In this article we consider the recent judgment in the case of Martlet Homes Limited v Mulalley & Co. Limited, being the first decision made by the TCC regarding fire safety defects since the Grenfell Tower tragedy. The case provides useful guidance on the court’s approach to fire safety and cladding claims, and will be of particular interest to housing associations, local authorities or other landlords embroiled in cladding disputes and to contractors who may have carried out historic cladding work.
Those involved on the dilapidations side, including landlords, tenants and dilapidations specialists, will no doubt also find the judgment of interest.
Kelsey Housing Association Limited owned five 1960s residential tower blocks. The blocks were a mix of either 11 storeys (30m in height) or 16 storeys (50m in height). In 2005, Kelsey appointed Mulalley to carry out extensive refurbishment works on the tower blocks. The refurbishment works included the installation of external wall insulation (EWI) rendered cladding.
The EWI rendered cladding installed by Mulalley was a system called StoTherm. This involved an inner layer of expanded polystyrene (EPS) insulation board which was fixed to the external wall with adhesive and mechanical fixing dowels and two render coats applied.
EPS is a combustible substance, so to mitigate the fire risk, the StoTherm system incorporated horizontal fire barriers at each floor level above the third storey.
Following the Grenfell tragedy in 2017, Martlet (who had acquired the tower blocks from Kelsey) carried out a fire safety review of the towers and discovered a number of fire safety defects, the most significant defects being:
In response to the defects discovered, Martlet arranged a ‘waking watch’ to patrol the towers until a permanent solution was implemented. Martlet subsequently removed and replaced all the cladding installed by Mulalley with a non-combustible material. Martlet sought to recover its losses of around £8million from Mulalley.
Martlet’s primary case was that there were defects in the installation of the cladding, namely inadequate fixing of the horizontal fire barriers at each level and inadequate fixing of the EPS insulation boards.
Mulalley admitted that there were defects in the installation but disputed both the extent of the defects and that the defects were sufficient to justify the full removal and replacement of the cladding or a waking watch. Mulalley argued that those breaches only entitled Martlet to more limited repair works and argued that the costs of the waking watch patrols were too remote to be recovered as damages.
In response to Mulalley’s arguments on the primary case, Martlet raised a secondary case arguing that Mulalley was also liable for a specification breach because the EWI cladding as specified did not meet applicable fire safety standards at the date of the contract.
Resolving this issue involved a consideration of the suitability of the specification of the combustible EWI cladding as against the fire safety standards in place in the early / mid 2000s and will no doubt be of interest to many landlords and contractors.
Mulalley had a contractual obligation to comply with statutory requirements, including any requirements, directions, recommendations and advice contained in a number of publications (including Building Research Establishment (BRE) reports) that were in place at the time of the contract. Martlet argued that Mulalley had breached its contractual obligations in selecting combustible external wall insulation.
The Building Regulations 2000 applied at the time of the contract. Regulation 4 required work to be carried in accordance with the functional requirements in Schedule 1 and B4(1) of Schedule 1 set out requirements relating to the adequate resistance of fire spread.
The relevant BRE report applicable at the time of the contract was BRE 135 (2003) which contained guidance on the use of external thermal insulation systems. In particular, BRE 135 (2003) stated the performance standards contained in Annex A “could be adopted where the implications of rapid fire spread by way of the external cladding system are considered to be unacceptable” such as high rise buildings above 18 metres.
The Judge noted that although the drafting of the BRE 135 (2003) “could have been clearer” and the wording was not mandatory, it contained a “clear recommendation” and therefore a reasonably competent contractor would have followed the guidance. This meant, as per the recommendation in BRE 135 (2003), EWI should not have been specified for use on the towers unless it met the performance standards in Annex A of BRE 135 (2003) or the specifier could otherwise be satisfied that it would adequately resist fire spread. In this case, there was no evidence that the EWI cladding had undergone the Annex A test, or that Mulalley was otherwise satisfied that it would resist fire spread.
Mulalley argued, as part of its defence, that at the time of construction it was typical for a professional designer to specify the chosen cladding system on the basis of it being a well-known system which had a valid British Board of Agrément (BBA) certificate. The Judge considered that a BBA certificate does not amount “to a form of “guarantee” or “passport” to compliance with the Building Regulations.”
Given that there was no evidence that the system had undergone the Annex A test or satisfied the design principles in BRE135 (2003) and the BBA certificate did not demonstrate compliance with these requirements, the system failed to satisfy the functional requirement B4(1).
The Judge also rejected Mulalley’s argument that because “everyone else was doing it” Mulalley was not negligent, stating that this “does not operate as a get out of jail free card”.
Although the installation breaches were an effective cause of the loss, the Judge held that had Martlet only been successful on the installation defects case it would only have been able to recover the costs of limited repair works and not the costs of the full replacement of the system (although it would have been entitled to some of the waking watch costs). However, as a result of his findings on the specification breach case, the Judge held that Martlet was entitled to recover the costs of the full replacement, together with the costs of the waking watch.
The Judge emphasised the court’s reluctance to criticise the reasonableness of a claimant’s remedial works where the decision has been made under urgent circumstances or based on incomplete information (as was the case in this dispute) and especially when a decision has been made having sought professional advice. In this case, the Judge was satisfied that Martlet had demonstrated that its decision to replace the cladding was made following full investigations and detailed expert advice.
The Judge also held that temporary safety measures as a result of fire safety defects, such as the appointment of a waking watch was foreseeable and in any event, was a reasonable step to mitigate the far greater loss which Martlet would have suffered had a full evacuation of the towers been required.
Landlords, tenants and dilapidations specialists will be mindful of the judgment, including the relevance and interpretation of any lease covenants and related obligations to comply with law, statute, etc. Otherwise, in relation to dilapidations, the usual principles apply: is the cladding replacement too extensive to constitute a repair (as was an issue in Ravenseft Properties v Davstone Holdings Ltd 1980 QB12), and, importantly, is the cladding part of the demise?
Whilst the case turns on its own specific facts, the decision is likely to be significant in future cladding cases and gives a good indication as to the court’s approach in such cases. Landlords who have put in place waking watch arrangements pending fire safety investigations or works will be reassured by the court’s acceptance of the reasonableness of such measures. Both contractors and employers anticipating cladding claims are likely to want to scrutinise the lengthy judgment in some detail.
We are assisting our employer, landlord, contractor and other clients and working with specialist experts in the assessment and management of claims and potential claims. If you require any assistance or advice, please get in touch.
We produce a range of insights and publications to help keep our clients up-to-date with legal and sector developments.
Sign up
