The recent decision of HHJ Stephen Davies in Martlet Homes Limited v Mulalley & Co. Limited [2022] is the first case concerning cladding and fire safety issues to have reached trial since the Grenfell fire tragedy. Though the decision is fact-specific, it addresses the circumstances that trace back to Grenfell and is therefore of industry-wide interest and significance.
Background to the dispute
Under an amended JCT 1998 Standard Form of Building Contract with Contractor’s Design dated 20 January 2005 (the Contract), Mulalley & Co. Limited (Mulalley), a well-known building contractor based in Essex, undertook refurbishment works to five tower blocks in Gosport, Hampshire, between 2005 and 2008.
The Claimant, Martlet Homes Ltd (Martlet), acquired the freehold of the five tower blocks in early 2017 and, post-Grenfell, Martlet then incurred significant costs investigating the blocks' fire safety. This resulted in the discovery of combustible external insulation rendered cladding which had been fitted by Mulalley.
Having discovered the fire-safety issues, Martlet bore the costs of replacing the entire cladding system between 2018 and 2020 and the costs of an ongoing waking watch for all five towers until the combustible cladding boards were removed. In total, approximately £8 million in damages was claimed.
Breach of the specification requirements
In addition to the execution of the works, the Contract stipulated that Mulalley was responsible for the design and selection of the specifications and that the standard to which it was held in this regard was that of a professional designer or architect.
The Contract also provided that the design and specifications were to comply with statutory requirements including the Building Regulations 2000 and industry codes of practice and standards (which included certificates issued by the British Board of Agrément (BBA) and reports produced by Building Research Establishment (BRE)).
In reliance upon its expert evidence, Martlet argued that the cladding system did not conform to the requirements of the Building Regulations 2000 due to, among other things, the presence of combustible materials. It claimed no reasonably competent designer would have specified such a system in the circumstances.
In its defence, Mulalley relied heavily on the fact that the cladding system had a 1995 BBA certificate which certified it as compliant with the extant Building Regulations. Additionally, Mulalley argued that other contractors were installing similar systems at the time and so it had acted reasonably and in accordance with the accepted practice.
The Court found that:
- To address whether the cladding system met the requirements of Regulation 4 of the Building Regulations 2000, it was necessary to consider the available evidence that the system satisfied BR135 (2003). In this regard, BR135 (2003) stated that because the "risk from rapid fire was…unacceptable in the case of high-rise buildings and sleeping areas…the performance standard [BS 8414-1] should be adopted". The BBA certificate in question was dated from 1995 and had not been updated since the introduction of BRE 135 (2003) and so it did not "seek to demonstrate compliance with" the requirements of BS 8414-1. A such, there was no evidence that the cladding system either had or would have passed BS 8414-1. Given the presence of combustible materials Mulalley had plainly breached the Contract specification requirements.
- In considering the recent authority of Knightsbridge Development Ltd v WSP UK Ltd, the Court confirmed that it is not a defence to say that others within the trade or profession were acting in the same way at the time. A defendant is exonerated only if there is "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”.
Consequently, Mulalley was found to have breached the specification requirements of the Contract.
Breach relating to defective installation
Moreover, the Court found that Mulalley defectively installed fire barriers and failed to install cavity barriers around windows and service penetrations. Mulalley was therefore also found to be in breach of its workmanship obligations under the Contract.
Given the breach of specification, Mulalley was held liable for the cost of the replacement of the entire cladding system and the associated costs of the waking watch (which the Court held was a foreseeable cost and a reasonable act of mitigation).
The Court remarked, in obiter, that had Mulalley not been responsible for any breach of specification, Martlet would have recovered only the cost of rectifying the defective workmanship in respect of the fire barriers and cavity barriers. n such circumstances, the damages for the waking watch would have been limited to the time required to remedy the defective workmanship.
What can industry learn from this approach to cladding claims?
Whilst the Judgment is certainly specific to the facts of this case and the terms of the Contract, it provided helpful guidance on the Court's approach to cladding claims. The following are a few points to take away:
- A contractual obligation to adhere to the Building Regulations requires strict compliance. Construction professionals should consider the Building Regulations in force at the time of the relevant contract and ensure that any specifications and designs comply.
- The existence of a BBA Certificate is not determinative of compliance with Building Regulations but rather it can be one of a number of aids that suggest the subject matter of the certificate is complaint and suitable for the intended use. Given the strict approach for contractual claims, BBA certificates (and other such certificates that purportedly confirm compliance) therefore should not be blindly followed. Instead, checks should be undertaken along the supply chain that the relevant performance test (in this case - BS 8414-1) has been adhered to.
- For professional negligence claims (whether against the contractor with design obligations or other professionals) BBA certificates may, however, be relevant to whether the professional has discharged its duty, as the Court opined that: "in the real world professional designers would place great weight on the existence of such a certificate and that this is undoubtedly relevant when considering the case for breach of the 'professional negligence'”.
- The excuse that 'all the contractors or professionals were using defective designs or materials at the time' is not going to assist defending a contractual claim or professional negligence claim if the design, product or works fail to meet the relevant statutory requirements.
It will be interesting to see what further cases come through the courts in the following months in the changing construction industry landscape since the introduction of the Building Safety Act 2022: listen to our recent podcast covering the key changes: Property Litigation Watch podcast – The new regime for building safety (Part 1)