Facts Neutral evaluation is a relatively little-used tool in the dispute resolution toolbox. Certainly, it has potential drawbacks: a party who is disappointed by an evaluator’s assessment may be slow to accept the outcome, while a party who feels vindicated may become more intransigent in their negotiating stance. 1 It would, however, be wrong to disregard neutral evaluation altogether. If properly understood and sensibly applied, it has considerable potential in the efficient resolution of commercial disputes. As the label suggests, neutral evaluation involves parties to a dispute referring matters at issue between them to a third party (an evaluator), who has no interest in the outcome, for an assessment as to what the likely outcome of litigation will be. The resulting evaluation is not binding, but is available to be used by the parties to inform their own assessments of the relative strengths and weaknesses of their positions, and in that way to facilitate negotiations. Of course, if neutral evaluation leads to a settlement then the sooner it is done in a litigation process, the more it will save in terms of litigation costs. For that reason, much of the literature refers to it as ‘Early Neutral Evaluation’ (or ‘ENE’). But experience teaches that the most effective time to resolve a dispute2 is not always at the outset. Evaluation shortly before trial – when the case has been prepared, the issues and evidence are clear, and the prospect of a determination (for good or ill) is imminent – can be more compelling than an evaluation offered at an earlier stage. There are no hard and fast rules, but it would be wrong to think that neutral evaluation only has relevance if done ‘early’ (whatever that really means).
What is the need that neutral evaluation meets? As one writer explains: “The development of neutral evaluation as an ADR technique came about in response to a reality we have all been confronted with many times: one of the main reasons cases don’t settle sooner than they ultimately do is because someone – sometimes one of the parties, sometimes an attorney, or maybe an adjuster – has misunderstood or misevaluated the case. That leads to unrealistic ideas about the probable outcome of the case, which in turn leads to unnecessary stubbornness, which in turn leads to a trial date …” 3 It is all about reality-checking, and the analysis of trial risk. At least arguably, it lies at the core of any truly evaluative mediation, although in that situation it comes wrapped up in the guise of a mutual commitment to negotiate to an outcome with the assistance of the evaluator/mediator. There are no doubt many cases in which one party thinks the issue would be easier to solve if only someone would give the opposing side a good talking to.4 Viewed from a mediator’s perspective, many settlement discussions would be far easier if only one party or the other (and often, both) had first undertaken a full and realistic assessment of the strengths and weaknesses of their position. But why undertake a risk assessment with the other side involved, and where the resulting assessment will be transparent? One reason is that a neutral evaluator will engage with both cases, and will have the facts and arguments that will actually be advanced by the parties (as opposed to having a one-sided view of what one party thinks the other might be able to establish, or may argue for). It is an effective way of understanding the opponent’s position