First substantive cladding case post-Grenfell highlights what costs can be claimed

The Technology and Construction Court has heard the first substantive cladding case arising since the aftermath of the Grenfell Tower tragedy.  In Martlet Homes Limited v Mulalley & Co Ltd¹, the judge determined key issues on:

• how to deal with breaches relating to installation and specification
• whether the specification breached fire safety standards, as they existed pre-Grenfell
• whether the defective works justified repair or replacement
• whether waking watch costs were recoverable.

Whilst these issues turned on the exact facts, and in particular the contractual requirements, they still provide guidance on how the court will consider these issues in the wider context of cladding claims.  As the Building Safety Act 2022 has broadened the scope for potential claims, through the introduction of longer limitation periods and new means of recovery from third parties, we expect to see more cladding claims through the courts. This case should be a useful steer on how claims will be dealt with by the courts going forward.

Background

The claimant, Martlet Homes Limited, is the owner of five tower blocks in Gosport, and sought to recover approximately £8 million in damages from the defendant contractor, Mulalley & Co Limited.  The cost claimed covered the removal and replacement of combustible external wall insulation rendered cladding and a waking watch patrol system, which was put in place as a fire safety precaution until the cladding was removed.  The cladding was installed between 2007-2008, as part of refurbishment works.

The claim was in relation to: (1) installation defects (the cladding was installed without a continuous line of adhesive) and (2) a specification breach, in that the choice of StoTherm Classic cladding system (“StoTherm”) was combustible and not in accordance with contractual and statutory requirements, given the height of the building on which it was to be used.

The defendant’s case was that although there were some defects in installation, this did not justify the complete replacement of the works, nor the need for the waking watch scheme.  With regard to the StoTherm cladding system, the defendant argued that it was typical for designers pre-Grenfell to specify this system even at high rise residential buildings and there was nothing mandatory in the Building Regulations to prevent its use for such purpose.

Court’s findings

1. Installation

The court agreed with the joint statement of the architectural experts that the adhesion was fixed using a “dot-dash” method rather than a continuous line, which created vertical gaps in the fire barrier, and was non-compliant with building regulations and the BBA certificate.  In this regard the BBA certificate had limited value as it certified the use of a product, without having any regard to the validity of its installation

2. Specification

Contractual requirements and breach of Building Regulations

The Contractor was under a contract based on the JCT 1998 Standard of Building Contract with Contractor’s Design, incorporating some bespoke amendments:

• the Contractor had responsibility for selecting any materials that were not already specified in the Employer’s Requirements
• the Contractor was liable for design which it had obtained from others, which was important as it was clear that others had inputted into the specification of the StoTherm system
• the Contractor was also under an obligation to comply with statutory requirements, which the court considered included Building Regulations
• the Employer’s Requirements also stated that the Works had to be designed in accordance  with “Agrement Certificates”, which are certificates issued by the British Board of Agrement (“BBA”).

The use of StoTherm created a fire risk where none previously existed due to it being a combustible substance and thereby not suitable for use in tall buildings. On that basis it breached the Building Regulations, which require the selection of materials that adequately resist the spread of fire, having regard to the height, use and position of those buildings.  The breach was according to the legal position as at the date of the contract, due to the 2003 update to a BRE report.  Although the Building Regulations were not expressed to be mandatory on this point, the court considered that a reasonable designer should have followed the appropriate guidance.

Professional negligence

The fact that StoTherm was used by designers for similar projects at the time was not an adequate defence.  It did not pass the “Bolam principle”, which states that a professional is not negligent if they conformed to a practice accepted as proper by some responsible members of their profession. Mr Justice Davies said, “the argument that “everyone else was doing it” does not, on a proper application of the “Bolam” principle operate as a get out of jail free card.”²  Referring to the case of Knightsbridge Development Ltd v WSP UK Limited³, Mr Justice Davies said, “For the Bolam principle to operate to exonerate a defendant, there must be “evidence of a responsible body of opinion that has identified and considered the relevant risks or events and which can demonstrate a logical and rational basis for the course of conduct or advice that is under scrutiny.” (paragraph 120). “A defendant is not exonerated simply by proving that others…[were]…just as negligent” (paragraph 106)”. Both of these observations apply in this case.”⁴

In both regards the defendant had breached their obligations regarding the specification of adequate materials.

3. Repair or Replacement?

The Court concluded that had this case been solely about an installation breach, then the claimant could only have recovered the costs of repair, rather than the costs of the replacement scheme.  However, as the claimant was also successful in claiming the specification breach, then it could recover the costs incurred for replacement.

4. Waking watch

The court concluded that the claimant was successful in recovering the cost of the waking watch, which arose from the specification claim.  As a matter of principle the court also noted that the cost of the waking watch would also have been recoverable if only the installation claim was successful, although this would have been for a shorter period and therefore for a lesser sum (due to the fact that remedial works would have taken less time to complete compared to replacement works).  The court considered it reasonable for a waking watch to be put in place whilst the claimant conducted its investigations and carefully considered the appropriate remedial measures it should take.

What should I do?

This case sets out an important distinction about what costs are recoverable for each type of breach.  In reality the cost of repair is likely to be similar to the cost of replacement.  However the issue of whether repair or replacement is appropriate is an important distinction, as if repair was sufficient this may affect the full recovery of associated costs (such as a waking watch scheme) on the grounds that repair works are likely to be of shorter duration.

Whereas claims regarding installation are likely to be straightforward upon investigation, this case demonstrates the complexities that are involved in specification breaches, with the judge in this case commenting that it was “highly contentious and thoroughly unclear”.  Some guiding principles and useful reminders from this case include: the contractual obligation to comply with statutory obligations includes adhering to Building Regulations; Building Regulations are to be interpreted with regard to the type and nature of the building that they apply to (which is of particular relevance to high rise residential buildings); and the fact that others were commonly doing the same thing is not a defence, unless such actions were based on a reasonable respected body of professional opinion.  

It is debatable whether these legal arguments regarding contractual duties and specification will be of continued relevance with the advent of the Building Safety Act 2022.  The Act promotes the rectification of work that constitutes a “building safety risk”  according to what is “just and equitable”.  It will be interesting to see how this will be interpreted by the courts, as liability under Remediation Orders and Remediation Contribution Orders seems to be applied regardless of the contractual liability involved.  Certainly the main thrust the Act has been against landlords and developers, rather than against designers and contractors. It may be that contractual arguments will have the most relevance in the flow down of claims to contractors and designers after liability has first been fronted by a landlord/developer.  However such contractual liability may have expired long before the 30 year limitation period that has been introduced by the Act.  In practice we suspect that more claims will be made against contractors/designers under the Civil Liability (Contribution) Act 1978 or the Defective Premises Act 1972, making contractual arguments less indicative of the full legal position.

Although this is the first cladding case post-Grenfell, the interpretation of the Building Safety Act 2022 still leaves a number of unanswered questions and we suspect that this will continue to be a developing area of law for some time to come.  Clients are advised to “watch this space.”

Further reading

For further information on building safety issues, please review our building safety hub, available here.

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1. [2022] EWHC 1813 (TCC)
2. Paragraph 271
3. [2014[ EWHC 43 (TCC)
4. Paragraph 120