Canada Square Operations Ltd -v- Potter

Summary

The Supreme Court judgment delivered on 15 November 2023 in Canada Square Operations Ltd -v- Potter [2023] UKSC 41 held that claimants can bring PPI “unfair commission” claims against banks, even after the usual six-year time limit has passed, if the bank has “deliberately concealed” facts essential to the pleading of a claim, which meant that the claimant was unable to bring proceedings within the usual time limit. In this regard, the Court held that the term “deliberate concealment” means that the bank has “kept a secret from the claimant, either by taking active steps to hide it or by failing to disclose it”.

Although the Supreme Court differed from the Court of Appeal in its reasoning, the judgment effectively maintains the status quo for claimants and banks dealing with PPI claims.

Background

PPI claims are typically brought under sections 140 A-C of the Consumer Credit Act 1974 (the “CCA 1974”), alleging that sums paid by a claimant for payment protection insurance (“PPI”), which protects the customer’s repayments under a credit agreement such as a loan or credit card, make the credit relationship between the bank and the customer unfair, due to the high level of commission earned by banks on the PPI premiums.

Section 9 of the Limitation Act 1980 (the “1980 Act”) sets a time limit of six years from the end of the credit relationship for the customer to issue their “unfair commission” claim. However, section 32 of the 1980 Act provides that, where any fact relevant to the claimant’s right of action has been deliberately concealed from them by the defendant, the limitation period shall not begin to run until the claimant has discovered the concealment, or could with reasonable diligence have discovered it. Accordingly, PPI claimants have sought to extend the time limit for bringing their claims by alleging that the bank has “deliberately concealed” certain essential facts, namely, the existence and amount of commission the bank earned on the PPI.

The Potter case

Mrs Potter entered into a loan agreement with Canada Square in July 2006, which was a credit agreement under the CCA 1974, also taking out a linked PPI policy to cover repayments under the loan. Over 95% of the PPI premium was paid to Canada Square as commission, which Canada Square did not tell Mrs Potter about until November 2018. However, the loan agreement had ended in March 2010 and so, when Mrs Potter brought a claim in December 2018, Canada Square argued that Mrs Potter’s claim was time barred under section 9 of the 1980 Act.

Mrs Potter argued that the limitation period had been extended under section 32 of the 1980 Act due to Canada Square’s “deliberate concealment” of the existence and amount of the PPI commission. Mrs Potter was successful at first instance. Canada Square’s appeals to the High Court and the Court of Appeal were unsuccessful, and so Canada Square appealed to the Supreme Court.

The Supreme Court Judgment

The Potter judgment considered the meaning of “deliberately” and “concealed” and, in particular, whether “deliberately” also means “recklessly”.

In a detailed analysis of both sections 32(1)(b) and 32(2) of the 1980 Act, with reference to the background to the enactment of the 1980 Act, and with a methodical consideration of the previous decisions relevant to the issue, which will be of significant importance to cases outside as well as within the PPI arena, the Supreme Court concluded that the words “deliberately” and “concealed” must be given their ordinary meanings.

It found that the verb “to conceal” means to keep something secret, either by taking active steps to hide it, or by failing to disclose it. The addition of the word “deliberately” meant that the concealment must be an intended concealment, whether by positive steps or by a withholding of information, but in either case, where the concealment was an intended result. Recklessness is not sufficient. Nor is a mere failure to disclose, unless that failure was a deliberate breach of a legal duty owed by the defendant to the claimant.

The court found the existence and amount of the commission were facts that Mrs Potter needed to know to bring her claim and that, as she did not find out about the commission earned by Canada Square until shortly before she issued her claim, her claim was brought in time. The Court came to this conclusion under section 32(1)(b) of the 1980 Act, as it found that Canada Square had deliberately concealed those facts by consciously deciding not to tell her about the commission.

Although the Court found that Canada Square’s conduct did not amount to a “deliberate commission of a breach of duty” for the purposes of section 32(2) of the 1980 Act, as Canada Square did not intend its failure to disclose the commission to Mrs Potter to render their relationship unfair within the meaning of section 140A of the CCA 1974, Mrs Potter had already succeeded in extending the time limit by virtue of section 32(1)(b) and so Canada Square’s appeal was dismissed.

Implications for PPI claims

In considering the impact of the case for other PPI claims, it is important to note:

1. Potter expressly excluded from its consideration the issue of whether Mrs Potter “could with reasonable diligence have discovered … the concealment”, as no issue of reasonable diligence had been raised by the parties. Mrs Potter’s claim was issued in 2018. Given the media coverage surrounding the PPI scandal and especially considering that the landmark judgment of Plevin v Paragon Personal Finance Limited [2014] UKSC 61 relating to undisclosed PPI commissions was handed down in 2014, banks will typically argue that claims issued from 2020 onwards, and especially more recent claims, should remain time barred as the claimants in those cases could with reasonable diligence have discovered the concealment. Previous caselaw (Paragon Finance Plc v DB Thakerar & Co [1999] 1 All ER 400 (CA)) has established that the burden is on the claimant to show that they could not have discovered the relevant facts without taking exceptional measures, which is a high burden in light of the extensive media coverage referred to above, as well as the widespread advertising by claims management companies and claimant firms.

2. The judgment also noted (at paragraph 96) that “if a claimant can plead a claim without needing to know the fact in question, there would appear to be no good reason why the limitation period should not run”. Many PPI complaints are brought with scant information pleaded in the particulars of claim, and without the full details of the credit agreement or the amount of commission being pleaded. It is therefore arguable that these claims could have been brought earlier, and that section 32 does not save the claimant in those cases.

3. The Potter decision comes swiftly after the decision of the Supreme Court in Smith & Anor v Royal Bank of Scotland [2023] UKSC 34 (judgment delivered 4 October 2023) in which the Court held that the limitation period for an unfair commission PPI claim starts only once the credit relationship has ended (and not earlier, even if the PPI ended earlier). Smith did not consider the issue of deliberate concealment, as (unusually) the claimants in that case had not pleaded or alleged deliberate concealment. However, the effect of the Smith decision was to reduce the number of claims in which banks could successfully argue limitation.

4. However, it should be noted that Smith emphasised the almost unfettered discretion that a Court has in an unfair commission claim to consider all factors relevant to fairness and remedy, with express reference to any delay in the issue of proceedings. Accordingly, even if a PPI claim is not time barred, any significant delay could mean that the credit relationship is either found not to have been unfair by the time of trial or, even if it is found to be unfair, that the Court will exercise its wide discretion to deny the claimant a remedy because of the delay. By logical extension, the overall impact of Potter could, again, be said to be reduced as a result of the availability of “delay” as an argument without the need for a finding that the claim is time barred.

Context – A history of PPI claims

Complaints about PPI were first brought in the 2000s and came broadly in three overlapping waves.

The first concerned PPI mis-selling claims which, if successful, resulted in full redress to consumers, putting them back in the position they would have been in had they not taken out PPI.

The second related to high commissions received by banks and other creditors on PPI premiums whereby consumers claiming under an FCA scheme prior to 29 August 2019 received a partial refund of PPI commission.

In the third (current) wave, which gained traction following the Supreme Court decision in Plevin, claimants issued County Court claims regarding the non-disclosure of commission arguing:

• their credit relationship was unfair under section 140A of the Consumer Credit Act 1974
• that any redress paid under the FCA scheme was insufficient to remedy the unfairness
• for an order under section 140B of the CCA 1974 to remedy the unfairness, which they argue means a complete return of all sums paid for PPI

The appeals in Potter and Smith arise from this third wave of PPI claims.