A standstill agreement can be drafted in either of two ways:
- It can suspend or "freeze" time for the purposes of limitation, in which case, if, for example, one month was remaining to issue proceedings when the standstill agreement was concluded, then the claimant still has one month to issue at the end of the limitation period; or
- It can extend time. In other words, if time runs out during the standstill agreement, the claimant can still commence proceedings up until the end of the standstill agreement (but not after the end of the standstill agreement).
In this case, the operative part of the standstill agreement provided for time to be suspended, and it also provided that neither party would issue or serve proceedings during the period of the standstill agreement. However, the recital to a second standstill agreement (entered into when the first one expired), provided that "the parties have agreed to further extend the period in which proceedings can be issued…." An issue therefore arose as to whether time had been suspended or extended.
Coulson J noted the increasing use of standstill agreements and said that although that might be regarded as a positive development, as they encouraged settlement, a "safer" option might be to issue proceedings and then seek a stay of eg 6 months to complete any Protocol process.
He further held that the parties here had agreed to suspend time, given the clause in the agreement which prevented either side from starting proceedings during the period of the standstill agreement: "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".
Accordingly, the claimant had not had to commence proceedings on or before the very last day of the last standstill agreement (the judge rejected an argument that the use of the word "until" in the agreement meant up to and did not include the last day of the last standstill agreement). Accordingly, the "extension" referred to by the parties only meant that they were extending the time to issue proceedings. Even if that was wrong, it is an established principle that the operative part of an agreement always takes precedent over a recital.
COMMENT: Most standstill agreements are drafted to suspend time. This case makes it clear that if you wish to instead extend time to issue proceedings but not stop time running, you need to draft that agreement very clearly, by providing that the parties agree to extend the time to issue proceedings to X day, and by not including a term about the parties agreeing that they will not commence proceedings until the end of the standstill agreement.