Martlet Homes Limited -v- Mulalley and Co Limited

Introduction

Last month, our construction bulletin covered the close of proceedings in the case of Martlet Homes Limited -v- Mulalley and Co Limited  [2022] in the Technology and Construction Court (TCC) (see article here). On Thursday 14 July 2022, HHJ Stephen Davies held in favour of our client, Martlet Homes Limited (Martlet), in what is the first High Court judgment on a claim concerning fire safety defects in cladding on a high rise building since the Grenfell Tower disaster in 2017. Martlet is part of the Hyde Housing Group, one of the largest housing associations in England, owning or managing some 50,000 homes in London, Kent, Surrey, Sussex, Hampshire, the East of England and East Midlands. 

This is a significant win not only for the Hyde Group but for many UK building owners facing similar cladding issues. It will additionally hold wider implications for the construction industry as a whole, as it offers much needed guidance on the court’s approach to numerous significant issues affecting the hundreds of cladding disputes ongoing in the UK today. (See the full judgment here.)

The court’s key findings

Martlet’s claim against Mulalley and Co Limited (Mulalley) concerned defective design and installation of cladding supplied by Sto Ltd, which was installed by Mulalley at four high rise residential towers in Portsmouth. HHJ Stephen Davies held that Martlet has succeeded on both its primary and alternative cases and awarded Martlet substantial damages for the remedial works it undertook to address the defects in the cladding system. The Judge additionally awarded Martlet damages for the substantial costs of the waking watch service implemented by Martlet as a temporary mitigation measure for the risks posed by the cladding pending it’s removal.

Workmanship defects

Martlet succeeded in its primary case against Mulalley in respect of Mulalley’s defective workmanship in the installation of the cladding system at the Gosport Towers. 

Mulalley argued that Martlet’s decision to remove and replace the cladding at the Gosport Towers was taken on the basis of post-Grenfell concern over the presence of combustible insulation within the system, rather than as a result of the defects in Mulalley’s installation. However, after a detailed analysis of relevant  case law relating to causation, the Judge found that the workmanship defects for which Mulalley is responsible were an effective cause of Martlet’s loss.

Specification of EPS insulation

In relation to Martlet’s alternative case on Mulalley’s specification of EPS insulation, the Judge found that Mulalley’s use of the Sto cladding system, which incorporated combustible EPS insulation panels, was both a breach of contract and a breach of the Buildings Regulations in force at the time. 

Specifically, Mulalley was found to be in breach of its contractual obligation to ensure the cladding system followed the recommendations and advice in BRE 135 (2003). Although the Judge noted that BRE 135 “could have been clearer” in its identification of the relevant design principles and performance standard for external wall systems, he found that “any careful reading of the document, especially by any construction professional with fire safety related knowledge” would have revealed that the performance standard in Annex A of BRE 135 should have been considered and complied with by a cladding specifier in the case of a high rise building with sleeping areas.

Mulalley attempted to rely on the BBA Certificate for the Sto Therm Classic K cladding system installed at the Gosport Towers in defence of Martlet’s alternative case, but the Judge held that contractors and designers cannot point to a BBA Certificate as a “guarantee” or “passport” to compliance with the Building Regulations. The Judge ultimately found that the system failed to meet the functional requirements of B4 (1) of the Building Regulations on the basis that:

i. there was no evidence that it had satisfied the Annex A performance criteria through a BS 8414-1 test; and/or 
ii. there was no evidence that it satisfied all of the general and system specific design principles found in BRE 135; and 
iii. the BBA Certificate that was in force at the time did not in fact demonstrate or seek to demonstrate compliance with these requirements.

As a result of his finding on Martlet’s alternative case, the Judge concluded that Martlet is entitled to recover the costs of the full removal of the cladding system and replacement with a non-combustible alternative, being the remedial scheme actually implemented by Martlet in 2018. The Judge noted that had Martlet only succeeded in proving the existence of the installation defects, it would only have been entitled to recover damages by reference to the cost of a more limited repair works scheme.

Waking watch costs

With regard to its waking watch claim, HHJ Stephen Davies held that, in contrast to Mulalley’s pleaded case, Martlet’s waking watch costs were not too remote to be recovered as damages for Mulalley’s breaches. 

The Judge found that Mulalley, as both design specifier and contractor of the cladding works at the Gosport Towers, must have been, “taken to know of the importance of fire safety in relation to the selection and installation of external cladding and the potentially serious, not to say tragic, consequences of fires in high rise residential buildings due to fire spread in external cladding”. Consequently, he reasoned 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. 

The Judge additionally commented that the fact that the Defendant was not aware of the use of waking watches prior to the Grenfell Tower fire more reflected, “a culture of endemic complacency within the construction sector about the true nature and extent of the fire safety risk associated with the use of combustible external cladding on high-rise residential tower blocks than any reasoned assessment that the risk could never be sufficiently high to justify the provision of temporary additional fire-safety precautions if serious fire safety related defects were discovered in such a building.” 

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 following the Grenfell fire tragedy.

Further findings

HHJ Steven Davies considered a range of technical issues and legal principles in his judgment that will be of significant interest to legal practitioners and the wider construction industry. We look forward to sharing further insights into these in the coming weeks and months.

Norton Rose Fulbright is proud of its role in delivering this outcome on behalf of the Hyde Group, which we hope will promote the resolution of the many cladding related disputes thanks to the court’s guidance delivered today.

Further information

For further information on this case, please contact Carol Jones, Director, Communications, Marketing and Public Affairs. 

Martlet Homes Limited is part of The Hyde Group and is represented by Norton Rose Fulbright LLP with Mr Jonathan Selby QC and Mr Tom Coulson of Keating Chambers. Mulalley is represented by Pinsent Masons LLP and Mr Simon Hughes QC and Mr James Frampton, also of Keating Chambers.

Should you have any questions regarding cladding-related issues, the Norton Rose Fulbright team would be happy to assist.

Our dedicated construction and engineering team provides a full cradle of legal services to a vast array of clients including institutional investors, project companies, sponsors, developers, contractors and financiers. We combine sector experience with commercial focus to deliver timely and properly reasoned construction law advice to clients in some of the most challenging jurisdictions for construction project delivery globally. The team has experience across every segment of construction from project inception through procurement and construction to operation and maintenance.

Simon Ramsden is a dispute resolution and litigation lawyer based in London. He focuses on dispute resolution in the construction, transport, energy, mining and infrastructure sectors. 

Amy Armitage is a dispute resolution lawyer based in London. Amy's practice encompasses disputes management as well as dispute resolution in the context of construction and engineering disputes in the infrastructure and energy sectors and the built environment.
Sarah Gosling is an associate in our construction and energy team, based in London. Sarah focuses on dispute resolution in the construction and energy sectors.