UK: Court Of Appeal Orders Early Neutral Evaluation Despite Party Objection

Last Updated: 27 September 2019
Article by Herbert Smith Freehills

The Court of Appeal has held that the court has power to order an early neutral evaluation (ENE) by a judge even where one or more parties do not consent to that course. There was no reason to imply into the relevant rule giving the court power to order ENE any limitation based on the parties’ consent: Lomax v Lomax [2019] EWCA Civ 1467.

Early neutral evaluation (ENE) is a form of alternative dispute resolution in which a neutral third party (often a judge) provides the disputing parties with a non-binding assessment of the merits of the dispute. The aim of the process is to assist the parties’ bilateral settlement discussions by encouraging them to appraise their cases realistically and step away from deadlocked positions.

The use of ENE in the UK has been very limited to date and the decision has the potential to prompt an increase in its use. Although it is unlikely to result in a large number of cases where judges order such a hearing over the parties’ objections, particularly in commercial disputes, the increased prominence of the process through the Court of Appeal’s strong endorsement of it could feasibly lead to it being more frequently suggested by judges and/or proposed by parties.

Perhaps more importantly, the decision is arguably of wider significance in the context of the ongoing debate as to the extent to which the court’s encouragement of ADR should extend into compulsion. Since the Court of Appeal’s 2004 decision in Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002, the established position in the UK has been that, while the court may strongly encourage parties to engage in ADR (including imposing costs sanctions for unreasonable refusal to mediate), this power stops short of compelling unwilling parties to do so. Amongst other reasons, it was held in Halsey that such compulsion would amount to an unacceptable obstruction of the parties right of access to the court, in breach of Article 6 of the European Convention on Human Rights.

However, as efforts to increase the use of ADR have failed to meet expectations, and with the increased focus on the efficient use of the courts’ resources, there have been increasingly prominent voices calling for a reconsideration of this position, at least for particular categories of disputes. These voices include that of Lord Justice Ward in Wright v Michael Wright Supplies Ltd & Anor [2013] EWCA Civ 234 (see our post here), in which Ward LJ (who was himself on the panel in Halsey) queried with hindsight the correctness of the “access to justice” objection. Whilst the point did not need to be decided in Wright, Ward LJ suggested that a "bold judge" may in future wish to rule on this question, in order that the Court of Appeal might revisit this aspect of Halsey.

The Court of Appeal in the present case has not directly taken up that challenge. It held that compelling ENE could be distinguished from the circumstances addressed by Halsey, and it therefore did not need to enter into the question raised in Wright as to what Halsey determined and the extent to which it remains good law. The court limited itself in this regard to a comment that “the court’s engagement with mediation has progressed significantly since Halsey was decided”.

The court’s decision here was clearly driven by its view of the value of ENE as a process, as demonstrated particularly by its successful use in the Family Division. However, the grounds on which the court was prepared to distinguish Halsey in order to compel ENE arguably suggest an openness to moving away from a wholesale prohibition on compelling ADR, and to open the door further to a full reconsideration of Halsey.

As we have previously commented, the extent to which such a development would be welcome would depend on the degree to which it took into account the vast differences in the types of cases dealt with across the civil litigation landscape. What measures may be appropriate to encourage a greater use of ADR will depend on a range of factors which differ across the broad range of claim types, not least of which includes the litigants’ level of familiarity with litigation and ADR processes (“ADR reform: One size does not fit all“).

Background

The context for the decision was an application by a widow under the Inheritance (Provision for Family & Dependants) Act 1975. The claimant sought an ENE hearing, which the defendant opposed on the basis that it considered mediation to be the preferable ADR option in the circumstances. Although the trial judge considered that the case "cries ... out for a robust judge-led process", she concluded that the court did not have the power to order an ENE hearing in the absence of all parties’ consent to the process.

Decision

The court’s decision was given by Lord Justice Moylan, with Lord Justice McCombe and Lady Justice Rose agreeing.

The court approached the issue principally by reference to CPR 3.1(2)(m). Rule 3.1 contains the court’s general case management powers and sets out a list of powers which are in addition to any other powers the court might have. The list includes, at paragraph 2(m), a catch-all provision specifying that the court may “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”. The reference to ENE was added in October 2015 and was broadly understood to have been prompted by the decision in Seals and Seals v Williams [2015] EWHC 1829 in which Norris J concluded that the court had power to order an ENE despite there being no reference to such power in the rules. In that case, the parties had consented to the ENE process.

The claimant argued that there was nothing in the wording of the provision or in principle to justify reading it as though it was dependant on the parties’ agreement. It also noted that, up until recently, commentary in the White Book stated that the power to order an ENE "is not constrained by the need to secure party consent" (this was deleted and the current version does not address the question of party consent).

Unsurprisingly, the defendant relied heavily upon Halsey. It argued that that authority applied to all forms of ADR, was still good law, and therefore precluded the court from interpreting the rules in such a way as would allow the court to order any form of ADR over a party’s objection. It also noted that each of the Commercial Court Guide, the Technology and Construction Court Guide and the Chancery Guide includes statements to the effect that party consent is a prerequisite to the ordering of ENE.

The court concluded that there was no reason to imply into CPR 3.1(2)(m) any limitation on the court’s power to order an ENE hearing in the absence of the parties’ consent. In particular:

  • In relation to the Court Guides, the court confirmed that, whilst they can assist in particular where there is ambiguity, the effect of rules and directions cannot be suspended or disapplied by what may be said in such guides. Similarly, commentary in the White Book (or the deletion of such commentary) is not determinative as to the proper interpretation of the rules.
  • As to Halsey, the court stated:

“I do not consider that Halsey v Milton Keynes assists with the proper interpretation of subparagraph (m) because it was dealing with a very different situation. It was concerned with whether a court can oblige parties ‘to submit their disputes to mediation’. It does not, therefore, in my view assist with the interpretation of subparagraph (m), which is dealing with an ENE hearing as part of the court process.”

The court went on to note that, in any event, ENE does not prevent the parties from having their disputes determined by the court if they do not settle their dispute at or following an ENE hearing and concluded that the process therefore does not obstruct a party’s access to the court. Insofar as it includes an additional step in the process, the court did not consider this in any sense an "unacceptable constraint" of the type disapproved of in Halsey.

It is not clear on what basis the court considered this position distinguishable from mediation, following which the parties can similarly commence or continue court proceedings if no settlement was reached.

It is also not clear whether the court intended to suggest that the prohibition in Halsey was limited to mediation. Such a distinction would be difficult to justify given that the judgments in Halsey refer on several occasions to “ADR” generally when expressing the prohibition. The court in the present case does not appear to have taken issue with the defendant’s submission that ENE is a form of ADR (within the glossary definition in the White Book).

  • On the issue of ENE more generally, the court was clearly heavily influenced by its use in financial remedy cases in the Family Division since 1996 (in the form of Financial Dispute Resolution (FDR) appointments). The court agreed with the trial judge’s observation that that process had been “outstandingly successful”. Further, it observed that those benefits frequently extended to cases where the parties were resistant or even hostile to the suggestion of resolving the dispute by agreement and resistant to the listing of an FDR. The court referred here with approval to the observations of Norris J in Bradley v Heslin [2014] EWHC 3267 (Ch) in the context of boundary disputes:

“I think it is no longer enough to leave the parties the opportunity to mediate and to warn of costs consequences if the opportunity is not taken. In boundary and neighbour disputes the opportunities are not being taken and the warnings are not being heeded, and those embroiled in them need saving from themselves.”

Given the trial judge’s clear view that ENE was appropriate in this case, the court directed that such a hearing take place.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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