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CHAPTER 2

THE WEAPONS OF LAW

2.9THE TIME LIMIT FOR LEGAL ACTION
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In the U.K. Limitation Act 1980, the legislature has laid down certain periods of limitation after the expiry of which no action can be maintained. In Ireland the relevant legislation is the Statute of Limitations Act 1957, wherein, the periods of limitation are similarly set down.

Equity has developed a doctrine of laches (delay in performing a legal duty, asserting a right, claiming a privilege), under which a claimant who has not shown reasonable diligence in prosecuting the claim may be barred from equitable relief.39

Note! Equity, as a branch of Law, means: the body of principles of justice constituting what is fair and right; the system of law or body of principles of justice originating in the English Court of Chancery and which supersedes the Common Law and Statute Law where there is conflict with natural justice. (Ref: Black's Law Dictionary.)


 

The provisions of the U.K. Limitation Act 1980 set the time limits as follows:

Section 2 provides that:

An action founded on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued.

Section 5 provides that:

An action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.

Section 8(1) provides that:

An action upon a speciality shall not be brought after the expiration of twelve years from the date on which the cause of action accrued.


NOTE!  A speciality, in Law, is a formal contract or obligation expressed in a deed, for example: an instrument under seal.



The Act also makes provision for postponement of the limitation period in the case of fraud, concealment or mistake
under subsection 32(1), stating:

…………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 Time of Discovery).



Subsection 32(2), clearly codifies (and MARK THIS WELL!) what instances deliberate concealment, by stating that:

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.


So, for example,


IF
—— a builder fails to disclose the deliberate breach of a building contract by using defective bricks or putting in inadequate foundations, or


IF
—— the vendors of a house knowingly fail to warn the purchaser of the risk of subsidence, when they are aware that the house has been built on a disused rubbish tip, 


THEN
—— the running of the limitation period will be postponed until such time as the claimant discovers the concealment or could with reasonable diligence discover it.39A


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Under the U.K. Latent Damage Act 1986, new 'period of limitation' provisions (Sections 14A and 14B) were inserted into the U.K. Limitation Act 1980 to cover Negligence actions in respect of latent damage not involving personal injuries.

In such instances of Negligence, the period of limitation is either 6 years from the date on which the cause of action accrued (as for a tort under Section 2 above), or 3 years from the Time of Discovery, this being the earliest date on which the plaintiff first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action.

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Latent Damage



These discovery of latent damage provisions do not in any way negate the Section 32 postponement provisions (as cited above) in the case fraud, concealment or mistake.


(See Lord Denning's explanation of the meaning of the words 'fraud' and 'concealed by the fraud' — under 'Equitable Fraud' below.)




I am drawing particular attention to this latent damage postponement period, because the U.K. Financial Services Authority mirrored this '3 years from the Time of Discovery' provision as the limitation period for complainants to bring complaints before the U.K. Financial Ombudsman Service on the matter of mis-sold Endowment Mortgages and similar issues.


By not invoking the Section 32 postponement provisions of the
Limitation Act 1980 with respect to the 6 year limitation period from Time of Discovery, the U.K. Financial Services Authority effectively diverted attention from the systemic deliberate breach of fiduciary duty by those in the U.K. Financial Services Sector.


Conduct
, that should have been categorised as
Systemic Fraud (systemic fraudulent misrepresentation), was effectively whitewashed down to Negligence (i.e. classified as Mis-selling, and treated as though the conduct constituted Negligence). This enabled the FSA to avoid having to address the burning issue of the statutory offences for fraudulent misrepresentation under the U.K. Financial Services Act 1986. (See Section 2.5.8: The Appalling Vista.)

 




Under the Irish Statute of Limitations 1957, actions founded on simple contract, and actions founded on tort, shall not be brought after the expiration of six years from the date on which the cause of action accrued. (Section 11 of the Act)


In the matter of postponement of the limitation period in the case of fraud, concealment or mistake, the provisions of the Irish Act are as follows:

Section 71(1) provides that:

Where, in the case of an action for which a period of limitation is fixed by this Act, either —

(a)

the action is based on 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,

the period of limitation shall not begin to run until the plaintiff has discovered the fraud or could with reasonable diligence have discovered it.

