CPR 52.19 costs caps refused where service-charge recoupment would shift unrecovered appeal costs onto non‑appellant leaseholders

Introduction

This commentary examines the England and Wales Court of Appeal decision in Spender & Ors v FIT Nominee Ltd & Anor (Rev1) [2025] EWCA Civ 1319, delivered by Lord Justice Birss with whom Lord Justice Nugee agreed. The case addresses an application for a costs capping order under CPR 52.19 in the context of a landlord and tenant dispute over the reasonableness of service charges for a security system at a large residential estate, St David’s Square (London E14).

Seventy leaseholders (out of 436) succeeded before the First-tier Tribunal (FTT), which reduced the challenged service charge element to 19% of the sum demanded. On the landlord’s appeal, the Upper Tribunal (UT) reversed that outcome, holding the charges reasonable (subject to an irrelevant concession). The 70 leaseholders then appealed to the Court of Appeal and sought a CPR 52.19 costs capping order to mitigate exposure to the landlord’s appellate costs, invoking access-to-justice and inequality-of-arms concerns.

The judgment breaks new ground in clarifying how CPR 52.19 interacts with the Landlord and Tenant Act 1985, sections 19 and 20C, in service-charge litigation. It squarely confronts whether a cap that reduces appellants’ exposure is just when the landlord can recoup any unrecovered costs across the estate via the service charge.

Summary of the Judgment

The Court of Appeal refused the tenants’ application for a costs capping order. While accepting that CPR 52.19 was engaged (as the appeal came from a costs-limited jurisdiction), the Court held that, in this landlord and tenant context, capping would have an unjust and unintended effect: any portion of the landlord’s appellate costs not recoverable from the 70 appellants because of the cap would, if reasonable and absent a section 20C order, be recoverable from all 436 leaseholders through the service charge. That would shift the adverse costs risk from the appellant tenants onto non-appellant tenants who chose not to participate in the appeal—an outcome inconsistent with justice and the CPR’s overriding objective.

Lord Justice Birss derived and applied established principles under CPR 52.19, but found the determinative factor to be the statutory service-charge regime. Lord Justice Nugee concurred, emphasising that the “real contest” was not between the appellant tenants and the landlord but between the 70 appellants and the other 366 leaseholders. The application was refused.

Analysis

Precedents Cited and Their Influence

• Manchester College v Hazel [2013] EWCA Civ 281
  Decided on the cusp of CPR 52.19’s introduction, Jackson LJ upheld a condition that the employer could pursue its appeal only if it did not seek costs against the employees. The judgment explained the mischief addressed by the forthcoming rule (highlighted in Eweida v British Airways [2009] EWCA Civ 1205): the Court of Appeal had previously lacked power to make protective/capping orders in appeals from no-cost jurisdictions. The case underscores that access to justice can justify protective measures where adverse costs would stifle an appeal.
• JE (Jamaica) v SSHD [2014] EWCA Civ 192
  Confirmed that CPR 52.19 cannot create one-way costs shifting. Any cap limits the recoverable costs of the appeal for whoever wins. This symmetry matters: applicants cannot obtain protection from paying if they lose while preserving full recovery if they win.
• Glass v Freyssinet [2016] EWCA Civ 1120
  The fact that the appeal is from a costs-limited jurisdiction does not make capping automatic. The Court retains a discretion and expects proper evidence of means. It also reaffirmed that adverse costs orders are intended to have a deterrent effect; mere deterrence is not enough to justify a cap.
• Blair v Wickes Building Supplies Ltd (No 2) [2020] EWCA Civ 17
  The Court accepted jurisdiction to cap costs but refused to exercise discretion where the appeal was wholly unmeritorious. It shows that merits can weigh against making a capping order.
• Campbell v NHS Business Authority [2023] EWCA Civ 1351
  The Court declined to vary an existing cap (set at permission stage), emphasising that CPR 52.19 orders are case-sensitive and not easily revisited absent sufficient reason.
• Prince of Wales Road RTM v Assethold Ltd [2024] EWCA Civ 1544
  Noted here because a costs cap was made in an RTM appeal context. Birss LJ cautioned that the landlord-and-tenant service-charge problem now identified did not arise in that case, so it does not assist in the present application.
• Shorts International v Google [2025] EWCA Civ 653
  Lewison LJ stressed that the “need to facilitate access to justice” is a factor of substantial weight under r52.19, and adopted the Supreme Court’s approach in Goldtrail Travel v Aydin [2017] UKSC 57 concerning “stifling,” demanding full and frank evidence of means and funding attempts. The cap was granted there on cogent evidence that refusal would likely stifle the appeal.
• Goldtrail Travel v Aydin [2017] UKSC 57
  Although about security for costs/stifling rather than r52.19, it provides the analytical framework for assessing whether financial requirements would prevent a party from pursuing an appeal, requiring rigorous evidence.

