Understanding limitation moratoriums/standstill agreements

Limitation should always be at the forefront of lawyers’ minds, but this is especially so given the difficulties being faced due to COVID-19. An understanding of the tools at your disposal should help to limit the difficulties faced and one key tool is a limitation moratorium or standstill agreement.

The first point to consider is when a claim is brought for the purpose of the Limitation Act 1980. Practice Direction 17A paragraphs 5.1 and 5.2 answers this question in clear terms:

5.1 Proceedings are started when the court issues a claim form at the request of the claimant (see rule 7.2) but where the claim form as issued was received in the court office on a date earlier than the date on which it was issued by the court, the claim is ‘brought’ for the purposes of the Limitation Act 1980 and any other relevant statute on that earlier date.

5.2 The date on which the claim form was received by the court will be recorded by a date stamp either on the claim form held on the court file or on the letter that accompanied the claim form when it was received by the court.

Given the current pressures on the court staff to arrange remote hearings it is not inconceivable that a claim form is not stamped the day it is actually received by the court. Claimant solicitors would be well advised to exercise caution and to keep records as to when a claim form was posted and therefore received. The burden of showing when the claim form was sent is on the Claimant (see Page v Hewetts Solicitors[2013] EWHC 2845 which concerns evidence of service).

It is not possible for the court to extend the limitation period in advance. In addition, outside the areas of personal injury and defamation there is no discretion to extend limitation. Accordingly, in cases where limitation is approaching but the Claimant is not ready to issue proceedings it will be necessary to consider entering into a moratorium or standstill agreement.

Two possible types of agreement are available to parties: the first that the relevant period is suspended; the second that the relevant period is extended. Guidance on the difference between ‘suspended’ and ‘extended’ was provided by Coulson J in Russell v Stone[2017] 1555 (TCC). The court held that where the agreement is framed as a suspension then limitation will resume at the date upon which the agreement ends (in effect it freezes limitation). In contrast, where limitation is extended the period will end at the expiry of the extension.

As a standstill agreement is a contract, which often runs to several pages, it is important to remember the principles of contractual interpretation – namely that an objective approach should be adopted and the document is to be interpreted as a whole (see Arnold v Brittan[2015] AC 1619). It is therefore important to consider whether the overall meaning is clear to the objective bystander. The use of clear language and precise dates is imperative.

What are the practical benefit of a standstill agreement? Asides from the obvious that it stops limitation running or extends limitation it will enable parties to comply with any relevant pre-action protocol. For example, the Industrial Disease pre-action protocol stipulates (at paragraph 11):

a claimant who commences proceedings without complying with all, or any part, of this protocol may apply to the court on notice for directions as to the timetable and form of procedure to be adopted, at the same time as he requests the court to issue proceedings. The court will consider whether to order a stay of the whole or part of the proceedings pending compliance with this protocol.

In addition, the Clinical Negligence pre-action protocol stipulates (at paragraph 1.6.1):

if proceedings are started to comply with the statutory time limit before the parties have followed the procedures in this Protocol, the parties should apply to the court for a stay of the proceedings while they so comply.

Adherence to the protocol will likely save costs in the long run and ensure that any case is properly investigated before incurring the cost of issuing proceedings.

A final point to note is that a properly drafted agreement will have the effect of estopping a defendant from raising limitation in a defence. For a claimant to assert that the defendant is estopped it will be necessary to show a clear, unequivocal and unambiguous promise (see Fortisbank SA v Trenwick InternationalLtd [2005] EWHC 399 (Comm)).

Going forward, the following guidance points can be gleaned:

  1. Proceed with caution when sending the claim form to the court. Ensure that there is evidence of when it was sent and by what method.
  2. The burden of showing that the claim form was sent and received rests with the claimant.
  3. A standstill agreement can either suspend the limitation clock or it can extend the limitation period.
  4. Any agreement should be in writing with clear terms. Be precise.
  5. The agreement is a contract and so it will be interpreted objectively.
  6. A defendant will only be estopped from raising limitation as a defence if clear, unequivocal and unambiguous.

Charles Austin