In July 2022, the Ministry of Justice (MoJ) released a consultation on Increasing the use of mediation in the civil justice system, which outlines proposals for mediation to be a compulsory element of all small claims track County Court proceedings. This would extend to all claims under £10,000 that were in the small claims track as well as personal injury and housing disrepair claims, although at the lower small claims track level for this type of litigation.
The framework for the proposals
Under these proposals, unless exempted by the court, parties in a defended small claim track matter will be required to attend a free mediation appointment with the Small Claims Mediation Service (SCMS) before progressing to a final hearing. The consultation is also looking to explore whether this should be extended beyond small claims, which would see parties referred to external mediators and outside of the SCMS. The consultation is seeking opinions on the proposals as well as user experiences of the SCMS.
The proposals are part of a wider reform programme of the court service and would be a significant step forward in resolving disputes through mediation in England and Wales. Compulsory mediation is already a feature of court processes in other jurisdictions and would align England and Wales more closely with jurisdictions like Italy, Australia and Ontario, Canada.
One of the key elements to this consultation is the compulsory nature of the proposals. Subject to any exemption, it is proposed that if a claimant does not agree to mediation, they may face having their claim struck out. If the defendant does not agree, then they may face costs consequences.
The compulsory nature of these proposals will focus the parties’ minds and incentivise engagement. However, this will change the face of lower value litigation, particularly if costs are introduced as another dimension to small claims track litigation beyond that of the current unreasonable behaviour provisions under CPR 27.
The impact of the proposals
The MoJ believes that this will lead to improved resolution of disputes between parties to defended small claims litigation and has forecasted a significant saving of judicial time. The consultation outlines an anticipated 20,000 cases annually being diverted from the court system and freeing up 7,000 judicial sitting days.
There is a corresponding impact that is likely to be had on solicitors, particularly those dealing with this type of work, which is addressed within the impact assessment.
The costs implications around failure to engage in mediation is established and case law has developed in this area to set out a clear expectation that where parties fail to engage, including failing to respond to requests to mediation.
We can go back almost 20 years to the Court of Appeal decision in Halsey v Milton Keynes General NHS Trust which outlined the importance of engagement with mediation. Halsey affirmed that an unreasonable failure to engage with mediation would result in costs sanctions. Ten years later in PGF II SA v OMFS and another it was held that silence could be seen as a failure to mediate. In Thakkar and another v Patel and Another, even “foot dragging” was to be seen as a refusal to mediate and would result in appropriate sanction.
However, there does need to be balance. There will be circumstances where a refusal of mediation is deemed reasonable and in Swain Mason v Mills and Reeve, the Court of Appeal accepted that the parties’ positions were so far apart to mean that there were no reasonable prospects of mediation being successful.
Any rule changes that may follow on from this consultation should carefully navigate the body of case law that has developed in this area over the last 20 years but also be clear on expectation around engagement between parties. There are substantial benefits that mediation can bring and with this we have seen an emergence of more mediation suppliers in the market. However, with the uncertainty of the extent as to whether this will apply only to small claims or whether this will extend beyond this track as well as the corresponding scope and rules surrounding these proposed changes, there are still many questions to be answered.
Stakeholders will be watching closely the extent of these proposals and whether this consultation leads to a change just within the small claims track, or a creep also into the fast track. However, what is clear is that mediation will become more of a feature of dispute resolution in the future and costs will continue to be an important element around engagement, regardless of the value of the dispute.
The final date for submissions on the consultation is 4 October 2022. The proposals are a significant step change in civil litigation in England and Wales and therefore stakeholder responses to the consultation are key.
Ian Curtis-Nye is a Council Member of the Association of Costs Lawyers and a Partner at Lyons Davidson.