Drawing on these authorities, Birss LJ set out a succinct list of principles for CPR 52.19 applications. Crucially, the Court’s reasoning innovates by integrating these principles with the Landlord and Tenant Act 1985’s service-charge provisions, a dimension not squarely addressed in earlier r52.19 case law.

Legal Reasoning

The Court’s reasoning unfolded in three broad steps.

1. Engagement of CPR 52.19 and applicable principles.
   The rule applies because the appeal is from a costs-limited jurisdiction (FTT/UT). The Court has a discretion informed by:
   • the means of both parties;
   • all the circumstances; and
   • the need to facilitate access to justice (to which substantial weight may be given).
   It is not automatic that a cap should be made. Deterrence by adverse costs is a legitimate feature of the system; bare assertions about hardship will not suffice. Unmeritorious appeals weigh against granting a cap.
2. The statutory service-charge framework (LTA 1985 ss 19 and 20C).
   Section 19 permits the landlord, where the lease allows, to recover litigation costs through the service charge if those costs are reasonably incurred. Section 20C empowers the court/tribunal to disallow such recovery if “just and equitable,” an order commonly made when tenants succeed but rarely where the landlord wins.
   
   The practical effect in this case is central: if the appellants lost and no cap was made, the 70 appellants would be liable for the landlord’s assessed appellate costs (e.g., around £75,000 on the figures before the Court), roughly £1,000 each. If a cap were imposed (say £25,000), the immediate exposure of the appellants would fall, but the uncapped balance (in the example, ~£50,000) would likely be shifted to all 436 leaseholders via the service charge, because a section 20C order disallowing that recovery would “rarely” be made when the landlord has succeeded. The cap would therefore transfer liabilities from the 70 appellants to the 366 non-appellants.
3. Justice and the overriding objective.
   Because a costs cap here would externalise the appellants’ costs risk onto non-participating leaseholders, the order would not accord with justice or the overriding objective. As Nugee LJ put it, the real contest is between appellants and other leaseholders. That decisive factor outweighed access-to-justice considerations on the facts. The limited financial evidence from the tenants (which might have been important in a different setting) did not alter the outcome given the statutory cost-shifting dynamic.

What is new in this decision

• A clear statement that in residential service-charge disputes, where leases and section 19 permit landlords to recoup litigation costs via the service charge and a section 20C order would not likely be made when the landlord wins, a CPR 52.19 cap is generally inappropriate if its practical effect would be to shift the uncapped balance onto non-appellant leaseholders.
• A reframing of the justice inquiry under r52.19 in such cases: the fairness assessment must consider impacts on third parties (non-participating leaseholders) who would bear the costs through the service charge.

Impact and Practical Consequences

This decision will significantly influence how costs capping applications are approached in leasehold service-charge appeals.

• For tenant appellants:
  • Expect CPR 52.19 applications to face headwinds where the landlord can recoup any unrecovered appellate costs via the service charge if it wins. You must address that risk head-on.
  • Consider whether the composition of parties can be changed. If all or substantially all leaseholders are parties (or properly represented in a representative claim), the fairness objection based on shifting costs to non-participants may be less acute.
  • Explore whether an undertaking can be obtained from the landlord not to recoup any unrecovered balance through service charges, even if it wins. Without such an undertaking, the logic of this judgment will likely preclude a cap.
  • Consider a targeted section 20C application in the appellate court designed to protect non-participating leaseholders from recoupment of any uncapped balance. The Court here noted that section 20C orders are “rarely” made where the landlord wins, but did not say “never.” Applicants would need to show why a partial order is “just and equitable” despite the landlord’s success—an uphill task but not legally impossible.
  • As emphasised in Shorts v Google and Goldtrail, assemble detailed, candid evidence of means and funding attempts if arguing that refusal will stifle the appeal. Even strong access-to-justice evidence, however, will not overcome the core unfairness identified here unless the non-participant cost-shift is neutralised.
• For landlords:
  • To resist r52.19, show the lease-based and section 19 entitlement to recoup litigation costs through the service charge and emphasise the rarity of section 20C orders in favour of tenants where the landlord wins.
  • Highlight the unfairness to non-appellant leaseholders of any cap that reduces the appellants’ liability but leaves an uncapped balance to be spread estate-wide.
• For courts and tribunals:
  • When r52.19 applications arise in the landlord and tenant context, the analysis must consider the service-charge recoupment machinery, not merely the means of the parties and general access-to-justice concerns.
  • Representative proceedings and party-structure choices may affect the justice of granting a cap; party composition is now a salient factor in the r52.19 balancing exercise.

More broadly, the case demonstrates that the weight given to “facilitating access to justice” under r52.19 can be overridden by justice considerations relating to non-parties. The decision should not be read as diminishing the importance of access to justice in r52.19 generally (as emphasised in Shorts v Google), but as recognising a limiting principle where a cap would unfairly externalise risks onto third parties through a statutory recoupment mechanism.

