News

14

Mar

The death of standstill agreements in Inheritance Act Claims?

iht standstill agreement

“Litigation should be a last resort”

- Paragraph 8, Practice Direction – Pre-Action Conduct and Protocols

This Practice Direction and the pre-action protocols do not alter the statutory time limits for starting court proceedings… If proceedings are started to comply with the statutory time limit… the parties should apply to the court for a stay…”

- Paragraph 17, Practice Direction – Pre-Action Conduct and Protocols

Claims under the Inheritance (Provision for Family and Dependants) Act 1975 are becoming more commonplace. However, a person wishing to make such a claim only has six months from the date of the grant of probate or letters of administration to do so. If they do not start their claim within this deadline (called a limitation period), then following a recent case in the High Court, there is now an even greater risk that they will be unable to do so.

The Court has discretion to extend the six-month deadline and the principles that the Court will take into account when excising this direction are summarised in the case of Berger v Berger [2013] EWHC Civ 1305. In short, the Court must be satisfied that the delay in issuing the claim was justifiable and that there is a sufficiently good claim to allow it to proceed.

The very recent case of Cowan v Foreman & Ors [2019] EWHC 349 (Fam) has cast doubt and raised concerns about whether or not the parties to such prospective litigation can agree between themselves that the six-month deadline should be “extended”.

Using a 'standstill agreement' 

If a limitation period in any claim is soon to expire, then it is common practice to agree what is known as a standstill agreement. A standstill agreement is a contractual agreement between the parties not to rely on the expiry of the deadline as a defence to the claim.

There could be several reasons why it would be worthwhile entering into a standstill agreement but the main one is to avoid the cost and expense of having to prepare and issue a claim, following which the parties are then committed to a litigious process which can generally only be brought to an end by the agreement of the parties or a decision by the Court.

A stand-still agreement enables the parties to negotiate and, much of the time, it is possible to agree a settlement without having to go to Court; something which the Court (certainly until this recent case) is keen to encourage.

Every practitioner will tell you that it is quite commonplace to agree to a standstill agreement, particularly in Inheritance Act Claims, where there are a lot of considerations to take account of and the parties may not have had the opportunity to explore all of the facts of the matter which may be relevant and enter into meaningful negotiations.

Furthermore, when issuing the claim, it is not a simple as just filing a claim form at Court, as it is in some other cases, which stops the limitation period from running. In Inheritance Act Claims, it is expected that all of the evidence and all of the facts of the case should be filed at Court with the claim when it is issued. This involves a lot of work and potential expense, particularly for complex cases, which may otherwise be avoided if the parties are able to agree on a settlement between themselves.

What is the problem with standstill agreements?

However, in this case, Mr. Justice Mostyn stated:

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. …I suggest that in no future case should a privately agreed moratorium ever count as stopping the clock in terms of the accrual of delay…

This will no doubt raise concerns for practitioners, as it means that they will have a very short period of time to prepare the case in full ready for issue, in light of the risk that in the future, Courts will be considerably less lenient when it comes to extending the deadline to issue the claim in situations where the parties have entered into a standstill agreement. It also gives scope to more unscrupulous potential defendants to disingenuously enter into a standstill agreement and later oppose any application for an extension of the limitation period.

In the writer’s humble opinion, and as Mr. Justice Mostyn acknowledged, it is not the place of the Court to re-write the law in cases where Parliamentary intention is clear.

However, the relevant provisions in the Inheritance Act already provide for judicial discretion to extend the limitation period. There must surely be some scope to enable sensible parties, wishing to minimise cost, to attempt to agree on a settlement and avoid committing to Court proceedings in an already overly burdened Court system, and to enter into a standstill agreement without the risk of prejudicing their claim.

Having said this, the quotes at the start of this post make it quite clear that limitation periods are not affected by negotiations and whatever the parties agree, Therefore, following this case, if they do wish to enter into a standstill agreement, they will have to bear in mind the risk that the Court may refuse to give permission to extend the limitation period.

In reality, a close examination of the facts of this case shows that there is not a huge shift in the previous legal position: the limitation continues to apply, irrespective of the parties’ wishes and the Court’s discretion would need to be exercised in the future if a claim did need to be issued.

This particular case involved a relatively complex will trust arrangement where both parties were aware of the limitation period and had legal representation throughout. Mr. Justice Mostyn considered a 17-month delay in issuing the claim to be unreasonable.

Concluding thoughts on Standstill Agreements

In the writer’s opinion, a key aspect of this particular case and the basis for Mr. Justice Mostyn’s decision is encapsulated in his comment “… a moratorium privately agreed after the time limit has already expired should never in the future count as a good reason for delay”.

In this particular matter, the limitation period expired on 16th June 2017, a standstill agreement (set out in an email from the trustee’s solicitor) was agreed on 25th January 2018. The claim was not issued until 8th November 2018.

In summary, entering into standstill agreements may very well still play a part in cost-effectively resolving claims under the Inheritance Act. However, it seems that there is now a greater risk to Claimants in doing, so which may see a shift in practice to issuing a claim, fully prepared or not, and then seeking a stay of the proceedings. It will certainly be the case that if a standstill agreement is not entered into before the expiry of the limitation period that it will not be effective.

If you have any inheritance issues you wish to discuss, please contact Bryony Wilmshurst from Cunningtons Solicitors' Wills and Probate department by emailing This email address is being protected from spambots. You need JavaScript enabled to view it., or call 01376 567280.

 

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