Reasonable Diligence – when is it enough to postpone limitation?

In this blog we consider the outcome of Arif v Sanger [2025] EWHC 1540 (KB) and the potential repercussions for directors in cases of possible fraud, deliberate concealment and misrepresentation under s.32 of the Limitation Act 1980 where reasonable diligence is not exercised.

The recent judgment considered whether the Claimant could overcome the limitation defence, relying on the Defendant's alleged fraudulent conduct pursuant to s.32 of the Limitation Act 1980 (the Act).

The underlying claim related to a joint venture which the parties had entered into, to invest in, purchase and develop land in London.

The key issue considered in this case related to the application of the limitation defence under the Act, as the claim form was issued more than six years post-completion. The Claimant relied on s.32 of the Act, specifically that the Defendant's actions were fraudulent (s.32(1)(a)) and that there had been deliberate concealment (s.32(1)(b)).

The Court considered previous case law authorities relating to fraud and deliberate concealment, noting that the statement of claim test applies to the fraud limb. This test requires a Claimant to know enough to plead a claim, and is now applicable to deliberate concealment, such that limitation begins to run in a case of this nature when the Claimant recognises that it has a worthwhile claim. The Court has previously emphasised that this test must be applied with common sense.

The Court considered the requirement of reasonable diligence, referencing Neuberger LJ in Law Society v Sephton & Co [2004] EWCA Civ 1627, which set out that there must be an assumption that the claimant desires to discover whether or not there has been a fraud, otherwise the definition of 'could' in this context does not carry the weight it should in circumstances where the claimant should be investigating the position. This point has been debated as to what should constitute the trigger for reasonable diligence. The Court considered that this must be judged in line with the relevant circumstances. Allison v Horner [2014] EWCA Civ 117 set out that it is not what the claimant should have known but rather what they could have known.

Here, the Judge was not convinced by the Defendant's argument that the Claimant was a director of the company and therefore had a duty to comply with their director's duties. In this instance, misrepresentations had been made to the Claimant directly, rather than the company. However, the Claimant had accepted, in cross examination, that he was an educated man with a degree in business which was relevant in the context of s.32.

The Court clarified that s.32 expects enquiries to be made in circumstances where reasonable diligence requires further investigation of matters. If that would have led to discovery of fraud or concealment, limitation isn't postponed beyond this point.

The Court considered whether an educated person in the position of the Claimant, entering a joint venture with someone he did not know well, could have discovered fraud or concealment if exercising reasonable diligence. The burden of proof was on the Claimant.

The Judge found that the Claimant was understating his business acumen, his ability to obtain relevant documentation and his understanding of the property. The Judge concluded that the Claimant could have discovered the alleged fraudulent or negligently misrepresented facts with a level of reasonable diligence.

Therefore, the Claimant was not able to overcome the limitation defence to the claim.

This case will be of relevance for claims against directors where the actions giving rise to a claim are alleged to have been concealed from the claimant(s) whether this be the company or its shareholders. The Court's assessment of what amounts to "reasonable diligence" on behalf of the Claimant to identify the alleged concealment and/or fraud is likely to remain an area of dispute.

To read the full judgment please click here.