Small claims mediation is now compulsory: Here's what to expect

Small claims mediation was first trialled in 2007, and meant that companies or individuals who were involved in litigation for less than £10,000 (otherwise known as cases on the small claims track) were offered a telephone appointment with a trained mediator. The mediators assist the parties by listening and seeking to understand the dispute, and consider options for resolving the case. The mediators are completely independent which (particularly when one or both parties do not have legal representation) can mean parties feel more confident in the negotiation.

A successful mediation means that the parties can resolve the dispute without incurring time and legal fees which they will not usually recover on the small claims track. In turn, this reduces the burden on the Court systems overall.

We are three months into the Small Claims Track Automatic Referral to Mediation Pilot Scheme (Practice Direction 51ZE). This is the first time mediation has been compulsory on small claims track matters. It will run from 22 May 2024 to 21 May 2026.  We shall monitor the results with interest over this time.

What will happen in a mediation appointment?

The parties will be assigned a two hour time slot, and the mediation can begin at any point within this slot. The mediator will telephone first one party, and ask them about their case and if they have any offers to make. They will then telephone the other party and ask the same questions, and put forward any offer made by the first party. From there, the mediator will go back and forth between the parties, and try to reach a settlement agreement. This process takes about an hour.

It is important to note that the mediator will not give legal advice, or comment on the merits of each party’s claim or defence.

If the parties do not agree settlement terms, the mediation will end, and they will continue to prepare for trial. Of course, there is nothing to prevent the parties agreeing terms between themselves later on, however this will generally attract additional fees.

If the parties successfully agree a settlement, the mediator will read the mediation agreement to each party and ask them to confirm they agree to the terms. A copy is then sent to each party and placed on the Court file. This agreement is legally binding.

What form might a mediation agreement take?

For a debt claim, the agreement will define the settlement sum, and confirm how this is to be paid e.g. in full within a short time period, or by monthly instalments of a set amount until the settlement figure is paid. It will also provide for what happens if the agreed payments are not made. The agreement may also provide for additional work to be carried out or goods to be delivered. Both parties must be satisfied that this is an acceptable solution.

The agreement will also provide for what happens if the settlement sum or instalments are not paid; this will usually mean that the Claimant has the option to request Judgment in default for the settlement sum.

Finally, the agreement will include a standard confidentiality clause, providing that parties cannot disclose the terms of the settlement (except where legally necessary).

What happens if a party fails to attend the mandatory appointment?

Although solicitor fees are generally not recoverable in a small claims case, a party can usually expect to recover some disbursements if they win. These can include the claim fee, trial fee, travel expenses, and the costs of instructing an advocate to argue the case on its behalf. Where a party fails to attend the mediation appointment without good reason, the Judge can consider this at trial, and may sanction the party. They may award the party a Judgment on the sum claimed, but then refuse to order some or all of the disbursements to be paid, and may even order that party to pay the other side’s costs.  In extreme cases, the Judge may dismiss the party’s claim or defence.

Can the mediator force the parties to settle?

No, mediators cannot compel the parties to compromise if they do not want to.

If you would like to discuss litigation in relation to a debt (whether more or less than £10,000) please contact our specialist debt recovery lawyers who will be happy to talk through your options.