Background
The claim concerned alleged breaches of restrictive covenants by Christopher Roberts after his employment with the claimants’ pension-trustee business ended under a settlement agreement. The claimants alleged that Roberts, through CJR Pensions Limited, competed with them in breach of his service agreement. They sought damages, injunctions, declarations and restitution of settlement payments; Roberts counterclaimed for sums said to be due under the settlement agreement.
An Early Neutral Evaluation (ENE) was ordered before witness statements were exchanged. At the ENE, the defendants advanced an unpleaded argument that their business did not compete with the claimants’ corporate-trustee and trust-management business because it supplied individual trustee services. The judge adjourned the ENE, considering that the new case required amendment and that the evaluation could not realistically continue without knowing whether the defence could be advanced or how the claimants would answer it. The claimants later declined to resume the ENE and sought their wasted costs from the defendants on an indemnity basis.
The Court’s Holding
HHJ Pearce held that the costs of the unsuccessful ENE should be costs in the case, rather than payable immediately by the defendants. The court had jurisdiction under CPR Part 44 to determine those costs and was not bound by earlier “costs in the case” orders, which concerned the relevant directions hearings rather than the ENE itself.
The judge said the starting point for a failed ENE should ordinarily be costs in the case absent compelling countervailing factors. Routine adverse costs orders risk discouraging participation in ADR, fostering satellite litigation about why an ENE failed, and penalising parties where the court cannot safely determine whether the criticised conduct actually caused wasted costs. Although the defendants’ incomplete pleading was the immediate cause of the adjournment, other unresolved factors—including the claimants’ amendments and the premature timing of the ENE—meant the court could not fairly conclude that the ENE would otherwise have succeeded or saved costs. The defendants’ request for their costs of resisting the application was also dismissed.
Key Takeaways
- A court may determine the costs of a failed judicial ENE under CPR Part 44.
- The usual approach should be caution: failed-ENE costs will generally be costs in the case unless compelling circumstances justify a different order.
- Late or incomplete pleading may cause an ENE to fail, but will not automatically justify an adverse or indemnity costs order where causation and responsibility are contested.
Why It Matters
The decision protects ENE as an ADR tool by resisting routine post-mortems over costs. It confirms that parties should prepare their cases properly before an ENE, but that courts will be slow to turn an unsuccessful evaluation into separate costs litigation.
For litigants, the case also highlights the practical risk of scheduling ENE before pleadings and evidence have fully crystallised: a process intended to narrow issues may instead be unable to proceed when a material case is raised late.