Russel & anor v Stone (t/a PSP Consultants) & others  EWHC 1555 (TCC)
In 2008, the Claimants engaged the Defendants to manage a construction project. The project was dogged by difficulties. The Claimants terminated the Defendants' appointment in 2012 and thereafter sent a Letter of Claim. The parties entered into a series of standstill agreements, the third of which expired on 30 November 2016. A settlement was not reached and the Claimants issued proceedings on 1 December 2016. The Defendants applied to strike out certain claims on the grounds that they were time-barred.
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, Recital B to the second standstill agreement provided that "the parties have agreed to further extend the period in which proceedings can be issued". As a result of what the Judge referred to as "sloppy drafting" arising out of amendment of a third party template agreement, the issue arose as to whether time had been suspended or extended.
On the Claimants' case, that time was suspended, if they had a period of, say, 3 weeks remaining out of the six years within which to issue proceedings when they entered into the standstill agreements, they still had a period of 3 weeks when the third standstill agreement came to an end. On the Defendants' case, that if the standstill agreements operated to extend time rather than to suspend it, the time for commencing proceedings finished when the third standstill agreement came to an end, on 30 November 2016.
The judge ruled that the claims were not time-barred. He held that the operative provisions of the standstill agreements repeatedly referred to suspension of time – the only mention of extension was in the recitals. There was no inconsistency between the description in Recital B of the desire to have longer to issue proceedings (i.e. to extend the time for doing so) and the mechanism of achieving that aim (i.e. to suspend time). If there had been an inconsistency, then as a matter of law the operative provisions would take precedence over the recitals.
The judge referred to Lewinson in Interpretation of Contracts, which indicates that modern methods of interpretation, in which background plays a far larger part than used to be the case, may temper the traditional approach, such that recitals in a deed can be looked at as part of the surrounding circumstances of the contract. The judge said that "in the so-called modern way, the words of Recital B can be taken into account as part of the factual background", without altering his findings that there was an agreement to suspend rather than extend time. The judge added that if he was wrong about that, then he was "bound as a matter of law to conclude that the operative provisions of clause 2 override the Recital".
Furthermore, there was evidence that the parties 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. The judge said that "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".
Most standstill agreements are drafted to suspend time. This case makes clear the danger that agreement could be construed simply as an extension of time to issue proceedings, which could create greater jeapordy of time bar and negligence claims. This demonstrates the need to draft with real care, and not to assume a precedent proposed may be adequate. The judge drew attention to the TCC Guide and queried why the claimants had not taken the "safer option" of issuing proceedings and applying for a stay, but no doubt the court issue fee of £10,000 was a major factor.