A strong Court of Appeal decision has struck a blow for consumers in the assessment of limitation periods for claims in business-to-consumer relationships but it has far-reaching effect beyond consumers because it deals with one of the fundaments of the running of a limitation period under section 32 Limitation Act 1980.
In Canada Square Operations Limited (CSOL) v Potter  EWCA Civ 339 the court analysed the provisions of section 32 which provides for the postponement of limitation periods in the case of fraud, concealment or mistake within the context of a claim by the consumer (C) that the relationship of the lender/borrower was an unfair one under section 140A Consumer Credit Act 1974.
The claim was one of the many thousands relating to the mis-selling of payment protection insurance (PPI) and secret commissions. In 2006, C took a loan from CSOL and bought with it PPI cover. She was not told that 95% of the premium for the PPI went to CSOL as commission. The loan was paid off in 2010. In December 2018, C started proceedings for the return of the PPI premium under section 140A Consumer Credit Act 1974 saying the secret commission on the premium meant that the loan for it was an unfair relationship. Fully secret commissions, as here, are regarded by the law as a form of bribe and fraud and taint the usual relationship of debtor (the consumer), creditor (the lender) and supplier (supplying the goods or services to which the loan relates).
CSOL said she was too late because limitation started running when the loan had been paid off in accordance with section 8 Limitation Act 1980. C said the time started running only when she found out about the secret commission by virtue of the extension of time under section 32 because it had been deliberately concealed.
There were three relevant pieces of statute:
- Section 8 Limitation Act 1980 provides that time in relation to an unfair relationship starts at the end of the relationship and runs either for 6 years for monetary damages or 12 years for other relief.
- Section 32 Limitation Act 1980 extends the commencement of a limitation period when there has been fraud, concealment or mistake. For this purpose a “… 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.”
- Section 140A and 140B Consumer Credit Act 1974 provide for relief for borrowers when a court determines the relationship between them unfair because of:
- any of the terms of the agreement or of any related agreement;
- the way in which the creditor has exercised or enforced any of his rights under the agreement or any related agreement; or
- 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).”
In agreeing with C and applying the law to the facts, the Court of Appeal determined that:
- CSOL’s failure to tell C of the commission made the relationship between the parties unfair under section 140A.
- Section 32 should not be interpreted restrictively but evenly to balance the interests of the defendant to avoid stale claims but allowing the claimant to overcome the limitation barriers where the facts make it appropriate.
- Concealment for the purposes of section 32 could arise from a breach of duty to disclose.
- The duty under section 32 did not have to be a pre-existing legal duty to disclose but a duty in a broader sense.
- Section 32 did not require “active concealment”. The deliberate concealment and the deliberate commission of a breach of duty could include a ‘reckless’ disregard for the duty, in this case the duty to disclose the commission, in the sense that the defendant realised there was a risk (that they should disclose the information, or that their conduct gave rise to a breach of duty) and that it was objectively unreasonable to take that risk.
What does this mean for consumers and defendant creditors?
The broad effect is that the court took a wide view of the duties of the supplier and the lender and a protective view for the consumer under both section 140A and under section 32, respectively. The conclusions of the court appear to import a duty of good faith between the lender and borrower supported by the regulatory framework. They may also import such a duty between the lender and supplier e.g. in these circumstances, importing an obligation on the supplier to inform the lender of a breach of duty. It may be that the lender/supplier will have to prove their mindset as to the regard they had for their duties to prove their intent in relation to those duties. The clarification of the term ‘deliberate’ in section 32, confirms that there is no need for the claimant to establish that the defendant was aware of its wrongdoing or that there was wilful blindness on the defendant’s part as long as the defendant was reckless and took an unreasonable risk that what it was doing was wrong.
In consumer contracts, claimants often resort to section 32 to extend time because they often learn of the facts at third hand, in newspaper articles, social media and, probably, in this case notification from lawyers or claims management companies. This decision undoubtedly opens up further arguments for claimants but it still very much depends on the facts.
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