Will I win?: Early neutral evaluation

There are many ways in which construction disputes can be resolved. If all else fails, the parties will have to go to court or to arbitration for a final and binding judgement or decision. Almost invariably, sensible parties to construction contracts sit down, relatively amicably, and settle whatever the problem is. Mediation has become particularly and rightly a favoured method of dispute resolution where an independent third-party “cracks heads” to bring about a settlement. There is another way, which is the Early Neutral Evaluation (“ENE”).

What it is ENE? It is a process by which parties refer to an independent third party their dispute for a (usually non-binding) opinion on what the likely outcome in any court or arbitration proceedings will be on any given issue. If that third party commands the mutual respect of the parties who have instituted the process, there is a good chance that the opinion or evaluation obtained will seriously inform the parties and encourage them to settle.

How long has it been around? At least since King Solomon when he considered the case of the two mothers each claiming one baby as her own. Historically however, it has been used in insurance policies where the parties agree to obtain a binding or non-binding opinion from a QC. It has been largely pioneered in the more recent past by the Technology and Construction Court. In the past few years particularly in the London TCC, it has been used with great success.

A Manchester judge handled an evaluation over a three-day period, complete with factual witnesses; the case settled thereafter and saved the parties the costs of a four-week trial

The key features of ENE are in the title. It has to be Early, to be most effective, so as to save the parties costs and time. It has to be Neutral because it is only by having a neutral evaluator that the parties are most likely to respect the evaluation. Finally, the Evaluation involves a totally independent reasoned prediction what the final outcome of the given dispute will be if the matter proceed finally to trial and judgement. Generally, unless the parties agree otherwise, the evaluation is not binding on the parties.

In the TCC, the judges are the people who are the evaluators. Of course, if the ENE process fails (and it rarely does), the judge in question will not try the case or pass on any information received or the evaluation. All proceedings on the ENE are “without prejudice”, so they can not be used in any later trial.

What sort of cases is ENE best suited for? In principle, it could apply to any sort of case. The most obvious is a dispute about law which might involve, for instance, an issue about what a key term of the construction contract means. There have however been “fact-heavy” cases successfully the subject of ENE. A Manchester TCC judge dealt with such a case over a three-day period with factual witnesses being available; the case settled thereafter and saved the parties costs of a 3 to 4 week trial. The London TCC has dealt with an ENE for a professional negligence claim against engineers which involved the judge discussing the matters in issue informally for about three hours with a solicitor of each side and four experts and then a few days later producing his eight-page evaluation; that led to the case being settled.

The ENE is usually conducted informally and the format does not mirror the typical adversarial procedure of cross-examination and speeches. The judge is simply trying to get to the nub of the issues between the parties and through the Evaluation tell the parties what he or she believes the final outcome on the dispute in question will be. It is very cheap and quick.

The advantages of ENE are that time, resources and above all costs are saved, if and when the case is settled following the Evaluation. Parties who are genuinely interested in settling the case should as a matter of course consider ENE where there are real disputes between them, the outcome of which they cannot otherwise agree upon. There will, conversely, be cases in which one party or the other will not be interested; for instance the defendant who is simply defending to avoid payment at all costs or the case in which the claimant believes that the other simply has no defence and wants to pursue a summary judgement application.

All actual or potential parties to litigation or arbitration should consider all types of ADR, including mediation. Another important alternative in the right sort of case is Early Neutral Evaluation.