Mulalley v Sto: What the First Section 149 Building Safety Act Case Means for the Construction Industry
The recent case of Mulalley & Co Ltd v Sto Ltd and Sto SE & Co. KGaA [2026] EWHC 1552 (TCC) is the first reported court decision to consider section 149 of the Building Safety Act 2022 (BSA). It gives useful guidance on how courts are likely to deal with claims between contractors and product manufacturers where historic building safety defects are involved.
The case is unusual because the manufacturer did not take part in the proceedings. Even so, the judgment provides a helpful indication of how responsibility for building safety defects may be shared. It is also the first reported case where a Building Liability Order was enforced after a default judgment. While the decision does not create new legal principles, it shows how courts may approach similar cases in the future.
Background
In 2006, Mulalley & Company Ltd entered into a design and build contract to refurbish Parkside Court, a residential tower block in Chelmsford. As part of the works, it installed an external wall insulation and cladding system called StoTherm Classic, manufactured by Sto Ltd.
Following the Grenfell Tower fire and the wider review of cladding systems across the UK, defects were found in the installed cladding. To settle its liability to the building owner, Mulalley agreed to carry out remedial works, including replacing the cladding system and made additional payments under a settlement reached in December 2022.
After paying these costs, Mulalley sought to recover part of them from Sto under section 149 of the Building Safety Act 2022.
During the court proceedings, Sto Ltd entered administration. Mulalley therefore obtained a Building Liability Order under section 130 against Sto’s parent company, Sto SE & Co. KGaA. The parent company did not take part in the proceedings, so the court entered judgment against it by default. The remaining issue was deciding how much Mulalley should recover.
The Court’s assessment of damages
Although Sto had already been found liable because it failed to defend the claim, Mulalley still had to prove the losses it had suffered.
The court made it clear that a claimant cannot recover damages simply because the other side does not respond. Evidence is still needed to show what losses were actually caused and how much should be awarded.
The court considered four main questions:
- What costs had Mulalley actually incurred?
- Which of those costs were caused by the defects?
- Were those costs reasonable?
- What contribution from Sto would be fair and equitable?
This confirms that good evidence remains essential, even where liability is not disputed.
Causation and recoverable costs
Mulalley provided detailed witness and expert evidence about the costs of the remedial works.
The court found that:
- the total remediation project cost about £3.43 million .
- approximately £2.03 million of those costs were directly caused by the defective cladding system.
This distinction was important because only costs that were caused by the defects could be recovered from Sto.
Were the remedial works reasonable?
The court recognised that decisions about remedial works often have to be made quickly and under difficult circumstances. Those decisions should not be unfairly criticised with the benefit of hindsight.
As long as the chosen repair strategy was supported by evidence and was a reasonable way of addressing the defects, the court was reluctant to second-guess it.
Apportioning Responsibility
The main issue was deciding how much of the loss Sto should contribute under the Civil Liability (Contribution) Act 1978.
Mulalley argued that Sto should be treated similarly to a design professional because the defects arose from the design and performance of the cladding system itself. It argued that Sto should pay 90% of the recoverable losses.
The court agreed that this comparison was appropriate. It also noted that in similar cases, the party responsible for the defective design often bears most of the financial responsibility.
Because of the earlier default judgment, the court accepted that:
- the cladding system did not comply with the Building Regulations.
- misleading statements had been made about its performance.
- the cladding system was defective.
- those defects made the apartments unfit for habitation.
Although there were also workmanship issues, including problems with the fire barriers, the court found that the defective cladding system was the main cause of the losses.
After considering all the circumstances, the court decided that it was fair for Sto to pay 87.5% of the recoverable losses. Mulalley was therefore awarded £1,772,312.17.
Key Takeaways
As the first reported case under section 149 of the Building Safety Act, this judgment gives an early indication of how contribution claims are likely to be handled. Future cases will depend on their own facts but this decision provides useful guidance.
1. Building Liability Orders are an important tool
The case shows that Building Liability Orders under section 130 can be an effective way of extending liability from a company to associated companies, such as a parent company, where the legal requirements are met.
2. Evidence is still essential
Even if a defendant does not take part in the proceedings, the claimant must still prove:
- what caused the losses.
- that the costs were reasonable.
- how much should be recovered.
A default judgment does not remove the need to prove the claim.
3. Manufacturers may bear most of the responsibility
Where a defective product is the main cause of a building safety failure, manufacturers may be required to pay the majority of the costs, even if contractors also contributed through poor workmanship.
4. Contractors may not have to bear all the costs
The decision shows that courts will carefully assess the responsibility of everyone involved in a project. Where product defects are the main cause of the problem, manufacturers may be required to make a substantial contribution.
Conclusion
As more claims involving historic building safety defects come before the courts, this judgment is likely to be relied upon when considering:
- contribution claims under section 149.
- how remediation costs should be assessed.
- the use of Building Liability Orders.
- the importance of clear evidence when bringing or defending building safety claims.
Overall, the decision suggests that courts will look carefully at the real cause of building defects and allocate responsibility accordingly, rather than automatically placing the entire financial burden on the contractor.
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