Compulsory Mediation for Small Claims in England and Wales

The introduction of compulsory mediation for small claims under £10,000 marks a landmark shift in the way disputes will be resolved in England and Wales. Effective from 22 May 2024, this new initiative aims to reduce court backlogs, provide quicker resolutions, and allow more efficient use of court resources. Mediation, which has long been encouraged but never previously compulsory in the Small Claims Track, will now be an essential and integrated step in the process.

Our experienced Alternative Dispute Resolution specialists can guide you through this new mediation process. We offer comprehensive support to clients who are navigating compulsory mediation and can advise you on the most effective approach to resolving your dispute. Our team will ensure that you are fully prepared for mediation, safeguarding your interests and ensuring that your position is clearly presented.

What is mediation?

Mediation is a structured process for resolving disputes where an impartial third party, the mediator, facilitates communication between conflicting parties to help them reach a mutually acceptable compromise solution. It is characterised by its voluntary nature, confidentiality, and focus on the needs and interests of the parties involved.

The process typically involves pre-mediation preparation, an opening session, private discussions with each party, negotiation, and potentially, a final agreement. Mediation offers several advantages over traditional litigation, including faster resolution, cost-effectiveness, greater control for the parties, and the potential to preserve relationships.

It is widely used in various contexts, from small claims and family disputes to complex commercial conflicts, providing a flexible and collaborative approach to conflict resolution that encourages open dialogue and creative problem-solving.

What Is Compulsory Mediation for Small Claims?

With effect from 22 May 2024, all new claims valued at less than £10,000, filed in the County Court and allocated to the Small Claims Track, have been subject to compulsory mediation as an initial step. This change has been implemented in two stages.

From 22 May 2024, mediation became a mandatory requirement for claims initiated on paper through the HM Courts and Tribunals Service’s (HMCTS) legacy systems, including:

• Money Claims Online (MCOL); and
• for bulk users issuing claims via Secure Data Transfer (SDT).

The obligation to mediate in respect of claims submitted through the Online Civil Money Claims (OCMC) system came into effect on 5 November 2024. From this date, all new civil money claims under £10,000 filed through OCMC are required to participate in a mediation session in an effort to resolve the dispute prior to proceeding to a court hearing.

Accordingly, all money claims allocated to the Small Claims Track are now automatically referred to the Small Claims Mediation Service (SCMS). This includes OCMC claims submitted on or after 11:00 a.m. on 5 November 2024. Automatic referral to mediation has already been applicable to claims issued on paper or through HMCTS’s legacy systems.

This new process follows the landmark Court of Appeal decision in Churchill v Merthyr Tydfil Borough Council [2023] EWCA Civ 1416, which granted English courts the authority to require mediation or alternative dispute resolution (ADR) in civil proceedings, provided it does not infringe on the claimant’s right to a judicial hearing. The change represents a shift towards reducing litigation and promoting dispute resolution methods that are faster, cheaper, and more effective.

Under Practice Direction 51ZE, which came into force in tandem with this reform, all small claims cases will be referred to a court-appointed mediator for a free telephone session lasting up to one hour. The aim is to ensure that parties engage in mediation before the case proceeds to a trial. Practice Direction 51ZE requires both the claimant and defendant to engage in this mediation process, unless they can demonstrate a valid reason not to participate, such as the case being inappropriate for mediation.

Why Is Compulsory Mediation Introduced?

One of the key reasons behind this change is the growing concern over the length of time it takes for small claims to reach trial. On average, small claims in the County Court take over a year from the filing of the claim to trial, largely due to the time spent on cases that could have been settled before reaching the court stage. By introducing compulsory mediation, the aim is to resolve disputes sooner, saving time for both the parties involved and the courts.

The government believes that by encouraging resolution through mediation, cases can be dealt with more efficiently, with fewer cases needing judicial intervention. This reform is expected to free up to 5,000 sitting days per year, which will allow courts to focus more on complex cases that require in-depth legal examination.

How Will Compulsory Mediation Work?

• Once a claim has been issued and the defendant has filed a defence, the case will be allocated to the Small Claims Track.

• Both parties will then be required to complete a directions questionnaire, triggering an automatic referral to mediation.

• A court-appointed mediator will contact both parties to arrange a one-hour telephone mediation session within 28 days of the referral.

