Court Of Appeal Provides Further Clarification On The Limitation Period In Fraud Claims

• Law Firm: Herbert Smith Freehills
• Subject Matter: Criminal Law, White Collar Crime, Anti-Corruption & Fraud
• Author: Ms Jan O'Neill and William Turner
• Published date: 30 May 2023

A recent Court of Appeal decision has added to the case law considering the operation of section 32(1)(a) of the Limitation Act 1980 (the Act), under which the limitation period for bringing fraud claims does not start until the claimant discovered, or could with reasonable diligence have discovered, the fraud: Seedo v El Gamal and others [2023] EWCA Civ 330.

The court held that:

• where the limitation issue is being considered at the trial after a decision on the merits, the question for the court is when the claimant discovered (or could reasonably have discovered) the fraud as found by the court, rather than the fraud as pleaded by the claimant in its statements of case; and
• where a claimant is deceived by more than one lie in connection with a transaction, the subsequent lies will not start a new limitation period running unless they give rise to a separate cause of action - which will turn on whether the lies were distinct and unconnected or made in furtherance of the same overall deceit.

In the present case, the court found that two misrepresentations regarding (i) the extent of an investor's ownership in a purchased property and (ii) the source of the purchase funds were both designed to conceal the same thing (the true ownership position) and were part and parcel of that deception. As the party could reasonably have discovered that deception once it became aware of the first lie, the limitation period started then, with the result that the fraud claim was statute barred.

In many cases where there are multiple misrepresentations in relation to a transaction, it will be difficult to predict whether a judge considering the limitation position would view them as distinct or part of the same deceitful scheme. That uncertainty will often be compounded by the other major source of unpredictability where section 32(1) of the Act is invoked - the question of when there was enough information for the claimant to have discovered the deceit.

This issue is important for victims of fraud to bear in mind when the extent of the dishonesty is uncovered only gradually over a period of time. The decision reinforces that it will usually be advisable to investigate any suspicions in a timely manner, and not assume that if clearer evidence of deception comes to light at a later date the victim will then have the full six years (or other applicable limitation period) in which to commence proceedings. If the earlier suspected dishonesty can be viewed as part of the same deceptive scheme, the limitation period in respect of it could already be running or, in a worst case scenario (as here), have expired.

Background

Mr Seedo, a wealthy investor, approached Mr Salfiti (the solicitor) to assist him in acquiring a new investment property. Mr Seedo subsequently agreed to a proposal by the solicitor...