Early Neutral Evaluation

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The dangers of commercial disputes

Commercial disputes can be a strain on any company and its business.  If customers do not pay for goods or services, then in the absence of any agreement the only way to get payment is by issuing Court proceedings – which can be lengthy and costly. 

Without cash flow from the goods or services it provides, a business can quickly unravel – unable to pay suppliers or staff.

Thankfully, a more straightforward and quicker way of resolving such disputes is through Alternate Dispute Resolution (“ADR”), which is a term used for various types of dispute resolution process which can avoid the cost and delay of court proceedings. 

One type of procedure is a process called Early Neutral Evaluation.

What is Early Neutral Evaluation?

Early Neutral Evaluation is a form of alternative dispute resolution where

• the parties agree and appoint a person to be an independent evaluator who is charged with assessing the strengths and weaknesses of each side’s case. 
• the independent evaluator will usually be an expert in the field relevant to the matters in dispute or is perhaps a barrister or a judge with experience in this area.

The independent evaluator does not give any legal advice and provides a finding on what they consider are the merits of each party’s case, rather than a determination of the case as would happen in an arbitration or adjudication.

The aim is that the viewpoint of the independent evaluator is used as a starting point to kick of negotiations between the parties.  The Early Neutral Evaluation process may not be desirable or appropriate in many cases but it has become a popular and useful way for businesses in dispute to get a practical view of their position without having to incur significant costs in litigation.

Agreeing to Early Neutral Evaluation

An agreement to Early Neutral Evaluation can provide for the framework and terms applicable to

• how the process is conducted,
• how the costs are shared; and
• what they agree to once the finding or decision is made.

Effectively, as a contract, (and if not confidential) the Early Neutral Evaluation agreement could crystallise the value of any dispute and form the basis for a claim or even the basis of a statutory demand, for the value that the evaluator determines may be determined as payable in court proceedings.

However, the Early Neutral Evaluation agreement will dictate whether such consequences are available and so it is important to get legal advice on any such agreement, particularly if any such finding or decision does not go in your favour.

The Process

If the parties agree, selecting an evaluator is where Early Neutral Evaluation begins. 

The courts offer an Early Neutral Evaluation service to suggest evaluators, or there are many private organisations who offer the service.  Which way you decide will likely depend upon the facts of the case and the expertise needed from the evaluator.

Although it is entirely flexible, and can be managed however the parties feel, there are two main ways of conducting the evaluation either by

• holding a hearing; or
• by reference to documents and case summaries prepared by each party on a desktop basis.

In either case, the parties will prepare a case summary for the evaluator setting out its case.  This is the opportunity to put forward the best case possible and, if you can, make suggestions as to the best possible way that that the dispute can be resolved.

• the evaluator will then make a finding or decision, although this has no legally enforceable characteristics as with a Court Order (unless the agreement provides for such enforceability as described above).  
• the finding or decision may indicate the likely outcome at trial and alert either party to the risks they face if the case continues to court.  In most disputes, this is a large part of the battle.

As with any ADR process, the goal of Early Neutral Evaluation is to save time and money and for that to be achieved the process must be conducted efficiently.

What are the advantages of Early Neutral Evaluation?

The main advantages of Early Neutral Evaluation are

• it can apply to almost any commercial dispute
• the case management restrictions of court proceedings do not apply;
• there is great flexibility as to how the parties agree to conduct an Early Neutral Evaluation, tailored directly to their personal circumstances;
• it is far quicker, without any clunky court system to negotiate and the process being arranged and managed between the parties, their advisors and the evaluator;
• It is relatively inexpensive compared to court proceedings, with less risk and the parties positioned to allow them to put their mind more realistically to the threat potentially faced. If a decision goes against what a party was expecting, the independent nature of the process may persuade a party to settle.
• the process is also confidential, and can be without prejudice, so it can be entered into without the wrongdoer fearing that any decision or finding will be used against them in Court proceedings. 
• it’s flexible and can be a short process so less stressful.

Disadvantages of Early Neutral Evaluation

There are of some disadvantages of Early Neutral Evaluation though and you need to consider these as part of the decision making process including

• as it is quicker and less complex, it may tend to deal with disputes in a more summary fashion, with less attention on the finer detail;
• often witness evidence is not considered (although it may be referred to or even details provided) but where witness testimony is critical to the success of a claim or defence, then Early Neutral Evaluation may not be appropriate.
• there is also the risk that a party may not have quite the information to hand than would be normally be available in commercial litigation proceedings – where the Court may order that all parties disclose documents useful to the other side’s case.  If a party knows a document exists, in commercial litigation proceedings they can seek disclosure of such a document.  In Early Neutral Evaluation it is likely not disclosed (although such disclosure could form a component of the agreement to enter Early neutral Evaluation);
• once an evaluator has made a finding or decision, it cannot be enforced against the other party and if the proceedings are confidential then such a decision will likely not be capable of being referred to in any subsequently issued Court proceedings.

That said, where an evaluator reaches a finding or decision this can motivate the benefitting party to issue the proceedings or more strongly defend the proposed claim, with the assurance that an independent expert considers their case strong (which will also demotivate the opponent).

This can be both an advantage or disadvantage, dependant on which side you are on.

It’s always important that before embarking on Early Neutral Evaluation – or any form of ADR – that you get specialist legal advice. 

At Francis Wilks & Jones we have comprehensive experience of dispute resolution and all forms of ADR and can advise and assist on the process which will best benefit you and the dispute you face or are engaged in.

We approached Francis Wilks & Jones following the termination of a large contract by a client on the basis of repudiation. The principal solicitor I dealt with was extremely responsive, assertive and able to redirect the problem against other company which agreed to reinstate the contract fully – with no loss of earnings – and even to pay a substantial sum towards my legal costs! I am very grateful for the assistance of FWJ

A company director