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Deliberate Concealment and Time Barred Actions
Deliberate Concealment and Time Barred Actions
Author: Serge Perkovic, Principal,
Northfields Lawyers, May 2016
It happens in commercial and other dealings that a person benefiting from breaches of law deliberately conceals his, hers or its wrongdoings. Because of such the concealment, aggravated parties may discover these wrongdoings later in time, when any actions may be time barred.
It happens in commercial and other dealings that a person benefiting from breaches of law deliberately conceals his, hers or its wrongdoings. Because of such the concealment, aggravated parties may discover these wrongdoings later in time, when any actions may be time barred.
When there is deliberate concealment, in Australia, NSW, there are three possible situations:
When there is deliberate concealment, in Australia, NSW, there are three possible situations:
1. This matter is regulated by a separate statute where the statute provides for a limitation period;
1. This matter is regulated by a separate statute where the statute provides for a limitation period;
2. It is not regulated by a separate statute so it is regulated by Limitation Act 1969 (NSW) (“LA”);
2. It is not regulated by a separate statute so it is regulated by Limitation Act 1969 (NSW) (“LA”);
3. In equitable proceedings if there would be deliberate concealment, rules about lashes may not be applied, and time for calculation of time bar would not run. However where there is a corresponding remedy at law in respect of the same matter and that remedy is subject to a statutory bar, equity will apply the bar by analogy unless there exists a ground that justifies its not doing so because reliance by the defendant on the statute would be unconscionable in the circumstances (Sterndale v Hankinson (1827) 1 Sim 393; Knox v Gye (1872) 5 LR HL 656; The Duke Group Ltd (In liq) v Alamain Investments Ltd [2003] SASC 415; Barker v Duke Group Ltd (In liq) (2005) 91 SASR 167).
3. In equitable proceedings if there would be deliberate concealment, rules about lashes may not be applied, and time for calculation of time bar would not run. However where there is a corresponding remedy at law in respect of the same matter and that remedy is subject to a statutory bar, equity will apply the bar by analogy unless there exists a ground that justifies its not doing so because reliance by the defendant on the statute would be unconscionable in the circumstances (Sterndale v Hankinson (1827) 1 Sim 393; Knox v Gye (1872) 5 LR HL 656; The Duke Group Ltd (In liq) v Alamain Investments Ltd [2003] SASC 415; Barker v Duke Group Ltd (In liq) (2005) 91 SASR 167).
Separate Statute with Limitation Rules
Separate Statute with Limitation Rules
For the first group of matters, rules developed which sometimes have unjust outcomes: the The High Court of Australia, in the case Wardley v Western Australia (1992) 175 CLR observed at 269: ``The equitable doctrine of concealed fraud does not operate to prevent a defendant to a purely legal claim, not being a claim also cognisable in the concurrent jurisdiction of an equity court, from pleading the Statute of Limitations.''
For the first group of matters, rules developed which sometimes have unjust outcomes: the The High Court of Australia, in the case Wardley v Western Australia (1992) 175 CLR observed at 269: ``The equitable doctrine of concealed fraud does not operate to prevent a defendant to a purely legal claim, not being a claim also cognisable in the concurrent jurisdiction of an equity court, from pleading the Statute of Limitations.''
Separate statues, such as Competition and Consumer Act 2010 (Cth) and (NSW) and Corporations Act 2001 (Cth) regulate consumer protection and corporate law matters, however, although they provide for a limitation periods up to six years, they do not provide for a fraudulent concealment exception.
Separate statues, such as Competition and Consumer Act 2010 (Cth) and (NSW) and Corporations Act 2001 (Cth) regulate consumer protection and corporate law matters, however, although they provide for a limitation periods up to six years, they do not provide for a fraudulent concealment exception.
In a case of expiration of limitation periods an applicant would be debarred despite the fact he did not know until too late of the existence of the cause of action, even if he remained in ignorance because of fraudulent concealment (Jobbins v Capel Court Corporation Ltd (1989) 25 FLR 226; Country Properties Pty Ltd v ANZ Banking Group Ltd (1991) ATPR ¶41-070 at pp 52,076–52,077).
In a case of expiration of limitation periods an applicant would be debarred despite the fact he did not know until too late of the existence of the cause of action, even if he remained in ignorance because of fraudulent concealment (Jobbins v Capel Court Corporation Ltd (1989) 25 FLR 226; Country Properties Pty Ltd v ANZ Banking Group Ltd (1991) ATPR ¶41-070 at pp 52,076–52,077).
Claims in such cases would be statute barred, notwithstanding the fact that the result may be an affront to common sense, and justice [Cartledge v E Jopling & Sons Ltd HL [1963] AC 758, [1963] 1 All ER 341 [H. (V.A.) v. Lynch (2000) ABCA 97, 255 A.R. 359 [(C.A.)].
Claims in such cases would be statute barred, notwithstanding the fact that the result may be an affront to common sense, and justice [Cartledge v E Jopling & Sons Ltd HL [1963] AC 758, [1963] 1 All ER 341 [H. (V.A.) v. Lynch (2000) ABCA 97, 255 A.R. 359 [(C.A.)].
