Gone are the days of aggressive debt litigation. If someone owes you money and the Claim is defended, the Court will expect you to engage in Alternative Dispute Resolution. For debts under £10,000.00, the only option (other than traditional correspondence or a round-the-table chat) is the Small Claims Mediation Service (“SCMS”).
Following the filing of a Defence to a money Claim, the Court, as a matter of course, will place a time-limited stay on the Claim to allow the Parties chance to utilise the SCMS. This is a ‘free’ service in that no further fees are payable to the Court when using it but, of course, the almost-constantly increasing fees already paid to the Court in issuing the Claim in the first place presumably cover the costs of the SCMS.
There is no obligation to use the SCMS but, if the matter proceeds to a Small Claims Trial, the Judge at the Trial might ask for an explanation as to why a mediation was not attempted. There are 2 main reasons why mediation is refused. The first is that the Parties are too far apart to ever make any sort of agreement so mediation would simply be a waste of time. The other, related reason, is that the Parties are so convinced that all/none of the money is owed that, again, a mediation would be a waste of time because there is no room for manoeuvre in the Parties’ respective positions.
The main benefits of using the SCMS are that it takes away the costs risk and the litigation risk of going to Trial. Small Claims matters, despite the low debt balances involved, can often end up being quite expensive and time-consuming and the general rule is that, other than Court fees and some fixed costs, no party will recover any costs at the end of a Small Claims Trial regardless of the result. In terms of the litigation risk, no matter how good you think your case is, if you get the wrong Judge on the wrong day then you can end up losing and getting nothing. Therefore, if an acceptable settlement can be reached early on in proceedings then taking/paying the money and running can often be an attractive option.
SCMS sessions are quite a bit simpler than ‘traditional’ mediation. The session itself lasts an hour and is conducted over the telephone so you do not even have to leave your desk to do it. The Mediator calls the Claimant first to obtain details on the background of the Claim and Defence. They will then call the Defendant for their version of events and to hopefully obtain an opening settlement offer. The Mediator will then call each party in turn obtaining responses to arguments raised and further settlement offers until, with any luck, an agreement can be made to settle the Claim. The Mediator will then draw up a Mediation Agreement. If there is a subsequent breach of the agreement a Judgment can entered for the agreed sum or a trial requested to try to obtain Judgment for the original debt sum. Anything discussed and agreed in the mediation is strictly ‘without prejudice’ and cannot be used as evidence in a Trial.
In reality, these sessions quite often amount to the Claimant starting with their ideal figure, the Defendant with theirs and then the Parties ending up somewhere in the middle by the end.
I have had a lot of success with this service but it does rely on both Parties being willing to resolve the dispute on, at least, a financial level. There is no real reason not to have a go as the only thing that can really be lost is an hour of your working day.