Section 72(1) provides that:

Where, in the case of any action for which a period of limitation is fixed by this Act, the action is for relief from the consequences of mistake, the period of limitation shall not begin to run until the plaintiff has discovered the mistake or could with reasonable diligence have discovered it.


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The lobbying power of the various vested interests in Ireland has been, and still is, such that, contrary to equitable Justice, provisions equivalent to the 'discovery of latent damage' provisions inserted into the U.K. Limitation Act in 1986 (see above) have never been enacted into Irish statute.

As a result, in Ireland, the commencement of the limitation period in instances of negligence continues to be from the time at which the negligence occurred and NOT the Time of Discovery.


In respect of the postponement of the limitation period in the case of fraud and concealment, in the context of Section 71 of the Irish Statute of Limitations, an understanding of the interpreted meaning of the words 'fraud' and 'concealed by the fraud', is therefore critical.

For enlightenment in this regard, the detailed explanations of Lord Denning are set out below.




NOTE!
Again, as was the case with the meaning of the concept of reasonable in the context of Negligence (see Section 2.3.3), the meaning to be applied to the expression reasonable diligence, in the context of discovering the fraud or concealment as stated within both the U.K. and Irish Limitation Acts, must relate to the diligence to be expected of the individual concerned within the reasonable limits of his own knowledge and not the diligence to be expected of someone with a specialist knowledge of the matter at hand.


 

'Equitable Fraud'


Remember that the respective Statutes of Limitations stem from Equity.

The word ‘fraud’ within the respective Statutes of Limitations therefore means fraud as understood in Equity and as originally set down by Lord Hardwicke in Chesterfield v Janssen [see Section 2.3.3] in 1851: it includes every species of fraud.  


In Kitchen v Royal Air Forces and Others (1958, England) (previously cited in Section 2.3.4), Lord Evershed, when setting out the meaning of the word 'fraud' within the U.K. Limitation Act 1939 [i.e. the meaning of 'equitable fraud'], stated:

‘What is covered by 'equitable fraud' is a matter which Lord Hardwicke did not attempt to define two hundred years ago, and I certainly shall not attempt to do so now, but it is, I think, clear that the phrase covers conduct which, having regard to some special relationship between the two parties concerned, is an unconscionable thing (‘against conscience’) for the one to do towards the other.’2


For further enlightenment on this matter, the detailed explanations of Lord Denning are set out below.

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'fraud' and 'concealed by the fraud'

Lord Denning explains


On the matter of postponement of the limitation period under the Statute of Limitations, Lord Denning explained the meaning of the word 'fraud' and the expression  'concealed by the fraud of (the defendant or his agent)' in the King v Victor Parsons & Co (England 1973) as follows:

"The word 'fraud' here is not used in the common law sense. It is used in the equitable sense to denote conduct by the defendant or his agent, such that it would be 'against conscience' for him to avail himself of the lapse of time.

 

The [precedent] cases show that, if a man knowingly commits a wrong (such as digging underground another man's coal), or a breach of contract (such as putting in bad foundations to a house), in such circumstances that it is unlikely to be found out for many a long day, he cannot rely on the Statute of Limitations as a bar to the claim. .......


In order to show that he 'concealed' the right of action 'by fraud', it is not necessary to show that he took active steps to conceal his wrongdoing or breach of contract.

It is sufficient that he knowingly committed it and did not tell the owner anything about it.


He did the wrong or committed the breach — secretly.

By saying nothing he keeps it secret.


He conceals the right of action.


He 'conceals it by fraud' as those words have been interpreted in the [precedent] cases.




To this word 'knowingly' there must be added 'recklessly'.

...... Like the man who turns a blind eye.


He is aware that what he is doing may well be wrong, or a breach of contract, but he takes the risk of it being so. He refrains from further inquiry lest it should prove to be correct — and says nothing about it.


The court will not allow him to get away with conduct of that kind.

It may be that he has no dishonest motive — but that does not matter.

He has kept the plaintiff out of the knowledge of his right of action — and that is enough .....

