If you’ve even been involved in a ‘small claims court’ matter, you might know that the sums are modest, the process is simpler, and in most small claims each side largely bears their own legal costs.
The reality is more nuanced. A recent costs decision linked to a Royal Albert Hall dispute shows how a claim that looks small on paper can turn into a sizeable costs liability if the court puts it on a higher track or if conduct problems creep in.
In this article, I take a look at Stockler v Royal Albert Hall and how an approximate claim for £3k landed the claimant with a £126k legal bill to pay.
How court tracks normally work
Civil claims in England and Wales are managed on three tracks. The small claims track is designed for lower value disputes and is meant to be informal and proportionate. Costs are very limited, usually to fixed court fees, capped witness expenses and a few modest items.
If a case is more complex, or raises tricky legal issues, it can be allocated to the fast track even if the money at stake is not huge. On the fast track the usual small claims cost protection falls away. The losing party can be ordered to pay a significant share of the winner’s reasonable and proportionate legal costs. Above that sits the multi track for higher value or particularly complex cases where costs risk increases again.
Track allocation is the court’s call. Value matters, but complexity and case management needs can trump value.
Background facts
Two permanent seat-holders at the Royal Albert Hall, solicitor William Stockler and his son, fell out with the Hall over payments under its ticket return scheme. The idea was that they could return their seats in return for payment, where they were not able to attend a performance.
Although the sums in issue were relatively modest, the case involved contractual interpretation, an accounting exercise, and a counterclaim. A judge allocated the matter to the fast track and ordered the claimants to pay the costs of an early hearing, subject to detailed assessment. That one decision on allocation changed the costs landscape from “largely protected” to “potentially substantial”.
Key Procedure & Outcome
1. Summary Judgment and Costs Orders
The defendant succeeded on summary judgment for the interpretation of a contractual letter (5 April 2018), with part of the claim stayed pending an accounting. Costs for that hearing were ordered, subject to detailed assessment.
2. Further Proceedings & Counterclaim
The balance of claim was dismissed; the Hall succeeded on a counterclaim. The claimants were ordered to pay the defendant’s costs, split as:
- Standard basis up to 8 June 2023;
- Indemnity basis thereafter (due to what the court found to be unreasonable conduct from the claimants post that date).
3. Detailed Assessment of Costs
- The Defendant submitted a bill of ~£162,789.37 consisting of three parts: standard basis (Part 1), indemnity basis (Part 2), and bill preparation costs.
- Many “Points of Dispute” by the claimants were struck out for being insufficiently particularised.
- The standard basis costs were reduced (line-by-line) from ~£76,066.38 to ~£55,581.38.
4. Proportionality Challenge Rejected
The claimants argued that even after reduction, £55,581.38 for a ~£3,000 claim was manifestly disproportionate. They proposed using a formulaic approach (multiples of the monetary claim plus small uplifts) which led to a “proportionate” figure of about £8,100.
However, the Deputy Costs Judge Joseph rejected that formulaic method. Instead, he emphasised that under CPR 44.3(5) and CPR 44.4, the court must look at a suite of factors (sums in issue; value of non-monetary relief; complexity; conduct; wider/public importance etc.) in a holistic way. The judge held that the line-by-line assessed figure of ~£55,581.38 was both reasonable and proportionate in all the circumstances.
Fairness in costs?
Mr Stockler argued the costs were disproportionate – and they were. I’ve never seen a bill that high for a claim this low, but importantly it was because of the move to fast track, and the indemnity costs being awarded.
Stockler, somewhat understandably, said:
“When I start something on the small claims track because I say that the case is worth only £10,000 I know what risk I am taking then. I am now being told that I am actually going to have a risk of much, much more which I would never have started the proceedings if that was the case. That cannot, that cannot be fair or right.”
But, alas, the Court had previously awarded the Defendant indemnity costs because of the misconduct and behaviour of the Claimant.
What are indemnity costs?
Most of the time, when a court orders one party to pay the other’s legal costs, those costs are assessed on what’s called the “standard basis”. That means the winning party has to show their costs were reasonably incurred and reasonable in amount. If there is any doubt about whether something was reasonable, the benefit of the doubt goes to the paying party.
Indemnity costs are different. They are awarded where the court thinks a party has behaved unreasonably, or there are other special reasons to justify it. On the indemnity basis, the rules are tilted in favour of the receiving party. The winner still has to show the costs were incurred, but they no longer have to prove they were strictly necessary. If there is any doubt, it is resolved in favour of the receiving party, not the paying party.
In practice, this makes a big difference. More of the winner’s costs will usually be allowed, and the paying party will struggle to argue them down. In this case, the judge decided that from a certain date the claimants’ conduct was unreasonable, and so their liability jumped from standard to indemnity costs for the rest of the case. That shift meant a much larger bill at the end of the day.
Lessons for business owners
Do not assume that a low headline value means low risk on costs. If your dispute has legal or factual complexity, or if the other side brings a counterclaim, the court may allocate it to the fast track. From there, if you lose, you can be ordered to pay a significant sum towards the other side’s legal costs. If your conduct is judged unreasonable at any stage, you may face indemnity costs which are even harder to resist.
Before issuing, sense-check three things. First, track. Ask whether the case is likely to be treated as small claims in practice given the issues involved. Second, exposure. Work through a realistic worst-case costs scenario if you were to lose on a higher track. Third, alternatives. Consider whether negotiation, a commercial compromise or mediation will get you to a sensible outcome with controlled spend and less risk.
I help small and medium sized businesses with dispute management as part of my general advice to clients and under my VIP Legal scheme. If you’re facing a dispute, get in touch early to get the best advice.