Sheldon (and Others) v R H. M. Outhwaite (Underwriting Agencies) Ltd (and Others)

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Keith of Kinkel,Lord Browne-Wilkinson,Lord Mustill,Lord Lloyd of Berwick,Lord Nicholls of Birkenhead
Judgment Date04 May 1995
Judgment citation (vLex)[1995] UKHL J0504-1

[1995] UKHL J0504-1

House of Lords

Lord Keith of Kinkel

Lord Browne-Wilkinson

Lord Mustill

Lord Lloyd of Berwick

Lord Nicholls of Birkenhead

Sheldon (and Others)
(Appellants)
and
R. H. M Outhwaite (Underwriting Agencies) Limited (and Others)
(Respondents)
1

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT IN THE CAUSE

Lord Keith of Kinkel

My Lords,

2

This appeal involves a short point as to the proper construction of section 32 of the Limitation Act 1980. That section was amended to some extent by the Latent Damage Act 1986 and by the Consumer Protection Act 1987, but as the amendments do not affect the point at issue it is convenient to proceed upon the terms of the only relevant subsections, (1) and (2), in their original form. These terms are:

"(1) Subject to subsection (3) below, 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.

References in this subsection to the defendant include references to the defendant's agent and to any person through whom the defendant claims and his agent.

(2) For the purposes of subsection (1) above, 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."

3

Subsection (3) is concerned with the protection of bona fide purchasers for value without notice.

4

The point arises in this way. The plaintiffs are Lloyd's names who were members of certain syndicates managed by the first defendants. The other defendants are members' agents. The plaintiffs issued their writ in April 1992, claiming damages for alleged breach of contract, breach of fiduciary duty and negligence. The alleged acts or omissions founded on as constituting the cause of action occurred in or before 1982. That being more than six years prior to the issue of the writ, the defendants pleaded that the action was time-barred. By their points of reply the plaintiffs alleged that by reason of deliberate concealment by the defendants in 1984 of facts relevant to the plaintiffs' cause of action they did not discover these facts until a time less than six years prior to the issue of the writ, and they founded on section 32 of the Act of 1980. The defendants applied to strike out those parts of the plaintiffs' points of reply which alleged deliberate concealment. On 20 October 1993 Saville J. dismissed the application. The defendants appealed, and on 30 June 1994 the Court of Appeal by a majority (Sir Thomas Bingham M.R. and Kennedy L.J., Staughton L.J. dissenting) allowed the appeal. The plaintiffs now appeal to your Lordships' House with leave granted by the Court of Appeal.

5

The question at issue is whether or not the plaintiffs can rely, for purposes of section 32 of the Limitation Act 1980, upon deliberate concealment by the defendants of matters relevant to the plaintiffs' cause of action which occurred after the accrual of the cause of action.

6

The argument before your Lordships traversed a very wide territory. Reference was made to many decided cases, to reports of the Law Revision Committee and the Law Reform Committee concerned with limitation, to other limitation enactments, particularly section 26 of the Real Property Limitation Act 1833 and section 26 of the Limitation Act 1939, and to textbooks. The impression left from a survey of this territory is that the issue which arises on this appeal has rarely been directly addressed. One judicial utterance which appears to do so (albeit obiter) is that of Sir Robert Megarry V.-C. in Tito v. Waddell (No. 2) [1977] Ch. 106. He was there dealing with section 26 of the Limitation Act 1939 which provided:

"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 his agent or of any person through whom he claims or his agent, or

( b) the right of action is concealed by the fraud of any such person as aforesaid, 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 or the mistake, as the case may be, or could with reasonable diligence have discovered it …"

7

The Vice-Chancellor said, at pp. 245-246:

"Under section 26 of the Act of 1939 the effect of fraudulent concealment is that 'the period of limitation shall not begin to run until the plaintiff has discovered the fraud … or could with reasonable diligence have discovered it.' If time has already begun to run, I do not think that a supervening fraudulent concealment will start time running again. Mr. Mowbray did contend that Kitchen v. Royal Air Force Association [1958] 1 W.L.R. 563 was an authority to the contrary, though he had to accept that the point did not seem to have been argued there, and that at best the case was an authority sub silentio. It is plain, of course, that under sections 23-25 a written acknowledgment or payment will start time running afresh. But the words of section 23(1) that produce this result are that in such cases 'the right shall be deemed to have accrued on and not before the date of the acknowledgment or payment'; and this language is very different from the 'shall not begin to run' of section 26.

