Thursday, May 19, 2011

Early neutral evaluations

An early neutral evaluations (an ENE) is a recently introduced form of dispute resolution being used by the Courts in Victoria. It sits somewhere between a mediation and a trial. The Supreme Court of Victoria first piloted the ENE program in 2009 and the Magistrates' Court of Victoria is now piloting the ENE program in 2011.

The Commercial Court of the Supreme Court of Victoria refers matters by consent to ENEs under chapter 11 of the 'Green Book', being practice note no. 1 of 2010 (Chapter 11). ENE is a process where the parties present their cases by way of submission on the facts and the law, and the evaluator (usually a Judge or a Magistrate depending on the Court in which the proceeding is issued) gives a non-binding evaluation of the matter on a confidential and 'without prejudice' basis.

Chapter 11 suggests that an ENE is particularly useful where there is a particular issue or question to be resolved. The following is an extract of Chapter 11:

11.1. The parties to a proceeding in the Commercial Court may by consent seek a without prejudice, confidential and non-binding early neutral evaluation (“evaluation”) of the proceeding or of one or more questions in the proceeding with a view to assisting them to resolve by agreement those questions or the proceeding as a whole.

11.2. With the consent of the parties, the List Judge may direct that there be an evaluation. Parties applying for an evaluation shall provide to the List Judge a written statement identifying precisely the matter sought to be referred and recording the party’s consent to the procedure.

11.3. In requesting an evaluation, the parties are taken to agree that the evaluation will be a confidential process, and that unless otherwise agreed all aspects of the process will be without prejudice. Nothing said in or produced for the evaluation may be communicated or relied upon outside of the evaluation except as required by law.

11.4. The process and conduct of an evaluation shall be in the discretion of the Judge or other person appointed by the Judge in charge of the Commercial Court to conduct the evaluation (“the evaluator”) but, unless otherwise directed, the process shall be as follows:

11.4.1. the parties shall produce a common folder or folders of only the key documents which are necessary for the evaluation;

11.4.2. each party shall provide a written submission of no more than 10 pages on facts and law;

11.4.3. the common folder(s) and written submissions must be provided on the date determined by the evaluator as notified to the parties;

11.4.4. the evaluator will appoint a date to meet with the parties (“the hearing”) to answer any questions which the evaluator may have or, at the evaluator’s discretion, to hear any further submissions which a party may seek to make;

11.4.5. the hearing with the evaluator will be held in private, shall not exceed half a day and any further submissions shall be confined to one hour for each party;

11.4.6. the evaluator may give an evaluation at the conclusion of the hearing or at such other time as the evaluator may determine and may do so orally or in writing at the discretion of the evaluator.

11.5. The parties may seek from the evaluator different and particular directions to suit the particular case, where the process and conduct described in paragraph 11.4 above would not be appropriate.

11.6. Parties seeking directions from the evaluator under paragraph 11.5 shall each provide to the evaluator a written statement:

11.6.1. identifying precisely the matters sought to be referred for evaluation;

11.6.2. identifying precisely the particular directions sought for the process and conduct of the evaluation including: whether the parties propose to lead evidence and, if so, whether that is sought to be done orally, or in writing, and whether with, or without, cross-examination; the length of any oral hearing; whether the parties will seek to make submissions and, if so, the time limits to be imposed on any oral submissions or the page limits on any written submissions; whether the parties propose to provide key documents on which they rely; whether there will be any expert report; and whether the evaluator will be asked to provide a written evaluation.

11.7. The costs of an evaluation shall be borne by the parties equally in the first instance unless otherwise agreed between them. The costs, however, may be included in the costs of the proceeding when these are determined.
The Magistrates' Court of Victoria has commenced a pilot program from 1 January 2011 where it is referring certain matters (presumably complicated matters) to an ENE process, instead of referring the matter to mediation. The pilot program ceases on 31 October 2011. The practice direction implementing this is Practice Direction no 4 of 2010 (PD4/2010).

PD4/2010 is more uncertain than Chapter 11. For instance, it does not provide that the process is to be 'without prejudice and confidential', nor does it prescribe any form of written submission. For the ENE procedure to be effective and appealing, I assume that the omission of a direction in PD4/2010 that the ENE process is to be 'without prejudice and confidential' was inadvertent. I assume that it is intended that an ENE in the Magistrates' Court will be conducted on a 'without prejudice and confidential' basis, as they are conducted in the Supreme Court of Victoria. I recently appeared in an ENE in the Magistrates' Court and I was told by the evaluator hat the process is intended to be 'without prejudice' and confidential.

I have included a link to the an online pdf version of PD4/2010 PD4/2010 includes the following:
  • Where an ENE has taken place, the parties will not be required to undertake another form of appropriate dispute resolution except for a trial.
  • The ENE will take place within 8 weeks of filing the notice of defence.
  • The parties must be prepared to explain the factual and legal issues to the Magistrate.
  • Unless otherwise directed, no oral evidence will be given.
  • All parties must attend personally and, if a legal practitioner is appointed, with that legal practitioner. If a party is a corporation then a person in the exclusive employment of the corporation who is authorised in writing to attend the ENE on behalf of the corporation must attend the ENE.
  • All parties must have at the ENE a person with authority to settle all or part of the proceedings.
  • The conduct of the ENE is at the discretion of the evaulator.
  • The parties must bring to the ENE all documents in the possession of the parties which supports or is injurious to that party's claim, defence or counterclaim.
  • The hearing will be held in private and will not exceed 3 hours.
  • Each party will be given up to 60 minutes to explain their case both factually and legally.
  • Some of this time may be spent answering questions from the evaluator.
  • The remaining time will be devoted to evaluation.
  • The evaluation may be given orally at the end of submissions or in writing.
  • The ENE will not be sound recorded.
  • At the conclusion of the ENE the Magistrate will advise of a hearing date if required.
  • ENE costs will be costs of the proceeding.
  • The Magistrate conducting the ENE will not conduct the trial.
Magistrates Braun and Lauritsen are the two appointed evaluators in the Magistrates' Court of Victoria at Melbourne. From discussions I have had with the Court, I understand that they review the Court files and decide which cases ought to be referred to ENE.

I have been involved in 2 ENEs and the parties' representatives usually have mixed reactions to the process. An ENE does require substantial preparation to get across the facts and the law almost to the extent of preparing for a trial. Because of this, it begs the question: why shouldn't the Courts just run a trial? Also, the summarised and short nature of an ENE means that the evaluator does not have the opportunity to properly assess the witnesses and the evidence they give. So the evaluation given may not be accurate at all, whereas it is ostensibly the strongest indication of a party's prospects of success prior to a trial.

However assuming the process allows each party to properly and fully state their case to the evaluator, it may also be the best way for the Court to get the parties to consider resolving the dispute on the relative merits of their cases. Also, it is probably the best opportunity for the parties to get an honest assessment from a Judge or Magistrate about how many issues there are and what the parties will need to do  in order to prepare for a trial.

It will be interesting to see whether the Magistrates' Court continues with this process, given the professional costs involved in preparing and running ENEs.

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