In this article, senior associate Ilyas Bulut and paralegal Ryan Ho summarise the progress of Canada Square Operations Ltd v Potter [2021] EWCA Civ 339. The case concerns the meaning of “deliberate concealment” in section 32 of the Limitation Act 1980 (“LA 1980”).

Section 32(1)(b) LA 1980 operates where the defendant deliberately concealed any fact relevant to the claimant’s right of action. It provides that the limitation period does not start to run until the claimant has discovered the fraud, concealment or mistake or could, with reasonable diligence, have discovered it.

The appeal was heard by the Supreme Court from 14 to 15 June 2022, and the judgment is expected to be handed down in the coming months.

The judgment will be relevant to claims under sections 90 and 90A of the Financial Services and Markets Act 2000 (FSMA). These claims make issuers of securities liable to persons who have acquired, continued to hold or disposed of securities in reliance on the issuer’s misleading published information.  Such claims invariably involve “concealment” of information otherwise required to be published by an issuer. The Supreme Court decision will serve as helpful clarification both in terms of the state of mind required and whether concealment engages a duty to disclose. The Supreme Court will decide whether:

• For the meaning of “deliberate”, is recklessness enough, or is actual knowledge required?
• For the meaning of “conceal”, does this require the defendant to have breached a legal duty to disclose?

First instance decision

Canada Square, the defendant, argued that Mrs Potter’s claim was statute-barred. She relied on both limbs of s32 LA 1980 to argue that the limitation period had not yet expired.

The recorder found against the defendant, holding that the defendant had deliberately concealed something from the claimant, thus postponing the start of the limitation period until the claimant discovered the concealment.

Appeal to the High Court

The defendant appealed to the High Court, who dismissed the appeal.

The judge found that the claimant could not rely on s32(1)(b) by itself because the concealment was not an active concealment but rather a case of omission to disclose. There was also no legal duty on the defendant to disclose the information. As such, the case turned on the meaning of the term “breach of duty” in s32(2).

Section 32(2) says that the deliberate commission of a breach of duty where it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.

The judge held that s32(2) should be interpreted more widely to cover legal wrongdoing of any kind, giving rise to a right of action. Based on this, he found that the defendant’s continued non-disclosure of the information constituted a breach of duty, such that the claimant could rely on s32(2).

The judge also analysed the nature of the mental element required and held that recklessness is sufficient.

Appeal to the Court of Appeal

The defendant appealed on the following grounds:

• Did the creation of an unfair relationship amount to a breach of duty under s32(2) Limitation Act 1980?
• Was Canada Square’s failure to disclose the existence and size of the commission a “concealment”?
• Was Canada Square’s concealment “deliberate”?

The Court of Appeal dismissed the appeal.

On the first ground, the court held that “breach of duty” applied to any legal wrongdoing. It was not restricted to a breach of duty in a tortious/contractual sense nor in an equitable/fiduciary sense. It therefore agreed with the High Court’s decision.

On the second ground, the court held that the concept of concealing something meant there was some obligation to disclose. However, for the purposes of LA 1980, the obligation could arise from utility and morality rather than strictly from contractual, tortious or fiduciary duty. The court also held that the claimant could rely on s32(1)(b) alone, disagreeing with the High Court judge.

On the final ground, the court held that recklessness with both a subjective and objective element would be sufficient to establish that the concealment was deliberate.

The test for recklessness is that formulated by Lord Bingham in R v G and Anor [2003] UKHL 50, ie, a person acts recklessly when he is aware of a risk that exists or will exist (the subjective element), and it is, in the circumstances known to him, unreasonable to take that risk (the objective element).

The court held that no reasonable person, apprehending the risk the defendant must have apprehended, would have decided not to disclose the information to the claimant.

Appeal to the Supreme Court

The defendant appealed to the Supreme Court on two grounds:

• For the meaning of “deliberate”, is recklessness enough, or is actual knowledge required?
• For the meaning of “conceal”, does this require the defendant to have breached a legal duty to disclose?

We await the Supreme Court’s impending decision to clarify the questions left unanswered in this case.

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