Neutral Evaluation for Construction Disputes

23rd March 2022

By TONY N GUISE

In a recent case (The Sky’s the Limit Transformations Limited –v- Dr Mirza [2022] EWHC 29) heard by HHJ Stephen Davies sitting in the Manchester Technology and Construction Court, a domestic building contract was the subject of heated dispute, an attempt to resolve via mediation and ad hoc settlement negotiations all of which came to naught save a fraught and fruitless trial.

In his judgment (handed down on 10 January 2022) the Learned Judge mentioned these key dates:

April 2017

The building contract was terminated “in acrimonious circumstances” according to the judgment.

December 2019

The Builder issues Proceedings

June 2021

Parties prepared for and attended trial, which was adjourned due to ill health of witnesses.

The Judge directed mediation, which failed to produce a settlement.

November 2021

The parties prepared for and attended the re-listed 5 day trial:

Day 1: Claimant’s factual evidence

Day 2: Defendant’s factual evidence

Day 3: Evidence, given concurrently, of the mechanical engineers, electrical engineers and building surveyors

Day 4: Evidence, also given concurrently, of the quantity surveyors

Day 5: Oral closing submissions.

Following the end of closing submissions the Judge suggested further settlement discussions, which also failed to produce a settlement.

January 2022

Judgment handed down under which neither party recovered damages or costs against the other despite this dispute taking up 5 years of the parties’ lives.

HHJ Stephen Davies observed almost at the outset of his judgment:  [para 5]

“I am acutely aware that, as so often occurs in this type of case, the outcome will likely be a financial disaster for one of the parties and, even if not, likely an expensive and ultimately unrewarding result for both.”

So far, so familiar:  I have lost count of the number of judgments like this.  HHJ Stephen Davies’ judgment is unusual in setting out an approach to the case management of future domestic construction cases to try to avoid litigators taking clients up the same ‘garden path’: [para 6]

“…directions to be given at the first CCMC along the following lines:

(a) disclosure limited to documents relied upon and to known adverse documents;

(b) a single joint expert building surveyor to be instructed in all cases to address all items in issue, both liability and valuation, with questions to the expert strictly for the purposes of clarification only; (c) a stay for mediation on receipt of the report and questions. 

If the parties are not willing to mediate and the judge does not consider it appropriate to order mediation, then there should be an order for compulsory early neutral evaluation before another TCC Judge.”

So far as I am aware, this approach was first put forward by Master Victoria McCloud in Telecom Centre (UK) Limited v Thomas Sanderson Limited (February 2020). Clearly Master McCloud intended that the approach should be more widely adopted, as she made a generic version of her Order available, to enable her decision to be “useful to others considering ENE”.

These two cases highlight an important trend that is transforming how disputes are resolved.  These decisions, and others like them, are simply reflecting the direction of travel canvassed in recent speeches by the Master of the Rolls and recent Civil Justice Council consultations.

As Master McCloud acknowledges in her judgment in Telecom Centre (para 8), if a Judge carries out  the neutral evaluation and the settlement is not achieved, the matter must be released to another Judge.  Unfortunately, the ranks of the Judiciary are currently running at between 60% and 75% of full complement, and this shortage of Judges is one of the principal reasons for the significant backlog in the civil matters.  Unfortunately, the future for claims within the Court Service is likely to be one of ever-lengthening delays before resolution, whether that be judicial neutral evaluation or trial.

Nature abhors a vacuum or more than one way to crack an egg

Whether because of the lack of Judges or the state of the Court backlog, recent pronouncements from on high indicate a determination to shift the battleground to ‘pre-issue’, thereby avoiding litigation completely.  Thus, pre-issue, private or independent evaluative solutions can and should be the norm in future

Private evaluation is a pragmatic solution with quicker turnaround times especially when leading providers, such as Independent Evaluation, manage their cases online with hearings being held in person, virtually or in hybrid format to suit the case and the parties.  The time taken from start to finish is reduced from years of litigation to weeks or months of ADR.   To quote one lawyer who routinely has his clients’ disputes evaluated: “it is the legal equivalent of private health; no waiting lists, best Consultants, best chance of a cure”.

For the parties in Mirza, and many like them, whose lives were blighted by years of stressful and costly, litigation, the changes are coming too late. However, for practitioners who take seriously their duty to act in the best interests of their clients, the landscape of dispute resolution is changing.

The rise and rise of neutral evaluation

Judicial decisions and Government consultations clearly envisage a leading role for neutral evaluation in the reformed dispute resolution system.  There will always be litigators who would rather that their clients ‘disputed’ rather than ‘resolved’, and there will always be litigation.  However, the world has moved on and they and the clients they represent are being left behind.  It is regrettable that the Government is forced to introduce compulsion, but the era of compulsory ENE is unquestionably here and, one way or another, it is the new landscape.

…….

Tony is the Director of DisputesEfiling.com Limited (DEF) which is the provider of Cloud based platform for the management of evaluations to Independent Evaluation and Facilitation Service (IEFS) Limited.  Tony is a past President of the London Solicitors Litigation Association, he speaks and writes regularly on issues concerning civil justice reform in England and Wales.