United States: English Court Of Appeal Holds That Courts Are Empowered To Order Early Neutral Evaluation

Last Updated: October 2 2019
Article by Sarah J. Thomas, Chiraag Shah, Saqib Alam and Nicole Tsui

In its August 6, 2019, judgment in Lomax v Lomax [2019] EWHC 1467, the English Court of Appeal (“CA”) reversed a High Court decision holding that the courts lack the power to compel parties to engage in early neutral evaluation, a form of alternative dispute resolution, under the English Civil Procedure Rules (“CPR”). This judgment underscores the emphasis that the English courts place on ADR in the civil court process and clarifies the courts’ case management powers.

The High Court’s Decision

The case concerned an inheritance dispute over an estate worth around £5.5 million. The claimant, the widow of the deceased, made a claim against the defendant, her stepson, under the Inheritance (Provision for Family and Dependents) Act 1975. The claimant sought an early case assessment and the defendant opposed, arguing that mediation was more appropriate. The defendant stated the court had no power to submit their dispute to ADR without the parties’ consent. The question for Parker J, therefore, was whether she could order an early neutral evaluation at the request of the claimant, in the absence of agreement between the parties.

Early neutral evaluation is a form of ADR that involves an independent and impartial evaluator, usually a judge, retired judge, or QC, appointed by the parties giving an assessment or “evaluation” of the merits of their respective cases. Parties are invited to make submissions and the evaluator will then state his/her views supported by a brief explanation on the likely outcome at trial. That view is without prejudice and has no legal effect, i.e., any disclosures during early neutral evaluation are later inadmissible in court. Early neutral evaluation offers parties a neutral assessment of their respective positions without incurring the significant cost of litigation.

CPR 3.1 sets out the court’s “general powers of management” and provides a list of powers in subparagraph (2). These powers include at (m) 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.”

Parker J held that the courts lacked the power to compel parties to engage in early neutral evaluation because the overriding objective of Rule 1.4(1) of the CPR was directed towards facilitation rather than compulsion. However, she acknowledged CPR 1.4(1) states that it is the court’s overriding duty to “actively manage cases” and stated that this was a case “which cries, indeed screams out, for a robust judge-led process to focus on the legal and factual issues . . . and perhaps even craft a proposed solution for the parties to consider” (at para 123 of Lomax v Lomax [2019] EWHC 1267).

The CA Decision

On appeal, the CA reversed Parker J’s decision and held that the court’s case management powers in CPR 3.1(2)m should not be interpreted to impose a requirement of party consent to early neutral evaluation.

In its judgment, the CA considered Halsey v Milton Keynes [2004] EWCA Civ 576 (“Halsey”), which held that it would be an unacceptable obstruction of the right to access to courts to compel unwilling parties to mediate. The CA reasoned that Halsey did not assist with the proper interpretation of CPR 3.1(2)m because Halsey addressed a different situation, i.e., whether a court can oblige parties “to submit their disputes to mediation.” CPR 3.1(2)m deals with an early neutral evaluation hearing as part of the court process and does not in any way prevent the parties from having their dispute determined by court if they do not eventually settle the case.  The CA declined to engage with the question of whether Halsey remains good law, but commented that “the court’s engagement with mediation has progressed significantly since Halsey was decided” (at para 27).

The CA further considered the argument that the wording of CPR 1.4(2)(e) (which uses such words and phrases as “encouraging,” “facilitating,” and “helping the parties settle the case”) supported a conclusion that the courts could only order early neutral evaluation with the parties’ consent. The CA reasoned that if the CPR’s drafters had intended to require party consent, they could have easily stated this requirement expressly. The absence of an explicit requirement was a powerful indication that consent is not required and that an early neutral evaluation hearing is not an obstruction to or constraint on a party’s access to court.

Finally, addressing the argument that early neutral evaluation would only increase costs, the CA stated that early neutral evaluation requires parties to focus on whether the case may be capable of settlement and to hear a judge’s neutral evaluation. Moylan LJ noted that in his experience, such methods usually save costs, rather than adding to them.  

Takeaways  

Although the CA was careful to emphasize that its decision was limited to early neutral evaluation and did not have a wider application to other forms of ADR (such as mediation), this judgment underlines the pro-ADR stance of the English courts and their willingness to encourage (and even impose) alternative methods to resolve disputes. This decision also reiterates the English courts’ overall commitment to the overriding objectives stated in the CPR, in particular the saving of expense and allotting to cases an appropriate share of court resources. 

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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