Compulsory Mediation - Faster resolution for small claims in England and Wales

Alternative dispute resolution (ADR), such as mediation, can offer a swifter and less stressful way to resolve legal problems. On 22 May 2024, mediation became an integral part of the small claims process, with parties now required to attend an appointment to try and resolve their case ahead of having a court hearing.

Since 2007, parties making a claim for less than £10,000 have been able to choose to take part in a mediation session. However, this new compulsory step will apply to all new money disputes under £10,000 in the County Court in England and Wales. These types of claims may include issues 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.

These changes follow the landmark Court of Appeal Decision in Churchill v Merthyr Tydfil Borough Council [2023], which held that English courts have the power to stay civil proceedings in order for parties to engage in mediation or another form of ADR (as long as this does not impair the claimant’s fundamental right to a judicial hearing and is proportionate to the aim of settling the dispute fairly).

The new policy overturns the long accepted general prohibition on English courts compelling ADR, and forms part of the government’s plan to increase the use of ADR across the county courts, family courts, and tribunals, to encourage sensible negotiations, and follow the overriding objective to resolve claims quicker and more consensually, while incurring as little costs as possible.

Practical Considerations

The “Practice Direction 51ZE – Small Claims Track Automatic Referral to Mediation Pilot Scheme” is set to run from 22 May 2024 to 21 May 2026. During the pilot, once a claim has been issued and directions questionnaires filed by all parties, proceedings will be stayed for a period of time. Claimants and defendants must then take part in a free one-hour mediation appointment, provided by HM Courts and Tribunals Service’s Small Claims Mediation Service.

The compulsory mediation appointment is free-of-charge, and there is no pressure to settle the case at this point. If an agreement cannot be reached - the case will go before a judge. Mediation sessions are generally organised within 28 days, which is often much quicker than the wait for a court date.

Following the one-hour mediation, the options open to the parties are to apply for:

(a) judgment for the unpaid balance of the outstanding sum of the settlement agreement; or

(b) the claim to be restored for hearing of the full amount claimed,

unless the parties have agreed that the claim is to be discontinued or dismissed.

If either party fails to attend the mediation provided by the mediation Service, the court must consider at the subsequent hearing whether any sanction is appropriate, in all the circumstances.

The pilot does not currently apply to a claim started using Online Civil Money Claims and does not apply to personal injury claims. Furthermore, mediation will not take place where there are safeguarding concerns, for example in instances where there is domestic abuse or where there are vulnerable parties.

Future considerations

It is widely accepted that ADR methods, such as mediation, may provide a low-cost and quicker alternative to litigation, which allows parties a quicker resolution while also freeing up court time and resources. Indeed, UK Government figures seem to illustrate how ADR can benefit the court system: in 2022, about 85,000 of small money claims reached the County Courts, with parties in 20,000 of those cases opting into voluntary mediation. The HMCTS service was able to help settle more than half.

The Government therefore projects that this new policy could see an extra 5,000 judicial sitting days per year made available, which judges can dedicate to efficiently resolving cases less suited to mediation. To support this ambition, HMCTS has more than doubled the number of mediators they employ.

However, in some quarters, the push for ADR may be seen as another unnecessary layer of bureaucracy, delay, and expense. Critics of the new policy suggest the very phrase “mandatory mediation” may be an oxymoron, with potential sanctions for individuals who do not co-operate with mediation negatively impacting access to justice for some.

Nonetheless, ADR methods are becoming more common; now often referred to as straight-up dispute resolution, and less “alternative”. The UK Government have been clear in their plans to expand the compulsory mediation scheme to higher value claims, such as disputes on the fast-track (£10-25,000) and multi-track (£25,000+).

The impact of this new compulsory mediation policy remains to be seen but it is expected to free up court time and resources, and to allow us to keep up with the evolving ways to resolve legal disputes in the modern age.

Jennifer Wells is trainee solicitor and Shepherd and Wedderburn LLP and co-chair of Young Mediators .