In the recent case of
Background
The Defendants were producers of smart card chips, who had been the suppliers of these chips to the Claimant ('
On
Nevertheless, on the same day,
On
The Commission then published a press release on
Accordingly,
The Law and the Issues
The Defendants accepted there had been deliberate concealment such that s 32(1)(b) of the Limitation Act 1980 was in principle engaged. The issue in dispute between the parties was when
Section 32 of the Limitation Act 1980 provides as follows:
(1) ... where in the case of any action for which a period of limitation is prescribed by this Act, either -
(a) the action is based upon the fraud of the defendant; or
(b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; or
(c) the action is for relief from the consequences of a mistake;
the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.
The Court Below
The Judge (Bacon J) identified two tests for determining when time starts to run in concealment cases for the purpose of s 32(1)(b):
1. The "Statement of Claim" test applied in
2. The "FII" test in Test Claimants in the Franked Investment Group Litigation v. HMRC [2020] UKSC 47 (FII)). This case concerned a mistake of law, but the test adumbrated by the UKSC was that time starts to run when the claimant knows, or could with reasonable diligence know, that it has a worthwhile claim. The claimant must know about the mistake (or in this case the concealment) with sufficient confidence to justify embarking on the preliminaries to the issue of proceedings, such as submitting a claim to the proposed defendant, taking advice and collecting evidence.
Neither side had, however, identified any practical difference between the two tests. Accordingly, the Judge applied the 'statement of claim test' and determined that
Accordingly, the Judge held that the claims, issued more than 6 years after this date, were statute barred.
The Present Appeal
On
1. what, after FII, is the applicable test to determine when time begins to run in a case where any fact relevant to the claimant's right of action has been deliberately concealed by the defendant;
2. whether the judge was right to place reliance on
3. whether
(i) Issue 1: Concealment Cases
Vos MR, with whom Green and Birss LJJ agreed, considered that, even if FII was a case on mistake, it was necessary to take "proper account" of the reasoning of the
Hence, Vos MR considered it sufficient to observe that much of the
The limitation period normally begins to run on the date when the cause of action accrues. It is not postponed until the claimant has consulted a solicitor, carried out investigations, and is in a position to plead a statement of claim. For example, a pedestrian who is knocked down and injured by a car while using a zebra crossing has a cause of action against the driver, which accrues on the date of the accident. It will take time before he can issue a claim: he will need to consult solicitors, and counsel may have to be instructed to draft the claim. There may be many matters which have to be investigated, and that may take time. And it may be that his claim will fail in the end, if, for example, it is found that he suddenly ran into the path of the car, or that the driver had a heart attack and lost control of the vehicle. Nevertheless, the limitation period begins to run on the date of the accident. It is not postponed until he has completed his investigations, or until he knows that his claim is guaranteed to succeed.
Hence, if there were any differences between the three subsections of s 32(1), such differences would be found either (i) in the stricter rules of pleading in fraud in contrast to pleading mistake or concealment; or (ii) the fact that the event relevant to a s 32(1)(c) postponement in mistake is based on discovering something affecting how the claimant has acted, whilst ss 32(1)(a) and (b) postponement in deliberate concealment and fraud cases is generally based on discovering conduct by the defendant. Vos MR, however, considered that (i) did not apply to competition cases, as "if anything, the secret nature of a cartel leads to a more liberal approach to pleading in advance of disclosure;"' and (ii) appeared to be a "distinction without a real difference" where the meaning of "discover" is concerned.
Vos MR therefore applied the test in FII and considered that time starts to run in a deliberate concealment case when the claimant knows he has a worthwhile claim; and that "discovery" of the concealment in this context means "to have a reasonable belief,' not 'ascertain the truth,' in relation to what has been concealed. In the case of a cartel, a claimant discovers he has a worthwhile claim when he has a reasonable belief that there has been a cartel.
From this, Vos MR considered that the most difficult aspect of the present case was whether, in a concealment case (and perhaps in a fraud case also), the FII test requires that the claimant has discovered "every essential element of the claim that has been concealed." In practical terms, does the FII test require
Vos C recognised that the pre-FII cases made clear that that was necessary, however, expressed the view that "post-FII, that can no longer be necessary at least in a concealment case." In Vos MR's view (at [50]):
It makes no sense to say that the test for whether the limitation period has begun to run is when the claimant recognises that it has a worthwhile claim, and then to say that it does not have a worthwhile claim when it knows there may have been a cartel, but did not know, for example, the period during which the cartel operated. The formulation for the necessary knowledge is "knowing with sufficient confidence to justify embarking on the preliminaries to the issue of a writ". One can embark on the preliminaries to the issue of a writ once one knows that there may have been a cartel without knowing chapter and verse about the details. That is what one either finds out when making investigations or will only find out upon disclosure within the eventual proceedings.
