High Court questions growing use of standstill agreements

High Court: stay would be a safer option

The High Court has questioned the growing use of standstill agreements in litigation, saying they are “potentially just another self-inflicted complication” when it would be simpler to apply for a stay.

Mr Justice Coulson – who will next year be elevated to the Court of Appeal – said he did not understand why they had become more common.

He was speaking in a newly published case where the effect of three standstill agreements was itself in dispute.

Russell & Anor v Stone (t/a PSP Consultants) & Ors [2017] EWHC 1555 (TCC) was a £2.2m professional negligence claim over the defendant’s quantity surveying and project management services.

The ruling concerned an application by the defendants to strike out three of the eight heads of claim – together worth £1m of the claim – on the grounds that they were statute-barred.

In addition to arguments as to when the relevant causes of action actually accrued, the court also had to consider the proper construction of the three standstill agreements entered into between the parties.

“On the face of it, the claimants need to rely on those agreements having the effect for which they contend, because otherwise the causes of action in contract and in tort underlying the three claims would appear, prima facie, to be statute-barred,” the judge observed.

In initial comments, Coulson J said that standstill agreements “have become much more common than they ever used to be, for reasons which remain obscure”.

He continued: “Since their underlying purpose is to allow claims and defences to be researched properly before the commencement of proceedings, and thereby to encourage settlement, they might be regarded as a positive development.

“But this dispute has left me with an overwhelming feeling that they are potentially just another self-inflicted complication.

“If limitation is an issue, and the claim needs further work, or the pre-action protocol process has not been activated or completed, the TCC Guide is very clear: paragraph 2.3.2 states that the claimant can commence proceedings and then seek a stay of, say, six months, in order to follow and complete the protocol process.

“I cannot help thinking that that would have been a safer option than the muddle that has occurred here.”

Coulson J added that although the standstill agreements in this case were drafted by well-known firms of solicitors – Beale & Co and Elborne Mitchell – “the disputes which now arise indicate that there may have been a fundamental difference between them as to what the standstill agreements were supposed to provide.

“The problem has been compounded rather than lessened by the fact that the solicitors used a template prepared by the Practical Law legal resource website, without perhaps fully understanding why they were doing so, and serially departing from the template in any event.”

The judge also cautioned parties to resist the “temptation” to strike out some or all the claims made on the grounds they were statute-barred.

“It is never straightforward to make applications to strike out based on a limitation defence, unless the claims are plainly and obviously statute-barred.

“A strike-out application requires the court to decide when particular causes of action accrued on an interlocutory basis, which can be unsatisfactory and may encourage a necessarily cautious approach.

“In addition, in cases of professional negligence, there will often be an argument that the defendant owed obligations both in contract and in tort, because the date of the accrual of the cause of action in tort will often be different, and if so, will inevitably be later in time than the accrual of the cause of action for damages for breach of contract.”

Meanwhile, it has also been announced that Mr Justice Coulson has been appointed as deputy head of civil justice designate – he will take up the role permanently when he joins the Court of Appeal next March – as well as deputy chair of the Civil Justice Council and vice-chair of the Civil Procedure Rule Committee.

    Readers Comments

  • Nigel says:

    Application for a stay of course requires the (often considerable) court fee for issue of proceedings and subsequent application to be incurred. Stand still agreement avoids this.

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