Contribution Liability and Building Liability Orders in Cladding Claims: Mulalley v Sto
June 2026The recent decision in Mulalley & Co. Limited v (1) Sto Limited & (2) Sto SE & Co. KGaA is a significant Technology and Construction Court judgment addressing contribution claims in cladding litigation in the post-Grenfell landscape. The decision is particularly notable for its treatment of Building Liability Orders (BLOs) under the Building Safety Act 2022 (BSA), as well as its approach to the quantification of damages following default judgment and apportionment under the Civil Liability (Contribution) Act 1978.
Importantly, the case illustrates the courts’ increasingly robust approach to building safety claims, signalling both a willingness to impose proportionate liability on product manufacturers and to use the BSA as a practical tool for reaching defendants beyond the immediate contractual chain.
Key takeaways
The decision represents an important step in the development of BSA-related case law. It highlights the scope of the BSA and a broader trend of the courts’ willingness to ensure that liability for unsafe buildings rests with those responsible, even where that requires crossing jurisdictional boundaries.
The case also highlights that:
- BLOs are emerging as a powerful tools capable of reaching domestic and overseas parent companies and cutting through complex contractual or restructuring structures.
- Default judgment does not remove the evidential burden on quantum.
- Courts will adopt pragmatic approaches to causation, apportionment of liability and assessment of damages and costs.
- Cladding product manufacturers and suppliers may face significant contribution exposure in the future. This is anticipated to increase in view of the proposals under the Remediation Bill announced earlier this year.
Background
Mulalley was engaged in December 2006 to design and build refurbishment works at a residential tower block, Parkside Court, in Chelmsford. The works included the design and installation of external cladding, which was subcontracted on the basis that the StoTherm Classic system, supplied by Sto, would be used.
Following the Grenfell Tower tragedy, the employer made a claim against Mulalley, alleging that the Sto system was unsafe and needed to be replaced. Mulalley settled that claim and subsequently sought a contribution from Sto for the cost of the remedial work and sums paid to the employer.
The claim was initially brought against Sto’s UK entity, which entered administration in January 2025. Following that event, Mulalley pursued Sto’s German parent company via a BLO under section130 of the BSA. That entity failed to defend the claim, and on 8 December 2025, default judgment was entered with damages to be assessed.
Notably, this demonstrates the practical reach of BLOs, particularly in a cross-border context. The Court was prepared to impose liability on a foreign parent company following the insolvency of the UK subsidiary, reinforcing the BSA’s objective of preventing corporate structures from shielding those ultimately responsible for building safety defects.
Assessment of damages
This judgment concerned the quantification of Mulalley’s claim against the cladding product supplier.
The Court reaffirmed that default judgment establishes entitlement, not quantum¹. The claimant must still prove its loss or damage by evidence, despite the parent company’s failure to engage here.
Pepperall J identified four key issues, including the:
- Level of costs incurred;
- Causation, i.e. whether the costs were incurred in respect of the pleaded defects;
- Reasonableness; and
- ‘Just and equitable’ contribution to such loss and damage that the parent company should be ordered to pay.
Mulalley’s total claim of just over £3.73 million was independently reviewed. Adjustments were made, particularly in regard of sums allowed for preliminaries, subcontractor and associated costs, resulting in an accepted figure of £3.43 million.
The Court then addressed causation, recognising that not all remedial work was attributable to Sto’s defective system. A percentage-based allocation was applied, alongside deductions for legal costs in achieving the settlement, resulting in a recoverable loss of £2.03 million.
This reflects a pragmatic approach to more complex loss, with the Court willing to accept sampling and proportionate methodologies rather than requiring exhaustive analysis into every cost, which has the potential to be considerably influential in future large-scale remediation claims.
In assessing reasonableness, the Court reiterated its reluctance to use hindsight to second-guess remedial works (Martlet v Mulalley²). It emphasised that Mulalley had no commercial incentive to overspend as part of the settlement reached, and that the costs fell within expected ranges, with no cheaper viable alternatives identified. The full £2.03 million was therefore considered to be reasonably incurred.
Claim for contribution
The contribution claim against Sto was brought under section 2(1) of the Civil Liability (Contribution) Act 1978, which requires the court to determine what is ‘just and equitable’ having regard to the extent of each party’s responsibility for the damage. The Court noted that this involves consideration of both the seriousness of the parties’ respective faults and their causative relevance.
In summary, Sto was treated not only as having supplied a cladding system that did not comply with the Building Regulations, but also as having made misleading statements about the system and provided a product that was inherently defective. These factors caused the apartments to be unfit for habitation. The defective product itself was identified as the primary cause of the loss, with even the alleged workmanship issues being traced back to defects in the system’s design.
Therefore, the Court placed decisive weight on the inherent unsuitability of the product, rather than treating the case as an allocation between contractor workmanship and design responsibility.
Decision
The Court held that Sto, and Sto Germany pursuant to the building liability order, was liable for 87.5% of the loss, resulting in an award of over £1.77 million plus interest. This level of apportionment is notable and reflects the Court’s view that the supply of an inherently defective, non-compliant product was the dominant cause of the loss and damage on the facts.
The decision therefore signals that, in cladding cases, product manufacturers or suppliers may face substantially higher levels of exposure than would traditionally arise in construction contribution claims.
Interest was awarded at a reasonable commercial rate pre-judgment, with additional interest at 8% applied to an unpaid interim sum. Costs were assessed on the standard basis, with the Court declining to award indemnity costs despite the Defendant’s failure to participate in the proceedings.
Beale & Co continue to monitor developments in BSA litigation for our clients. If you have any questions regarding the judgment covered above, please contact the authors.
This article includes contributions from Kayleigh Rhodes
¹Strachan v Gleaner Co. Ltd [2005] UKPC 33, [2005] 1 W.L.R. 3204, per Lord Millett, at paragraph [16]
²Matlet v Mulalley [2022] EWHC 1813 (TCC)
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