The Court of Appeal has held that a standstill agreement in a lender claim against valuers was broad enough to cover claims for fraud despite being expressed to deal with claims in negligence and breach of contract. 

At the time when the lender sent the Letter of Claim – relating to 46 valuations – no fraud was suspected.  It alleged negligence and breach of contract in providing inaccurate valuations which no reasonably competent surveyor could have provided.  However, it did reserve “the right to amend and/or raise any additional allegations and/or particulars on receipt of any further relevant information …”.

Nevertheless, the standstill agreement, entered into in 2010, stated that the claims covered by the agreement were those set out in the Letter of Claim and based on the allegation that:

the valuations of the Properties produced by the Surveyors were outside the parameters of what would be regarded as reasonable in that each valuation was negligent and beyond the level of skill, care and diligence expected of a reasonably competent surveyor”.

The agreement then defined the dispute covered by the agreement to mean “any claim or claims directly or indirectly arising out of or in any way connected with the matters referred to … above”.

By the time that the Claim Form was issued the lender alleged that in 41 of the valuations concerned the Defendant had been fraudulent and the cause of action included deceit.  The Defendant argued that the standstill agreement related only to claims in negligence and breach of contract, not deceit.  The TCC (HHJ Raeside QC, sitting in Leeds) agreed with the Defendant.

However, the Court of Appeal has reversed this decision and held that the definition of “dispute” was sufficiently wide that in the circumstances the fraud claims should be seen as “arising” “indirectly” from the matters described in the standstill agreement and the Letter of Claim – despite the absence of any allegation at that time of dishonesty. 

It is doubtful that either party had given any thought to fraud at the time of the standstill agreement, and so it is unlikely that he Defendant had carefully worded the agreement to exclude fraud allegations.  Would the Defendant (and its insurer) have sought to exclude such allegations if they had thought of them at the time?  Perhaps standstill agreement templates to which we all have recourse need to be revised to cover such claims.

See: Mortgage Express v Countrywide Surveyors Ltd [2015] EWCA Civ 1110