Early Neutral Evaluation

Early Neutral Evaluation (or "ENE") has been given a boost recently by the introduction into the Civil Procedure Rules of an additional general power of court management in rule 3.1(2)(m) which allows a court to "take any other step or make any other order for the purpose of managing the case and furthering the overriding objective, including hearing an Early Neutral Evaluation with the aim of helping the parties settle the case" [underlining added]. In other words, a judge can now provide an evaluation for the parties in circumstances where, perhaps, the parties have been unable to settle the case by the more conventional means of commercial discussions or mediation.

ENE has been around for a number of years, especially in the Technology & Construction Courts (the "TCC") and the Commercial Courts (as set out the respective Court Guides). ENE is also codified for specific types of dispute such as for certain product safety and communications disputes. It is a process by which an independent and neutral evaluator is appointed by the parties to give them an objective and realistic assessment of the merits of their case. The assessment is usually non-binding and the process, like mediation or negotiation, is usually conducted on a "without prejudice" basis.

The amendment to the civil procedure rules may be as a result of, or certainly hastened by, the case of Seals and another v Williams [2015] EWHC 1829 (Ch) where the court decided that "the expression of provisional views – with a view to assisting the parties – reduces the areas of dispute and the general scope of the argument, and is an inherent part of the judicial function both in civil litigation and in criminal proceedings." That function has now been expressly provided for in the new wording of rule 3.1(2)(m).

In the Seals case, the Judge commended the parties' legal representatives for proposing the court undertake an early neutral evaluation of an inheritance case and noted that an early neutral evaluation is particularly useful where the parties have very differing views of the prospects of success and an inadequate understanding of the risks of litigation. It was intended that the evaluation be given by a different judge: "[t]he proposed directions have been carefully crafted so as to afford the Settlement Judge the opportunity to make non-binding recommendations as to the outcome and to state short reasons for that recommendation without in any sense attempting a provisional judgment. Indeed, the Settlement Judge will not be further involved in the proceedings at all. The directions also provide that, in the light of the recommendations, the parties may agree a Consent Order." Indeed, both the TCC and Commercial Court guides state that the judge conducting the ENE will take no further part in the case unless the parties agree otherwise.

However, what remains unclear after the introduction of the new CPR wording is whether a court can now order ENE without the parties' consent.

It should also be noted that an evaluator need not invariably be a judge. The choice of evaluator very much depends on the circumstances and the nature of the issues in dispute. Of course, an evaluation by a judge or senior QC is likely to carry the required weight and gravitas such that their evaluation will be respected by the parties. The parties are free to appoint an evaluator of their own choice or apply to an organisation such as CEDR, the ADR group, RICS or the Chartered Institute of Arbitrators. If the parties decide to use the TCC or Commercial Court for an ENE, then they must apply to the court for a judge to carry out the evaluation.

Following an ENE, the parties will normally arrange for a commercial settlement meeting or discussions to take place with a view to settling the case or, at least, to narrow the scope of the dispute.

ENE is not suitable in all circumstances and there are risks as well as advantages with the process. Cases which involve or are likely to turn on factual issues may not be suitable or where the issues are complex and multi-faceted. There simply may not be enough time to realistically present all of the evidence on all issues for the evaluator to consider. The risk with ENE is that a negative decision will weaken one party's position and entrench the other party making settlement even less likely. Preparation for an ENE can be expensive and yet the outcome is only a non-binding opinion which may or may not lead to settlement.

However, there are other avenues that parties and their legal representatives can consider where ENE is not suitable such as, of course, negotiation and mediation, or for example, trial of a preliminary issue or a Part 8 claim for a declaration. Moreover, there is now the choice of using the Shorter Trials Scheme or the Flexible Trials Scheme in the TCC (see my article on the subject entitled: "Swift Justice in Technology and Construction Cases" published on 13/11/15). In other words, the options available for resolving disputes have probably never been better.

If you have a question about the early neutral evaluation process or any other aspect of dispute resolution, contact Marie-Claire O'Hara, one of the partners in Bevan Brittan's construction and engineering team (contact details below).