If the defendant was, however, quite unaware that he was committing a wrong or a breach of contract, it would be different. ..... then he could avail himself of the Statute of Limitations."40

 

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NOTE !


Lord Denning's 'in the equitable sense' means 'as understood in Equity', i.e. 'from the understanding within the branch of the Law (Equity) that imparts justice and fairness' —— as distinct from any 'literal or technical interpretation'.

In explaining the meaning of 'fraud' in the context of a plaintiff's right of action being 'concealed by the fraud' of the defendant, Lord Denning expands on the principles of Justice as rooted in Equity, where 'against conscience' means against the moral rule in Law that requires justice and honest dealings between people.40A


It is also worth noting that this effect of 'concealment of right of action' has long been the applied interpretation with respect to non-disclosure of material facts where there is a duty to do so.


Turner and Sutton's 1990 edition of Spencer Bower, The Law Relating to Actionable Non-Disclosure and Other Breaches of Duty in Relations of Confidence and Influence, at paragraph 13.20, sets out the position under U.K. Law (subject to the reasonable diligence provision within the U.K. Limitation Act) where there has been non-disclosure of material facts as follows:

'The period during which the lapse of time counts against the party complaining does not even begin to run until his right of election accrues, that is, until he has knowledge of the facts giving him that right.'



But this 'Statement of Law' from the 1990 edition of The Law Relating to Actionable Non-Disclosure and Other Breaches of Duty in Relations of Confidence and Influence is verbatim as was in Spencer Bower's 1915 original edition (at paragraph 217), the precedent cases referenced going back to the nineteenth century, to a time when Ireland was under British rule.40B


This 'Statement of Law' (subject to the reasonable diligence provision within the Irish Statute of Limitations) is therefore equally applicable to current Irish Law.





 

A Continuum of Fraud


Remember that in the U.K. 2006 case of Conlon v Simms [see Section 2.3.4 (a)], Collins L.J., citing Spencer Bower, The Law Relating to Actionable Non-Disclosure and Other Breaches of Duty in Relations of Confidence and Influence, 2nd edition (1990), by Turner and Sutton, set out, within his reasoned conclusions, the circumstances that would give rise to a fraudulent breach of a duty of disclosure:

... it is clear that where there is a duty to disclose, and the failure to disclose is fraudulent, there will be an action in deceit and damages will be an available remedy. In such cases "the non-disclosure assumes the character of fraudulent concealment, or amounts to fraudulent misrepresentation, or is otherwise founded on, or characterised and accompanied by, Fraud".40C


And remember that the judgements in Conlon v Simms did not purport to be making any new Law on this matter.


And, again remember that the precedent Law with respect to a fraudulent breach of duty to disclose, as cited by Collins L.J. in the 2006 U.K. case of Conlon v Simms (above), goes back to the time when Ireland was under British rule, and it therefore sets out the precedent Law that is also applicable in Ireland


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It is often the case where there has been a deliberate breach of an obligation to disclose, whether flowing from a fiduciary relationship or from a special relationship, that the party to whom the duty is owed is unlikely, if ever, to discover that the party under obligation to disclose has not acted in his best interests.

In such circumstances there is a continuum of deliberate breach of fiduciary duty.



There is a continuum of conscious knowledge on the part of the fiduciary that the party to whom the fiduciary duty is owed remains in a state of ignorance with respect to his just cause of action.

There is a continuum of Fraud.




But it can also be the case that a fiduciary with specialist knowledge or skill, such as a solicitor, a stock broker or a financial advisor, may have been engaged by a client to exercise that specialist knowledge or skill to a specific task, and the fiduciary may not have been aware at the time that he failed to act in the interests of the other party. This would therefore be a negligent breach of fiduciary duty.

 

But the fiduciary's dutyspecific to the matter for which he was originally engagedto act in the interests of the other party doesn't die then and there.

For, the fiduciary may become aware of his negligent breach of duty some time after the breach and yet before the expiry of the 6 year limitation period within which an action based on the tort of negligence must be taken. He will therefore then have conscious knowledge of his breach and be in a position to disclose his negligence to the other party and, thereby, protect the other party from the consequences of the negligence or reduce the impact of that negligence.


