English High Court confirms the broad reach of building liability orders

A German parent company has been held jointly and severally liable for its UK subsidiary's defective cladding system by the Technology and Construction Court in the first building liability order (BLO) to be granted by default judgment.

The ruling in Mulalley & Co. Ltd v Sto Ltd & Sto SE & Co. KGaA, is the first time a court has assessed  the "just and equitable" contribution payable by a cladding product supplier. 

Mulalley's claim 

Mulalley was engaged under a 2006 design and build contract to refurbish a residential tower block in Chelmsford, including the installation of an external cladding system supplied by the UK subsidiary, Sto Limited, of a German building materials group. Following the Grenfell Tower fire, the cladding was identified as defective and Mulalley reached a settlement with the building owner. 

Mulalley then sought to recover those losses from Sto's supply chain. Following Sto Limited entering into administration in 2025, Mulalley pursued a BLO against Sto's German parent, Sto SE & Co. KGaA However, the German parent failed to engage in the proceedings at any stage, resulting in default judgment on liability and a subsequent assessment of damages.

Quantum of costs 

Expert quantity surveyor analysis established that total costs incurred by reason of the defective cladding system were £2,025,499.62, after excluding legal costs incurred in reaching the settlement. The court was satisfied these costs were reasonably incurred.

'Just and equitable' contribution 

On the "just and equitable" test, under section 2(1) of the Civil Liability (Contribution) Act 1978, the court drew an analogy with the contribution typically awarded against an architect, of around 67% to 80%, and found Sto's conduct sufficiently serious to exceed that range. 

The court noted that Sto had marketed and supplied an inherently defective product, made misleading statements about it, and that its standard detail, including combustible insulation over fire barriers, was "fundamentally deficient". This was consistent with the findings in Martlet Homes Ltd v Mullalley & Co. Ltd [2022]. The just and equitable contribution was assessed at 87.5%.

The judgment was given in favour of Mulalley in the sum of £1,772,312.17, with interest at 1% over base rate from 1 October 2023. Costs were awarded on the standard basis, not on the indemnity, despite the German parents  non-engagement with the proceedings), with £175,000 on account.

Osborne Clarke comment

This case has an interesting pedigree as Mulalley was itself the defendant in the seminal case of Martlet Homes, in which the same Sto cladding system was found defective at a different property. The court's reliance on the outcomes in that case illustrates how building safety case law is working through the supply chain in both directions.

The administration of Sto Limited was the trigger for the BLO route, not an obstacle to it. This is precisely the scenario the regime was designed for. The availability of default judgment in this context is an important practical confirmation for claimants navigating group structures in building safety disputes and exemplifies how these new recovery mechanisms have rendered the option of ringfencing liabilities within the group largely ineffective. 

Much of the commentary on BLOs to date has focused on developers and contractors and their claims with the building owner. This decision confirms that cladding and building product manufacturers, including international groups with UK subsidiaries, are squarely within the regime's reach. We expect this to be relied upon increasingly as developers and contractors seek recoveries down the supply chain. 

Ibrahim Issa, a solicitor apprentice with Osborne Clarke, helped prepare the Insight.