Summary of Court of Appeal Opinion — Costs Capping Application
Factual and Procedural Background
This opinion records an application for a costs-capping order under Civil Procedure Rule 52.19 in an appeal concerning contested service charges relating to the security system on an estate ("The Property") in The City. The Appellants are 70 of the 436 tenants of The Property; the Respondents are the landlords (landlord corporate entities are referred to generically below). The dispute began in the First-tier Tribunal, which found in favour of the tenants and held that only 19% of the sums demanded by the landlords were reasonably incurred. On appeal the Upper Tribunal allowed the landlords' appeal and concluded (subject to an irrelevant concession) that the charges were reasonably incurred. The tenants then brought an appeal to the Court of Appeal and simultaneously sought a costs-capping order under CPR r52.19 to limit their exposure to an adverse costs order if they lost on the appeal.
The application was supported by an application notice and a witness statement from Attorney Spender, who appeared on behalf of himself and the other tenant appellants. The tenants argued that without a costs-capping order the appeal would be stifled because of the risk of a large adverse costs award. The landlords' counsel provided a lower estimate of likely costs. An earlier related fire-safety issue was noted to have been resolved and is not relevant to the decision on the costs application.
The Court of Appeal refused the application. The primary reasons given relate to the interaction between CPR r52.19 and the provisions of the Landlord and Tenant Act 1985 (notably sections 19 and 20C), and the consequence that any cap on recoverable costs from the 70 appellants could result in the unpaid remainder being recovered via the service charge from all 436 tenants, thereby shifting the costs burden to non-participating tenants.
Legal Issues Presented
- Whether the Court should exercise its discretion under CPR r52.19 to make a costs-capping order in favour of the Appellants to facilitate access to justice by limiting their exposure to adverse costs on appeal.
- How the interaction between a costs-capping order under r52.19 and the recoverability of litigation costs through service charges under the Landlord and Tenant Act 1985 (notably sections 19 and 20C) affects the appropriateness of such an order in landlord/tenant collective disputes.
- Whether the Appellants' evidence of means and the inequality of arms between tenant appellants and corporate landlords is sufficient to justify a costs-capping order under the principles derived from the cited authorities.
Arguments of the Parties
Appellants' Arguments
- The Appellants sought a costs-capping order under CPR r52.19 to facilitate access to justice and prevent their appeal from being stifled by the risk of a large adverse costs award.
- They had succeeded at first instance and faced an Upper Tribunal decision adverse to them; to vindicate their rights they needed to pursue the appeal to the Court of Appeal.
- The Appellants estimated the Respondents' likely costs of the appeal at around £150,000; given 70 appellants this would be disproportionate relative to their interests (the overall service charge in issue was about £480,000, averaging about £1,500 per individual tenant involved in the litigation).
- The Appellants relied on inequality of arms between ordinary homeowner tenants and the landlord companies (the landlords are described as ultimate subsidiaries of a major banking group — anonymized below as Company A).
- Attorney Spender provided the supporting witness statement on behalf of the tenant appellants.
Respondents' Arguments
- At the hearing the Respondents' counsel gave an estimate of likely costs of approximately £90,000. This estimate was accepted by the court as a reasonable figure for present purposes.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court in This Opinion |
| Precedent A [2013] EWCA Civ 281 (Manchester College v Hazel) |
Illustrates the protective role of the forthcoming r52.19 (at the time) and that evidence of inability to pursue a case without protection can justify limiting costs exposure. |
The court relied on the principle that bona fide evidence that modest means would prevent pursuit of an appeal can support a costs-capping order; but noted that such considerations must be weighed with other statutory consequences in this landlord/tenant context. |
| Precedent B [2009] EWCA Civ 1205 (Eweida v British Airways) |
Identified the mischief that r52.19 was intended to address (the inability to make protective orders on appeals from jurisdictions where no costs were awarded). |
Used historically to explain why r52.19 exists; the court treated that background as part of its understanding of the rule's purpose. |
| Precedent C [2014] EWCA Civ 192 (JE (Jamaica) v Secretary of State for the Home Department) |
Clarifies that an order under r52.19 applies symmetrically to the costs of the winning party on appeal, whoever that may be (i.e., not a one-way costs shifting device in favour of the appellant). |
Cited to emphasise the limits of orders available under r52.19 (they apply to the winner's recoverable costs, not to create one-way shifting of costs). |
| Precedent D [2016] EWCA Civ 1120 (Glass v Freyssinet) |
Establishes that the Court has discretion under r52.19 and that engagement of the rule does not automatically require an order; the deterrent effect of adverse costs is legitimate; adequate evidence of means is required. |
Reinforced the proposition that mere assertion of deterrent effect is insufficient and that full evidence of means is necessary; the court applied this as part of the multi-factorial assessment. |
| Precedent E [2020] EWCA Civ 17 (Blair v Wickes) |
Confirms the court's discretion to make an order under r52.19, but indicates a wholly unmeritorious appeal is a reason not to exercise that discretion in favour of an appellant. |
Cited for the principle that merit (or lack of it) of the appeal is a relevant factor in deciding whether to cap costs. |
| Precedent F [2023] EWCA Civ 1351 (Campbell v NHS Business Authority) |
Contains discussion in the appellate report of variation of a costs-capping order previously made; addresses limits and variation of such orders. |