Claimants would usually have other claims, for example in purely equitable proceedings or causes of action at common law where LA applies however, they may lose enhanced consumer and corporations law protection under the statutes.
Claimants would usually have other claims, for example in purely equitable proceedings or causes of action at common law where LA applies however, they may lose enhanced consumer and corporations law protection under the statutes.
Limitations Act
Limitations Act
Where there is no separate statute regulating the matter than section 55 of LA applies: If there is a cause of action based on fraud or deceit or there was a fraudulent concealment about a cause of action or the identity of a person, then the cause of action commences to run and before the date on which a person having the cause of action first discovers, or may with reasonable diligence discover the above, does not count in the reckoning of the limitation period. .
Where there is no separate statute regulating the matter than section 55 of LA applies: If there is a cause of action based on fraud or deceit or there was a fraudulent concealment about a cause of action or the identity of a person, then the cause of action commences to run and before the date on which a person having the cause of action first discovers, or may with reasonable diligence discover the above, does not count in the reckoning of the limitation period. .
The High Court of Australia held in Hawkins v Clayton (1988) Aust Torts Reports ¶80-163; (1988) 164 CLR 539 that where the wrongful conduct of the defendant has the effect of preventing the institution of proceedings against the defendant, the commencement of the limitation period is suspended for as long as that prevention continues.
The High Court of Australia held in Hawkins v Clayton (1988) Aust Torts Reports ¶80-163; (1988) 164 CLR 539 that where the wrongful conduct of the defendant has the effect of preventing the institution of proceedings against the defendant, the commencement of the limitation period is suspended for as long as that prevention continues.
For application of s 55 LA it is necessary that the plaintiff exercised reasonable diligence to discover the fraud [H. (V.A.) v. Lynch (2000) ABCA 97, 255 A.R. 359 [(C.A.)]. Reasonable diligence means what an ordinary prudent person would have done having regard to all circumstances. The onus of proof is on plaintiff. The test may be modified if the plaintiff can establish that he or she was entitled to rely on defendant for knowledge.
For application of s 55 LA it is necessary that the plaintiff exercised reasonable diligence to discover the fraud [H. (V.A.) v. Lynch (2000) ABCA 97, 255 A.R. 359 [(C.A.)]. Reasonable diligence means what an ordinary prudent person would have done having regard to all circumstances. The onus of proof is on plaintiff. The test may be modified if the plaintiff can establish that he or she was entitled to rely on defendant for knowledge.
Equity
Equity
There are two possible situations in equity, the first being when there is a limitation statute to be applied by analogy (the above example of unconscionable conduct) and when there is no such statute.
There are two possible situations in equity, the first being when there is a limitation statute to be applied by analogy (the above example of unconscionable conduct) and when there is no such statute.
In the former case, equity applies limitation statues by analogy even to claims brought in its exclusive jurisdiction (Lindsay Petroleum Company v Hurd (1874) LR 5 PC 221, [1873] 5 AC 221). However, equity would only apply the relevant statute where there had been mere delay during the limitation period.
In the former case, equity applies limitation statues by analogy even to claims brought in its exclusive jurisdiction (Lindsay Petroleum Company v Hurd (1874) LR 5 PC 221, [1873] 5 AC 221). However, equity would only apply the relevant statute where there had been mere delay during the limitation period.
On the other hand, it would decline to permit a defendant to rely upon a statutory bar by analogy on grounds where there has been fraudulent concealment, which requires either fraudulent conduct as an element of the right of action or conduct consisting of active concealment of a right of action that does not include fraud as an element [Heydon, Leeming & Turner: Meagher, Gummow and Lehane’s Equity: Doctrines & Remedies (Lexis Nexis; 5th Edition; 2014).
On the other hand, it would decline to permit a defendant to rely upon a statutory bar by analogy on grounds where there has been fraudulent concealment, which requires either fraudulent conduct as an element of the right of action or conduct consisting of active concealment of a right of action that does not include fraud as an element [Heydon, Leeming & Turner: Meagher, Gummow and Lehane’s Equity: Doctrines & Remedies (Lexis Nexis; 5th Edition; 2014).
Above rules developed in equity regarding the taking of limitation defences in cases of fraud seem to have been confined to purely equitable proceedings.
Above rules developed in equity regarding the taking of limitation defences in cases of fraud seem to have been confined to purely equitable proceedings.
Conclusion
Conclusion
An important protection for innocent claimants granted by provisions of consumer or corporate law may be lost by deliberate concealment of defendants. Wrongdoers gain advantage from their misconduct. Only legislation can amend this situation.
An important protection for innocent claimants granted by provisions of consumer or corporate law may be lost by deliberate concealment of defendants. Wrongdoers gain advantage from their misconduct. Only legislation can amend this situation.
Although a claimants would usually stand chance to obtain remedies through alternative causes of action, we can not imagine that the legislative body has desired to provide a wrongdoer with this advantage but in fact it did.
Although a claimants would usually stand chance to obtain remedies through alternative causes of action, we can not imagine that the legislative body has desired to provide a wrongdoer with this advantage but in fact it did.
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