2020-02-17
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Standstill agreements

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Posted by Laura Abbott on 21 May 2019

Laura Abbott Associate

Standstill agreements are commonly used in litigation. 

Legal proceedings are required to be issued within certain timeframes under the Limitation Act 1980, but, if for some reason it is not appropriate or cost effective to issue the proceedings within that timeframe the parties can agree, through a standstill agreement, not to issue them and that if they subsequently need to, they will not be prevented by the otherwise applying limitation period.  Effectively the agreement is to extend or suspend the limitation period, the parties contracting not to raise limitation as an issue.

Time limits

In Inheritance (Provision for Family and Dependants) Act 1975 claims there is a very strict and tight time limit to issue the claim, being 6 months from the date of the grant of representation (s4).  Often, this does not leave parties with enough time to gather together the evidence needed to prepare the case and conclude pre-action work to try to settle without recourse to court, including exploring alternative dispute resolution options.  It is possible to apply to the court for permission to issue out of time and standstill agreements can also come into play. 

However, in February this year, in Cowan v Foreman (2019 WEHC 349 Fam) the judge, Mr Justice Mostyn, commented that he opposed standstill agreements in the context of Inheritance Act cases and called for the end of their use.  In this case, he refused the surviving spouse’s application for permission to apply for provision under the act out of time, even though the parties had entered into a standstill agreement.

The judgement

In his judgment, Mostyn J said: 'I was told that to agree a stand-still agreement of this nature is "common practice".  If it is indeed common practice, then I suggest that it is a practice that should come to an immediate end. It is not for the parties to give away time that belongs to the court. If the parties want to agree a moratorium for the purposes of negotiations, then the claim should be issued in time and then the court invited to stay the proceedings while the negotiations are pursued. Otherwise it is, as I remarked in argument, simply to cock a snook at the clear Parliamentary intention……I suggest that in no future case should any privately agreed moratorium ever count as stopping the clock in terms of the accrual of delay.  Put another way, a moratorium privately agreed after the time limit has already expired should never in the future rank as a good reason for delay."

The appeal

Mostyn J’s comments were controversial.  The act deliberately imposes a narrow window for proceedings so that the administration of estates is not held up indefinitely, but to be too rigid on this flies in the face of the current climate of parties being encouraged to (and indeed penalised if they unreasonably fail to) settle their disputes without incurring unnecessary costs and court resources. 

Some commentators argued it may well be ‘a storm in a tea cup’ and they were right; the decision was reversed on appeal in July (Cowan v Foreman, 2019 EWCA Civ 1336).   Whilst an extension of the limitation period very much remains at the discretion of the court, it is open for parties to agree to a standstill as it always has been and the courts are likely to honour the agreement.

About the author

Laura Abbott

Associate

Laura specialises in all aspects of contentious probate work and disputed estates.

Laura Abbott

Laura specialises in all aspects of contentious probate work and disputed estates.

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