![Martlet Homes Limited -v- Mulalley and Co Limited [2022] EWHC 1813 (TCC) - Sharpe Pritchard](https://www.sharpepritchard.co.uk/wp-content/themes/sharpepritchard/img/Sharpe-Pritchard-white.svg)
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13 October 2022
A decision from the TCC in July this year saw a ruling in favour of Martlet Homes Limited (Martlet), this being the first High Court judgment in respect of a fire safety and cladding claim involving high rise residential buildings since the Grenfell Tower disaster in 2017. This ruling saw the defendant, Mulalley and Co Limited (Mulalley) being found liable to pay the claimant approximately £8 million in damages for the costs of investigating, removing and replacing cladding on a series of high-rise residential buildings in Portsmouth. In addition, Martlet succeeded in its claim for waking watch costs, a safety measure that Martlet had deemed reasonable and necessary to put into effect until the cladding had been successfully removed.
Martlet, the claimant, is the owner of five tower blocks in Gosport in Portsmouth (the Gosport Towers) having acquired them from a social housing company known as Kelsey Housing Association Limited (Kelsey). The due diligence carried out by Martlet at the time of acquisition did not reveal anything to be wrong with the works and did not identify any issues regarding fire safety. The defendant is a well-known privately owned building contractor, which has a particular niche in the residential social housing sector, and who carried out refurbishment works to the Gosport Towers as both contractor and designer, under a design and build contract dated 20 January 2005. The contract was based on the JCT 1998 Standard Form of Building Contract with Contractor’s Design, incorporating Amendments 1 to 5 and some bespoke amendments (the Contract). The Contract which was originally between Kelsey and Mulalley was transferred to Martlet as part of the acquisition referred to above; there was no dispute as to Martlet’s entitlement to sue Mulalley. The refurbishment works delivered under the Contract included installation of external wall insulation (EWI) rendered cladding with the objective of improving resistance to cold and damp. The defendant chose, for the EWI rendered cladding to the external walls of the Gosport Towers, to use the proprietary system known as the StoTherm Classic render system (the System).
Following the Grenfell Tower disaster, the claimant immediately became aware of the need to protect residents of its own high-rise residential tower blocks and launched investigations into the Gosport Towers the same month. The claimant’s investigations quickly revealed that the cladding system at the Gosport Towers used expanded polystyrene (EPS), a combustible material. In addition, the investigations revealed serious installation defects the most significant of which was in the installation of the fire barriers which created a real risk that they would not operate as intended to prevent the spread of fire. As a result of these findings, the claimant decided to remove all of the EWI cladding on the Gosport Towers and replace with a new, non-combustible cladding system using stone wool insulation panels rather than EPS insulation panels. The claimant subsequently sought damages for the loss it had incurred in the removal and replacement of the cladding as well as for the waking watch.
Relevant Contract Terms
The Contract made clear that the defendant was responsible for the design as well as the execution of the works, including the completion of the design and the selection of the specifications.
It is important to note that the conditions of Contract as fortified by the Employer’s Requirements established and imposed strict design and materials obligations upon the defendant. It was not possible, for example, for the defendant to plead that there was a requirement to establish professional negligence for breach of the design obligations. This is not always the case and the position, as ever, turns on the specific provisions of the contract in question.
The Contract also included the usual requirement to comply with statutory requirements, it was common ground that such requirements included the Building Regulations. However, the additional requirements imposed through the Employer’s Requirements had a fairly significant bearing on the outcome in this case. Most notably paragraph GDI 004 of the Employer’s Requirements, stated that the contractor must “conform with the requirements, directions, recommendations and advice contained in the latest edition of the following publications, copies of which are required to be in the possession of the Contractor acting for the Association:- … f) Building Research Establishment’s Reports, Papers, Defects Action Sheets and the like”. This was of particular relevance as the relevant Building Research Establishment (BRE) report – BRE 135 (1988) – had been replaced by BRE 135 (2003) by the time the Contract was entered into and the claimant placed particular reliance on the 2003 version.
Martlet’s primary claim against Mulalley was based on the defective installation of the cladding. The architectural experts agreed that:
As a result of these defects, the works did not comply with (i) the Building Regulations[1]; (ii) the guidance in Approved Document B, Fire Safety, 2000 edition 2002 revision (ADB 2002)[2]; (iii) the guidance in BRE 135 (2003); or (iv) the 1995 British Board of Agrément[3] (BBA) Certificate. This conclusion was also agreed with by the fire engineering experts and supported by the inspections carried out by StoTherm, the manufacturer of the System. Additionally, the defendant admitted that the EPS insulation boards were not fixed by a continuous band of adhesive and that the dowels used in this installation were also too short. Again, architectural experts found that as a result of these failings the works did not comply with (i) the Building Regulations or (ii) the 1995 BBA Certificate.
