In its consultation which closed on 4th October, the Ministry of Justice (MOJ) made it pretty clear that it is proposing to introduce an automatic referral to mediation in all small claims track (SCT) claims, irrespective of their nature. The consultation left open the possibility that parties should be able to apply for individual exemptions from the requirement but this would almost certainly be the exception, rather than the rule.
Whilst the principles of mediation are sound of course, our response to the consultation urged caution against the proposals.
Our principal concern is that although SCT cases are not cost bearing, there are large numbers in which at least one of the parties is an insurer, bank, utility company or another type of large, professional organisation. These organisations are experienced in handling low value claims that would fall within the remit of the SCT, and well placed to attempt settlement or make it clear that a settlement is not an available option, without any need for the delay and increased internal costs that mediation would incur. Many of these organisations are already parties to pre-action dispute resolution (ADR) processes, and it is a concern that if mediation is introduced within the litigation process it may encourage parties to bypass the pre-litigation ADR.
There is also a plethora of SCT claims where one or both parties will have legal representation because of the technical nature of the dispute. Credit hire, subrogated ‘bent metal’ motor claims and personal injury claims are just three examples. The representatives in these cases often already use some form of ADR without the need for an automatic referral to mediation and of course cases involving allegations of fraud require a hearing so that there may be cross-examination to test the credibility of the evidence.
A further concern that we have highlighted in our response is the availability of a sufficient number of mediators with the necessary experience and competency to meet the vastly increased demand for their services. A growing backlog of claims waiting for mediation should not be permitted to simply take the place of the current backlog of SCT final hearings.
This proposal to introduce automatic referral to mediation comes at the same time as the Civil Justice Council's work on review of the pre-action protocols (PAPS) to make them more effective.
In our responses to both consultations, we have maintained that unless pre-action behaviour is properly monitored and policed by the judiciary, PAPs will remain largely ineffective. This in turn feeds into how genuinely a party enters into the mediation process, whether voluntarily or otherwise: if that party’s case has not been set out openly and/or key documents have not been disclosed, how can the other party be expected to engage in the mediation with confidence that the other side is doing so with integrity?
Behaviour during the mediation is impossible to criticise, as the process is confidential, so only the behaviour in the earlier stages of the PAP can be scrutinised. Where poor behaviour is found to have taken place, the appropriate penalty must be in costs. In the absence of fraud, striking out a claim or a defence in its entirety would be draconian.
We are firmly of the view that mediation does have a place in disputes between litigants in person, or in certain types of common, high-volume disputes. The existing Small Claims Mediation Service guidance recognises that these typically involve claims relating to parking penalties, online shopping, building works and unpaid invoices. Parties should certainly be made aware of the value of mediation and encouraged to use it but we feel that compulsion is a step too far.
In summary, we feel that in a large number of SCT claims, an automatic referral to mediation would build in unnecessary and avoidable costs and delay, particularly to the many cases where the litigation process has been commenced to obtain a court decision.
Across the board mediation would require a large body of suitably trained and accredited mediators (or would see significant delays) and there would need to be adequate support for vulnerable and disadvantaged litigants.
We have highlighted to the MOJ that justice would be served more effectively by ensuring that those SCT claims requiring adjudication, progress to a final hearing promptly before a judge and that the MOJ would be better focusing their limited resources in increasing the number of judges able to adjudicate SCT hearings to bring down the existing delays.