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Stop the world… I want to get off - The rise of Standstill Agreements

07 October 2021

Increasingly Consultants are being asked by potential claimants to sign a Standstill Agreement, extending the time that the claimant would have to bring court (or other) proceedings.  Mark Klimt explores the various considerations associated with whether to extend or suspend the limitation period in a usual construction design and build context. 

A reminder about Standstill Agreements

A common post-Grenfell scenario is a Design & Build Contractor facing a claim from a Developer and wanting to preserve its rights against its Design Team until the progress of the Developer claim.  A refusal by the Designer to agree a Standstill is unlikely to lead to the claimant taking no further action (unless the approach was the last throw of an opportunist dice).  The Designer Consultant is therefore left with the unenviable choice of either allowing a claimant more time to build up its case, or else obliging the claimant to bring proceedings now. There are certain processes that should be followed in order to arrive at an informed "least worst" decision.   Simply denying the request will not always be in the Consultant's best interest.

Factual considerations

Consideration should be given as to why additional time is being requested. The claimant's claim against the Consultant being dependent upon a claim that the claimant is itself facing will be a more powerful and logical reason for the Consultant to extend than if, say, the claimant is simply seeking more time to gather its ammunition.

Another consideration will be whether the existing limitation period has a long time still to run, suggesting the request is premature and unattractive; it is, after all, not pleasant to have to face the spectre of a claim indefinitely,  so giving a claimant to understand that claim may be processed at the claimant's leisure is the wrong signal. Nor will the Consultant's Insurers welcome having to keep claims "open" for an indeterminate period without good reason. 

The Consultant's personal circumstances and the facts relating to the claim also play into the decision. If there is a particular reason (for example retirement, closure of the business, or other practical reasons why delaying the matter will mean the Consultant will no longer have access to the materials needed to mount a proper defence) then that would militate against agreeing to enter into a Standstill extending the period.

Cost considerations

In the absence though of these sorts of factors, the likelihood is that those advising the Consultant (including its Insurers) will come down in favour of a Standstill, if for no other reason than to avoid wilfully cranking into motion the costly legal process at a time when there is at least a chance of it being avoided. The majority of disputes result in a negotiated settlement and rapidly rising legal costs will only force the parties further apart and make a resolution more difficult.   

Terms of the Standstill 

If though, the Consultant is contemplating entering into a Standstill Agreement then it should ensure that the following matters are properly reflected within the text.  Firstly, there should be a clear statement that entering into the Standstill is not an acknowledgement by the Consultant of liability.  Secondly, a Standstill is simply intended to suspend the operation of time for the duration of the Agreement and not to waive any rights; there should be a clause that expressly preserves any limitation arguments that the Consultant may have had before the Standstill came into operation.  

The parties to the Agreement should be checked - for example that the correct Client entity is entering into the agreement with the Consultant (although if the wrong parties contract and the Standstill Agreement is therefore ineffective , that is likely to be a greater concern for the claimant).  Finally, whilst a claimant may seek to extend time for as long as possible, or make the Standstill automatically renewable, the Consultant will wish to have some control over the process; a sensible compromise is to agree a Standstill for a significant period (perhaps six or twelve months) but terminable on (say) thirty days' notice. 

Comment

Consultants should also be aware that whilst the burden of proof remains with the Claimant, the longer a project recedes into history, the harder it is likely to be for the Consultant to produce firm evidence to counter allegations. Regardless, therefore, of whether a Standstill has been entered into or not, when a claim is mooted, it is good practice for the Consultant to immediately to investigate the matter fully and to take witness statements from relevant persons whilst memories are fresh (remembering to label them "Privileged and Confidential", so that they are not discloseable in the event of litigation). It will rarely be a waste of time, and even if it is, as wastes of time go, it is one of the best!    

For further information please contact the author, Mark Klimt.

Further Reading