Spender v FIT Nominee: Court of Appeal rejects costs capping order in landlord-tenant dispute

The Court of Appeal has dismissed an application for a costs capping order in Liam Philip Spender & Others v FIT Nominee Limited & Another [2025] EWCA Civ 1319, highlighting the unique challenges faced by tenants appealing service charge disputes where costs recovery mechanisms under the Landlord and Tenant Act 1985 come into play.

The case concerned 70 of 436 tenants at St David's Square in London E14 who challenged the reasonableness of service charges relating to the estate's security system. The First Tier Tribunal initially found in the tenants' favour, determining that only 19% of the charged amounts were reasonably incurred. However, the Upper Tribunal reversed this decision on appeal by the landlords, FIT Nominee Limited and FIT Nominee 2 Limited (ultimately subsidiaries of NatWest Bank), prompting the tenants to appeal to the Court of Appeal.

The costs capping application

Facing estimated adverse costs of approximately £90,000 if unsuccessful, the appellant tenants sought a costs capping order under CPR rule 52.19. They argued that without such protection, their appeal would be stifled, particularly given the disparity between the individual stakes (averaging £1,500 per tenant) and the potential costs liability. The tenants emphasised the inequality of arms between ordinary homeowners and the corporate landlords.

Lord Justice Birss, delivering the lead judgement with which Lord Justice Nugee agreed, acknowledged the court's discretion to make such orders where costs recovery is limited at first instance. The judgement outlined key principles governing costs capping applications, including the need to facilitate access to justice, consideration of both parties' means, and recognition that whilst adverse costs risks should act as deterrents, evidence demonstrating genuine stifling of appeals could support making an order.

The critical distinction

The court identified a crucial distinction in this case arising from the interaction between CPR rule 52.19 and sections 19 and 20C of the Landlord and Tenant Act 1985. Under section 19, landlords can typically recover reasonably incurred litigation costs through service charges, subject to the court's power under section 20C to prevent such recovery where it would not be just and equitable.

The judgement recognised that if a costs capping order limited the appellant tenants' liability to, for example, £25,000, the remaining unpaid costs (potentially £50,000) would likely be recoverable by the landlords through service charges levied on all 436 tenants. This would effectively shift the costs risk from the 70 appellants who chose to pursue the appeal to the 366 tenants who opted not to participate in the litigation.

Lord Justice Nugee succinctly observed that "the real contest is not between the tenants who are appealing and their landlord; the real contest is between the 70 tenants who have brought the appeal and the other 366 tenants on the estate who have not."

Implications for future cases

This decision demonstrates the complexities inherent in costs protection for tenant appellants in service charge disputes. Whilst the court maintains discretion to grant costs capping orders, the potential for non-participating tenants to bear unsuccessful appellants' costs through service charge mechanisms presents a significant barrier to such applications succeeding.

The judgement underscores that costs capping applications in landlord-tenant disputes require careful consideration of the broader impact on all affected parties, not merely the immediate litigants. The decision provides important guidance on how courts will approach the intersection of civil procedure rules and statutory landlord-tenant provisions when determining costs protection in appeals.