Referred to for context on the Court's approach to costs-capping orders and applications to vary them. |
| Precedent G [2024] EWCA Civ 1544 (Prince of Wales Road RTM v Assethold Ltd) |
Notes that a costs-capping order had been made in an Upper Tribunal appeal in landlord and tenant proceedings where the particular problem of cost redistribution did not arise. |
The court observed that the facts of that case differed materially from the present matter so that the existence of a capping order there does not assist the Appellants here. |
| Precedent H [2025] EWCA Civ 653 (Shorts International v Google) |
Emphasises that facilitating access to justice is a factor of substantial weight under r52.19; requires full and frank evidence about means and a skeptical approach to bare assertions; recognises adverse costs as a legitimate deterrent but allows capping where evidence shows a party would otherwise abandon. |
Adopted in the present analysis as supporting the weight to be given to access to justice, while also stressing the need for reliable evidence of means. The court applied these considerations but concluded they were outweighed by statutory consequences in this context. |
| Precedent I [2017] UKSC 57 (Goldtrail Travel v Aydin) |
Provides guidance on factors to consider when deciding whether an appeal would be "stifled" by an order requiring payment into court; highlights the need for candid evidence and skepticism about bare assertions. |
Cited by the court as supporting the approach that evidence must be full and frank where an applicant says a costs burden will stifle an appeal. |
Court's Reasoning and Analysis
The court began by setting out the text of CPR r52.19 and identifying the relevant statutory matrix. The key aspects of r52.19 noted were:
- It only applies to appeals from proceedings in which costs recovery was limited or excluded at first instance (r52.19(1)).
- In deciding whether to make an order, the court must have regard to the means of both parties, all the circumstances of the case, and the need to facilitate access to justice (r52.19(2)).
- There is a specific qualification that if the appeal raises an issue of principle or practice on which substantial sums may turn, it may not be appropriate to make such an order (r52.19(3)).
Having reviewed the authorities (summarised above), Judge Birss distilled the applicable principles: the rule is discretionary; engagement of the rule does not oblige the court to make an order; the court must consider means and access to justice; a wholly unmeritorious appeal is a reason not to cap costs; and assertions about deterrence of appeal by the risk of adverse costs require credible, full evidence of means.
The court then applied those principles to the facts. It accepted that r52.19 was engaged because costs recovery was limited at first instance. It accepted the inequalities the Appellants highlighted and also accepted the Respondents' estimate of likely costs at about £90,000. The court acknowledged the Appellants' understandable motive to seek protection to facilitate access to the appellate court.
However the court placed decisive weight on the way that costs are recoverable under the Landlord and Tenant Act 1985. Two statutory provisions were highlighted:
- Section 19 — allows, subject to the requirement that costs be reasonably incurred, the recovery of litigation costs by landlords through the service charge in a proper case.
- Section 20C — gives the court power to prevent recovery through the service charge if it would not be just and equitable to allow recovery (commonly exercised where tenants succeed, less commonly where landlords succeed).
The court reasoned that a conventional costs-capping order limited to the 70 appellants would mean that any portion of the Respondents' assessed costs not met because of the cap would likely be recoverable via the service charge from the whole body of tenants (all 436). That would have the effect of shifting the cost risk from the 70 tenants who chose to litigate to the 366 tenants who did not participate. In short, the protection sought by the Appellants would result in the costs being borne by other uninvolved tenants rather than by the Respondents.
Judge Birss concluded that this redistribution of cost risk to non-participating tenants did not accord with justice or the overriding objective and therefore weighed decisively against making a costs-capping order in the circumstances of this case. Judge Nugee agreed with this analysis, emphasising that the real contest would thereby become a contest between the 70 participating tenants and the other 366 tenants on the estate, a result that would not be just.
Holding and Implications
REFUSED
Holding: The Court refused the Appellants' application for a costs-capping order under CPR r52.19.
Implications:
- Direct effect: The Appellants will not have their potential exposure on appeal capped by the Court of Appeal; if they lose the appeal they will remain exposed to an adverse costs order in accordance with the ordinary costs rules.
- Practical consequence highlighted by the court: a costs-capping order in this landlord/tenant context would likely produce a redistribution of unpaid costs via the service charge to all tenants of The Property, thereby shifting the financial burden to non-participating tenants — a result the court found to be unjust in the circumstances.
- Broader precedent: The court applied and clarified how r52.19 should be approached in the specific context of landlord/tenant litigation involving service charges and the Landlord and Tenant Act 1985. The opinion does not purport to lay down a new general rule beyond those principles, and no broader binding principle beyond the case-specific reasoning was announced.
Outcome and Court Composition
The application for a costs-capping order was refused by a panel consisting of Judge Birss and Judge Nugee, both of whom gave reasons in agreement as summarised above.
Notes on Anonymization
In this summary, individual and corporate names appearing in the original opinion have been replaced with consistent generic placeholders for confidentiality and to comply with the instruction to anonymize personally identifiable information. Statutory references and authorities cited in the judgment have been preserved in anonymized or citation form as required for an accurate account of the court's reasoning.