Martlet Homes Limited v Mulalley & Co Limited [2021] EWHC 295 (TCC)

In the recent case of Martlet Homes Limited v Mulalley & Co. Limited, the Court considered an application to strike out on the basis that the Claimant had raised a new claim by way of its Reply. It also considered the Claimant’s request to amend its Particulars of Claim, despite the expiry of the relevant limitation period. The case has provided some helpful insight into the arguments used by contractors in cladding claims and it will be interesting to monitor any future decisions.

Facts

The case relates to five high rise towers now owned by Martlet Homes Limited (“Martlet”). Mulalley & Co Limited (“Mulalley”) had entered into a design and build contract (“D&B contract”) with the original owners of the towers in 2005 under which it agreed to design and undertake various refurbishment works, including the design and installation of the external cladding.

Martlet issued proceedings against Mulalley in December 2019 (just prior to the expiry of the limitation period) seeking damages of c. £8m for alleged negligence and breach of contract. The allegations related to defects in the fire barriers; a failure to properly fix the insulation boards to the external walls; and a failure to properly repair the existing substrate. The fire barrier and insulation defects were pleaded as breaches of Mulalley’s obligations in respect of both workmanship and design. The damages claimed comprise of remedial costs (including replacement of the cladding) and costs of a ‘waking watch’.

In its Defence and submissions, Mulalley admitted some breaches of contract (specifically in relation to defective workmanship) but denied that the alleged breaches of contract had caused any loss. It argued that the waking watch was introduced immediately after the Grenfell tragedy upon identifying defects that Mulalley was not responsible for. As to the decision to replace the cladding, it argued that the combustible expanded polystyrene (“EPS”) insulation used was no longer permitted for use on buildings over 18 metres in height and accordingly, Martlet was required to replace the cladding system in any event in order to comply with its duty as building owner pursuant to the Regulatory Reform (Fire Safety) Order 2005 following the Grenfell tragedy.

Martlet served a Reply which refuted the causation defence and pleaded an alternative case that Mulalley’s use of EPS as insulation was in breach of the D&B contract as:

1. The external walls of the building did not adequately resist the spread of fire over the walls and from one building to another contrary to Regulation 4 and Requirement B4(1) of the Building Regulations 2000;
2. The building fabric elements and/or components did not provide for a minimum useful life of 70 years;
3. The Sto system that was installed was not suitable for tall constructions; and
4. The Sto system that was installed would not achieve a class 0 fire rating in respect of those areas of the Towers above 18 metres.

In this application, Mulalley sought to strike out the alternative case raised at paragraphs 80 to 83 of the Reply on the basis that this was a new claim.  Martlet resisted the order but, in the alternative, sought to amend its Particulars of Claim to plead out its EPS case.  Mulalley argued that this should be refused as it was a new claim on new facts after the expiry of the limitation period.

Decision

The judge held that paragraphs 80-83 of the Reply should be struck out (on the basis that new claims must be added by amending the Particulars of Claim) but granted Martlet permission to amend its Particulars of Claim.

The judge considered four key issues in reaching his decision on the amendment application, being (1) Is the claim outside the limitation period; (2) Is it a new cause of action; (3) Is it arising out of the same or substantially the same facts; and (4) Exercise of the Court’s discretion. The judge was satisfied on each of these issues that this was a proper case for allowing a post limitation amendment.

Comment

Although the judgment does not opine on the facts of the matter and is therefore of limited use in terms of whether Mulalley’s arguments in its original Defence will be successful at trial, it is a useful example of the arguments that contractors can run in similar situations.  It will be worth following this case to trial so as to consider the Court’s findings once the parties have amended their respective pleadings to take into account the allegation that the use of EPS was contrary to the Building Regulations at the time.  The defences raised by Mulalley in its amended Defence will be of particular interest to D&B contractors subject to claims from property owners in relation to buildings over 18m.