The fiduciary's duty — specific to the matter for which he was originally engaged — must be such that he is still bound to act in the interests of the other party. His fiduciary duty therefore requires him to bring his negligence to the attention of the other party, even though doing so is likely to expose him to a potential legal action.

The fiduciary's silence at this stage must be seen to be a deliberate silence.

And what started out as Negligence must be seen to have transmuted to Fraud.


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In each such set of circumstances it would be very much 'against conscience' if, in the application of Justice, the party who was in deliberate breach of duty could avail himself of the lapse of time provisions of the respective Statute of Limitations.



Note!
Obviously the major differential between the above instances is that there would be a strong presumption of dishonest intent in the case where the fiduciary was in deliberate breach from the outset [see Section 2.3.4 (a): Where a Fiduciary Relationship or a Special Relationship exists] — but here we're just exploring variations on the application of the 'concealed by the fraud' provision for postponement of the limitation period.


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All the above matters have a critical bearing on the time from which the limitation period for taking a legal action commences .


Under the respective Statutes of Limitation (interpreted through Equity), concealment, by way of a knowing or reckless breach of fiduciary duty, gives effect to concealment by fraud and keeps the plaintiff out of the knowledge of his right of action.



This is the situation in Law, and it is of major importance for those dealing with persons in positions of trust (whether the relationship is a fiduciary relationship, or a special relationship as defined under Hedley Byrne v Heller), most particularly for those in Ireland, where the constrictions of the Irish Statute of Limitations are such that there are no 'discovery of latent damage' provisions equivalent to those under U.K. Statute.

Most particularly, it includes the concealment of a right of action following from the knowing or reckless non-disclosure of material facts, and, in that regard, it does not matter whether the duty or obligation to disclose follows from a fiduciary relationship or from a special relationship.
For, in the context of the primary subject matter of this website-book, the systemic deliberate breach of fiduciary duty by those within the Financial Services Sector, it activates the postponement of the 'commencement of the limitation period' provisions of the Statute of Limitations in the case of fraud or concealment by fraud.


In such circumstances, the equitable application of Justice sets the commencement of the limitation period at the Time of Discovery ——  NOT at the time at which the breach occurred.



 

So, notwithstanding the more recent express wording used within the U.K. Limitation Act 1980, it is clear that the provisions of the Irish Act, in respect of postponement of the limitation period in the case of fraud, concealment or mistake, would still be interpreted to similar effect, and that Equity would never countenance any tortured interpretation to the contrary.

 


IMPORTANT NOTE !



As we have seen in the preceding sections on The United Kingdom Position and The Irish Position, the matters of 'fraud' and 'concealed by the fraud', in respect of the breach of fiduciary duty by those in the Financial Services Sectors, have been whitewashed at every turn.

In the context of the postponement of the commencement of the limitation period for a right of action in the case of fraud, concealment or mistake, IF, in reading the contents of this website-book, you have only now become aware of your right of action, THEN, the Clock, by which your limitation period is set, is only beginning to tick NOW.

 

39 Beatson, Burrows and Cartwright, Anson’s Law of Contract, (29th ed.), p. 605.

39A Beatson, Burrows and Cartwright, Anson’s Law of Contract, (29th ed.), p. 607.

40 This explanation by Lord Denning in the King v Victor Parsons & Co. was cited by Lord Millet in the House of Lords in the judgement on the Appeal in Cave v Robinson Jarvis & Rolf (2002). It is taken here from the U.K Parliament Publications website.

40A Black's Law Dictionary — definition of 'conscience', in Law.

40B The learned authors, Turner and Sutton, reference the precedent case of Lindsay Petroleum Co. v Hurd (1874), which stated: "in order that the remedy should be lost by laches or decay ..... it is necessary that there should be sufficient knowledge of the facts constituting the title to relief", and Rawlins v Wickham (1858).

40C [2006] England and Wales High Court 401 (Chancery Division), which can be studied on the British and Irish Legal Information Institute (BAILII) website.

 

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