HMCTS has announced that, from 22 May 2024, parties whose claim is worth less than £10,000 (ie claims on the small claims track) will be required to attend a mediation session prior to any court hearing. This applies to claims made on paper or through HMCTS’s online systems. The requirement is part of a government plan to increase the use of dispute resolution across the civil courts, in order to resolve disputes swiftly and with less stress. Since 2007, parties making a small claim have had the choice to participate in mediation, leading to around half of these cases being settled out of court. Compulsory mediation under the new policy will remain free of charge and parties are not required to settle a claim through mediation if an agreement cannot be reached.
To help you prepare for the requirement to mediate in small claims, we’ve set out some guidance below on handling small claims proactively. Our Small claims toolkit contains a how-to guide and relevant template documents to assist you with the small claims process.
What do I need to do before starting a small claim?
There are rules governing your actions before starting a small claim (ie a non-complex claim for less than £10,000) against someone. You must:
- read the rules on preparation that apply to your case and do what they say. In all cases, you must read the Practice Direction for Pre-Action Conduct and, depending on what the claim is about, you may need to also look at the pre-action protocols;
- write a formal letter to the other side, explaining what has happened, warning that you are going to sue them and saying what you want from them (known as a letter before action or a letter of claim: see our Letter before action for a template you can use); and
- try to resolve the matter out of court.
Why should I try to resolve matters before starting a small claim?
Prior to starting a small claim, you should try to resolve the matter out of court. There are two main reasons why:
- The law requires you to consider alternatives and treat going to court as a last resort. The court can order you to pay some or all of the legal costs incurred by the other side if you ignore this and do not consider alternatives before going to court, even if you ultimately win the case.
- Bringing a small claim is not usually desirable for your business. It costs money, takes time, distracts you from your business, can be stressful and is not usually confidential (you may have to disclose information about your business to the public, including competitors), and it is not guaranteed that you will win your case.
The main ways you can try to resolve a small claim out of court are negotiation (by emails, letters, calls or other face-to-face meetings with the other side to try and settle the dispute) and mediation.
See Resolving disputes proactively for more detail on these methods in the context of resolving a dispute with your customer.
What is mediation?
Mediation is a popular form of dispute resolution. An impartial third party (the mediator) meets with you and the other side together and helps you to reach an agreement. The meeting can take place at a physical location or online via video-conferencing, and may include group sessions or the mediator acting as an intermediary between the parties.
A mediator is not like a judge or an arbitrator as they will not make a decision about your dispute, but rather will focus on helping you come to an agreement.
What are the benefits of mediation?
It is always worth considering mediation when it is offered for a variety of reasons:
- It can be quick and cheap, as most mediation processes will require no more than a day.
- There can be cost consequences if you unreasonably refuse to mediate.
- The focus of mediation is on your broader interests, rather than on technical legal rights. For this reason, factors such as reputation issues, personal emotions and business relationships can be taken into account if necessary. This means that, if successful, the process can assist in maintaining your commercial relationship with the other side.
- Unlike litigation, you and the other side decide the outcome, rather than having a judge’s decision imposed on you.
- If mediation does not end in an agreement, everything that was said and done during the mediation is confidential. This means that the judge will not be told what went on at the mediation as the case continues through the court.
What are the costs of mediation?
Unless you hire a lawyer to help you, the cost of mediation will usually just be the mediator’s fee and the hire of a suitable venue to meet, if needed. Your mediator will explain what sort of venue will be suitable for your mediation.
The mediator’s fee is dependent on the amount of money involved in the claim and the mediator you choose. The costs of the mediator are usually divided equally between the parties, although you can agree a different divide if you want to.
Under the government’s small claims mediation service, mediation is free in small claims.
Where can I find a mediator?
If you agree to try mediation, search for a qualified mediator. You can try the Centre for Effective Dispute Resolution website (use the ‘find a CEDR mediator’ tool on the right hand side) or the Civil Mediation Centre directory.
The content in this article is up to date at the date of publishing. The information provided is intended only for information purposes, and is not for the purpose of providing legal advice. Sparqa Legal’s Terms of Use apply.
Marion joined Sparqa Legal as a Senior Legal Editor in 2018. She previously worked as a corporate/commercial lawyer for five years at one of New Zealand’s leading law firms, Kensington Swan (now Dentons Kensington Swan), and as an in-house legal consultant for a UK tech company. Marion regularly writes for Sparqa’s blog, contributing across its commercial, IP and health and safety law content.