Small Claims Mediation and the Costs of Refusing ADR

Since 22 May 2024 many small claims go to mediation whether the parties want it or not: a claim for a specified sum of money, other than a road traffic or personal injury claim, is referred to the free HMCTS Small Claims Mediation Service once the directions questionnaires are in, under a pilot that runs to 6 April 2027 (PD 51ZE). Since 1 October 2024 the court has also had an express power to order the parties to engage in alternative dispute resolution, and an unreasonable failure to engage in it is conduct the court considers when it decides costs (CPR 3.1(2)(o) and 44.2(5)(e)). On the small claims track, where recoverable costs are a closed list, our reading is that further costs can follow only under the unreasonable behaviour rule, though the court may weigh ADR conduct in deciding whether to award the items the rule allows.

The free small claims costs checker works out whether a claim is referred to mediation, what the rules say about a missed appointment or a refusal of ADR, and what costs can be recovered, and our N164 builder fills in the appellant’s notice for a small claims appeal.

Jump to: which claims are referred · missing the appointment · refusing ADR · small claims costs · appeals

Which small claims are referred to mediation

CPR 26.6 applies to claims started in the County Court that would normally be allocated to the small claims track, and “the Mediation Service” is the Small Claims Mediation Service run by HM Courts and Tribunals Service (CPR 26.6(1) and (3)). On its own terms, the rule refers a claim only where every party agrees on its directions questionnaire, and never a road traffic accident, personal injury or housing disrepair claim (CPR 26.6(2) and (4)).

Practice Direction 51ZE changes that for a pilot that runs from 22 May 2024 to 6 April 2027 and applies to claims issued on or after 22 May 2024 (para 2). For those claims, the modified rule applies where the only remedy claimed is a specified sum of money; it does not apply to road traffic accident or personal injury claims, or to claims started in Online Civil Money Claims; and the claim is referred once all the parties have filed their directions questionnaires, with no need for their agreement (CPR 26.6(2) and (4) as modified by para 6 and the annex). Claims in Online Civil Money Claims that are suitable for the small claims track are referred through the Online Civil Money Claims pilot instead (para 3(b); PD 51R).

Our reading is that a housing disrepair claim for a specified sum only, with no order for repairs, is within the pilot’s words, because the modified rule excludes only road traffic and personal injury claims. A tenant’s claim that includes an order for repairs is normally a small claim only where the repairs are estimated at £1,000 or less and any other damages claimed are £1,000 or less (CPR 26.9(1)(b)).

How the service works

The service is free. An HMCTS mediator speaks to each side separately by telephone, in an appointment lasting up to an hour, and what happens in mediation cannot be mentioned at the hearing (GOV.UK, “Resolve the claim through mediation”); the Ministry of Justice said in May 2024 that sessions are generally arranged within 28 days. If the claim settles, it is stayed automatically, with permission to apply for judgment for any unpaid balance of the settlement or for the claim to be restored for the full amount, unless the parties agreed to discontinue or dismiss it (CPR 26.6(5)). If the court is not told of a settlement, the claim is allocated no later than four weeks after the last directions questionnaire is filed (CPR 26.7(3)).

Missing the mediation appointment

Where the pilot made mediation compulsory and the claim reaches a final hearing, the court must consider whether any sanction is appropriate in all the circumstances, having regard to whether the parties attended (CPR 26.6(6) and 27.8(7) as modified by PD 51ZE paras 6 and 7). On costs, it may take into account a failure to attend, including when deciding whether a party behaved unreasonably under CPR 27.14(2)(g) (CPR 27.14(2A) as modified by para 8). The standard directions ask a party who did not attend to file its explanation, and the other party its comments, with the documents for the hearing (PD 27A Appendix B, direction 1, as modified by para 9). For a claim referred through Online Civil Money Claims, the duty to consider a sanction comes from CPR 27.8(7) as modified; CPR 27.14(2A) speaks of mediation “under rule 26.6”, so our reading is that the court would weigh a missed OCMC mediation on costs under its general discretion (CPR 44.2(5)(e) and 27.14(2)(g)).

The rules do not list the sanctions. When the scheme began, the Ministry of Justice said that a sanction for missing the appointment without good reason could include “a fine, covering the cost of the wasted mediation appointment” or, in extreme circumstances, having the claim or defence dismissed; GOV.UK’s guidance mentions the case being struck out or having to pay all the court costs even after winning. What, if anything, is ordered is for the judge. The pilot also lets the court, of its own initiative, reduce or increase the costs ordered by an amount equal to 50% of the fixed recoverable costs, for unreasonable behaviour, in a claim to which Sections VI to VIII of Part 45 apply and CPR 26.6(6) applies (CPR 45.13(2A) as modified by para 10); our reading is that this matters only if the claim leaves the small claims track, since the small claims costs rule otherwise governs.

Refusing ADR: Churchill and the October 2024 rules

In Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416, a claim in nuisance over Japanese knotweed that the council said should first have gone through its internal complaints procedure, the Court of Appeal held that the court can lawfully stay proceedings for, or order, the parties to engage in a non-court-based dispute resolution process (at [58]). It should do so only where the order does not impair the very essence of the claimant’s right to proceed to a judicial hearing and is proportionate to achieving the legitimate aim of settling the dispute fairly, quickly and at reasonable cost (at [65]), and the court declined to lay down fixed principles or a checklist for when to do so (at [66]). On the facts, it did not order a stay, because matters had moved on (at [72] and [73]).

