Commentary - Standstill agreement - or just an extension?

In Excel Polymers v Achillesmark the court had to decide as a preliminary issue, inter alia, the eff...

In Excel Polymers v Achillesmark the court had to decide as a preliminary issue, inter alia, the effect of an agreement made between solicitors prior to litigation.

The essence of the determination was whether the agreement amounted to a 'standstill agreement' or merely an agreement to extend the limitation period. Further, did the agreement lead to an estoppel by convention in accordance with the principles set out by Arden J in London Borough of Hillingdon v ARC (2000)?

In spite of the use of the wording 'standstill agreement' by one of the party's solicitors in this case, Robin Purchas QC, sitting as a deputy High Court judge, ascertained the meaning of the agreement by using an objective approach. He considered from the evidence before him not what the parties had actually intended or understood but the meaning the words used would convey to a reasonable person having the knowledge of the parties.

He found in favour of the defendant that the agreement reached was no more than an agreement to extend the limitation period.

This decision resulted in the claim in this case being statute-barred.

Had the agreement been found to be a standstill agreement, the effect would have been that the parties had agreed to take no steps to bring proceedings within the agreed period and that the claimant would then be allowed a reasonable period thereafter in which to bring proceedings.

The court did not consider in this case whether the period in which proceedings had eventually been brought would have been deemed as reasonable.

Standstill agreements have been put to good use where, for example, complex issues of jurisdiction have arisen. However, when being applied to more straightforward matters, they must be treated with caution. The intentions of the parties must be not only clear to each other, but also capable of being interpreted similarly by a reasonable third party with similar knowledge. The consequences of a lack of certainty in respect of what has been agreed, particularly with regard to limitation, are serious.

Caution is paramount to avoid potentially damaging and expensive outcomes.

- These law reports are contributed by insurance law firm Berrymans Lace Mawer (http://www.blm-law.com)

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