The pitfalls of Standstill Agreements

by | Sep 20, 2017 | Blog Posts

An action must be commenced at court within a specified period, known as a limitation period.  Therefore, if you are thinking about bringing a claim, it is important to work out whether you are in time to do so.  Limitation periods differ depending on the type of claim that you have, and we look at these here.  If the limitation period has expired, your opponent (the Defendant) may have a complete defence to that claim.

Standstill agreements

In certain circumstances where limitation periods are nearly up, the parties can enter into what is known as a Standstill Agreement.  A Standstill Agreement serves to pause limitation.   It will allow for a suspension in the time for purposes of limitation.  Standstill agreements give the parties extra time, and therefore a number of benefits:

  • time to further explore the merits of the claim and/or the defence; and
  • time to attempt to resolve matters without needing to spend otherwise unnecessary time and costs on the matter at Court.

There are however, some frequently encountered problems with Standstill Agreements, particularly in respect of Professional Negligence claims.

1. Who is the Claimant?

Sometimes, for instance in cases of insolvency or complex company structures, it is less than certain who the proper Claimant will be.  For example, if the Claimant is insolvent, does a claim need to be brought in the name of the liquidators?  It is important to make sure that the Claimant’s name and details are correct within the Standstill Agreement itself.  Failing to do this may leave the Standstill Agreement invalid and limitation will not pause.  This leaves the possibility that when a Claimant wishes to issue his claim, limitation has expired.

2. Who is the Defendant?

Again, the correct Defendant may not always be apparent immediately.  For example, a professional negligence claim lies against the firm as it was at the time when the cause of action accrued.  This is particularly important where the business has since changed; for example, merged with another business.  You may need to enter into a Standstill Agreement with more than one party if you are unsure who is the party to blame or, was the party at which time the cause of action accrued.
In respect of legal practices, it is common for Standstill Agreements to include a catch all clause which will state that it binds predecessor and successor firms.

3. What is the claim about?

The Standstill Agreement should refer to the subject (or cause of action) of your potential claim. In some cases, it might not be quite clear precisely what your cause of action is going to be.  In these cases, it is worth including all potential causes of action.   If this is not possible, defining ‘dispute’ as any claim or all claims directly or indirectly arising out of or in any way connected with the matters referred to (or involving the parties) might be preferable.   You do not want to end up in a situation where you have a Standstill Agreement in place for the wrong type of claim.

4. Extensions to Standstills

Often Standstill Agreements need to be extended.  The steps which you had hoped to have taken during the Standstill Agreement might not always have been carried out within that time for a variety of reasons.   A Standstill Agreement should set out the terms of extending it and what formalities have to be complied with in order for that extension to be binding on the parties.  A common example is that any variations/extensions need to be done in writing.

5. Ending a Standstill Agreement

It is key to keep in mind when your Standstill Agreement is likely to end and also not to forget how long will be left to run in terms of limitation following the expiry.  If, for example, the Agreement is due to expire on a Saturday it would be prudent to extend it to the following Monday.
If you require advice regarding a claim, our dispute resolution and professional negligence teams can help. We offer a FREE initial consultation. Call us now on 0800 988 7756.
standstill agreements

Recently Added

Probate court fees to rise in May

Probate court fees to rise in May

Following a consultation last year, the Government is increasing the probate court fee by 10%. | Probate court fees A court fee is usually payable when applying for probate. There is no fee if the estate is valued at £5,000 or less. If it is over £5,000, the...

Renters (Reform) Bill: Can the Courts cope?

Renters (Reform) Bill: Can the Courts cope?

The government has pledged to bring in the Renters (Reform) Bill and end “no fault evictions” before the next general election. For more information on this, read our previous blogs on the topic. In fact, it looks likely to be back in the House of Commons next week. ...

What our clients say