In both instances the judge found in favour of the claimant that the case had been fully made out and that the installation defects were not “isolated but rather a widespread breach[4]”.
Martlet’s secondary claim, pleaded in the alternative, related to Mulalley’s specification of the System and combustible EPS insulation panels. The question being whether, regardless of any installation breaches, the specification of the combustible EWI rendered cladding breached fire safety standards as they existed.
The relevant standards were imposed through a combination of the functional requirement B4(1) of Schedule 1 to the Building Regulations 2000, the relevant approved documents (ADB 2002) and BRE 135 (2003) as well as the applicable British Standard (BS 8414-1).
The claimant sought to advance the argument that BRE 135 (2003) stated in mandatory terms that combustible insulated panels should not be used for buildings over 18 metres high with fire barriers unless the system had passed a BS 8414-1 test. The defendant argued that there was no material difference between BRE 135 (1988) and BRE 135 (2003), therefore, the fact that the System complied with the former was evidence of compliance with the latter. The defendant supported this argument with expert testimony with regards the interpretation of BRE 135 (2003) and also stated that the mere existence of the 1995 BBA Certificate was confirmation of compliance.
The judge alighted on an altogether more nuanced position as a result of a detailed analysis of what the standards actually said. The conclusion reached was that the combined effect of the relevant standards, was that BRE 135 (2003) contained a recommendation and/or advice that the default position for a system such as the System, comprising a combination of combustible thermoplastic EPS insulants and an organic surface render, which thus created an obvious fire risk and a heightened fire risk for high-rise residential tower blocks, was that it should not be specified for use in such buildings unless it had been shown to meet the Annex A performance standard in accordance with the test method set by BS 8414-1. It should be noted that it was not in fact demonstrated that the System would have failed a BS 8414 test. Nevertheless, the defendant was, by virtue of GDI 004 (detailed above), contractually obliged to comply with the aforementioned BRE 135 (2003) guidance. It was decided that the defendant was in breach of contract in failing to conform with the recommendation and/or advice contained in BRE 135 (2003) by demonstrating that the System met the Annex A performance standard or that it was not necessary to do so by reference to the particular features of the System which showed that it did not create an unacceptable risk of rapid external fire spread.
The question of causation was hotly contested, focussing largely on whether or not the claimant could have simply repaired the cladding instead of entirely replacing it.
The defendant denied that it was in breach of contract in fixing combustible cladding in 2005-08 and therefore argued that it could not be responsible for the cost of the replacement. As outlined above, the judge found that the defendant was in breach of contract by fixing combustible cladding in 2005-08 and outlined three cost possibilities based on causality. The first was that the claimant would not be entitled to recover any loss because there was no causal connection between the installation breaches and the replacement works. The second was that the claimant would be entitled to recover the replacement costs because there was a sufficient causal connection between the installation breaches and the replacement works. The third was that the claimant could only recover the amount that would have been required to remedy the installation defects as a causative cap on its recoverable damages. The judge found that had the issue been the installation breaches only, the claimant would have been able to cover the cost of repair only. However, as the ‘purpose behind replacement as opposed to repair was precisely to achieve the objective of replacing the existing EPS insulation boards as well as the fire barriers[5]’ as a result of the specification breach, the claimant was able to recover the full replacement costs.
Finally, the judge found in favour of Martlet in recovering damages for their waking watch installed as the removal and replacement works were being carried out. The implementation of the waking watch was not found to be too remote to be recoverable and was seen to be a reasonable step taken with the alternative being an altogether more costly evacuation process.
This is an extremely important judgment being the first in relation to fire safety and cladding post-Grenfell. It demonstrates the importance of the combined effect of the contractual terms and the regulatory framework. It is not possible to consider any one standard or requirement in isolation and, as was the case here, guidance and recommendations may play an extremely important part in determining the ultimate standard or requirement. A simplistic approach to the interpretation of and compliance with fire safety standards is a high-risk strategy, as stated by HHJ Stephen Davies “…the argument that “everyone else was doing it” does not, on a proper application of the “Bolam” principle, operate as a get out of jail free card.”[6]
This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email enquiries@sharpepritchard.co.uk.
[1] Consideration had to be to the Building Regulations as in force at the time of design and installation. These were the Building Regulations 2000. Paragraph 79.
[2] Approved Documents were issued under the power conferred by section 6 Building Act 1984 to provide “practical guidance with respect to the requirements of any provision of building regulations”.
[3] The British Board of Agrément was a body established by the UK Government in 1966 and is accredited by the United Kingdom Accreditation Service (“UKAS”) to provide product conformity certification
[4] Paragraph 170.
[5] Paragraph 388.
[6] Paragraph 271.
