Is the UK's PPI claim door still open? 'Deliberate concealment' and limitation periods

The long-running saga of the mis-selling of payment protection insurance (PPI) to retail borrowers is still not at an end. Seventeen years on from the Financial Conduct Authority (FCA) first imposing fines for the mis-selling of PPI, the impact of the scandal is still being felt. In just the past two months, the Supreme Court has issued two judgments which potentially keep the door open for the impact to be felt further.

In the first of these cases, Smith v Royal Bank of Scotland, the Supreme Court clarified that when assessing whether or not consumer credit relationships were unfair, it was necessary to look at the whole of the relationship – right up to the end – meaning that the limitation period for claims under the Consumer Credit Act 1974 may not expire until six years after the relationship ended, even if the cause of the unfairness (a PPI product) had been terminated before then. Consequently, the door is still open for any PPI claims attached to any credit relationships which were only terminated in 2017 or after.

In the second judgment, handed down last week in Canada Square v Potter, the Supreme Court was concerned with clarifying the law on whether there had been "deliberate concealment" of the PPI mis-selling such that time on any PPI claims did not begin to run until the relevant bank made a disclosure of any facts essential to the pleading of a claim to the consumer.

Mrs Potter's claim against Canada Square

Mrs Potter had entered into a loan agreement with Canada Square in July 2006. She had also taken out a PPI policy to cover repayments under the loan. The loan agreement ended in March 2010. Of the PPI premium, 95% was paid to Canada Square as commission. At the time the loan and PPI policy were sold to Mrs Potter, the applicable regulatory rules did not expressly require that the level of any commission on the sale of a PPI policy needed to be separately disclosed to the customer from the premium for the policy. Unsurprisingly, financial institutions therefore did not disclose it to their customers.

However, in 2014, the Supreme Court held in Plevin v Paragon Personal Financial Limited 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 Consumer Credit Act 1974.   Subsequently, the Financial Conduct Authority introduced new rules (Dispute Resolution: the Complaints sourcebook appendix 3) on the handling of PPI complaints including the assumption that –  if more than 50% of the premium amounted to commission – then the relationship was unfair. 

In light of the high percentage of commission in Mrs Potter's case, she made a claim in December 2018 for the full reimbursement of the sums paid under her "unfair" relationship.  

Canada Square did not contest the unfairness in light of the decision in Plevin and admitted that it had not disclosed the fact that it would receive commission. It argued, however, that Mrs Potter's claim was time barred because it had been brought more than six years after the relationship between the parties had ended in March 2010.  Mrs Potter in turn relied on section 32 of the Limitation Act 1980 arguing that Canada Square had "deliberately concealed" the commission relevant to her claim, and time did not start to run until she found out about it.

The specific provision of the Limitation Act 1980 provides that time does not start to run if:

• Section 32(1)(b) "any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant"; or
• Section 32(2) "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"

The Court of Appeal had held that Canada Square owed Mrs Potter a duty, on the somewhat controversial grounds that it was not a legal duty but a lesser duty of "utility and morality", to disclose the information about the commission and had acted in breach of that duty in failing to do so. Canada Square appealed on the grounds that there was no proper basis to impose that duty.

Occam's razor applied

The Supreme Court considered that the Court of Appeal had over-complicated matters. The Court of Appeal had focused on the meaning of the words "concealed" and "deliberately".  "Concealed" had been understood by the Court of Appeal to require a duty to disclose the relevant fact or facts, and the Court of Appeal appeared to have "constructed" a duty based on the imported concept of a duty of "utility" and "morality".

The Supreme Court rejected the need for a duty of disclosure which was not contained in section 32(1)(b). They said that that approach went beyond the language used in the statute and, therefore, what Parliament intended. The clear language of the Limitation Act 1980, given its ordinary meaning, made perfectly good sense: it did not require the added elaboration or complexity imported by the Court of Appeal. 

Further, the Supreme Court rejected the concept of a duty based on morality and utility. Courts are not meant to determine obligations based on moral or social norms, and there are no established standards to objectively establish such obligations. The suggestion that something less than a legal duty would suffice was problematic.

The Supreme Court noted that most defendants who breach a duty which is owed to a claimant are not legally obligated to disclose their wrongdoing.  Requiring a duty to exist significantly narrowed the scope of section 32(1)(b), which is already limited by the requirement of concealment to be deliberate.

The judgment went on to say that all section 32(1)(b) requires is for the defendant to have deliberately concealed a fact relevant to the claimant's right of action (being the right of action asserted by the claimant in the proceedings, in this case the unfair relationship arising from the credit relationship).  The fact must be one without which the cause of action is incomplete. However, there was no need for there to be a duty of disclosure: any intentional hiding or withholding of information is concealment.

Was there 'deliberate' concealment?

The Court of Appeal reasoning had been that "reckless" concealment (that is, conduct that knowingly took the risk of concealment) was sufficient to establish "deliberate" concealment. However, that approach arose from the premise that a duty of disclosure was required. As that had already been rejected, the "reckless" approach was also rejected by the Supreme Court.

Again, the Supreme Court took a more straightforward approach:  "Deliberately" should be understood as requiring an intentional act or omission with the intended result of concealing the relevant fact from the claimant. This interpretation aligns with the purpose of section 32 and balanced the interests of both parties.

If the defendant has concealed a fact from the claimant, and has done so deliberately, then he has the means to start the limitation period running by disclosing the fact. If they do not do so, but choose to keep the claimant in ignorance of a fact required to plead her claim, then it is just that the defendant should be deprived of a limitation defence. As Lord Millett once observed: if the defendant is not sued earlier, he has only himself to blame.

Osborne Clarke comment

This is very much a decision which gives with one hand and takes away with the other to credit providers.

On the one hand, the rather ambiguously framed "moral" duty inferred by the Court of Appeal has been definitively quashed, which will provide a degree of certainty to organisations who wish to understand the scope of their obligations to their customers.

On the other, the Supreme Court has made clear that no duty at all is required for the purposes of deliberate concealment under the Limitation Act. That means that not only is the non-disclosure of significant commissions likely to be unfair, but also that the failure to disclose the commissions, or the deliberate concealment of a fact relevant to a borrower's claim, is likely to extend still further the timetable for consumers to bring PPI claims. 

Consequently, that door remains – for the time being – open, provided that the claimant did not know, and could not reasonably have discovered, the fact and extent of the commission charged. In circumstances where the FCA and the court have been addressing these matters in a high-profile way for nearly two decades, and particularly since the Plevin decision in 2014, that may not be the most straightforward argument.