Hence, a claimant in a cartel case can begin preliminary investigations when it knows there may have been a cartel and the identities of the participants. Once the claimant knows objectively thus that a cartel has been concealed, it does not need to have certainty about its existence or about the details of that cartel; this is what is discovered upon making the investigations that precede the issue of any claim or in the disclosure process.
Issues 2 and 3: The Present Facts
Vos MR considered the Judge had been right both to rely on the Statement of Objections as founding a reasonable belief in the existence of a cartel; and to have held that
Vos MR further considered it worth commenting on the status of the Statement of Objections following FII. In his view, it was 'obvious' that once the regulator publicises the fact that it believes, subject to defences, that there is prima facie case that certain persons have participated in an unlawful cartel, a claimant knows that it has a worthwhile claim. Vos MR considered that "a claim pleaded on the basis of that information and inferences drawn from it would never be struck out without the court being able to see the Statement of Objections itself, which would provide many of the details that a claimant from whom the cartel had previously been concealed would be lacking."
Commentary
The Court of Appeal has now made it clear that the test outlined in the FII case is applicable to cases of deliberate concealment and not confined to cases concerning mistakes of law. The decision provides further clarity on the application of Section 32 of the Limitation Act 1980 and will, no doubt, be of interest to practitioners working on cases concerning the sale of
The Court of Appeal has now held that the so-called "statement of claim test" acts as a gloss on the test identified in FII (i.e. that limitation begins to run when the claimant recognises that it has a worthwhile claim). However, the Court did recognise that it was possible that applications of the differing tests could, in principle, make a difference to whether or not a claim is time-barred.
In cases of concealment, the trigger to start time running is the Claimant's discovery of the concealment. It is not necessary for the Claimant to know the intricacies of the matters concealed. In this case, the fact that a cartel had been concealed was sufficient to start time running. Applying this reasoning to where an unfair relationship is alleged to have arisen under the Consumer Credit Act 1974, the discovery of the concealment of an element rendering the relationship unfair (e.g. undisclosed commission) may be sufficient to start time running (providing, of course, that the failure to disclose amounts to concealment); ignorance of the precise details of the matter allegedly concealed (e.g. the amount of commission) may not postpone the start of the limitation period. Of course, much will depend on the facts of any case.
The Court also held (at [46]) that a claim in respect of a concealed event would not be a worthwhile one if it were pure speculation, but would be if, an authoritative regulator had thought it sufficiently serious, having investigated all the evidence available, to lay charges or issue a statement of objections. Again, applying this by analogy to cases concerning unfair relationships due to undisclosed PPI commission, the publication of the
The Court made it clear (at [47]) that the question as to whether a claim is worthwhile is not a complex balance of the chance of success. However, if the putative claim would have been struck out, then the claim cannot be said to have been one that was worthwhile. The Court, however, observed (at [85]) that no legal representative seeking to strike out a claim could, in accordance with that person's overriding and primary professional duty to the Court, properly advance an argument that the pleading was premature or inadequate knowing that its client was aware of the details of the relevant concealed matter. Moreover, the Court indicated (at [85]) that the courts will adopt a relaxed approach to the pleading requirements where it is known that the detailed facts relevant to the cause of action have been, and remain, largely concealed.
The fact that there is an ongoing dispute as to the wrongdoing is insufficient to postpone the limitation period. In particular, it is in the nature of litigation that facts and law are disputed. A dispute as to an element of a cause of action does not mean that a claimant cannot know it has a worthwhile claim. The test is not one of certainty.
Finally, the Court addressed the risk that its decision would prejudice unwary consumers. It held (at [89]) that the application of the test in FII was fact and context sensitive and took into account the nature of the claimant (corporate or otherwise). It held that the position of a consumer relative to that of a corporate litigant may be very different. In particular, it drew attention to the fact that a typical consumer might be unlikely to have specialist advice or resources to investigate and understand matters. It remains to be seen, what the position is in relation to consumers who allege unfair relationships arising out of the sale of PPI in circumstances where there has been widespread media attention on the topic since the early 2000's. Of course, much will depend on the particular consumer claimant.
The decision shines light on the application of Section 32. However, it is by no means the last important decision likely to have an impact on cases concerning alleged unfair relationships. In June this year, the
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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