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Compulsory mediation has been introduced for quantified money claims issued on or after 22 May 2024 that are likely to be allocated to the small claims track and valued up to £10,000.
The mediation sessions are conducted by trained mediators from the small claims mediation service, a government-funded body. These sessions are typically conducted over the phone, last up to one hour and are free of charge.
The mediator is neutral and will act as a ‘go between’ to help the parties to find a resolution. They will not make decisions, offer legal advice, or try to adjudicate the dispute.
Why mediation?
The mandatory mediation scheme requires parties to engage in a mediation session before their case can proceed to a full court hearing.
The intention is to roll out compulsory mediation to all small claims issued under Part 7 of the Civil Procedure Rules, as well as damages cases such as personal injury claims.
This new mandate is designed to streamline the resolution process, reduce court backlogs, and provide a more efficient, cost-effective means for parties to reach settlements
The UK’s civil justice system has long faced challenges with delays, high costs and the adversarial nature of litigation. Nevertheless, small claims, often involving relatively modest financial disputes, can become drawn-out and costly affairs, consuming valuable court resources and creating additional stress.
The pandemic exacerbated these issues, leading to increased backlogs, highlighting the need for more efficient dispute resolution mechanisms. Against this backdrop, the Government has increased its focus on alternative dispute resolution (ADR) methods.
Introduction of mandatory mediation
Mediation has been optional in small claims disputes since 2007. However, in 2023 the Ministry of Justice (MoJ) confirmed that mediation will become compulsory for cases allocated to the small claims track valued up to £10,000, issued under Part 7 of the Civil Procedure Rules. The announcement followed a MoJ consultation on the topic which closed on 4 October 2022.
In a pivotal judgment in the role of the courts in directing the use of ADR, on 29 November 2023 the Court of Appeal handed down its judgment in Churchill v Merthyr Tydfil County Borough Council.
The Court found that judges can lawfully stay proceedings for the parties to engage in non-court-based dispute resolution, provided the power is exercised in a way that does not impair the very essence of the claimant’s Article 6 of the Human Rights Act 1998 (right to a fair trial).
Impact on defendants and their insurers
Many cases allocated to the small claims track are those pursued by litigants in person who may not have a legal background. A compulsory free mediation service may be of benefit to weed out claims where prospects of success are low. In turn, this could result in a significant saving of time and costs for defendants or their insurers, where previously those cases would have been pursued to a final small claims hearing.
The same may also be true in small claims cases where claimants have legal representation, as there will be an expectation that solicitors and claims handlers will approach mediation with the intention of resolving the dispute. If there is a willingness by both parties to engage with the mediation process, it is likely that more claims will be disposed of at this early stage in proceedings.
If the parties are entrenched in their respective positions, there may not be much to be gained by going through the mediation process. For a defendant or their insurer, there is minimal risk in running a small claim; fixed costs remain low and part 36 offers do not apply to small claims.
There is often little to be gained by adopting a commercial approach to a settlement where prospects on a claim are finely balanced. However, the guidance suggests the parties are expected to try to reach an agreement. Here there is a risk that defendants or their insurers may feel pressured into making nuisance offers to ‘buy off’ claims they would otherwise have fought, leading to an overall creep in indemnity spend across small claims.
Where a defendant is of the view that an appropriate denial has been made in a claim, ultimately, the aim is to either persuade the claimant to discontinue the claim or to run the matter to a hearing for final adjudication by a judge. An additional mandatory step will likely add more time to a process that already takes on average 12 months to progress through the court system.
Current guidance suggests the court will aim to offer a mediation appointment within 28 days of a case being referred to the service. His Majesty’s Courts Service has recruited and trained an additional 39 new mediators in England to meet demand. Whether that is the case, however, remains to be seen as the process is tested in practice.
