When a business is faced with a dispute, legal proceedings are quite rightly seen as a last resort. There are many forms of well-known alternative dispute resolution (or ADR) available which can result in disputes being resolved more quickly, at less cost and at the same time preserving the business relationship. But have you tried a neutral evaluation?
There are two situations in which neutral evaluation can be activated – in the early stages of a dispute or when proceedings are issued. We can take each in turn.
It is possible for the parties engaged in a dispute to agree that the matter should be referred to an experienced and independent lawyer or other professional. The professional concerned would be asked to review the dispute and give a view as to the position of both parties. The professional may even be asked to give a determination on possible liability for a claim or its value. The parties can also agree to either be bound by the decision of the neutral evaluation or to reflect upon the views of the professional after they have been delivered.
The process can help as it forces the parties to listen to someone else’s opinion on their dispute and to hear what they think about the strength of the arguments the parties are seeking to advance. It is therefore an effective way of bringing home the inherent risks that exist in litigation and provides an opportunity to consider whether it might be preferable to work together to negotiate the terms of a resolution while having a degree of control.
A neutral evaluation (sometimes referred to as an Early Neutral Evaluation) can also occur once proceedings are issued.
Early neutral evaluation involves a judge hearing a short summary of each party’s case and their evidence and then assessing the relative merits of this to provide a non-binding and without prejudice evaluation of each party’s position. The Judge also provides a provisional view about how they believe the case (or a particular issue within it) is likely to be decided.
The judge who oversees the process will not usually be the same judge who handles any subsequent trial if the matter should end up needing formal determination by the court.
This procedure is not necessarily voluntary. Raworths were representing a party in one of the most recent cases of note on this issue namely Lomax v Lomax, decided by the Court of Appeal in the summer of 2019, which focuses on the court’s ability to compel the use of early neutral evaluation regardless of the views of the parties.
In Lomax v Lomax, the court confirmed that a judge hearing a civil dispute was within their rights to order the parties to attend an early neutral evaluation hearing and that this was the case even where one party was opposed to such a hearing taking place.
This came as a surprise to many, as use of any sort of alternative process within the context of a civil dispute (other than one arising in family proceedings) has always been seen as something that requires all-party consensus. The only sanction previously was that one or both parties may face an adverse costs order where they fail to consider whether ADR may be helpful, or where ADR is suggested and unreasonably refused.
Requiring the parties to a commercial dispute to submit to early neutral evaluation can be a very helpful step, not just in cases where both parties have an appetite to resolve their differences but also specifically in cases where there is hostility towards the idea of settlement.
While many people have criticised the decision in Lomax, arguing that to compel someone to engage in early neutral evaluation against their will constitutes a breach of their right to access justice through the courts, the Court of Appeal was of the view that this was not the case and said instead that ordering early neutral evaluation was, in fact, part and parcel of the court process.
The court’s power is now clearly set out in the rules that govern civil disputes, and it is a power that the court can exercise without the need to seek the prior approval of the parties involved. This is in contrast to mediation, which the courts currently have no power to compel commercial parties to use against their will.
How we can help
We are experienced conflict resolution lawyers, who understand that there is more than one way to resolve a commercial dispute and who recognise that traditional litigation may not always be the best or most appropriate course of action.
We are able to accept instructions from parties who are not otherwise clients of Raworths to provide a neutral evaluation form one of our experienced lawyers. Alternatively, if you are already engaged in litigation, we can advise you on the possible application of an Early Neutral Evaluation and ADR more generally.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.