Parties bringing or defending small claims could soon find themselves forced to take part in a mediation to try to resolve their dispute – whether they like it or not.
The idea was put forward in a government consultation launched last July, which closed in October. We are still waiting for the Ministry of Justice to confirm its plans, having considered the consultation responses. But in the meantime, things are moving forward.
The recently published minutes of a December meeting of the Civil Procedure Rule Committee (CPRC) revealed that the CPRC has already appointed the first two members of what will be a new a sub-committee being set up to prepare for the change. And as the CPRC chair observed, the extension of compulsory mediation is an ‘important topic’ that raises ‘some reasonably profound issues for civil justice’.
So why is the government taking this new and fairly bold step? At the moment, these small claims – valued at £10,000 or less – are taking some 51 weeks to get to court. That is far too long. The government hopes that compulsory mediation will reduce that backlog – with potentially 272,000 parties accessing mediation every year. It estimates that 20,000 cases a year could be diverted from the court system, freeing up judicial resources for more complex cases.
How would it work? The government proposes using the existing Small Claims Mediation Service (SCMS), but instead of parties choosing to use the service, they would be compelled to do so; with all defended claims stayed for 28 days and referred to the SCMS. The SCMS allocates each party a separate one-hour appointment with a court appointed mediator. At the end of the process, a binding agreement can be made verbally through the mediator. The two parties do not talk to one another directly.
Importantly, under the government’s proposals, while parties will be obliged to engage with the mediation, they do not have to accept a settlement, and still have the right to proceed to court if the mediation fails.
Is this a positive development for small claims? Typical small claims involve things such as parking penalties; online shopping; building works; unpaid invoices or pet expenses. Being herded through a mediation process will inevitably lead to many people resolving these disputes much more quickly – and that will be a considerable advantage. Where you have issues of fact rather than law (as a mediator cannot rule on the law), and where there is no major imbalance between the two parties, then mediation might well be a practical solution. But personally, I’m not convinced that the process should be compulsory. It seems to me that it really should be the parties’ own choice.
Say you were badly let down by a builder who took your money and left you in the lurch with a hole in your roof. Why should you be forced to mediate, when you know you are fully in the right? The essence of a mediation is that both sides are open to some degree of compromise. Where that clearly isn’t the case, then the mediation will inevitably fail. If that happens, all you have done is to build in an extra 28 days to what is already a very long wait before you can get before a judge.
Then we have the issue of balance of power; and in particular, whether one side has legal representation, when the other doesn’t. It’s wrong to assume that in a small claim, neither side will be legally represented. As the Law Society pointed out in its consultation response, while legal costs are not recoverable in civil small claims, many people are still prepared to pay for a lawyer from their own pocket.
This is well illustrated by the new Official Injury Claim portal introduced as part of the government’s whiplash reforms. Despite legal costs not being recoverable, more than 90% of claimants using the portal are legally represented. Meanwhile in the small claims space, litigants are often large companies with high volumes of small claims, such as insurers or parking companies. As such, they will be represented by an in-house or external lawyer. To insist on compulsory mediation where one side has the benefit of legal advice and experience, and the other is completely on their own, surely poses a risk of unfair settlements.
It seems to me that – while compulsory mediation may seem like a temptingly cheap and easy way to slash court backlogs – the government should tread carefully with reform in this area. Parties have the right to expect not only that their dispute will be resolved promptly, but also fairly – whatever the sum at stake.
March 13, 2023
Insights
