Mulalley v Sto: manufacturer takes the lion's share of fire safety defect remedial costs

Background

The Technology and Construction Court (“TCC”) decision in Mulalley & Co Ltd v Sto Ltd and Sto SE & Co KGaA [2026] EWHC 1552 (TCC) provides a helpful insight into the court's approach to the just and equitable apportionment of liability between a contractor and a product manufacturer in defective cladding claims.

Mulalley was engaged in 2006 to demolish an existing structure, construct a new podium comprising 27 flats, and refurbish an adjoining 54-flat tower block. The works included the design and installation of external cladding, which Mulalley subcontracted, but specified the use of a “StoTherm Classic” render system (the "System").

Following the Grenfell Tower tragedy in 2017, investigations identified the System as defective and requiring remediation. Mulalley subsequently entered into a settlement agreement with the building owner, agreeing to undertake remedial works and to meet the associated costs.

Mulalley sought a contribution from Sto Ltd (“Sto”), the company who manufactured and supplied the System. However, Sto entered administration in January 2025, meaning Mulalley’s claim was subject to a statutory moratorium. Mulalley therefore pursued Sto’s German parent company (“Sto Germany”) by way of a building liability order ("BLO"), pursuant to s.130 of the Building Safety Act 2022 (the "BSA").

Sto Germany did not defend the proceedings and Mulalley obtained default judgment, leaving only quantum to be determined.

The TCC’s Approach to Assessing Damages

The TCC reiterated several key principles which are relevant when assessing damages following default judgment:

1. Liability is already determined – the only issue is quantum;
2. The claimant must still prove its loss with evidence, despite the absence of a defence;
3. A defendant cannot advance arguments inconsistent with the pleaded case on liability; and
4. The Particulars of Claim operate as a “proxy for the judgment”, defining the basis of liability.

Mulalley claimed approximately £2.4m in damages. The TCC considered the live issues were: what costs were incurred, whether they were incurred in relation to the pleaded defects, whether the costs were reasonable and, importantly, what the just and equitable contribution should be from Sto Germany. 

Apportionment of liability 

The court emphasised that contribution under the Civil Liability (Contribution) Act 1978 turns on the parties’ relative responsibility for the damage.

While Mulalley bore some responsibility as both designer and installer, the court found that the misleading statements and the inherently defective nature of the System were the causes of the apartments being unfit for habitation. The court ultimately assessed liability at 87.5% attributable to Sto Germany and 12.5% to Mulalley. 

Conclusion

While the decision provides useful insight into the TCC’s approach to contribution in post-Grenfell building safety disputes, it should be treated with caution. The procedural context (i.e. the default judgment) meant that the case was decided without the level of evidence typically seen at trial, including disclosure and cross-examination. As a result, several issues were not explored in detail, such as the precise extent of Mulalley’s design responsibility, the specification process or the relevance of industry knowledge/approaches at the time.

Nevertheless, the judgment is a good indicator of the court’s willingness to place responsibility on manufacturers where defective products are supplied (and marketed) with misleading statements. 

It was noted that Sto Germany were ordered to pay an interim payment of £1,200,000 but failed to do so. It will be interesting to see whether Sto Germany pay the judgment. If they do not, Mulalley may seek to enforce the judgment in Germany, which presents its own set of challenges and associated costs. Such a decision should, however, be helpful for the industry to understand the extent to which BLOs can be enforced overseas, which is particularly important considering the number of companies operating in the construction sector with parents (or otherwise associates) based in other jurisdictions.