Mulalley v Sto: a landmark Building Safety Act decision and what it means for contractors

Notably, it appears to be the first reported judgment involving a s.149 BSA 2022 claim, and the first instance of a Building Liability Order being made following default judgment. 

Whilst the case is noteworthy, it should not be viewed as a radical development in the law. Claims relying on section 149 have been pursued since the BSA 2022 came into force and it is likely that some have resolved without reaching a reported judgment. Nor is the outcome particularly surprising. Given the findings established by the earlier default judgment and the court's broad discretion in contribution proceedings, many practitioners would have expected liability to fall predominantly on the manufacturer whose allegedly defective system formed the basis of the claim.

The decision nevertheless offers useful guidance on how the court may approach these types of claims and the assessment of responsibility between contractors and product manufacturers in the context of historic building safety defects.

Background: From Refurbishment to Litigation 

In December 2006, Chelmer Housing Partnership Ltd engaged Mulalley & Company Limited design and build contract to carry out refurbishment works at Parkside Court, a residential tower in Chelmsford. The project included the design and installation of external cladding.

Mulalley subcontracted the cladding works, specifying the StoTherm Classic System (the Cladding System), which was manufactured and supplied by Sto Limited. 

Following the Grenfell Tower fire in 2017, concerns about cladding safety prompted investigations. The Employer subsequently identified defects in the Cladding System. 

To resolve its liability, Mulalley entered into a settlement agreement in December 2022, under which it: 

• Agreed to remove and replace the defective cladding; and
• Pay certain associated sums to the Employer. 

Mulalley then sought to recover these costs from Sto Limited by way of a contribution arising from its own liability to the Employer pursuant to s.149 of the BSA 2022. 

However, matters became more complex when Sto Limited entered administration in January 2025. Mulalley therefore pursued Sto Limited’s parent company, Sto SE & Co. KGaA, for a Building Liability Order pursuant to s.130 of the BSA 2022. 

Sto Germany failed to engage in the proceedings. Consequently, in December 2025, the TCC entered default judgment, granting the Building Liability Order, with damages to be assessed later. 

Assessing Damages: The Court’s Approach

With liability established by default, the TCC clarified that the only issue remaining was quantum.

Importantly, the TCC emphasised that: “Notwithstanding Sto Germany’s failure to engage, the assessment is not made by default and Mulalley must prove its loss or damage by evidence”. 

The TCC identified four key questions:

1. What costs were actually incurred?
2. Were those costs caused by the pleaded defects?
3. Were the costs reasonable?
4. What contribution is “just and equitable”?

Issues 1 & 2: Costs and Causation

Mulalley relied on detailed expert and factual evidence to establish its losses.

The court found:

• Total remedial costs incurred: £3,431,633.53
• Costs attributable to the defective cladding system: £2,025,499.62

The distinction was critical. While the overall project involved broader works, only those costs causally linked to the defective cladding system were recoverable against Sto.

Issue 3: Reasonableness of Remedial Works 

On reasonableness, the court adopted a familiar stance seen in earlier building safety cases, citing Martlet v Mulalley [2022] EWHC 1813 (TCC).  

The key principle is that courts are generally reluctant to second-guess remedial schemes with the benefit of hindsight. 

Accordingly, once costs were properly evidenced and linked to the defects, the TCC treated them as a reasonable starting point.

Issue 4: Contribution: A “Just and Equitable” Apportionment  

Mulalley’s claim was ultimately one for contribution under the Civil Liability (Contribution) Act 1978. Under section 2(1), the court must determine what contribution is “just and equitable having regard to the extent of that person’s responsibility for the damage in question”. 

Mulalley’s Submission

Mulalley argued that Sto’s role should be treated analogously to that of a design professional (such as an architect), as the defects stemmed from the design and performance of the cladding system.

It contended that Sto should bear 90% of the responsibility.

The TCC’s Findings

The TCC accepted that the contractor–designer analogy was appropriate, noting that such cases often result in contributions in the range of 67% to 80%.

As the court was bound by the default judgment, it found that Sto’s liability necessarily included that: 

• the Cladding System breached Building Regulations;
• Sto had made misleading statements about the Cladding System;
• The Cladding System was inherently defective; and
• The misleading statements and defects rendered the apartments unfit for habitation. 

Crucially, the TCC determined that the Cladding System was the primary cause of the loss, even though there were additional workmanship issues (such as fire barrier defects). Those issues were viewed as derivative of the defective system itself.

Outcome

Balancing these factors, the TCC held that Sto was responsible for: 87.5% of the recoverable loss. 

This resulted in an award of £1,772,312.17 in favour of Mulalley.  

Key Takeaways for the Industry

This judgment offers several important insights:

1. A Rare Look at Section149 in Practice 

The case provides guidance on the interplay between s.149 of the BSA 2022 and contribution claims, an area likely to expand as historic defect claims continue. 

2. Building Liability Orders Are a Powerful Tool

The successful use of a Building Liability Order under s.130 of the BSA 2022, even following default judgment, demonstrates the court’s willingness to pierce the corporate veil where appropriate. 

3. Default Judgment Does Not Eliminate the Burden of Proof

Even without a defence, claimants must still prove causation, quantum, and reasonableness through evidence.

4. Courts Focus on Primary Responsibility 

Where defects stem from a core design or product failure, responsibility is likely to fall heavily on manufacturers or designers - even where contractors’ workmanship is imperfect.

5. A Measure of Reassurance for Contractors

The judgment may offer some comfort to design & build contractors facing large volumes of post-BSA claims. It shows that liability can be significantly shared (or shifted) where product defects are the dominant cause.

Final Thoughts

While this is a noteworthy and potentially encouraging decision for contractors, it should be approached with caution. The result itself is unlikely to surprise many construction litigators. Once the findings underpinning the default judgment were established, and in the absence of any contrary evidence from Sto, a substantial allocation of responsibility to the manufacturer was always a realistic prospect.

Nevertheless, Mulalley v Sto marks a positive development in building safety litigation. As more claims emerge under the BSA 2022, this decision is likely to serve as a useful reference point for how courts will handle liability allocation, contribution, and corporate accountability in the evolving post-BSA 2022 landscape.