LIMITATION: DELIBERATE CONCEALMENT BY THE DEFENDANT EXTENDS THE LIMITATION PERIOD

In IT Human Resources PLC -v- Land [2014] EWHC3812 (Ch) Mr Justice Morgan considered when the limitation period started when there had been concealment by a defendant. It is an important example of s.32 of the Limitation Act 1980 in practice.

THE CASE

The claimant was claiming damages against a former director. Whilst the defendant was a director he supplied computer software, copyright in which was owned by the claimant, to another company without the claimant’s permission. The allegation was that there was infringement of copyright and breach of fiduciary duty.

THE LIMITATION ISSUE

Most of the acts of infringement took place more than six years before proceedings commenced. The defendant alleged the action was statute barred. The claimant’s response was that the limitation period was extended pursuant to s.32 of the Limitation Act 1980 because of deliberate concealment by the defendant.

THE JUDGE’S FINDING ON LIMITATION

The judge found that there had been deliberate concealment. There is a careful discussion of the act.

Limitation

  1. An action for damages for copyright infringement is an action founded on tort and such an action may not be brought after the expiration of six years from the date on which the cause of action accrued: see Limitation Act 1980 (“the 1980 Act”), section 2. The cause of action for copyright infringement arises on the date of the act of infringement. The Claim Form in the present case was issued on 3 October 2011. Thus acts of infringement before 3 October 2005 are outside this six year limitation period. However, one of the acts of infringement (i.e. the back up copy of the database on 12 December 2006) was within the six year limitation period.
  2. As to the claims for breach of fiduciary duty, Snell’s Equity 32nd ed. at para. 7-063 states that a six year limitation period applies to claims against fiduciaries for breach of fiduciary duty. This was not challenged by the Claimant in that I heard no submissions on the point at all. I will therefore proceed on that basis and it is unnecessary to discuss section 21 of the 1980 Act.
  3. As regards the causes of action which accrued before 3 October 2005, ITHR submits that the relevant period of limitation did not begin to run when the cause of action accrued because facts relevant to the right of action were concealed from ITHR so that the period of limitation was postponed until ITHR discovered the concealment or could with reasonable diligence have discovered it. ITHR relies on section 32 of the 1980 Act, the relevant parts of which provide:

“(1) Subject to subsections (3) and (4A) 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.”

  1. ITHR contends that the facts relevant to their claims against Mr Land were deliberately concealed from it by Mr Land. In addition to a general contention of deliberate concealment within section 32(1)(b), ITHR also relies on section 32(2) of the 1980 Act. As to section 32(2), ITHR says that Mr Land deliberately committed breaches of duty in circumstances in which the breaches were unlikely to be discovered for some time. Further, ITHR says that it did not discover the breaches of duty until October 2009 and it could not with reasonable diligence have discovered them earlier. ITHR issued its claim form within six years of October 2009.
  2. Section 32(1)(b) refers to facts being deliberately concealed from the claimant. Such concealment need not be contemporaneous with the wrongdoing: see Sheldon v RHM Outhwaite Ltd [1996] AC 102. For there to be deliberate concealment within section 32(1)(b), the defendant must have considered whether to inform the claimant of the relevant fact and decided not to do so; the fact which the defendant decides not to disclose must be one which it was his duty to disclose or must at least be one which he would ordinarily have disclosed in the normal course of his relationship with the claimant: see Williams v Fanshaw Porter & Hazelhurst [2004] 1 WLR 3185 at [14] per Park J. In the same case, Mance LJ said of section 32(1)(b) at [34] that it applied where a defendant deliberately concealed facts knowing that they were relevant to an actual or potential breach of duty and at [36] he added that where there was a duty to speak then the intentional suppression of information which it is known should be communicated pursuant to that duty can readily be regarded as “concealment” of the information.
  3. Section 32(2) refers to deliberate commission of a breach of duty amounting to deliberate concealment of the facts involved in “that breach” of duty. Where section 32(2) is relied upon the relevant circumstances are those surrounding the relevant breach of duty. Section 32(2) will not operate to cover an earlier breach of duty to which section 32(2) was not separately applicable. In order for there to be a “deliberate commission of a breach of duty” within section 32(2) there must be a deliberate breach of duty, that is, a breach of duty which is committed intentionally. The distinction for the purposes of section 32(2) is between intentional wrongdoing on the one hand and negligence or inadvertent wrongdoing on the other: Cave v Robinson Jarvis & Rolf [2003] 1 AC 384 at [17] and [25] per Lord Millett and at [58] and [60] per Lord Scott.
  4. I will first consider the position under section 32(1)(b) and then the position under section 32(2). As regards the copyright infringement and the corresponding breach of fiduciary duty before January/February 2002, Mr Land was under a duty to disclose his conduct to ITHR if he either thought it was in ITHR’s best interests to know of it or he would have considered it was in its interests if he had thought about it in good faith. I have held that Mr Land was under a duty to disclose his wrongdoing in that period and he did not do so, in breach of his duty. Therefore, he deliberately concealed facts relevant to his liability for the purposes of section 32(1)(b). The position is even more clear in relation to the provision of copyright material after January/February 2002.
  5. As to the position under section 32(2), Mr Land’s infringements of copyright were knowing and intentional wrongdoing and therefore deliberate commission of a breach of duty within section 32(2).
  6. Accordingly, the six year limitation period did not begin to run in this case until October 2009 and the present claims are not statute barred.

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