• The mediation session will be free of charge.

• The mediator will work with the parties separately and facilitate settlement, but will not judge the merits of the case.

• If the parties reach a settlement during mediation, it will be formalised through a legally binding agreement.

• Settlement during mediation remains voluntary; parties can refuse to settle and proceed to a full trial if necessary.

For further information on what to expect from a mediation session, a short video has been prepared by HM Courts & Tribunal Service which can be viewed here.

What Happens if Mediation Does Not Result in a Settlement?

If mediation does not result in a settlement, the dispute will proceed to court for a full hearing. The parties can apply for judgment on the unresolved issues, or they may request that the case be restored for further hearing before a judge. Failure to attend mediation without a valid reason will lead to sanctions at the discretion of the court, which may include cost penalties or even a strike-out of the case.

Under Practice Direction 51ZE, failure to engage in the mediation process or unjustified refusal to mediate may result in the court imposing additional costs or striking out the claim. The court has the authority to decide whether there are sufficient grounds to continue without mediation, based on the circumstances of the case.

While sanctions can be imposed for non-compliance, it is important to note that mediation does not eliminate the option of going to trial. The new rules simply add a requirement that parties must attempt to mediate before their case can progress in the court system.

What Are the Benefits of Mediation in Small Claims?

Mediation provides a low-cost, efficient alternative to lengthy court proceedings. It allows the parties to work with a neutral mediator to find mutually acceptable solutions, without the pressure and formalities of a courtroom. Mediation is generally faster than litigation and often leads to settlements that save both time and money for all parties involved.

It also allows the parties to maintain control over the outcome, rather than leaving it to a judge to decide. Importantly, mediation can often preserve relationships between the parties, which may be critical in disputes between businesses, landlords and tenants, or other ongoing professional relationships.

How Can We Help You Navigate Compulsory Mediation?

We understand the complexities of the new compulsory mediation requirement. Our Alternative Dispute Resolution specialists are well-versed in dispute resolution strategies and can assist you in preparing for mediation, ensuring that you are fully informed and ready to make the best decisions for your case. We can provide you with expert advice on whether mediation is likely to be successful, how to approach negotiations, and how to manage expectations throughout the process.

What Are the Potential Challenges of Compulsory Mediation?

While compulsory mediation is designed to streamline the dispute resolution process, it presents certain challenges. Some critics, including the Law Society of England and Wales, have raised concerns about the fairness of mandating mediation, particularly in cases where one party may be unwilling to settle. Additionally, there is a risk that enforcing mediation could lead to delays in resolving some disputes, especially where settlement is improbable. Furthermore, compulsory mediation may impose additional pressure on court resources if the demand exceeds the capacity of available mediators.

However, the overarching aim of the government is to reduce court backlogs and create a more accessible and efficient system for resolving disputes. If the scheme is successful, it could pave the way for mandatory mediation in more complex and higher-value cases, which would further ease the burden on the court system.

Could Mandatory Mediation Expand Beyond Small Claims?

The current initiative applies only to claims under £10,000, but the success of the pilot scheme will likely lead to the expansion of mandatory mediation in other areas. There is speculation that mediation could eventually become a compulsory step in higher-value cases, such as those in the fast-track (£10,000 to £25,000) and multi-track (£25,000+) categories.

The government has already signalled its intention to expand mediation further, making it an integral part of the dispute resolution process for a wider range of cases. As the legal landscape evolves, the use of mediation is expected to become more prevalent, offering parties a more efficient, less adversarial route to resolving their disputes.

How Can Our ADR Specialists Support Your Small Claims Case?

If you are facing a small claims dispute, our expert Alternative Dispute Resolution team at LEXLAW is here to support you every step of the way. From preparing for compulsory mediation to handling any litigation that may arise from unsuccessful attempts at mediation, we can ensure that you are fully prepared and positioned to achieve the best possible outcome. Our team’s expertise in the Small Claims Track and dispute resolution means we can offer tailored advice and clear guidance throughout the mediation process and beyond.

We are committed to helping our clients navigate this new process with confidence. Our experienced Alternative Dispute Resolution Lawyers are here to offer practical advice, prepare you for mediation, and ensure that you achieve the best possible resolution to your dispute. If you are involved in a small claim or any legal dispute, don’t hesitate to contact us for expert legal guidance and representation.