The first substantive claim concerning cladding defects on high rise buildings since Grenfell was handed down by the Technology and Construction Court on 14 July 2022 in the case of Martlet Homes Limited (“Martlet”) v Mulalley & Co. Limited (“Mulalley”)  EWHC 1813 (TCC) which has provided further clarity as to how the courts will handle claims which involve fire safety defects and cladding issues post-Grenfell.
Martlet owns 5 social housing tower blocks in Gosport (“the Towers”). Following the Grenfell fire, Martlet carried out an inspection of the Towers and found that the StoTherm Classic system (an external wall insulation system), specified and installed by Mulalley during a refurbishment of the Towers in 2005, was highly combustible and that the fire barriers installed as part of the refurbishment were defective in that many were missing or incorrectly installed.
Martlet sought expert advice and arranged a 24/7 ‘waking watch’ as a fire safety precaution and, thereafter, carried out remedial works to remove and replace the StoTherm Classic system with a non-combustible system. This was at a cost of approximately £8 million which it sought to claim from Mulalley.
Martlet had two bases of claim:
- The Installation Breach Case – Martlet argued there were various defects in the installation of the system and its cavity barriers
- The Specification Breach Case – Martlet argued that the StoTherm Classic system did not meet applicable fire safety standards at the date of the contract.
Martlet was successful in both of its claims. The Court found that it was entitled to recover the cost of the replacement work carried out along with the ‘waking watch’ costs, which were considered a reasonable step to mitigate the potential fire risk caused by the combustible cladding. Mulalley argued that the costs associated with the ‘waking watch’ were too remote from the admitted breaches of contract to be recoverable as damages for breach of contract. However, the Court found that a sensible company in Mulalley’s position would have appreciated that, in the face of serious fire safety defects, temporary measures would be required to ensure the safety of building residents until remedial works could be carried out. This is an important finding for the housing sector, given the widespread use and substantial cost of waking watch patrols in residential buildings to mitigate fire safety defects post-Grenfell.
Mulalley admitted that there were some defects in the installation but strongly denied causation and liability; and further denied that it was in breach of contract by specifying the StoTherm Classic system. Mulalley argued that the admitted defects were not sufficient to justify the complete replacement of the system and only (cheaper) repair works should have been carried out instead. After a detailed analysis of case law, the Court found that workmanship defects which Mulalley was responsible for were an effective cause of Martlett’s loss.
The Court further found that under the Contract, Mulalley’s use of the StoTherm Cladding system which incorporated combustible EPS insulation panels, was both a breach of contract and a breach of the Building Regulations in force at the time. This included a requirement for external walls to “adequately resist the spread of fire”. The existence of a 1995 British Board of Agrément (BBA) certificate for the StoTherm Classic system could not ‘be read as if it was a guarantee’ of compliance with requirements of the Building Regulations and that Mulalley’s obligations meant it ought to have gone further to ensure the system was appropriate.
BRE 135, a report referred to in Approved Document B which provides guidance in relation to the use of external wall systems such as StoTherm Classic, advised that systems of this type should not be specified for use in high-rise residential buildings unless meeting the performance standard in Annex A to BRE 135. This could be demonstrated by passing tests carried out in accordance with BS 8414-1. The Court held that there was no evidence that the StoTherm Classic system had passed such a test. Mulalley’s argument that it could avoid liability by showing that other professionals were acting in the same manner (ie: by specifying the same or similar combustible systems) was rejected by the Court.
Mulalley then sought to argue that the main reason Martlet wished to replace the cladding was not due to any deficiency in its works, but rather out of concern that there was combustible cladding post-Grenfell. The Court however sided with Martlet, stating that the replacement remedial action taken was the ‘only sensible way to address’ the problems caused by Mulalley’s defective installation and presence of combustible cladding. Mulalley was found liable for the costs due to the installation breaches being one of the factors which led to the decision to replace the cladding.
The case is a landmark decision in that it provides a very useful insight into the analysis of the Court on important legal and technical issues that impact cladding claims. However, the judgment has its limitations because every cladding case is different. The Judge indeed emphasised that everything turned on the contractual requirements; the cladding used; industry standards; the pleadings; and the evidence. In this case, for example, the JCT Design and Build contract included an unqualified design duty, which might not be the same in other cases.
Fortunately for Martlet, it succeeded on the specification breach case and therefore was entitled to recover the costs of the replacement scheme. However, the outcome may have been very different if it had succeeded only on the installation breach case. In that case, it would have only been entitled to recover the reasonable costs of the repair scheme and not the costs of the replacement scheme. This alternative potential outcome is one of the reasons why so many cladding cases have settled before reaching trial. It remains to be seen whether this decision will embolden claimants to take cases to trial or will act as a catalyst for settlements at higher figures than might generally have been seen previously.