Limitation of Actions Consultation - Law Commission

8.17 In Sheldon v RHM Outhwaite (Underwriting Agencies) Ltd, 44
the cause of action of
the plaintiffs, Lloyd’s names, was alleged to have arisen as a result of various acts
and omissions in 1982 by the defendants, the members’ agents of the underwriting
syndicate to which the plaintiffs belonged. The plaintiffs issued proceedings for
damages for breach of contract, breach of fiduciary duty and negligence in 1992.
They claimed that they had been prevented from discovering the facts relevant to
their cause of action by deliberate concealment undertaken by the defendants in
1984, after the cause of action accrued. This raised the question whether section
32(1)(b) could apply to cases of deliberate concealment after time had started to
run (that is, subsequent concealment). The House of Lords reviewed three
possible interpretations of the subsection:
(1) The subsection does not apply to subsequent concealment. Therefore,
where time has started to run before the defendants act to conceal the
relevant facts from the plaintiffs, the subsection does not apply, and once
the limitation period prescribed by the Act has expired, the action will be
time-barred, even if the plaintiffs never became aware of the facts giving
them a cause of action against the defendants.
(2) The subsection does apply to subsequent concealment. It has the result
that the limitation period is restarted (that is, the clock is reset) after the
concealment has been discovered.
(3) The subsection does apply to subsequent concealment. It has the effect of
suspending time. That is, it excludes a period of time, starting when the
facts are concealed from the plaintiffs and ending when they discover the
concealment, from the limitation period. When the discovery is made, the
plaintiffs would therefore have an amount of time, equivalent to the time
remaining of the limitation period at the point when the concealment took
place, to issue proceedings against the defendants.
8.18 The majority of the House of Lords rejected the first interpretation and held that
the subsection clearly applied to every case of deliberate concealment, whether
that concealment coincided with the accrual of the cause of action or not. The
interpretation of the phrase “shall not begin to run” caused more difficulty.
Although Lord Browne-Wilkinson and Lord Nicholls 45
felt that the third
interpretation would be the most logical, 46
both agreed that this could not be
44 [1996] AC 102.
45 The two judges forming the majority with Lord Keith of Kinkel.
46 Lord Nicholls in particular felt that both the first and third interpretations would frustrate
the intention of Parliament, suggesting that if the first interpretation were taken to its logical
extreme, a defendant could be deprived of a defence of limitation which had accrued before
the concealment took place. If the third interpretation were adopted an artificial distinction
would be read into the subsection, and the mischief it aimed at (protecting the plaintiff
from deliberate concealment practised by the defendant) would not be met. However,
though regarding the second interpretation as the most attractive, he accepted that it could
not be supported on the words of the statute, and chose, with reluctance, to support the
first interpretation.
148