Supreme Court rejects limitation defence in secret commission claim

On 15 November 2023, the Supreme Court handed down its judgment in the test case of Canada Square Operations Ltd v Potter [2023] UKSC 41. The decision concerned whether Canada Square, a commercial lender and insurance intermediary, could rely on a limitation defence to a claim by its customer, Mrs Potter, that she had been mis-sold a PPI policy. The Court ruled that despite the significant period of time that had elapsed since Mrs Potter had taken out the policy, her claim was not time barred.

Mrs Potter took out a loan and PPI policy with Canada Square in July 2006. The loan agreement stated that the total value of the credit advanced was £20,787.24, being a cash amount of £16,953 and a PPI policy premium of £3,834.24. What was not stated in the credit agreement, or disclosed in any other way, was that over 95% of the premium constituted Canada Square’s commission for introducing the policy. The sum paid to the insurer was just £182.50.

In Plevin v. Paragon Personal Finance Ltd [2014] UKSC 61, the Supreme Court ruled that the non-disclosure of very high levels of commission in similar circumstances rendered the relationship between the creditor and borrower “unfair”, and that the borrower was entitled to a number of remedies under the Consumer Credit Act 1974, including repayment of amounts paid to the creditor in respect of the premium.

In November 2018, Mrs Potter consulted solicitors who advised that the amounts she had paid were likely to include substantial commission. On 14 December 2018, she issued her claim against Canada Square under the relevant sections of the Consumer Credit Act 1974, some 12 years after entering into the credit agreement, and 8 years after her final payment.

In its defence to the claim, Canada Square admitted it had not disclosed the fact that it would receive commission as part of the credit agreement, but argued that Mrs Potter’s claim was time-barred under s.9(1) Limitation Act 1980 as the six year limitation period for bringing a claim under the Consumer Credit Act 1974 had expired. Mrs Potter argued that the time period did not start to run for the purpose of the Limitation Act 1980 until the date she found out about the commission.

The lower courts found in favour of Mrs Potter, and the Supreme Court ruled that Mrs Potter could rely on s.32(1)(b) of the Limitation Act 1980 to deprive Canada Square of its limitation defence. This states that where any fact relevant to a claimant’s right of action has been deliberately concealed from them by a defendant, the limitation period does not start to run until the claimant discovers the concealment, or could with reasonable diligence have discovered it.

In this case, Canada Square was held to have deliberately concealed the existence and amount of commission from Mrs Potter by consciously deciding not to disclose the commission to her in breach of the relevant sections of the Consumer Credit Act 1974, and that she could not, even with reasonable diligence, have discovered it until she obtained legal advice on her position.

There are said to be approximately 26,000 active claims of a similar nature which were awaiting the Court’s judgment, and it seems likely that lenders may have to brace themselves for further claims to come following publication of this judgment.

The decision may also be of interest in other sectors, such as the energy sector, where claims relating to secret or half-secret commissions paid to brokers have begun to proliferate. Lenders, utility providers and others should consider the extent to which claims against them can be distinguished from the decisions in Plevin and Potter, and the nature of defences which may be available to them.