Mortgage Express v Countrywide Surveyors Ltd

A standstill clause suspending time for limitation defences may cover causes of action that were not specifically intimated when the agreement was made. Construction depends on what a reasonable person, equipped with the relevant background knowledge, would understand the contractual language to mean. Specific references to negligence and breach of contract do not confine wider wording such as claims arising indirectly or being connected in any way with identified matters. Claims in deceit may therefore fall within the standstill where they are factually connected with the matters and allegations described in the agreement.

A mortgage lender claimed against a valuation firm in relation to 46 property valuations, alleging negligence in all cases and deceit in 41. The parties entered into a standstill agreement suspending time for limitation defences concerning a broadly defined dispute. The High Court, on a preliminary issue, held that the agreement did not suspend time for the deceit claims. The lender appealed, raising the question whether those claims were within the contractual definition of the dispute despite not having been specifically intimated before the agreement.

The appeal was allowed. The standstill agreement suspended time for limitation defences in relation to the claims in deceit.

1. Commercial contracts are construed by asking what a reasonable person with the background knowledge reasonably available to the parties at the time of contracting would have understood the language to mean. The Court adopted and applied the approach stated in Rainy Sky SA and others v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900.
2. The relevant language was exceptionally broad. Clause 2.1 applied for all purposes of limitation arguments in connection with the dispute. The definition of dispute covered claims directly or indirectly arising out of, or in any way connected with, the matters identified in the background preamble.
3. The court took account of the distinction between fraud or dishonesty and negligence or breach of contract, as discussed in Paragon Finance Plc v. D.B. Thakerar & Co (a firm) [1998] 1 All ER 400. That distinction did not justify reading down the wider contractual words. The letter of claim also reserved the right to raise additional allegations, and the reference to laches would have been difficult to explain if the agreement covered only contract and negligence claims.
4. The deceit claims were at least connected with the factual matters concerning the valuations and with the allegations described in the preamble. They therefore fell within the suspension provisions, notwithstanding that deceit had not been specifically alleged before the agreement was made.

1. Court of Appeal (Civil Division) allowed the appeal and held that the standstill agreement covered the claims in deceit.
2. High Court (Technology and Construction Court), HH Judge Raeside QC, determined on a preliminary issue that the agreement did not suspend time in relation to the deceit claims.