The Introduction of Compulsory Mediation for Small Claims: A Comprehensive Overview

The Ministry of Justice (MoJ) has recently confirmed that mediation will become compulsory for civil claims valued at up to £10,000 – with parties facing costs sanctions or a strike-out if they fail to engage in the mediation process. 

The MoJ’s consultation on the proposal, which commenced in 2022 has finally concluded with the announcement in July of this year. However, the exact timeline for the implementation of these changes remains somewhat ambiguous. It has not been confirmed as to when the changes will take place, but they are expected to come into effect towards the latter end of 2024.

Compulsory mediation

Why Are These Reforms Happening?

This significant move is a reflection of the government’s commitment to streamline the legal process and reduce the burden on the courts.

The reforms are designed to make mediation a standard procedure in most small claims. This decision was seemingly expedited due to the success of ‘remote’ hearings during the coronavirus pandemic. The pandemic has reshaped many aspects of our society, and the legal system is no exception. The ability to conduct hearings remotely has demonstrated the potential for more flexible and efficient legal processes.

Initially, compulsory mediation will apply only to specified money claims, which currently constitute around 80% of all small claims. However, the vision is for this to be extended to all small claims issued under Part 7 proceedings in due course.

This means that a vast majority of claims, specifically those up to a maximum of £10,000, will be affected. The MoJ has projected that this change could impact approximately 92,000 cases annually.

The Proposed Procedure in Detail

  • Claims to be issued in the usual way. 
  • If the Defendant fails to file a Defence, the Claimant will be able to proceed with a request for Default Judgment. 
  • In the alternative, if the Defendant serves a Defence and the court should allocate the case to the small claims track, the parties will be informed that the next step is mediation. 
  • The parties will complete their respective ‘directions questionnaire’ and the case will progress to the Small Claims Mediation Service, where appointments will be offered within 28 days. 
  • The parties will be offered a 1-hour telephone mediation (free of charge) and a court-appointed mediator will discuss with the parties and explore areas for compromise and potential settlement.
  • If a settlement is reached, a formal agreement will be drawn up, which will be legally binding. 
  • If a settlement is not reached, the claim will fall back into the small claims court to be heard by a Judge, in the usual way. 

Failure to comply with Mediation

The court will have jurisdiction to apply sanctions if a party does not attend their scheduled mediation appointment. These sanctions can be severe, ranging from a strike-out – which could result in a ruling in favour of the compliant party – to costs sanctions. This means the Judge can order the non-compliant party to pay for part or all of the other party’s legal fees. 

Without sanctions, the introduction of compulsory mediation will not succeed and will have little effect on the overriding objective, which ultimately, is to deal with cases promptly and at a proportionate cost. 

Conclusion & Broader Implications

It is, therefore, hoped that the introduction of compulsory mediation will increase the number of disputes that are settled at an early stage. In theory, this will save costs and free up the court’s time and resources. 

The Law Society has emphasised the importance of adequately resourcing and funding the Small Claims Mediation Service to ensure its success. Moreover, groups like the Federation of Small Businesses are advocating for an increase in the Small Claims limit to maximise the benefits of the proposed changes.

The MoJ has reiterated that while mediation is encouraged, settlement remains voluntary. Every party retains the right to a hearing before a judge if they believe it’s necessary.

If you need help navigating the mediation process, our experienced solicitors are on hand to offer tailored advice. Contact SRB today.