Compulsory mediation: Landmark change for small claims in England and Wales

Yesterday marked the first day that mediation will be an integrated, required step for all new small claims issued in the County Court in England and Wales.

This will initially apply to new civil claims made on paper or through traditional online systems before being rolled out to all claims under £10,000.

The changes come after the landmark Court of Appeal Decision in Churchill v Merthyr Tydfil Borough Council [2023] EWCA Civ 1416 which held the English courts have the power to stay civil proceedings in order for parties to engage in mediation or another form of alternative dispute resolution (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). This overturns the long accepted general prohibition on English courts compelling alternative dispute resolution.

What does this mean for claimants lodging applications after 22 May 2024?

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 this period, once a claim has been issued and directions questionnaires filed by all parties, it will be stayed for a period of time and claimants and defendants will be referred to a one-hour mediation which is free of charge to the parties.

The pilot does not currently apply to a claim started using Online Civil Money Claims and does not apply to personal injury claims.

If either party fails to attend the mediation, and fails to settle, the court must consider at that hearing whether any sanction is appropriate in all the circumstances having regard to whether the parties attended mediation provided by the Mediation Service.

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.

The mandatory mediation therefore does not preclude parties from continuing with the action should mediation fail.

Future considerations

ADR methods such as mediation are often seen as a low cost and quicker alternative to litigation, allowing parties a quicker resolution and freeing up court time and resources. The Centre for Effective Dispute Resolution estimates a strong success rate, with 93% of mediated issues being resolved on the day or soon after.

That being said, some people see the push for ADR as another unnecessary layer of delay and expense. Others suggest the very phrase “mandatory mediation” to be an oxymoron. There is a fear that potential sanctions for individuals who do not co-operate with mediation could result in removal of the access to justice for some. However, it is clear ADR methods are becoming more common and accepted, to a point of simply being referred to as “dispute resolution” rather than alternative.

The 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 remains to be seen but it is expected this will free up court time and resources and allow us to keep up with the evolving ways to resolve legal disputes in the modern age.

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