Should court fees now be top of the list of reasons for using mediation?

The Law Society has raised its concerns that the increase will represent a significant barrier to access to justice.

By Peter Whitman, North West Mediation Solutions.

Claimants who already struggle to pay the court fees may well be priced out of even considering litigation and this is sure to have an impact on personal injury claims – will the insurer cover this or will the claims be stifled?

SMEs who rely on the courts to recover debts will be badly affected. At a time when cash flow is tight due to the debtors can businesses afford to litigate or will this have a drastic impact on the state of 'small business Britain' and lead to an increase in insolvencies.

Even insolvencies will be affected. It is unusual for the insolvent estate to have the funds available which will be required under the new regime so inevitably insolvency practitioners will be prevented from commencing proceedings and the estate won’t make the recoveries it ought to, which in turn will affect the creditors.

There are alternatives out there. Court proceedings aren’t always the correct method for resolving disputes – one party is always the winner and the other the loser, and with the fee increase it will be the defendant who is liable for the additional costs even if a settlement is reached.

Mediation is often overlooked in this country; it is seen as the soft option and a sign of weakness, notwithstanding the fact that the courts direct that mediation be considered at an early stage and sanctions may be imposed if the protocol has not been followed.

Mediation isn’t soft or weak. It is an effective economic method to resolve disputes and recover debts. Don't write off the bad debts yet. Given the increase in fees, mediation is going to look increasingly attractive. You get to control the process and the outcome, not a judge; business relationships remain intact and the process can even heal relationships. More importantly it is quick, economic and in your hands.

Cost benefits

In the many “posts” North West Mediation Solutions has published highlighting the benefits of mediation as an alternative to proceeding through the courts, the cost benefits have never been placed at the top of the list – now may be the time to do so.

How much?

The new fees will be calculated at 5% of the value of a claim, which replaces the previous fixed fees that were based on the value of the claim. Therefore, a claim with a value of £45,000 previously fell within the £15,000 to £50,000 bracket and, therefore, attracted a court fee of £610. However, after 9th March 2015, the same claim will attract a Court fee of £2,250 – a substantial increase.

Fees for claims of less than £10,000 are unaffected by these proposals and will remain at their current levels and will, therefore, depend on which bracket the claim falls into.

The government’s reasoning behind the changes is that 90% of claims issued fall below the £10,000 limit and, therefore, the majority of claimants will be unaffected by the changes.

The oft-stated criticism that mediation is an expensive extra step is often levied against taking an alternative or additional step if proceedings have commenced. In view of the proposed increases the fees charged by North West Mediation Solutions for mediations involving disputes in the range of £50,000 - £200,000, which represents the majority of the matters we deal with, would, under the proposed changes: • show a saving of between £750 and £8,250 if the mediation course was taken, as opposed to litigation, or, • if litigation has commenced, the additional fee pales when compared with that already paid for the issue fee, and of course, the dispute is more likely than not to end in settlement (NWMS average settlement rate over last 4 years is 80%). These are, as I have said, are the figures now in force but there may be changes in view of opposition from the Law Society and others but there’s no doubt, whatever happens, court issuing fees are likely to increase.