Small Claims Mediation – HMCTS ‘opt out’ evaluation report

The recent publication by HMCTS of an evaluation report on an ‘opt out’ small claims mediation pilot scheme provides further insight into relevant issues in the ongoing reform debate on the increased use of mediation in the civil justice system.

There is a clear direction of travel towards compulsory mediation in Small Claims Track cases (up to £10,000 in value) imminently, with parties likely to be compelled to attempt to settle their case through a one-hour court provided telephone mediation service – before their case can continue to final hearing.

The HMCTS report on a tweaked version of the existing ‘opt-in’ scheme identifies issues that should perhaps be considered before the widespread roll out of a compulsory scheme. A pilot of cases where parties are compelled to mediate would be sensible to assess the effectiveness of the approach and identify areas for improvement to give the best chance of success – before widespread introduction. There is some evidence from the pilot that perhaps suggests that a compulsory system of referral may not deliver significantly greater benefits than the current system.


The planned introduction of compulsory mediation is of course seen as the first wave of reform with a strong likelihood of a compulsion to mediate being introduced in cases of higher value in time – though by use of independent mediators outside the court service.


The results of the pilot from HMCTS provides interesting data on a pilot scheme where, instead of compelling parties to mediate, the onus was changed from the existing ‘opt in’ to the process to ‘opt out’ mediation, together with provision of enhanced information to tell participants what to expect from the process. This was a ‘nudge’ strategy to change behaviour, requiring a conscious decision to opt out of the process. The decision to proceed was still one of choice however, without compulsion.


This change in approach provided a relatively low increase in the number of cases proceeding to mediation – increasing from only 17% to 21%. The number of Defendants agreeing to mediate increased from 27% to 31% – seemingly demonstrating that the overwhelming number of Defendants are less likely to want to try to settle than Claimants. Claimants were asked whether they wanted to proceed to mediation after knowing that the Defendant had already agreed to it and this, unsurprisingly, was a greater number – with an increase of 64% to 69%.


The report states that about the same rate of cases settled in the pilot as those cases under the current opt-in system. In 2021 of all cases in the Small Claims mediation programme 55% of cases settled. In other words, in an existing system that deals with 100% of parties who actually want to mediate only around half those cases settle. That is food for thought in a system where currently unwilling parties will be compelled to try mediation.


The success rate achieved is considerably lower than rates in higher value cases (with parties more likely to have the benefit of legal advice and representation and a longer mediation process) that showed, according to the recent CEDR survey, a settlement rate of 72% on the day with 20% settling shortly thereafter.


What insight can be drawn from the evaluation report?


  • Compelling parties to mediate will force behaviour on to the vast majority of litigants who currently do not want it. Even of those that currently want it, the survey says that in around 30% of cases there is a ‘no show’ by the defendant.


  • While this will probably lead to more cases being settled than previously, it remains to be seen whether the settlement rate achieved in the Small Claims scheme will remain at the current level. One would have thought not, once less willing participants are added to the process. If 100,000 cases go to mediation instead of the current 16,000, a greater overall number of cases will likely settle however – even if the settlement rate drops substantially. The current settlement rate demonstrates that even with willing participants around half cases do not settle. But, even if the settlement rate in a compulsory process is, say, half that rate, around 25,000 cases would settle as opposed to the current 8,000 or so. If the rate stays around the 50% mark, then obviously 50,000 cases would settle.


  • Is there a point at which the success rate is so low that it would not be worth the cost of providing the service (which presumably presents huge infrastructural and practical challenges for the court system), or the time and cost incurred by participants in pursuing it? A pilot may provide useful information.


  • In the opt-out pilot there was still seemingly a lack of understanding of the mediation process itself and the role of the mediator, despite enhanced information being provided. This again underlines the crucial need for proper education and awareness for participants before and during the process. The information must be clear in substance and presented in an easily accessible way to the range of disputants who are involved in cases.


  • The fact that the survey shows that cases typically settle at around 54-55% of claim value perhaps underscores that this form of mediation is something of an exercise in barter and splitting the difference – which is perhaps understandable given the time limited process that applies.


  • Whether this amounts to the delivery of ‘justice’ for participants is arguable and depends on a definition of what that actually means. Some parties will no doubt compromise their case for less (or more) value than it is truly worth, had a judge considered the legal and factual merits of the case at a final hearing. In Small Claims cases it is likely that many parties will not have had legal advice. Indeed, the survey states that some mediation users are unclear what they ‘should’ be settling for and look for guidance from the mediator (which they cannot give).


  • This potentially leads to a power imbalance between those who have had previous experience of mediation or access to legal advice. Given that cases tend to settle for half of the sum claimed, a repeat defendant could use that knowledge to their advantage when being pursued in proceedings.


  • Nevertheless, there can be sound reasons for the benefit of reaching compromise and the ability to move on from the dispute. Participants must be clearly aware though that they are not compelled to settle and can proceed to a final hearing. They must have informed freedom of choice.


  • The aim of compelling parties to mediate is part of an attempt to change culture of those involved in a dispute. That is not easy. It will be a significant challenge to encourage a culture of disputants voluntarily taking less than they think they are entitled to, or more than they think they should give. That will apply especially in the Small Claims Track where the recovery of legal costs (and therefore the risk of adverse costs) is limited and so is less likely to be a contributing factor in encouraging parties to compromise their case than in higher value disputes.


The path forward is not straightforward. While there is sometimes merit in an approach of ‘build it and they will come’ to move behaviour, in this case it could well be a case of ‘build it and they will come, but most will still leave more frustrated than when they came.’