Small claims mediation

SARAH LOCK of Ashton Graham explains how mediation can offer a cost-effective alternative to court action

IN business it is often necessary to resort to issuing proceedings to endeavour to recover unpaid invoices from customers who fail to pay their bills.

Often these claims run smoothly. However, if a claim is disputed and a defence is filed, and if the invoice value is for less than �5,000, then the proceedings will be automatically referred to the Small Claims Track. The court will then set a date for a small claims hearing.

Dealing with these types of claims can be difficult as there are strict limits on recoverable expenses – even for the winning party – and consequently, it is often uneconomic to appoint a lawyer. This means that you will have to attend the hearing yourself.

The courts are now offering a free small claims mediation service which aims to settle any claims without a court hearing. Mediation is a process whereby the parties can discuss the claim in a confidential manner with a trained neutral mediator. The mediator does not judge the case or give legal advice, but works with the parties to try and find an acceptable solution. If successful, clearly there will not then be the need to proceed with the court hearing before a judge.

There are many benefits to mediation as – if both parties agree – the mediation can usually be conducted quickly within a few weeks. It’s free and the mediation takes place by telephone. All parties agree a mutually convenient time and once the appointment has been arranged, the mediator will telephone each party separately to discuss the issues at stake. Often the mediator will be able to establish some common ground between the parties and by facilitating negotiation, hopes to arrive at a settlement which is acceptable. It is fair to say that anyone participating in mediation will need to agree to enter in good faith with the aim of achieving settlement.

If and when an agreement is reached, a legally binding agreement can be drawn up and the small claims court hearing can be cancelled. If no agreement can be reached then the court hearing will go ahead. In the latest proposed Ministry of Justice Reforms, there are suggestions that mediation should become a routine and automatic part of the process and that the limit for small claims should be increased from �5,000 to �15,000. It therefore looks like mediation will become a bigger part of the smalls claims track in the future.

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This article is for general information purposes only and does not constitute legal or other professional advice. We would advise you to seek professional advice before acting on this information. Ashton Graham is authorised and regulated by the Financial Services Authority.