The rules followed on 1 October 2024 (S.I. 2024/839):

• dealing with a case justly and at proportionate cost now includes “promoting or using alternative dispute resolution” (CPR 1.1(2)(f));
• active case management includes ordering or encouraging the parties to use, and facilitating the use of, alternative dispute resolution (CPR 1.4(2)(e));
• the court may order the parties to engage in alternative dispute resolution (CPR 3.1(2)(o)); and
• the conduct the court considers on costs includes whether a party failed to comply with an order for alternative dispute resolution, or unreasonably failed to engage in it (CPR 44.2(5)(e)).

How ADR conduct reaches costs on the small claims track

On the small claims track the court may not order a party to pay another’s costs, fees and expenses, including those of an appeal, except for the items listed in CPR 27.14(2): the fixed costs of issuing the claim, court fees, reasonable travel expenses, loss of earnings of up to £95 a day for each person, experts’ fees of up to £750 for each expert, up to £260 for legal advice on a claim for an injunction or specific performance, the low value personal injury protocol fixed costs in defined cases, an approved transcript on an appeal, and such further costs as the court assesses summarily against a party who has behaved unreasonably (CPR 27.14(2); PD 27A paras 7.2 and 7.3).

Because the list is closed, refusing ADR, or ignoring an order to use it, cannot add an item to it: our reading is that it can lead to further costs only under that last head, CPR 27.14(2)(g). The court may also weigh it when deciding whether to order the listed items at all, as CPR 27.14(2A), as modified by the pilot, expressly allows for a failure to attend pilot mediation. The test for unreasonable behaviour is whether the conduct permits of a reasonable explanation (Dammermann v Lanyon Bowdler LLP [2017] EWCA Civ 269 at [30] and [31]). In Orton v Barclays Bank UK plc [2026] EWCA Civ 1025 the Court of Appeal added that the question must be judged against the small claims track’s costs-neutral starting point, and that the burden is on the party alleging unreasonable behaviour (at [90]). Rejecting an offer to settle is not of itself unreasonable, though the court may take it into account (CPR 27.14(3)), and Part 36 does not apply to small claims (CPR 27.2(1)(g)). Discontinuing a small claim is not unreasonable in itself either (Orton at [90] and [103]): see our note on Orton v Barclays.

Outside the small claims track, for example in a housing disrepair claim allocated to the fast track, the costs are not limited by CPR 27.14, and CPR 44.2(5)(e) applies directly to the court’s decision about costs.

Appealing a small claims decision

Permission to appeal is needed (CPR 52.3(1)(a)). It can be asked of the judge at the hearing, or of the appeal court in the appellant’s notice (CPR 52.3(2)); where the claim was decided without a hearing, or in the appellant’s absence at their request, it must be asked of the appeal court (PD 27A para 8.2). The appellant’s notice in a small claim is Form N164 (PD 27A para 8A), filed within 21 days after the decision unless the judge directed another period (CPR 52.12(2)), and served on each respondent within 14 days after it is sealed (CPR 52.12(3)). The parties cannot agree to extend those times (CPR 52.15(2)).

An appeal from a District Judge goes to a Circuit Judge in the County Court (PD 52A Table 1), and the court fee is £151 (fee 2.3(a)). The appeal court allows an appeal only where the decision was wrong, or unjust because of a serious procedural or other irregularity (CPR 52.21(3)). The small claims costs limits apply to the appeal as well (CPR 27.14(2)). For the dates, use the appeal deadline and route checker.

How DMD Costs can help

We do not act in small claims. DMD Costs prepares and negotiates claimant costs for solicitor firms in housing disrepair, clinical negligence and MoD NIHL claims, where the costs are not capped by the small claims rule: the bill, the Points of Dispute and Replies, and the negotiation to settlement. The fee is fixed and agreed before any work begins.

Sources

• Practice Direction 51ZE: Small Claims Track Automatic Referral to Mediation Pilot Scheme (paras 2 to 10 and the annex)
• The 196th Practice Direction Update (PD 51ZE para 3(b), from 1 October 2026) and the 187th Practice Direction Update (PD 51R, from 28 July 2025), both summarised on the Civil Procedure Rules home page
• CPR Part 26 (rules 26.6, 26.7 and 26.9) and CPR Part 27 (rules 27.2, 27.8 and 27.14) with Practice Direction 27A (paras 7.2, 7.3, 8.2, 8A and Appendix B)
• CPR Part 1 (rules 1.1 and 1.4), CPR Part 3 (rule 3.1) and CPR 44.2, as amended from 1 October 2024 by S.I. 2024/839
• CPR Part 45 (rule 45.13)
• CPR Part 52 (rules 52.3, 52.12, 52.15 and 52.21) and Practice Direction 52A (Table 1)
• Civil Proceedings Fees Order 2008, Schedule 1 (fee 2.3(a))
• Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416
• Dammermann v Lanyon Bowdler LLP [2017] EWCA Civ 269
• Orton v Barclays Bank UK plc [2026] EWCA Civ 1025
• GOV.UK: Resolve the claim through mediation and Ministry of Justice press release, 22 May 2024