The Commercial Court has held  that a standstill agreement did not preclude a defendant (D2) from pursuing an additional claim against another defendant, D, under CPR 20.6.

The claimants (Cs) two insurance companies brought negligence claims against brokers in relation to the placing of reinsurance which turned out to be invalid. D1 and D2 entered into a standstill agreement under which they agreed not to commence any claims against each other pending the conclusion of the main claim.  "Claim" was defined as:

"any alleged claims, rights or causes of action existing at the date of this Agreement that either party has or may have against the other in the Dispute either now existing or accruing before and including the date of termination of the Standstill Period."

D1 applied for permission under CPR 20.6 to make an additional claim against D2 on the grounds that D2 had falsified documents, taken larger commissions than those to which it had been entitled and made fraudulent misrepresentations on the basis of which D1 had agreed to enter the standstill agreement.

In relation to the question of whether the standstill agreement, properly construed, applied to unknown fraud claims, Cooke J held that:

  • the Court must approach such agreements with caution; and
  • whilst the wording of the terms Claim and Dispute was undoubtedly very wide, in the absence of clear express wording, it could not be taken to encompass unknown claims for fraud, particularly where that fraud was alleged to have resulted in the ignorance of D1 at the time of concluding the standstill agreement.

Comment

This reinforces established authority: fraud is considered "a thing apart" when construing contracts and clear and specific language is required to exclude fraud-based claims from any agreement.

Hyundai Marine and Fire Insurance and another v Houlder Insurance Services Ltd and another [2015] EWHC 378 (Comm), 27 January 2015 (transcript only recently available and unreported).