Martlet Homes Ltd v Mulalley & Co Ltd (2022)
The inclusion of deleterious materials clauses in building contracts and appointment documents is common within the construction sector. The clause may vary from contract to contract however; their general purpose is to prohibit the use of dangerous materials in construction projects. It is crucial that both developers and contractors consider the particular circumstances of the individual project when negotiating the extent of such clauses.
Following the tragedy at Grenfell, the Technology and Construction Court ("TCC") released its decision in a dispute relating to combustible cladding and recovering costs to repair or replace external wall insulation. This case is fundamental for the construction industry as it provides an example of the TCC's approach to cladding disputes that could potentially arise in the future.
The Claimant was Martlet Homes Ltd (“Martlet”), a subsidiary of Hyde Association Limited, registered providers of social housing.
The Defendant was Mulalley & Co Ltd (“Mulalley”), a building contractor, which is well-known within the residential social housing sector.
The dispute concerned five concrete tower blocks, built in the early 1960s in Gosport, Hampshire, which provided social housing. All five blocks were significantly in excess of 18 metres in height. In the early 2000s, a decision was made by the owner, Kelsey Housing Association Limited (“Kelsey”) to renovate the towers. Kelsey appointed the Defendant under a design and build ("D&B") contract to finish the renovation works which involved the application of external wall insulation (“EWI”).
The walls of the tower blocks consisted of a proprietary system known as StoTherm Classic system, which included an inner layer of expanded polystyrene ("EPS") insulation boards fixed into the external walls. No issues occurred with the cladding system following practical completion, however, due to the Grenfell Tower tragedy, the Claimant (who had purchased the tower blocks from Kelsey in 2017,) took action for the safety of the residents.
Once an investigation had taken place, this revealed that the cladding system included combustible EPS insulation boards and installation defects, including defects within the installation of fire barriers, which meant that they would not operate as intended to prevent the spread of fire, causing a major risk. Consequently, a decision was made by the Claimant to remove the whole EWI cladding system installed by the Defendant and substitute this with a non-combustible system using stone wool insulation panels rather than EPS. This resulted in the Claimant bringing a claim against the Defendant associated with the:
- Costs of investigation;
- Removing and replacing the EWI cladding system; and
- Waking watch fire safety precaution until the EWI was eliminated.
The Defendant accepted some defects were in place within the installation, but denied the extent of the defects which had been claimed. It further submitted that the installation defects were not legally causative and the decision to replace the whole EWI cladding was not necessary, considering that an affordable repair solution would be sufficient.
The decision follows the earlier decision by the Court of Appeal in January 2022, allowing Martlet to plead both:
- The installation statement, in relation to the fire breaks and the combustible expanded polystyrene insulation (EPS); and
- That the EWI (StoTherm Classic system) including EPS should not have been specified to begin with under a D&B Contract without sufficient proof that it met Building Regulations.
Furthermore, the EWI was designed to improve thermal protection and waterproofing, and provide an appealing finish, and was contained in Mulalley's Contractor's Proposals for the Building Contract. It was held that a 1995 BBA Certificate was not sufficient evidence to support the specification, therefore there was no proof that the Sto system met the performance standards in Annex A of BRE 135, 2003, under testing agreed by BS 8414. This was defended by Mulalley on the grounds that the Grenfell tragedy, which led to requirements for the Sto system, included combustible materials to be removed as it did not meet fire safety standards following practical completion
The Claimant was awarded circa. £8 million in damages, and it was determined by HHJ Stephen Davies that the StoTherm Classic system was incorrectly installed with insufficient provision of fire barriers, which did not comply with Building Regulations. Additionally, the Judge determined that the StoTherm Classic system would not have complied with the Building Regulations even if it had been fitted in accordance with the manufacturer's specifications. As regards the Defendant's reliance on BBA Certificates to assist StoTherm's compliance with Building Regulations, the Judge held that it could not be said to amount to a form of “guarantee” or “passport” to compliance with the Building Regulations.
The issues to be considered were whether the cladding complied with Building Regulations, which needed the external walls of a building to properly resist the spread of fire, the height of the towers, use and position.
Martlet pleaded breaches in relation to both installation and specification of materials. If Martlet had succeeded only in its installation claim, this may have covered the cost of repairing the defects, but not those of replacing the cladding. The Judge found that the system that had been designed and specified did not comply with the fire safety standards in place in 2005. Specifically, he held that the system failed to meet requirement B4(1) of the Building Regulations.
The Judge further determined that the costs of the waking watch were foreseeable and not too remote that any reasonable company in the contractor's place would have taken into consideration that it was a serious possibility that provisional fire safety measures would need to be in place.
This case is relevant to all parties involved in construction projects involving cladding by providing a detailed and informative view as to the likely approach of the Court on fire safety conditions of Building Regulations with regard to cladding systems. Developers and building owners will be encouraged by the TCC's point of view on the recovery of waking watch costs as this safeguard has been widely used.
Overall, it is key for contractors to understand the importance of completing and passing BS-8414 testing; we suggest this as the Court has indicated that buildings which have not been tested in accordance with BS-8414 are unlikely to be determined as being compliant with Building Regulations. As a result of the Building Safety Act 2022 coming into force, it is likely we will see an influx of further cladding disputes, especially due to the new causes of action and longer limitation periods brought in by the Act.