Often in disease claims, the claimant will be on the verge of limitation when they instruct solicitors. This results in a very short period for parties to investigate and make pre-litigation decisions. In these circumstances parties often agree what are called limitation amnesties or standstill agreements. However these agreements can create more problems than they solve if not dealt with carefully.

In June of this year His Honour Mr Justice Coulson heard the matter of Russell v Stone [2017] EWHC 1555 (TCC). The facts of the case relate to a property dispute. Within that case the court handed down useful guidance on the validity of standstill agreements (or limitation amnesties, as they are sometime called) and a warning about the risks involved.

A standstill agreement can do one of two things, it can either suspend time for the purposes of limitation, to enable the parties to carry out further investigations, or in the alternative it can extend the time within which a claimant can validly bring their claim, again providing more time.

Judge Coulson noted that standstill agreements have become much more commonplace than they used to be and set out that their underlying purpose is to allow claimants and defendants to properly research their claims before commencing proceedings thereby encouraging settlement. However despite that noble intention, he also expressed the view that he was left with the “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 (Technology and Construction Court) 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”.

In the circumstances of Russell v Stone it appears that that would have been a much wiser and safer option to have issued then agreed a stay, given the difficulties and confusions which arose.

One of the key problems was that while the standstill agreement was drafted by a reputable firm of solicitors, there was a dispute as to the actual intention of the agreement and the content of the agreement. Judge Coulson was somewhat critical of the fact a template had been prepared from a well-known legal resource website and that those using and amending the template did not fully understand what it was that was required. In this case the relevant part of the standstill agreement provided for time (for the purposes limitation) to be suspended and that neither party would issue or serve proceedings during the period of the standstill agreement. Unfortunately, a second standstill agreement, entered into after the first had expired, provided as follows: “the parties have agreed to further extend the period in which proceedings can be issued…” The matter in dispute was therefore whether time had been suspended or extended.

Judge Coulson carried out an analysis of the agreement and held that the parties had agreed to suspend time given that the effect of the clause in the agreement prevented either party from issuing proceedings during the period of the standstill agreement. He expressly stated “it is an untenable construction of any agreement if it requires one party to breach its terms in order to make the agreement work in the way contended for”.

The logical conclusion of the agreement was that the claimant did not have to commence proceedings on or before the very last day of the standstill agreement.

What this means for you.

In the first place this is the second decision to deal with the validity of standstill agreements following Exsus Travel Ltd v Baker Tilly [2016] EWHC 2818 (in which the dispute was ‘when the period covered by the standstill agreement came to an end’ rather than the extension of the time for issue of proceedings).

The take away message from this case is about the careful drafting of the wording of standstill agreements and giving thought to whether to suspend time or extend time and when precisely the agreement ends.

As observed by Judge Coulson, if parties wish to avoid the complication of drafting an accurately worded agreement the better approach may be to issue proceedings and then agree a stay.