme Court’s approach

Section 32(1)(b)

8. The Supreme Court’s judgment identified a number of serious difficulties with the approach to section 32(1)(b) as developed by the Court of Appeal through to the present case, in particular the elaboration or embellishment of the words “concealed” and “deliberate(ly)”. So far as “concealed” is concerned, this had come to require: (1) in cases of non-disclosure, a duty to make disclosure, whether a legal obligation or one arising from utility and morality; and (2) knowledge that the concealed fact is relevant to the claimant’s right of action, or recklessness as to its relevance. “Deliberately” has come to require that the breach of a duty of disclosure be undertaken either (1) intentionally; or (2) recklessly.
9. Those embellishments read far more into the section than Parliament enacted which in any event makes good sense without elaboration. Such a reading is inconsistent with the emphasis placed in Sheldon and Cave on giving clear language its ordinary meaning. The Court of Appeal’s construction of “deliberately concealed” was based on an understanding of the meaning of ordinary English words which the Supreme Court considered was wrong.
10. Applying the language without elaboration or embellishment, the Supreme Court held that “concealed” simply refers to keeping something secret, whether by taking active steps to hide it or by failing to disclose it. A person hiding something can properly be described as concealing it, whether or not there is any obligation to disclose it. If the defendant is subject to a duty of disclosure, that might well have evidential significance in determining whether the concealment was deliberate, but any such duty is not an essential prerequisite to the application of the section. In any event, the duty could not be the Court of Appeal’s suggested duty arising from a combination of utility and morality. Such a test raises no justiciable issue. Accordingly, the reasoning of the Court of Appeal in Williams and The Kriti Palm suggesting that a duty was required should be disapproved. Similarly, the suggestion in those cases that a defendant must also know that (or be reckless as to whether) the concealed fact was relevant to the claimant’s cause of action should be disapproved. All that the section requires is 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.
11. As to “deliberately”, this did not encompass reckless conduct. Instead, all that was required was that the defendant must have considered whether to inform the claimant of the relevant fact and decided not to. This strikes a fair balance between the parties. If the defendant has knowingly concealed a fact from the claimant, he has the means to start the limitation period running by disclosing the fact. If he does not, and chooses to keep the claimant in ignorance of a fact required in order to plead the claim, then it is just that the defendant should be deprived of a limitation defence.
12. The Supreme Court therefore concluded that the elaborate and confusing analyses put forward in William, The Kriti Palm and the Court of Appeal in the present case represent a wrong turn in the law: it should return to the clarity and simplicity of Lord Scott’s authoritative explanation in Cave (at [60]). In summary, what is required 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 a withholding of the relevant information; and (3) an intention on the part of the defendant to conceal the fact in question.

Section 32(2)

13. The appeal raised the single issue of the meaning of “deliberate” as used in section 32(2). The Court of Appeal decision on the point was premised on a conclusion that “deliberate” did not have a natural meaning which did not include recklessness. For that reason, the Court of Appeal considered that it was permissible and necessary to delve back into the pre-1980 case law and Parliamentary materials. Having done so, the Court of Appeal concluded that to construe the word as encompassing recklessness best met the Parliamentary objective.
14. The Supreme Court could not accept that analysis. So far as the starting premise was concerned: (1) as a matter of ordinary language, the adjectives “deliberate” and “reckless” have different and distinct meanings; (2) that distinction in the legal context is readily apparent from the authorities where “reckless” has never been treated as a synonym for “deliberate” and where the courts have repeatedly maintained, as in ordinary usage, that deliberation and recklessness are different concepts; (3) the same is true when considering legislation where the two words have repeatedly been regarded as distinct alternatives.
15. Secondly, contrary to the Court of Appeal’s view, on proper analysis all of the relevant case law on section 32(2) demonstrate that it must be shown that the defendant’s breach of duty was done intentionally or knowingly and not merely recklessly: see Cave, Williams, Giles v. Rhind (No. 2), Primeo.
16. Thirdly, the Court of Appeal’s reliance on decisions arising out of the pre-1980 law of concealed fraud based upon Parliamentary materials relating to the Limitation Act Amendment Act 1980 was mistaken. Those materials said nothing relevant about “recklessness”. Further, for the reasons laid down in Pepper v. Hart, it would only be permissible to refer to such materials if the legislation was ambiguous or obscure, or the literal meaning led to an absurdity, and those conditions were not met in this case. In any event, the materials did not meet a further condition laid down in Pepper v. Hart, namely that the materials must clearly disclose the legislative intent behind the meaning of “deliberate”.
17. Fourthly, the Court of Appeal’s reliance on the old law ignores the clear guidance given by the House of Lords in Sheldon and Cave that it was impermissible to rely on those older cases where the meaning of the current legislation is clear, as it is in this case.
18. Fifthly, the Court of Appeal was wrong to accept the claimant’s submission that extending the mental element to include “recklessness” was necessary to avoid a logical paradox to the effect that whether the necessary wrongdoing existed to allow a claim to proceed might only be known once the court had determined the claim. There was, in truth, no such logical paradox in this case. The most that could be said is that there may be cases where the application of section 32 (2) could not be determined as a preliminary issue, but that does not constitute a logical paradox. Moreover, the claimant’s contention as adopted by the Court of Appeal comes with its own practical problems. If it were enough that a defendant knew it was exposed to a claim, that would expose professional people (such as surgeons and lawyers) to stale claims without any limitation protection. That cannot have been the Parliamentary objective.
19. For these reasons, the Supreme Court rejected the Court of Appeal’s approach. “Deliberate” in section 32(2) does not include “recklessness”, nor does it include awareness that the defendant is exposed to a claim. As Lord Scott said in Cave (at [58]), the words “deliberate commission of a breach of duty” are clear words of English and (at [61]), that they mean the defendant “knows he is committing a breach of duty”.

Conclusion on the appeal

20. 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 cause of action. At first instance, and in the absence of any factual evidence from the defendant, the Recorder had inferred that the defendant deliberately concealed those facts from her by consciously deciding not to disclose the commission to her. The requirements of section 32(1)(b) were therefore met.
21. So far as section 32(2) is concerned, a claimant must show that the defendant knew or intended to commit a breach of duty. The claimant had already conceded that this test cannot be met on the facts in this case. Accordingly, the claimant could not also rely on section 32(2).
22. For these reasons, although the Supreme Court rejected the Court of Appeal’s reasoning on section 32(1)(b) and their decision on section 32(2), the claim was not time-barred and the defendant’s appeal was dismissed.

Comment

23. The judgment provides welcome clarity on the scope and meaning of section 32(2).
24. In relation to section 32(1)(b), however, it might be said to leave open some interesting questions. In this respect, it is not easy to see how, in a case of non-disclosure, there can be ‘concealment’ without a decision not to disclose. On that hypothesis, it remains unclear what the word ‘deliberate’ then adds. Questions may also arise as to whether the Supreme Court intended section 32(1)(b) to apply to entirely innocent non-disclosures. Is it intended that section 32(1)(b) should catch a defendant who was not under a legal duty to disclose, reasonably believed they were not under a duty to disclose, and reasonably believed that the facts not disclosed had no relevance whatsoever to any possible claim against it? And, if so, how does that sit with the age-old principle of caveat emptor? No doubt some of these questions will be explored further in future cases.