Downstream recovery in historic cladding claim: court awards 87.5% contribution claim against cladding product supplier

The TCC in Mulalley & Co Ltd v STO Ltd & Anor considered how much a contractor could claim for contribution against the supplier of a defective external cladding system via a building liability order (“BLO”).

In the aftermath of the Grenfell Tower fire in June 2017, many building owners undertook reviews to determine whether their properties contained potentially dangerous cladding.

In this recent case, the installed cladding system was found to be unsafe, and Mulalley entered into a settlement agreement where it agreed to remove and replace the defective cladding.

Mulalley sought to recover the cost of these remedial works from Sto, the British company that supplied the cladding system. Sto was placed into administration in 2025, and so Mulalley instead pursued Sto’s German parent company via a BLO.

BLO’s are a legal mechanism which prevent developers from escaping liability for safety defects by hiding behind complicated legal structures. They extend liabilities to associated companies (such as parents, successors, or related groups), typically, where the original developer has become insolvent, or where the company involved was a special purpose vehicle without any assets.

In any event, Sto Germany did not participate in the proceedings, and so Mulalley obtained a default judgment against them. The only question left for the Court was how much could Mulalley claim in contribution from Sto Germany?

The Court noted that notwithstanding Sto Germany’s failure to engage, Mulalley must prove its loss or damage by evidence. In this regard, Mulalley produced evidence from its Commercial Directors as to the remedial costs incurred and independent expert evidence as to the reasonableness of these remedial costs.

The Court found the remedial costs to be reasonable, and so next looked to how much Mulalley could recover in contribution towards these remedial costs.

In doing so, the Court had to consider both the seriousness of Mulalley and Sto’s faults, and their causative relevance. The Court accepted that it was to adopt a similar approach to that between a contractor and an architect on the basis that Sto, like an architect, was responsible for any design defect. It found that the principal cause of the remedial works was that Sto had marketed and supplied an inherently defective cladding system.

On that basis, it found that the just and equitable contribution payable by Sto (and therefore Sto Germany under the BLO) was set at 87.5% of the costs of carrying out the remedial works.

Commentary

This is another example of BLOs cutting through companies group structures and insolvency protections in building safety claims.

Unlike most recent defective cladding cases, where a building owner has been seeking to recover from the original contractor, this was a contractor passing the costs “downstream” to the cladding supplier after already reaching an “upstream” settlement with the building owner.

The award of 87.5% against the supplier of the defective cladding system is a good indicator as to how similar future cases may be decided, however, each case will turn on its respective facts. As Sto Germany did not take part in proceedings, they could not dispute either the reasonableness of the remedial costs or forward any defence as their liability. If defended, it’s possible the award would not have been so high.

This is a developing area, and we will continue to provide updates as to the various court's approaches to BLO’s, contribution orders, and historic cladding claims.