Mulalley wins landmark Building Safety Act cladding claim against overseas parent of stricken UK product firm

Mulalley has been handed a £1.8m settlement in a landmark ruling by a High Court judge who decided that the German parent of a UK cladding firm which went into administration last year should have to shoulder some of the contractor’s costs caused by it having to replace a defective cladding system its subsidiary supplied.

Last week’s judgment against Sto SE & Co. KGaA by Mr Justice Pepperall was immediately hailed as a major development by law firm Charles Russell Speechlys which represented Mulalley in the case.

The ruling is one of the first major contribution claims under the Building Safety Act (BSA) to reach judgment and the law firm’s senior associate Rebecca Morjaria said: “The decision sends a clear message to product manufacturers and their parent companies: the BSA has real reach, and structuring around a subsidiary will not insulate a group from liability where a defective product has been placed on the market.”

The case related to a contract Mulalley signed at the end of 2006 with Chelmer Housing Partnership for work on a new build and refurbishment scheme at a residential tower block called Parkside Court in Chelmsford, Essex.

The judgment said: “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. On 22 December 2022, Mulalley entered into a settlement agreement by which it agreed to remove and replace the defective cladding and pay certain sums to Chelmer.”

Sto Ltd, which was based at King’s Norton near Birmingham, supplied the cladding system at Parkside Court but called in administrators last January – a month after Sto SE & Co. KGaA filed a winding up notice against it at the Edinburgh Court of Session.

Mulalley, which had already issued a claim against Sto Ltd, then issued a claim against Sto SE & Co. KGaA under the Building Safety Act’s building liability order provisions.

The German company failed to defend the proceedings and judgment was entered in default.

Mulalley said the cost of carrying out the remedial work was £3.7m which the judge revised down to £3.4m before the judge amended the figure again to just over £2m because “the remedial works extended beyond the work necessary to remedy the defective render system”.

In his ruling, Mr Justice Pepperall said: “In my judgment, the principal cause of the remedial works was plainly the fact that Sto marketed and supplied an inherently defective product.”

Mulalley said a “just and equitable contribution in this case is 90%” to cover the cost of its work with the judge eventually awarding it 87.5% of the £2.025m it claimed with the final sum being awarded coming in at £1.77m.

Morjaria added: “We are delighted to have secured this result for Mulalley. They stepped up to remediate Parkside Court for the benefit of residents and the building owner, and it is only right that the manufacturer of the defective cladding system bears the majority of those costs.

“This is one of the first substantive contribution claims under the Building Safety Act to result in a BLO, and the first to do so by way of default judgment against an overseas parent company.”