The TCC determines the proper quantification of a contractor's contribution claim against the supplier of an unsafe external cladding system.
Facts
Chelmer Housing Partnership Ltd ("Chelmer") engaged Mulalley & Company Ltd ("Mulalley") with regards to refurbishment works at a residential tower block in Essex, which included the design and installation of external cladding, by a contract dated 30 December 2006. Mulalley subcontracted the cladding works specifying the use of the StoTherm Classic System.
Following the Grenfell fire, Chelmer identified that the cladding system was defective and entered into a settlement agreement by which Mulalley agreed to remove and replace the defective cladding and pay certain sums to Chelmer.
Mulalley sought to recover a portion of those costs from Sto Limited ("Sto"), the company which provided the cladding system, arising from its own liability under s.149 of the Building Safety Act 2022 (the "BSA"). This section created a retrospective liability for past defaults relating to cladding products which are present in an external wall of a building and have caused a dwelling or dwellings in that building to be unfit for habitation including where a misleading claim is made by a person marketing or supplying a cladding product and/or the manufacturing of a cladding product that is inherently defective.
On 17 January 2025, Sto was placed into administration. As a result, Mulalley also pursued a claim against Sto's parent company ("Sto Germany") for a Building Liability Order ("BLO") pursuant to s.130 of the BSA, as an associated company.
Sto Germany failed to defend the claim and judgment in default was entered against them on 8 December 2025 with damages to be assessed. Sto Germany also failed to take part in the damage assessment proceedings summarised below.
The law
As judgment in default had been entered, the only live issue in these proceedings was the determination of the amount of the damages that should be awarded. In the event of a judgment in default, the claimant must still prove its loss or damage by evidence.
Therefore, the issues for the Judge to determine were limited to the following:
- what costs were in fact incurred;
- whether those costs were incurred in relation to the pleaded defects
- whether the costs incurred were reasonable; and
- what is the just and equitable contribution to such loss and damage that Sto Germany (pursuant to the BLO) should be ordered to pay.
In order to determine the contribution pursuant to the Civil Liability (Contribution) Act 1978, section 2(1) provides that the court must determine what is just and equitable having regard to the extent of that person's responsibility for the damage in question. As such, the Judge must consider both the seriousness of the respective parties' faults and their causative relevance.
The decision
The gross costs incurred as a result of the entire remediation works amounted to around £3.7m. This was reduced to a little over £3.4m due to sums allowed for preliminaries, subcontractor costs, and consultancy and legal fees.
As the remediation works extended beyond the works required as a result of the unsafe cladding, the claim was then further reduced to account for the actual percentage of the works which were necessary to remedy the defective render system. This reduced the claim to a little over £2m.
The Judge accepted the expert evidence regarding the reasonableness of the costs incurred and did not deduct any amounts under this heading.
The Judge considered the typically awarded contributions in design breach cases against architects, which sits at around 67%-80%, but determined that Sto's responsibility extended beyond a design role since Sto also manufactured, marketed and supplied an inherently defective product, which was the principal cause of the remedial works. The Judge decided that, as a consequence of this and with the addition of Sto's misleading marketing, Sto's contribution must be set at a higher level. As a result, the Judge awarded an 87.5% contribution, totalling £1,772,312.17, payable by Sto, and therefore also payable by Sto Germany pursuant to the Building Liability Order.
Conclusions
This is the first reported judgment that has referred to s149 of the BSA which created a liability for past defaults relating to cladding products, albeit such a claim was not defended in this instance. However, given the criticism of the cladding manufacturers in the Grenfell Inquiry's Report, and as building safety claims move down the chain, this is unlikely to be the last. The determination of the increased level of responsibility attributable to cladding designers and manufacturers will provide a powerful precedent for contractors seeking significant contributions from manufacturers in cladding claims.
It is another demonstration of the court's willingness to ensure that the BSA meets its purpose in holding those responsible for fire safety defects to account in response to the Grenfell Tower tragedy. However, with large construction companies such as the Ardmore Construction Group and, huge cladding manufacturer, Sto Germany's own subsidiaries already folding under the rising costs of cladding remediation claims – it remains to be seen just how much will actually be recovered from those responsible, who will foot the bill once they have folded, and what the construction industry will look like in the future as a result.
