Mulalley v STO: Court Awards 87.5% Contribution Against Cladding Manufacturer
The Technology and Construction Court (TCC) has provided important guidance on the assessment of contribution claims arising from defective building products in Mulalley & Co Ltd v STO Ltd & Anor [2026] EWHC 1552 (TCC). The decision considers the proper approach to quantifying damages following default judgment and the allocation of responsibility between a contractor and a manufacturer under the Civil Liability (Contribution) Act 1978.
Background
Mulalley & Co Ltd was engaged to carry out the refurbishment of Parkside Court, a residential tower block in Chelmsford, including the design and installation of an external cladding system. The cladding works incorporated the StoTherm Classic System supplied by STO Ltd.
Following the Grenfell Tower fire, the cladding system was identified as defective. Mulalley subsequently entered into a settlement agreement with the employer, Chelmer Housing Partnership Ltd, under which it agreed to remove and replace the defective cladding and make compensation payments.
Mulalley then sought to recover these losses from STO Ltd under the Building Safety Act 2022 and, following STO Ltd’s entry into administration, pursued its German parent company, STO SE & Co. KGaA, through a Building Liability Order under section 130 of the Act. STO Germany failed to participate in the proceedings, resulting in default judgment on liability, leaving the court to determine the appropriate quantum of damages.
The Issues
The Court was required to determine:
- the correct approach to assessing damages following default judgment;
- whether the remedial costs claimed had actually been incurred;
- whether those costs were caused by the pleaded defects;
- whether the costs were reasonably incurred; and
- what constituted a “just and equitable” contribution under section 2(1) of the Civil Liability (Contribution) Act 1978.
The Court’s Decision
The Court reaffirmed that although liability had already been established by default judgment, Mulalley was still required to prove its losses through evidence. A default judgment determines liability but does not automatically entitle a claimant to recover the full amount claimed.
The Court accepted detailed witness and expert quantity surveying evidence demonstrating that Mulalley had reasonably incurred remedial costs of £2,025,499.62 directly attributable to the defective Sto cladding system. In reaching this conclusion, the Court reiterated the established principle that it will generally be reluctant to criticise, with hindsight, the reasonableness of remedial works undertaken to rectify serious building safety defects where those costs have been independently verified.
The remaining issue was the extent of STO Germany’s responsibility for those losses.
Applying section 2(1) of the Civil Liability (Contribution) Act 1978, the Court considered both the seriousness of each party’s fault and the causal significance of their conduct. While contractors commonly bear responsibility for design and installation, the Court concluded that the primary cause of the losses was STO’s marketing and supply of an inherently defective cladding system, together with misleading statements regarding its compliance.
Although workmanship issues had also been alleged, the Court found these were secondary to the inherent defects within the StoTherm Classic system itself. Taking all the circumstances into account, the Court held that it was just and equitable for STO Germany to bear 87.5% of the recoverable losses. Judgment was therefore entered against STO Germany in the sum of £1,772,312.17, together with interest.
Key Takeaways
This decision provides several important reminders for parties involved in building safety disputes:
- Default judgment establishes liability, not quantum. A claimant must still prove the losses it seeks to recover through appropriate factual and expert evidence.
- The burden remains on the claimant to demonstrate that remedial costs were actually incurred, caused by the pleaded defects, and reasonably incurred.
- Courts will generally regard actual remedial expenditure as the starting point when assessing damages, particularly where independent expert evidence confirms the reasonableness of those costs.
- Contribution claims under the Civil Liability (Contribution) Act 1978 remain highly fact-sensitive, with the Court assessing both comparative blameworthiness and causal responsibility.
- Manufacturers may bear the overwhelming share of liability where an inherently defective building product is found to be the principal cause of the loss, even where contractors retain design and installation responsibilities.
How CCC Can Help
At Contract & Construction Consultants (CCC), we regularly advise employers, contractors, subcontractors and consultants on complex construction disputes including defect-related disputes. Our team has extensive experience assisting clients with the preparation and defence of claims involving defective works, remediation costs, Building Safety Act issues, extensions of time, loss and expense, adjudication, and alternative dispute resolution. We work closely with technical experts to develop robust evidential strategies and provide commercially focused advice throughout the dispute resolution process. If you require advice regarding defective building products or any other construction dispute, our team would be pleased to discuss how we can assist.