Key principles restated by the Court

Birss LJ distilled the following (paraphrased) principles from the authorities:

• r52.19 applies only where costs recovery was limited or excluded at first instance.
• Its engagement does not make a cap automatic; the Court retains a discretion.
• Discretion involves all circumstances, including both parties’ means and the need to facilitate access to justice.
• A cap is inappropriate for wholly unmeritorious appeals.
• Facilitating access to justice carries substantial weight.
• Deterrence by adverse costs is part of the system; bare assertions are insufficient. Full and frank financial evidence is required. Evidence showing that a party’s modest means would cause them to abandon the appeal if exposed to normal adverse costs, especially where the opponent can bear that risk, supports capping—absent countervailing factors.

In this case the countervailing factor—service-charge recoupment of any uncapped balance—was decisive.

Complex Concepts Simplified

• Costs capping under CPR 52.19: A discretionary order limiting the recoverable costs of an appeal in proceedings where costs were limited or excluded at first instance. The cap applies symmetrically (to whoever wins) and is distinct from special regimes like Aarhus (CPR 52.19A).
• Access to justice: The principle that litigants should be able to bring or defend appeals without prohibitive cost risk. Under r52.19 it is a factor of “substantial weight,” but it is not absolute.
• Service charge “reasonably incurred” (LTA 1985, s19): Landlords can only pass on costs, including litigation costs, through service charges if those costs are reasonably incurred (and reasonable in amount).
• Section 20C orders (LTA 1985): A court or tribunal may direct that costs incurred by the landlord in connection with proceedings are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge. Commonly granted when tenants succeed; rarely when the landlord wins.
• Stifling: A concept from security for costs jurisprudence (e.g., Goldtrail): a litigant shows that a financial requirement will prevent prosecuting the appeal. By analogy, r52.19 applicants should provide detailed, credible evidence of financial circumstances and funding attempts.

Practical Guidance and Checklists

For tenant appellants contemplating r52.19 in service-charge appeals

• Evidence: Prepare full, frank evidence of means, liabilities, assets, and steps taken to obtain funding or insurance.
• Party structure: Consider joining more leaseholders or using a representative action to reduce the risk of costs being shifted to non-participants.
• s20C strategy: Be ready to explain why it would be “just and equitable” to disallow recoupment of any uncapped balance even if the landlord wins—recognising this is exceptional.
• Undertakings: Explore whether the landlord would undertake not to recover any uncapped balance via service charges. Without such an undertaking, the application faces the problem identified in this case.
• Funding alternatives: Consider ATE insurance, litigation funding, group funding arrangements, or cost-sharing agreements among all interested leaseholders.

For landlords opposing r52.19

• Highlight lease terms enabling cost recovery and section 19/section 20C practice.
• Demonstrate the fairness problem: a cap would force non-participants to subsidise appellants via service charges.
• Costing: Provide realistic cost estimates and explain why costs would be “reasonably incurred” in defending the appeal.

Unanswered Questions and Future Issues

• Partial section 20C in favour of non-participants? Could a court craft a partial section 20C order at the appellate level to prevent recoupment of the uncapped balance where a landlord wins, specifically to protect non-appellants? The Court suggests such orders are “rare” when landlords succeed, but it remains open in principle if justice demands it.
• Representative proceedings as a solution? If all leaseholders are represented, the fairness objection based on shifting costs to non-participants may lessen. Future cases may explore how party composition influences r52.19 discretion in service-charge appeals.
• Extension beyond landlord and tenant? The judgment’s logic—refusing a cap that externalises costs onto third parties via a contractual/statutory recoupment mechanism—may inform other domains where winners can indirectly spread unrecovered costs across non-parties (e.g., certain association or indemnity schemes).

Conclusion

Spender v FIT Nominee Ltd establishes a significant constraint on the use of CPR 52.19 in leasehold service-charge appeals. While the rule aims to facilitate access to justice in appeals from costs-limited jurisdictions, it cannot be deployed where its practical effect would be to offload unrecovered appellate costs onto non-appellant leaseholders through the service-charge mechanism authorised by the Landlord and Tenant Act 1985. In such circumstances, justice and the overriding objective point against capping.

The decision preserves the substantial weight accorded to access-to-justice considerations under r52.19, as recognised in Shorts v Google, but confirms that those considerations yield to the unfairness of shifting costs to third parties who have elected not to participate in the appeal. For practitioners, the case underscores the need to grapple explicitly with section 19/section 20C consequences when seeking a costs cap in landlord and tenant appeals, and to consider alternative strategies—party composition, undertakings, or targeted section 20C relief—if a cap is to be realistically pursued.

In short, the new guiding principle is clear: a CPR 52.19 costs cap will generally be inappropriate in service-charge appeals where the landlord can recoup any uncapped balance via the service charge, thereby transferring the risk from appellants to non-appellants.