The Ministry of Justice’s drive towards mandatory mediation has entered a new phase with the introduction of a one-year pilot scheme referring certain credit hire claims to mediation. From July 2025, lower-value credit hire claims issued via the Online Civil Money Claims (OCMC) system will be automatically referred to the Small Claims Mediation Service. While personal injury elements remain excluded, the pilot encompasses standalone credit hire claims for a fixed sum, representing a significant proportion of post-RTA litigation.
This latest development forms part of the government’s broader digitalisation and efficiency agenda, supported by the Civil Procedure Rule Committee (CPRC), and is likely to set the stage for further reform following a public consultation during the pilot.
A High-Volume Source of Litigation
Credit hire litigation represents a substantial volume of civil claims. It has been estimated that tens of thousands of credit hire claims are issued annually, often involving relatively modest sums but consuming disproportionate judicial time. In Tescher v Direct Accident Management Ltd [2024], Lord Justice Birss noted that credit hire disputes form a “significant” part of the workload of district judges. Evidence was presented that one claimant firm alone fields 10 barristers in court every day on such matters.
Scope for Compromise – or a Need for Precedent?
At first glance, many credit hire disputes should be amenable to resolution through mediation. The typical points of contention—need, rate, impecuniosity, and period of hire—are often fact-sensitive and susceptible to pragmatic compromise. Mediation offers parties the opportunity to test the strengths and weaknesses of their case, assess proportionality, and avoid the cost and uncertainty of trial.
However, from a strategic perspective, defendant insurers may resist settlement in certain cases, particularly where they wish to establish precedent on impecuniosity or market rate arguments. These issues can significantly affect future case values, and some parties may be reluctant to compromise where a favourable ruling could have broader implications across a claims portfolio.
The Impact of Tescher: Non-Party Costs Orders and Risk Exposure
The move toward early settlement may be accelerated by the Court of Appeal’s ruling in Tescher, which imposed non-party costs orders on the credit hire companies that funded the unsuccessful claims. Lord Justice Birss held that the companies were the real parties to the litigation and, as such, should be liable for costs incurred by the defendants. In one appeal, the credit hire firm was ordered to pay 100% of the defendant’s costs, and in another, 65%.
This landmark decision introduces material costs risk for credit hire organisations and may encourage earlier resolution, particularly in marginal or weaker claims. The prospect of direct costs exposure is likely to incentivise more careful assessment of which claims proceed to trial and which should be settled, potentially making mediation a more attractive route.
According to the Ministry of Justice and HMCTS, the SCMS is currently the default provider for mediation in Online Civil Money Claims (OCMC) cases, including:
The SCMS is staffed by HMCTS mediators, not external or independent mediators. The process is generally:
Practical limitations
Many legal professionals and mediation providers have raised concerns about whether the SCMS has the capacity or expertise to handle more complex small claims—especially those like credit hire disputes which involve technical issues such as:
While SCMS mediators do not provide legal advice, they facilitate dialogue. In some cases, parties may settle purely to avoid the effort of preparing for trial.
Implications for Practitioners
Looking Ahead
While the pilot applies only to a subset of cases, it marks a further step in the evolution of the civil justice system away from adversarialism and towards a resolution-first culture. Should the pilot prove successful, it is likely to be extended to other case types and values.
Barristers practising in credit hire, RTA, and consumer litigation will need to adapt to this new procedural environment. Advising clients—both lay and corporate—on the merits of early mediation, prospects at trial, and the changing costs landscape will be more important than ever.
For further briefing on the implications of Tescher, credit hire litigation trends, or to instruct counsel experienced in mediation advocacy, please contact our civil team.