Are cladding manufacturers liable for unsafe cladding?

The post-Grenfell legal landscape continues to reshape the construction sector. In the recent decision of Mulalley & Co Ltd v Sto Ltd & Sto SE & Co. KGaA, the technology and construction court (TCC) provided guidance on the quantification of a contribution claim against a cladding manufacturer, alongside a demonstration of how the Building Safety Act 2022 (BSA) can be used to hold parent companies liable for their ‘associates’.

The background

In December 2006, Chelmer Housing Partnership Ltd (Chelmer) engaged the contractor, Mulalley & Co. Ltd (Mulalley), to design and build refurbishment works at Parkside Court, a residential tower block in Chelmsford. Mulalley subcontracted the cladding works, specifying the use of StoTherm Classic System.

Following the Grenfell tragedy, Chelmer identified the cladding system in Parkside Court as defective and unsafe. In December 2022, Mulalley entered into a settlement agreement with Chelmer, agreeing to remove and replace the defective cladding and to pay settlement sums.

To recover these remedial sums, Mulalley raised action against:

Sto Limited (Sto) – the British supplier of the cladding. Mulalley was seeking a contribution under s149 of the BSA, however, Sto entered administration in January 2025, triggering a statutory moratorium on the claim.
Sto Se & Co KGaA (Sto Germany) – Sto’s German parent company. Mulalley sought a building liability order under s130 of the BSA to bypass the insolvent subsidiary and target the parent group.

Sto Germany failed to defend the claim, leading to a default judgment against it on 8 December 2025. The TCC hearing was subsequently directed to assess the level of contribution and damages owed.

Navigating damages assessment in default judgments

The court began by outlining the strict legal principles governing the assessment of damages following a default judgment:

No automatic windfall. Even when a defendant fails to engage, and the claimant has a achieved a right to damages from a default judgment, the quantum of damages is not awarded by default; the claimant must still prove its loss through robust evidence
Consistency with pleadings. A defaulting defendant cannot later raise arguments on damages that are inconsistent with the liability established in the particulars of the claim.

Proving causation and stripping costs

While Mulalley claimed gross remedial costs of over £3.73 million, its quantity surveying expert analysed the costs and made necessary deductions:

Excessive costs. Around £302,000 was deducted as representing excessive allowances for preliminaries, subcontractor costs, consultancy and legal fees.
Non cladding remedials. The overall remedial works at the tower went beyond the defective render system. The expert calculated that the defective Sto system accounted for 85.83% of the tower’s external wall works and 69.03% of the overall development.
Legal costs. Mulalley’s legal fees incurred in settling with the building owner were stripped out of the core quantum.

Ultimately, the court accepted a revised figure of £2,025,499.62 as the reasonable cost of remedial works directly caused by the defective Sto system.

Apportioning responsibility

A critical element of the case was determining the “just and equitable” contribution due by Sto under the Civil Liability (Contribution) Act 1978.

Traditionally, contractors bear significant responsibility for the materials they select and install. However, Mulalley argued that Sto, as the manufacturer, should be treated similarly to an architect who commits a design breach, which would typically attract a 67% to 80% contribution assessment.

The court took an even firmer stance against the manufacturer, finding that the principal causes of the apartments being unfit for habitation and the necessary remedial works were Sto’s marketing approach and its supply of an inherently defective product. The court noted that Sto:

Made misleading statements regarding the safety of the StoTherm classic system.
Failed to supply a cladding product that complied with the functional requirements of the Building Regulations
Included a standard design detail that allowed a layer of combustible insulation to run over the face of the fire barriers – a fault characterised as “fundamentally deficient” in prior case law.

Taking these factors into account, the Court ordered Sto Germany to pay a significant 87.5% contribution of the remedial costs, plus interest, from 1 October 2023.

Conclusion

The case of Mulalley v Sto serves as a warning to associates of cladding manufacturers of the need to pay close attention to the nature of the manufactured products and their marketing, and highlights that failings by manufacturers in these respects can create significant liabilities for parent or other associated entities.

If you would like help with a similar matter, or simply have any questions, please contact a member of our Construction, Engineering and Infrastructure Disputes team.

This article was co-authored by Trainee Euan Rennie.

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