Mulalley v Sto: TCC awards 87.5% in contribution for “inherently defective” cladding

On 22 June 2026, in Mulalley & Co Ltd v STO Ltd & Anor [2026] EWHC 1552 (TCC), the Honourable Mr Justice Pepperall handed down his Technology and Construction Court (TCC) decision concerning the quantification of Mulalley & Co’s contribution claim against Sto SE & Co. KGaA (Sto Germany), the parent company of Sto Limited, the supplier of a defective cladding system.

Background

Mulalley was contracted by Chelmer Housing Partnership Ltd to design and build various refurbishment works at its residential tower block in Essex. This included the design and installation of external cladding. Mulalley subcontracted the works, specifying the StoTherm Classic System, supplied by Sto Limited. Following the Grenfell fire, it was identified by Chelmer that the cladding system was defective.

In December 2022, Mulalley and Chelmer entered into a settlement agreement by which Mulalley agreed to remove and replace the defective cladding and pay a sum to Chelmer. Mulalley then sought to recover the costs of the works and the sums paid from Sto Limited.

Following Sto Limited’s January 2025 administration, Mulalley pursued a claim against Sto Limited’s parent company, Sto Germany, under section 130 of the Building Safety Act 2022. Given Sto Germany’s failure to defend Mulalley’s claim (perhaps to avoid submitting to the UK jurisdiction), a default judgment was made for damages to be assessed.

In its claim, Mulalley relied heavily on an expert report from Mr Tom Taylor, a chartered quantity surveyor. Sto Germany did not file any evidence or take part in the proceedings.

The TCC’s approach to the assessment of damages

Mr Justice Pepperall established that Mulalley obtained its right to damages from the default judgment in 2025 and that the only “live” issue to be determined was the damages to be awarded. Mr Justice Pepperall also explained that Mulalley would be required to prove its loss and / or damage with substantive evidence, despite Sto Germany’s decision not to take part in the proceedings.

The Court accepted that the total costs incurred during the remedial works were £3,431,633.53.

Causation & Reasonableness

The remedial works extended beyond the work necessary to remedy the defective render system. Mr Taylor therefore provided an assessment of the costs caused by Sto Limited’s breach of duty. He assessed these costs in the sum of £2,086,826.65.

After reviewing the costs occasioned by the breach, and with reference to His Honour Judge Davies’ observation in Martlet Homes Ltd v Mulalley & Co Ltd [2022] EWHC 1813 (TCC)  that the courts are “generally reluctant to criticise, with the benefit of hindsight, the reasonableness of the claimant’s expenditure on remedial works”, Mr Justice Pepperall accepted that costs totalling £2,025,499.62 had been reasonably incurred.

Contribution claim

Mr Justice Pepperall observed that Section 2(1) of the Civil Liability (Contribution) Act 1978 provides that the amount of recoverable contribution shall be such sum as may be found by the Court to be “just and equitable having regard to the extent of that person’s responsibility for the damage in question.”

Mulalley submitted that, when assessing contribution, the Court should adopt a similar approach to liability as between a contractor and an architect that was responsible for a design defect. Mr Justice Pepperall accepted that: (i) the Court might typically award a contribution against an architect for a design breach of between 67% and 80%; (ii) “liability findings by virtue of the default judgment necessarily included:

19.1     Sto would have produced or provided a version of its standard specification for the StoTherm Classic System for this project although that document has been lost;

19.2     the specification in this case was for the StoTherm Classic K;

19.3     Sto failed to supply a cladding product that complied with the functional requirement B4(1) and regulation 7 of the Building Regulations;

19.4     Sto made misleading statements about the StoTherm Classic system; 

19.5     the system was inherently defective; and

19.6     the misleading statements and the inherently defective nature of the StoTherm Classic system were the causes of the apartments being unfit for habitation.”

Decision

Mr Justice Pepperall held that the “principal cause of the remedial works was plainly the fact that Sto marketed and supplied an inherently defective product”.

As a result, the TCC concluded that the just and equitable contribution payable by Sto  Limited, and therefore Sto Germany under the Building Liability Order, was 87.5%.

Comment

This is the first time the TCC has had to consider whether a contribution claim against a cladding supplier under a design and build contract was “just and equitable”. The decision, an 87.5% award against the supplier of the defective product, is a good indicator as to how similar future cases may be decided, although, of course, all cases will turn on their respective facts - in particular where an active defence on "liability" is advanced (which was not the case in this instance). 

In his decision, Mr Justice Pepperall made a couple of references to the 2022 Martlet v Mulalley decision referred to above, which also involved a StoTherm Classic Render system. In doing so, the TCC reiterated its reluctance to criticise, with hindsight, a claimant’s expenditure on remedial works.

The decision is also an important reminder that even when a defendant does not engage with the proceedings, a claimant is still required to prove its loss and / or damage with substantive evidence

Finally, we note that as Sto Germany did not take part in the proceedings, the TCC did not have the opportunity to assess any quantum defences which may exist in other matters and could influence any outcome.

We await with anticipation the extent to which Mulalley succesfully enforces this Judgment against Sto Germany, given we anticipate a jurisdictional issue is likely to be raised.