Mulalley v Sto: Germany cladding product supplier found 87.5% responsible in contribution claim

On 22 June 2026, the Honourable Mr Justice Pepperall handed down judgment in Mulalley & Co. Ltd v Sto Ltd & Sto SE & Co. KGaA [2026] EWHC 1552 (TCC), awarding Mulalley & Co. Ltd (Mulalley) an 87.5% contribution from a specialist cladding manufacturer and supplier whose defective system had to be stripped and replaced in the wake of the Grenfell Tower fire.

The decision is notable for:

• the Court making a building liability order by default judgment and the level of contribution awarded – materially above the 67–80% range typically seen in claims against architects for design breaches; and
• the Court’s reasoning as to why a manufacturer’s supply of an inherently defective product supported by misleading marketing warranted a higher apportionment.

Background

By a building contract dated on or around 30 December 2006, Chelmer Housing Partnership Limited (Chelmer) engaged Mulalley to design and construct the refurbishment and extension of Parkside Court, Chelmsford, Essex including the design and installation of external cladding on the 54-unit residential tower block.

Mulalley subcontracted the cladding works including the supply and installation of the StoTherm Classic System which was manufactured and supplied by Sto Limited (Sto UK).

Following the devastating Grenfell fire, Chelmer investigated Parkside Court and identified that the cladding was defective. Chelmer subsequently made claims against Mulalley.  In December 2022.  Mulalley settled Chelmer’s claims by agreeing to carry out remedial works which included the removal and replacement of the defective cladding and to pay certain sums to Chelmer.

Mulalley then sought a contribution under the Civil Liability (Contribution) Act 1978 against Sto UK, arising from its liability pursuant to s.149 of the Building Safety Act 2022, and Sto SE & Co. KGaA (Sto Germany), its German parent company and sole shareholder by way of a Building Liability Order under section 130 of the 2022 Act, seeking to recover the cost of the remedial works and the sums paid to Chelmer.  Sto UK went into voluntary administration and therefore the statutory moratorium on proceedings was triggered. Sto Germany failed to defend the proceedings, and on 8 December 2025 Waksman J entered default judgment against Sto Germany granting the Building Liability Order with damages to be assessed.

Assessment of damages, not default

In assessing the contribution, Pepperall J was careful to distinguish between the effect of the default judgment (which established Mulalley’s right to damages) and determining the amount of damages that should be awarded stressing, that notwithstanding Sto Germany’s failure to engage in the claim, the assessment is not to be made by default and that Mulalley was still required to prove its loss or damage by evidence. The Particulars of Claim operated as a proxy for the judgment, fixing the basis of liability, but the quantum of loss remained a live issue.

Pepperall J set out the test for assessing the contribution as follows:

• what costs were in fact incurred;
• whether those costs were incurred in relation to the pleaded defects;
• whether the costs incurred were reasonable; and
• what is the just and equitable contribution to such loss and damage that Sto Germany should be ordered to pay.

Quantum and causation

The Court accepted the evidence of Mulalley’s witnesses and the quantum expert, Mr Tom Taylor of Socotec Advisory Ltd, who assessed total remedial costs incurred at £3,431,633.53 before stripping out items not caused by Sto’s breach. Mr Taylor’s analysis showed that the Sto render accounted for 85.83% of the external wall works and 69.03% of the overall development costs. After apportioning for causation, he assessed the costs attributable to the defective Sto system at £2,086,826.65. Counsel for Mulalley invited a further reduction to £2,025,499.62 to exclude legal costs of achieving the settlement, and the judge accepted this figure.

Reasonableness

Citing Martlet v Mulalley for the proposition that courts are generally reluctant to criticise remedial expenditure with the benefit of hindsight, Pepperall J therefore took the costs incurred as the starting point and, considering the evidence, found the costs were reasonably incurred. The judge observed that Mulalley, performing remedial works under a settlement agreement, had no interest in gold-plating and had a direct financial incentive to work efficiently.

Contribution Awarded

The central issue at the assessment hearing was the just and equitable contribution to be awarded under section 2(1) of the 1978 Act. Mulalley submitted that Sto UK’s responsibility was analogous to that of an architect responsible for design defects and invited the Court to award 90%. Pepperall J, citing Downs v Chappell [1997] 1 WLR 426, assessed both the seriousness of fault and the causative relevance of Sto UK’s breaches.

The judge accepted that courts might typically award contributions of 67–80% against an architect for a design breach, but found that Sto’s position was materially worse and that the liability findings by virtue of the default judgement necessary in assessing contribution, namely:

• Sto would have supplied a project-specific specification;
• that specification was for StoTherm Classic K;
• Sto failed to supply a system complying with Building Regulation requirements B4(1) and Regulation 7;
• Sto made misleading statements about its product’s fire performance;
• the system was inherently defective; and
• the misleading statements and those defects rendered the apartments unfit for habitation. 

Taking matters in the round, and identifying the principal cause of the remedial works as Sto UK’s marketing and supply of an inherently defective product, Pepperall J awarded a contribution of 87.5% — just below Mulalley’s submission of 90%.

Comparison with Contributions Awarded Against Architects

Significantly, the judgment expressly records that contributions awarded against architects for design breaches typically fall in the range of 67–80%. The 87.5% contribution in this case sits materially above that range. The distinction is instructive.

An architect’s design breach will ordinarily attract a contribution reflecting the architect’s role as one of several professionals in the construction process, each bearing a share of overall responsibility. In such cases, the fault lies in the design specification or supervision, and the Court apportions having regard to the contributions of others—the contractor, specialist subcontractors, and (where relevant) the employer.

In the present case, Pepperall J considered that Sto’s culpability extended beyond a mere design role. Sto was not simply specifying or certifying a system; it designed, manufactured, marketed, and supplied a proprietary product that was inherently defective. Furthermore, it made affirmative misleading statements about the product’s fire performance. Those factors—the supply of a defective product coupled with misleading marketing—elevated the seriousness of Sto’s fault and its causative contribution beyond the level typically seen in architect cases.

The decision suggests that in cladding-product cases under the 2022 Act, and especially where a manufacturer or supplier marketed and supplied a defective system whilst making misleading statements about its suitability, contributions may exceed the architect-design range. The judgment is a significant marker of the Court’s willingness to hold product suppliers to a higher degree of responsibility particularly when they are heaviliy involved in the design and/or selection of their product.

Conclusion

Mulalley v Sto is significant as it is the first time the Court has made a building liability order by default judgment and has assessed the respective “just and equitable” contribution for a manufacturer and supplier of a cladding product, reinforcing the strength of contribution claims against cladding product suppliers in the post-Grenfell regulatory landscape. The 87.5% award demonstrates that where a supplier’s conduct goes beyond design involvement—encompassing the manufacture and marketing of an inherently defective system—the Court may award contributions that materially exceed those typically recovered against architects.

You can read the full judgment here.

For more developments and insights on Building and Fire Safety, please see here.

Charles Russell Speechlys LLP acted for Mulalley & Co. Limited and instructed James Frampton of Keating Chambers.