Key takeaways
ENE costs usually in case
Failed ENE costs will ordinarily be costs in case.
Separate costs orders remain exceptional
Strong justification is needed to depart from default.
Avoid disputes about ADR processes
Courts discourage costly satellite litigation over ENE.
We examine a recent case involving Early Neutral Evaluation (ENE) - 3173 Bidco Ltd & Anor -v- Roberts & Anor [2026] EWHC 2312 (Comm).
ENE is an ADR process in which a judge or other neutral evaluator provides a non-binding assessment of the parties' cases. The objective is to help the parties better understand the merits of their positions, encourage settlement and reduce the scope of the dispute. As part of their case management powers, courts may order parties to participate in ENE, reflecting the wider judicial encouragement of ADR following the Court of Appeal's decision in Churchill -v- Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416.
The High Court has provided useful guidance on the costs consequences of an unsuccessful ENE, indicating that the starting point will ordinarily be for those costs to be treated as costs in the case, absent compelling reasons to order otherwise.
In 3173 Bidco Ltd -v- Roberts, HHJ Pearce was asked to determine who should bear the costs of a court-ordered ENE that did not result in a resolution of the dispute. Although the claimants argued that shortcomings in the defendants' preparation had rendered the exercise ineffective and justified an indemnity costs order, the court declined to undertake a detailed examination of responsibility for the ENE's failure.
Instead, the judgment emphasises the importance of encouraging the use of ADR and avoiding costly satellite disputes about the ADR process itself.
Why the court declined to make a separate costs order
A central theme of the decision was the practical difficulty of determining whether particular conduct genuinely caused the ENE to fail. The court noted that such enquiries can become disproportionate, particularly where the outcome of the ENE may have been uncertain regardless of the alleged procedural shortcomings.
The judgment also reflects a broader policy objective. If parties face the prospect of extensive costs arguments whenever an ENE proves unsuccessful, there is a risk that the attractiveness of ENE as a dispute-resolution tool will be undermined.
Against that background, HHJ Pearce considered that the better starting point is ordinarily for ENE costs to be absorbed into the overall costs of the litigation and determined at the conclusion of the proceedings.
The facts
The dispute arose from allegations that the defendants had breached post-termination restrictive covenants following the departure of the first defendant from the claimants' pension trustee business.
During a court-directed ENE, the defendants relied upon an argument that had not previously been pleaded, namely that the parties were not competing in the same market. The issue caused difficulties during the ENE process and the costs question was subsequently reserved.
While the court accepted that the defendants' approach had contributed to those difficulties, it was not persuaded that the ENE costs would have been avoided, or that a successful outcome would necessarily have been achieved, had the argument been pleaded earlier.
Lessons
The decision demonstrates that parties seeking a standalone costs order following a failed ENE are likely to face a significant hurdle. Mere criticism of another party's conduct may not be sufficient. Instead, the court is likely to require compelling justification before departing from the usual position that ENE costs should follow the ultimate outcome of the litigation.
The court noted that where participation in ENE is court-directed, it may be difficult to argue that the costs of attendance would have been avoided altogether
The judgment also highlights the benefit of expressly addressing costs when agreeing to, or seeking, an ENE. Clear provision within the relevant order or agreement may reduce the scope for subsequent disputes.
Comment
This is a pragmatic decision that aligns with the courts' broader commitment to encouraging ADR. While the jurisdiction to make adverse costs orders remains intact, the judgment suggests that courts will be slow to embark upon detailed post-mortem analyses of why an ENE did not succeed. Absent unusual circumstances, the expectation is likely to be that the costs of the exercise are dealt with alongside the costs of the proceedings as a whole.
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This article was co-authored by Trainee Solicitor, Josh Evans.