Mr. Mowbray then contended that section 1 showed that section 26, like section 23, was intended to start time running afresh, in that both sections were in Part II of the Act, and section 1 made the time limits of Part I have effect

'subject to the provisions of Part II of this Act which provide for the extension of the periods of limitation in the case of disability, acknowledgement, part payment, fraud and mistake.'

However, a provision which postpones the commencement of the running of time seems to me to be one way of providing for the extension of the periods of limitation, just as to start time running afresh is another way of doing it; and I do not see why the fact that both are provisions for the extension of the periods of limitation should make one operate in the same way as the other, when the language of each differs so markedly from the other.

I also have in mind one of the general principles of the legislation on limitation, discernible as early as Prideaux v. Webber (1661) 1 Lev. 31. This is that once time begins to run, it runs continuously, and that this principle can be ousted only by a statutory provision. Where the construction of a statutory provision is doubtful, I think the tendency should be towards construing it as conforming with the principle rather than as providing an exception from it. Accordingly I would hold that once time has begun to run, a subsequent fraudulent concealment will not start it running afresh."

8

In Thorne v. Heard [1894] 1 Ch. 599, a case under section 8 of the Trustee Act 1888 where the limitation defence was sustained, there are indications in observations of Lindley L.J. at pp. 603 and 605 and A. L. Smith L.J. at pp. 614-615 that they attached significance to the circumstance that fraud and concealment had not taken place until after the cause of action had accrued. The point was not, however, essential to the decision and does not seem to have been argued.

9

On the other hand, there are indications in the judgments of the Court of Appeal in Beaman v. A.R.T.S. Ltd. [1949] 1 K.B. 550 and in Kitchen v. Royal Air Force Association [1958] 1 W.L.R. 563, both cases under the Act of 1939, of a view that concealment after the accrual of the cause of action did defeat the limitation defence. Here again, the point does not appear to have been addressed in argument nor to have been essential to either decision, but rather to have been taken for granted.

10

The only case that deals with section 32 of the Act of 1980 is Westlake v. Bracknell District Council (1987) 19 H.L.R. 375, a decision of Mr. P. J. Cox Q.C., sitting as a Deputy High Court judge. In 1975 the plaintiffs applied to the defendant council for a loan to be secured by mortgage over a house they proposed to buy. The council obtained a report from their surveyor to the effect that the house represented adequate security for the loan. The report was shown to the plaintiffs and they bought the house in reliance on it. Shortly afterwards the plaintiffs became aware of a gap under a skirting board. They contacted the defendant council, which sent a surveyor who inspected the gap and told the plaintiffs that there was nothing to worry about. In fact, the house was affected by subsidence which seriously reduced its value. The plaintiffs sued the defendant counsel for negligence by writ issued in June 1983, and were met by a plea of limitation, that date being more than six years after the original survey. Mr. Cox held that the plea was defeated by section 32(1) of the Act of 1980 by reason of the deliberate concealment of facts relevant to the cause of action on the occasion of the second visit to the house by the defendants' surveyor. He held in the alternative that the conduct of the surveyor on the occasion of the second visit raised an estoppel against the defendants so as to prevent them from claiming that the cause of action arose more than six years before the issue of the writ. The case represents clear authority, though perhaps not very persuasive, in favour of the present plaintiffs.

11

No assistance of value, in my opinion, is to be gathered from any other of the...

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