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Price v Spoor [2021] HCA 20 (Price v Spoor)

Contractors with defects claims against subcontractors often commence litigation prematurely to preserve their claims from being time-barred. This occurs despite the costly nature of litigation and its potential to undermine settlement negotiations. The High Court case of Price v Spoor has confirmed that in some cases, standstill agreements may be used to suspend limitation periods from running during settlement negotiations.

What is a standstill agreement?

A standstill agreement involves a party making a claim (such as a contractor) agreeing to hold off initiating legal proceedings against the other party (such as a subcontractor).  In return, the other party agrees to suspend the running of time during the limitation period in respect of the claim.

Price v Spoor

The use of a standstill agreement to suspend the running of time during the contractual limitation period was recognised in Price v Spoor, where the Court confirmed that parties may ‘contract out’ of some statutory limitation periods.

The Court’s reasoning was that:

  1. contracting out of some statutory limitation periods is not contrary to public policy because the limitation period is not an automatic bar to proceedings but rather a defence for a defendant to raise individually; and
  2. parties have freedom of contract to waive the limitation defence unless this is expressly prohibited by, or contradicts the intention of, the relevant limitation statute.

Limitation periods of contractual and tortious claim may be waived

While Price v Spoor concerns the Limitation of Actions Act 1974 (QLD) in Queensland, the Court’s reasoning could equally apply to the Limitation Act 1969 (NSW), which is the equivalent NSW legislation. Parties may be able to rely on a standstill agreement to suspend the limitation periods as set out in the Limitation Act 1969 (NSW) for contractual and tortious claims.

Where a standstill agreement may not apply

Despite the Court’s determination in Price v Spoor, it is still risky to try to use a standstill to suspend the running of time during the limitation periods under the Home Building Act 1989 (NSW) (HBA) and Environmental Planning and Assessment Act 1979 (NSW) (EPAA) because the HBA and EPAA use stronger, mandatory language. For instance:

  1. section 18E(a) of the HBA states “Proceedings must be commenced before the end of the warranty period for the breach” (emphasis added); and
  2. section 6.20(1) of the EPAA states “A civil action for loss or damage arising out of or in connection with defective building work or defective subdivision work cannot be brought more than 10 years after the date of completion of the work. (emphasis added)

Key Takeaways

Contractors approaching limitation periods for claims who are in negotiations may be able to use a standstill agreement to delay commencing litigation depending on the nature of their claims.

We can help you find out whether a standstill agreement is appropriate for you, and, if required, help you draft one.

If you would like to discuss this article with us further, please contact Brett Vincent, Managing Partner, or Angie Kim, Graduate Lawyer on (02) 9261 5900.