Compulsory mediation in small claims: a quick guide for the busy lawyer

We previously analysed the Ministry of Justice's plans to introduce compulsory mediation to all County Court claims.  The first part of this strategy is now in force…

What is it?

A new pilot scheme requiring parties in money claims valued at up to £10,000 to take part in a compulsory free one-hour mediation appointment, provided by HMCTS' Small Claims Mediation Service – before the claim can then proceed to Court if no settlement is reached. 

When does it apply?

It came into force on 22 May 2024 and runs until 21 May 2026. 

However, much like the Disclosure Pilot, do not expect this to go away, as it is anticipated to expand to include more claims – the MOJ says it has not ruled out mandatory mediation in higher value County Court claims.  

Which claims are suitable?

The pilot targets claims started in the Country Court and which would normally be allocated to the small claims track.  Claims must meet the following criteria to be caught by the pilot:

• Money claims - so claims in which the only remedy claimed is a judgment for a specified sum of money;
• Small Claims – valued at no more than £10,000;
• No more than 2 parties;
• Claims made on paper or issued through Money Claims Online (MCOL) or through Secure Data Transfer (SDT). Cases submitted through Online Civil Money Claims (OCMC) are going to be introduced later. Until then, these cases will be opted-in to mediation, but with the ability for parties to opt out.

The pilot will not apply in the following circumstances: 

• Complex claims (eg professional negligence claims) are excluded; 
• Road Traffic Accident and Personal Injury Claims are excluded; and
• Mediation will not take place where there are safeguarding concerns, eg where vulnerable parties are involved. 

The MOJ guidance provides examples of suitable claims, such as businesses recovering debt from customers, individuals contesting parking tickets, or disagreements over payments for goods and services – such as a homeowner suing builders for not completing work as agreed.

What actually happens?

Once pleadings have closed and the parties have filed their Directions Questionnaire, the claim will automatically be referred to the mediation service. 

The claim will be stayed for 28 days to allow time for the mediation appointment to be arranged. 

At the mediation appointment, the mediator will speak to each side separately and work between the two to find a solution each side can agree on. 

Crucially, the parties are not required to reach a settlement at mediation, but it provides an opportunity to discuss a potential resolution. 

If an agreement cannot be reached, the case will progress – potentially to trial. 

If the claim is settled at the mediation, the proceedings will automatically be stayed with permission to apply for judgment or restoration if the settlement goes unpaid – unless the parties agreed the claim is to be discontinued or dismissed. 

What happens if a party refuses to attend?

If a party does not attend the required mediation appointment, without good reason, the judge may apply a sanction at the final hearing. This could include a fine, covering the cost of the wasted mediation appointment or, in extreme circumstances, having their claim or defence dismissed.

Costs are not usually awarded on the small claims track, unless a party has behaved unreasonably (other than fixed costs). However, failure to attend the mediation appointment is another factor a judge can take into their consideration when exercising their discretion on costs – so could be considered unreasonable behaviour. 

That being said, the Practice Direction specifically states that "A party’s rejection of an offer in settlement will not of itself constitute unreasonable behaviour under paragraph (2)(g) but the court may take it into consideration when it is applying the unreasonableness test." It is not clear how this would apply in the context of a party attending mediation and refusing to engage properly or declining reasonable offers of settlement. 

Why has this been introduced?

In short, to free up Court time. The MOJ say c. 85,000 Small Money Claims progressed through the County Court in 2022, but parties in only 20,000 of these cases opted into voluntary mediation – of which HMCTS was able to help settle more than half. 

It is thought compulsory mediation will reduce the burden on the Court and is anticipated to free up an extra 5,000 judicial sitting days per year – which can be used to focus on more complex cases. 

Is it a good idea?

The Law Society raised concerns about access to justice, worried that this would create a two-tier system: where some parties can access justice and others can only access a means to end a dispute. The introduction of this proposal as a pilot appears to be a result of those concerns. 

The above said, it is only compulsory to attend the mediation, it is not compulsory to reach a settlement. So, in low value disputes that really are just about the money, it may be that an early mediation at which both parties are asked to consider what they may accept in settlement could be beneficial – particularly if those parties are unrepresented. 

One concern will be whether parties truly engage in the mediation process or whether they simply attend as a box ticking exercise. Only time will tell. 

More Information

For our detailed analysis on the planned introduction of compulsory mediation, please see our previous article.

For the new rules themselves, please see Practice Direction 51ze  – Small Claims Track Automatic Referral To Mediation Pilot Scheme.