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04 July 2019
In Lomax v Lomax,(1) Justice Parker ruled that parties cannot be ordered to engage in early neutral evaluation or financial dispute resolution procedures in the Chancery Division where one party objects to doing so.
Early neutral evaluation and financial dispute resolution hearings are two types of alternative dispute resolution (ADR), both consisting of preliminary hearings, which may assist parties in understanding and settling claims. Early neutral evaluation consists of the court stating its preliminary view on a claim, while Chancery Division financial dispute resolutions have been introduced following success in the Family Division and usually involve a chancery master providing an opinion on a range of settlement figures and sometimes specific comments on the merits of the underlying claim. Both procedures are without prejudice to the claim as a whole and non-binding on the parties (although participants in early neutral evaluation can agree otherwise) and the judge will have no further involvement in the case. Directions will be given in advance of either hearing, usually including directions regarding bundles and position statements.
As might be expected given its family division origins, financial dispute resolution can be a useful tool in claims made under the Inheritance (Provision for Family and Dependants) Act 1975. There have been many successful settlements at or following a financial dispute resolution hearing of a 1975 act claim, as the parties can be heard in court and be given guidance as to the court's likely approach to the claim (and therefore the risk that they run in pursuing the claim to trial). They are particularly effective in cases which are highly fact specific or discretionary and where mediation or negotiation is proving difficult and could be assisted by judicial guidance. Early neutral evaluations can assist in a similar way in such claims, as they provide the parties with guidance as to the potential outcome of their claim at trial.
Nevertheless, the Civil Procedure Rule (CPR) and Chancery Division guides are somewhat inconsistent in their guidance on the use of early neutral evaluation or financial dispute resolution hearings. This was the problem raised in Lomax.
Lomax centred around a claim brought by a widow under the 1975 act against her late husband's estate and two lifetime trusts. She sought variation of the trusts in order to meet her reasonable needs. Her stepson strongly resisted her claim.
The £5.5 million estate is held on trust for the widow for life, following which it is held on discretionary trust for the children and remoter issue of the deceased. Parker presumed that the claim was being defended on the basis that the widow had been adequately provided for without any further award. The parties' positions were starkly opposed and, in Parker's opinion, the case "screams out, for a robust judge-led process to focus on the legal and factual issues presented by this case; and perhaps even craft a proposed solution for the parties to consider". Parker considered that this case was unlikely to benefit from mediation.
While much of the reported judgment details the evidential issues and timings which pre-dated her decision, Parker declined to order early neutral evaluation or financial dispute resolution, as she concluded that she was unsure whether the CPR intended to impose early neutral evaluation or financial dispute resolution on parties who do not consent to the same. This is in line with the principle set out by the Court of Appeal in Halsey v Milton Keynes General NHS Trust(2) – that is, that the court cannot order unwilling parties to engage in mediation (ie, another form of ADR) – but distinguishes the Chancery Division financial dispute resolution from the Family Division financial dispute resolution (which can be imposed on the parties).
Parker urged the Rules Committee to clarify whether early neutral evaluation is compulsory and asked them to consider providing a clear route to compulsory financial dispute resolution in appropriate cases. Given the values involved and the wider interest, this may not be the end of this issue.
For further information on this topic please contact Roberta Harvey or Hannah Mantle at Forsters LLP by telephone (+44 20 7863 8333) or email (email@example.com or firstname.lastname@example.org). The Forsters LLP website can be accessed at www.forsters.co.uk.
(2) (2004) EWCA Civ 576.
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