Issue estoppel in service charge disputes

The decision in Vernon v Orbit Housing Association [2026] UKUT 19 (LC) represents the third chapter in the Upper Tribunal’s consideration of issue estoppel, following its earlier decisions in Hemmise v London Borough of Tower Hamlets [2016] UKUT 109 (LC) and Francis v Sandoz [2022] L. & T.R. 1.

The Appellant, Mr Vernon, is the assured tenant of a flat in sheltered housing (“Rosalind Court”). He appealed the decision of the FTT that a Scheme Based Support Charge (“SBSC”) demanded of him by the Respondent, Orbit Housing Association, was reasonable and therefore payable per s.19 Landlord and Tenant Act 1985 (“FTT 2”). FTT 2 was not the first time the FTT, and indeed, the UT had made a determination concerning the SBSC.

FTT 1

Mr Vernon first applied to the FTT in 2022 for a determination as to whether the SBSC was payable for the 2021/22 and 2022/23 service charge years. The FTT found that the SBSC was a charge for overnight personalised care only for residents with a separate service agreement, not a service for the benefit of all residents.

The FTT held that the SBSC was not a service charge within the meaning of s.18 LTA 1985 and therefore that it had no jurisdiction under s.27A of that Act. However, in the event that the SBSC was a service charge, the cost was not reasonably incurred because it was unreasonable to incur a cost on behalf of all residents in order to provide a service only to those with a Support Agreement.

On appeal in 2023, the UT made three findings: (1) Mr Vernon was contractually obliged to pay the SBSC, (2) it was a variable service charge, and (3) that the finding that no services were provided to Mr Vernon in return for the SBSC was open to the FTT on the evidence it heard. Accordingly, the UT upheld the FTT’s finding that the cost to which the SBSC related was not reasonably incurred.

FTT 2

Orbit subsequently charged Mr Vernon the SBSC for the 2023/24 and 2024/25 service charge years, which Mr Vernon again challenged. This time, the FTT had new evidence before it which had not been produced in the first proceedings, including a s.106 agreement and Orbit’s contract with its care provider, Unique Senior Care. This evidence showed an obligation to provide overnight support to all residents. On this basis, the FTT found that services were provided to Mr Vernon and that the charge was reasonable and therefore payable.

UT 2

Mr Vernon appealed the FTT 2 decision on the ground that the FTT was issue estopped from making a decision was inconsistent with FTT 1.

Mr Vernon argued that Orbit lost in FTT 1 because the SBSC was not reasonable under s.19 LTA 1985 because the FTT/UT could not identify any benefit Mr Vernon received in respect of the services provided. That finding was not limited to a particular period of time, it was a static fact. Unless Orbit could have demonstrated in FTT 2 that there was further material which showed that the pervious decisions were incorrect and that material could not have been adduced by reasonable diligence, then the finding as to reasonableness applied in subsequent service charge years.

In response, Orbit argued that no estoppel arose. FTT 1 was about service charge years 2021/22 and 2022/23 and FTT 2 was about the next two years. FTT 1’s decision starts and ends with the service periods under challenge. They also argued that the issue to which an estoppel can arise must be one which is essential to the decision on the cause of action. If FTT 1 found that the SBSC could only ever benefit Mr Vernon if he had a Support Agreement, that finding was extraneous to what it decided, which was that no services were provided for him in 2021-2023.

Alternatively, Orbit argued that if an issue estoppel did arise, an exception should apply. Relying on Hemmise, it contended that the first FTT decision was plainly wrong, and it would be inequitable to bind Orbit to that incorrect finding for the duration of Mr Vernon’s tenancy.

The UT dismissed the appeal, with Judge Cooke holding that no issue estoppel arose from the FTT 1 decision to prevent the FTT 2 from finding the SBSC to be reasonable and payable for the years 2023/24 and 2024/25.

FTT 1 made a finding only about the facts as they stood in the two years in question. As Judge Cooke held “that was inevitably the case because the evidence it heard was limited to what was actually happening”. Furthermore, she found “nothing in the FTT’s 2022 decision that indicates that it intended to make a decision about a “static fact” or to say that Unique’s contractual arrangements were such that no service was or could in the future be provided to Mr Vernon” (at [37]).

Judge Cooke emphasised that FTT 1’s finding was not that no benefit was derived from the services provided, it was that no services were being provided. She noted that the evidence in 2025 was “very different” and that “the FTT in its 2022 decision made a finding of fact about what was happening in 2021/22 and 2022/23. There was nothing to prevent it reaching a different conclusion about the facts in 2023/24 and 2024/25” ([40]).

Judge Cooke also noted that Orbit was not asking FTT 2 to take a different view of the facts found by the FTT 1. Rather, it was saying that “the facts on the ground remain the same as in 2022, and its argument was “we failed to persuade you in 2022 that the facts were as we said they were and you reached a different view of the facts; now in 2025 we have produced better evidence to show you that the facts on the ground are as we say they are.”’. Accordingly, the 2022 FTT decision made a finding only about facts on the ground in the service charge years 2021/22 and 2022/2023. There is nothing to prevent Orbit making its argument on facts afresh in 2025 ([50]).

Finally, Judge Cooke held that although there was no need to consider the exception in Hemmise, if there were, she would have applied it. FTT 1’s decision was plainly wrong, because the contractual arrangements with Unique require it to provide a service for all residents and the factual evidence heard by FTT 2 showed that it was doing so [41].

Justin Bates KC and Poppy Kemp are barristers at Landmark Chambers. They appeared for the Appellant, instructed through Advocate (formerly known as the Bar Pro Bono Unit).