Judge interprets meaning of a standstill agreement
A standstill agreement can either suspend time for the purposes of limitation (i.e. if 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 (i.e. if time runs out during the standstill agreement, the claimant can still commence proceedings up until 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 held 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: "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 standstill period. 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 standstill period. 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 precedence over a recital.
Therefore, if a party wishes a standstill agreement to extend time to issue proceedings but not stop time running, the agreement needs to be drafted 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 period. As indicated by the judge, a safer option might be to issue proceedings and then either agree an extension of time for service of the claim form or seek a stay of, say, six months to complete any Protocol process.
Russell & Anor v Stone (t/a PSP Consultants) & Ors [2017] EWHC 1555 (TCC)The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
