Judgment was handed down in the matter of Mulalley & Co v Sto Ltd on 22 June 2026 in the Technology and Construction Court (‘TCC‘), which concerned the quantification of a Building Liability Order (‘BLO’) under the Building Safety Act 2022 (‘BSA‘), made against the non-UK parent company of a supplier of defective cladding. It represents the first BLO made by default judgment.
The case provides commentary on the just and equitable test contained in s.130(1) BSA, and awarded the Claimant, Mulalley & Co (‘Mulalley‘), an 87.5% contribution payment by the Defendant, Sto Germany. Sto Germany is a non-UK parent company of Sto Limited (Sto UK), who had manufactured and supplied defective cladding which had to be removed and replaced following the Grenfell Tower fire.
Background to the Mulalley v Sto dispute
Mulalley was contracted by Chelmer Housing Partnership Ltd in 2006 to design and build refurbishment works at a residential tower block in Chelmsford. Mulalley subcontracted the cladding works, inclusive of the supply and installation of the StoTherm Classic System, which was manufactured and supplied by Sto Limited. Following the Grenfell Tower fire, Chelmer investigated the block and discovered that the cladding was defective.
In 2022, Mulalley and Chelmer entered into a settlement agreement under which Mulalley agreed to remove and replace the cladding, and to pay Chelmer a sum. Mulalley then sought to recover the costs of the work and the sum from Sto Limited.
Sto Limited went into administration in 2025, so Mulalley pursued a claim against Sto Limited’s parent company, Sto Germany, via a Building Liability Order pursuant to s.130 of the BSA. Sto Germany failed to defend the claim and as such, Mulalley obtained default judgment for damages to be assessed.
The TCC’s approach to the assessment of damages and the BLO
Mulalley relied substantially on an expert report of a chartered quantity surveyor, who assessed the costs attributable to the defective Sto system at just over £2 million, with total remedial costs at just under £3.5 million. Sto Germany did not file any evidence. The Judge confirmed that Mulalley would nonetheless be required to prove its loss and/or damages with substantive evidence, in order to determine damages to be awarded.
The Judge accepted that Mulalley’s costs had been reasonably incurred, referring to a Judges comments from Martlet Homes Ltd v Mulalley & Co Ltd, whereby the courts are ‘generally reluctant to criticise, with the benefit of hindsight, the reasonableness of the claimants expenditure on the remedial works’.
The Judge said that the amount recoverable as a contribution from Sto Germany should be such sum that is ‘just and equitable, having regard to the extent of that persons responsibility for the damage in question’. Mulalley submitted that, when assessing contribution, the Court should take a similar approach to liability as between a contractor and an architect that was responsible for a design defect. The Court accepted that this would typically be between 67% and 80%.
The Judge found that Sto’s misleading statements about the cladding system and inherently defective nature of the cladding system were the causes of the flats being unfit for habitation. The Judge therefore held that the ‘principal cause of the remedial works was plainly the fact that Sto marketed and supplied an inherently defective product’. Consequently, the TCC concluded that it was just and equitable to order Sto Limited, and therefore Sto Germany under the BLO, to make a contribution payment to Mulalley of 87.5%.
Sto’s culpability was increased from that of an architect/design role, as it designed, manufactured, marketed and supplied an inherently defective product, elevating the seriousness of Sto’s blameworthiness and contribution.
Key takeaways for the Construction Industry
The TCC was prepared to make a BLO against Sto Germany, a non-UK parent company, enabling Mulalley to pursue recovery despite the UK subsidiary being in administration. The decision reinforces the BSA’s objective of ensuring that those ultimately responsible for defective building products cannot avoid liability through insolvency or corporate group structures. For contractors, developers and building owners, it strengthens avenues for cost recovery. For manufacturers and parent companies, particularly those involved in cladding and fire safety products, it is a clear warning that substantial liability may follow them many years after completion of a project.
The case acts as an important reminder for claimants that default judgment will not negate the need to prove loss where damages are to be assessed.
Product manufacturers may face substantial liability where defects stem from the product itself. The courts may regard the supply of an inherently defective product as more culpable than a professional design error.
Parties undertaking remediation works may find it easier to recover costs where those works were reasonably undertaken in response to safety concerns. Defendants may face difficulties arguing that less extensive remedial works should have been carried out.
As Sto Germany did not participate in the proceedings, the Court did not have the benefit of hearing any defence to Mulalley’s case which could influence any outcome, and therefore we haven’t anything to report as to what it might have thought to any defence. The decision should therefore be viewed in that context.
If you would like further information or require advice in relation to the Building Safety Act 2022, please contact a member of our Building Safety team.
Please note that the above does not constitute legal advice.
