Default judgment and building liability orders: lessons from historic cladding claims

The TCC in Mulalley & Co Limited v STO Limited & Anor provided guidance on the liability aspects of a default judgement where the claimant is seeking a Building Liability Order (“BLO”).

This case relates to the Gosport Towers development and follows the Court's earlier judgment where Mulalley, the contractor, was found liable for the defective cladding system.

The cladding system was supplied and manufactured by British company Sto, whom Mulalley sought a “just and equitable” contribution from pursuant to the Civil Liability (Contribution) Act 1978. Sto was placed into administration in 2025, and so Mulalley instead pursued Sto’s German parent company via a BLO.

What is a BLO?

BLOs are a legal mechanism which prevents developers from escaping liability for safety defects by hiding behind complicated legal structures.

Under section 130 of the Building Safety Act 2022 (the “BSA”), the High Court can grant a BLO against an associated company (such as parents, successors, or related group entities) of an original party who has incurred a relevant liability in relation to buildings within scope. A relevant liability is one which arises:

• under the Defective Premises Act 1972;
• under section 38 of the Building Act 1984 (although this is not yet in force); or
• because of a building safety risk.

The Court will grant these only where they consider that it is “just and equitable” to do so.

BLOs “pierce the corporate veil” as – if granted – they extend liabilities to associated companies of the original developer, removing the traditional protections offered by separate legal personality. Typically, these are being used where the original developer has become insolvent, or where the company involved was a special purpose vehicle without any assets.

What happened in Mulalley?

With Sto having entered administration, Mulalley requested the Court to grant a BLO against Sto Germany. Sto Germany did not participate in the proceedings, and so Mulalley applied for “default judgment” against them. A default judgment can be granted in favour of the claimant when a defendant fails to respond to a legal claim.

Under the court rules, a default judgment can be entered for either:

• a specified amount of money i.e. when the claimant puts a figure on the amount of their claim; or
• where damages are to be assessed.

Mulalley sought a specific figure as its primary case, with a secondary position that damages should be assessed at a later date.

The Court granted the alternative request. It confirmed that, given the just and equitable requirement, where claimant seeks contribution, it will generally only be appropriate to enter default judgment for damages to be assessed. Equity generally requires that evidence of the sum should be led, and the Court is unlikely to enter default judgment for a specific sum under a BLO. A further hearing was therefore set where Sto’s contribution was to be assessed.

If you have any questions, please get in touch with a member of our construction team or your usual Brodies contact.