Short cutting costly and time-consuming disputes with Early Neutral Evaluation

Early Neutral Evaluation (“ENE”) is a form of Alternative Dispute Resolution, sometimes used as a means of short cutting costly and time consuming disputes. As the name might suggest, Early Neutral Evaluation is a process generally attempted at the early stages of a potential dispute before significant costs are incurred.

The procedure for ENE varies massively, depending on the nature of the dispute and the “evaluator” chosen, but the general principle is that an independent third party will assess the strengths and weaknesses of each case. The parties will then use that information to reflect on their respective positions and hopefully a settlement will result. 

The parties themselves have a significant say in the procedure including agreeing what information is going to be provided, which issues the evaluator will address and whether the parties can make representations to the evaluator once they have reported. The evaluator chosen is normally an expert in the particular field in issue. 

The process is usually “without prejudice”, meaning that if a settlement is not achieved following ENE then the parties cannot refer to the evaluation in the later dispute until such time as the question of costs arises. 

A number of professional bodies offer an ENE service. ENE is also offered in certain circumstances before the Technology and Construction Court or the Commercial Court, with a Judge acting as evaluator, and that particular judge often being prevented from hearing the trial if the dispute continues. 

The choice of evaluator is key, partly because the evaluation is not binding on either party. The evaluation simply being ignored is a particular risk if there is scope to argue that the evaluator was wrong because of lack of information or knowledge in the field. The risk decreases with the correct choice of evaluator; parties run a significant risk if they ignore, say, an expert surveyor in a property dispute or a High Court Judge in a dispute on a point of law.

ENE can be particularly useful in matters involving a number of issues, some of which are unlikely to be settled and need to be dealt with by way of full determination (trial, adjudication etc.) but some of which could be settled with some third party input. Some parties find it difficult to consider individual points in isolation, preferring to deal with all issues as one dispute. ENE may convince a party in those circumstances that they have reasonable prospects of success on certain issues but will lose on others. Reducing the number of points in issue minimises the costs and time spent on a dispute. 

If a matter does proceed to a trial, the “loser” will pay the winners costs. An evaluation indicating that a party will lose on certain points could save that party tens of thousands of pounds in costs if the opportunity is taken to settle at least those points which are unlikely to succeed, even if the entire dispute cannot be settled. 

The downsides of ENE are that it can involve fairly substantial fees both in engaging the evaluator (the parties usually split those cost) and in preparing a case to be evaluated (costs usually born by the parties). It can also be as time consuming as other options which may have more certainty, such as expert determination, or which are aimed directly at achieving a settlement, such as mediation. 

There is also the issue that ENE may expose potential holes in party’s evidence, which might weaken its negotiating position. Given time and further work those holes may be closed and in fact the party may have a strong case but may not be able to settle because of an ENE which went against them. The evaluator will often also have less information than would be presented at a full trial and it is unusual for witness evidence, sometimes a key part of a case, to be presented to an evaluator. 

ENE has its place and is useful in certain disputes. However, the process effectively involves asking an expert to give their opinion on a matter which is a similar principle to expert determination. One of the fundamental differences is that expert determination is binding and will usually bring an end to a dispute, while ENE, being not binding, may lead to an end to the dispute. 

Should you require any further information about the benefits of Early Neutral Evaluation as a form of Alternative Dispute Resolution or have any questions about the litigation process, please contact the Dispute Resolution Team at Fraser Brown Solicitors on 0115 9888 8777 or email us at info@fraserbrown.com.

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