Building liability orders and contribution claims: key lessons from the Mulalley v Sto judgment

The judgment in the Mulalley & Co Ltd v Sto Ltd (2026) case* is an important decision in terms of the Building Safety Act 2022, and in particular the extent to which a cladding manufacturer should bear responsibility for remediation costs.

There have been a very limited number of decisions since the introduction of the Building Safety Act 2022 and each case that does get as far as a published judgment brings with it important principles to guide parties involved in construction projects.

In this article, we examine the court's approach to building liability orders and contribution claims, and consider what the judgment means for contractors, manufacturers and associated companies facing building safety liabilities.

Building liability orders and the 'just and equitable' test

This judgment deals with issues concerning contribution claims under the Civil Liability (Contribution) Act 1978 and Building Liability Orders under section 130 of the Building Safety Act 2022. It also provides guidance on how the court has approached the question of just and equitable.

The Building Safety Act 2022 opened the door to new types of claim and against parties who might previously have been out of reach. In particular a party can now seek a building liability order against a company involved in the supply chain, or an associated company if it's ‘just and equitable’ to do so.

This mechanism is invaluable to a claiming party as it gives alternative routes if the contracting company is insolvent or has a complicated company structure in an attempt to avoid liability. It does however retrospectively open up potential liability for associated companies even if they were not involved in the works.

Background

Mulalley was engaged by Chelmer Housing Partnership to carry out refurbishment works at Parkside Court in Chelmsford. The works included the design and installation of external wall cladding. The cladding system designed and installed by Mulalley was the StoTherm Classic system, which was supplied by Sto Ltd.

This cladding system was found to be unsafe and non-compliant with building regulation requirements, which rendered the flats unfit for habitation.

Mulalley entered into a settlement agreement with Chelmer and agreed to remove and replace the cladding, as well as making an additional payment.

Initially Mulalley sought a contribution from Sto Ltd pursuant to section 149 of the Building Safety Act, but Sto Ltd subsequently went into administration. Therefore Mulalley pursued Sto’s German parent company, Sto SE & Co KGaA through a building liability order under section 130 the Building Safety Act 2022.

The German parent company did not defend the claim, and did not participate in the proceedings at all.

The question before the court was therefore limited to how much Mulalley was able to recover, as liability had been determined in Mulalley’s favour through a default judgment, as Sto Germany had not responded to the building liability order claim.

Nonetheless, an earlier decision in the case of Martlett Homes Ltd v Mulalley & Co Ltd (2022) had already found that the StoTherm Classic system did not satisfy the relevant fire safety requirements for high rise residential buildings and so there was never a question about whether the product was defective as it had already been found to be so.

The court’s findings

Mr Justice Pepperall considered the following issues:

1. What costs had actually been incurred?

2. Were those costs caused by the defects pleaded against Sto?

3. Were the costs reasonable?

4. What was the ‘just and equitable’ contribution that Sto Germany should pay?

The court found that some of the works carried out by Mulalley went beyond what was necessary to remedy the defective Sto system and those costs were therefore excluded and found not to be caused by Sto.

The court accepted that the majority of the costs incurred by Mulalley, were reasonably incurred and reiterated the established principle that courts are generally reluctant to criticise a party’s remediation decisions with the benefit of hindsight where safety is concerned.

Perhaps the most significant part of the court’s decision was that Sto bore an overwhelming share of responsibility, as it had supplied an inherently defective cladding product, made misleading statements regarding the system’s compliance, and the defects in the product were the principle reason why the building required remediation.

Despite Mulalley being the main contractor responsible for the design and construction of the project, the court held that Sto should bear 87.5% of the loss, amounting to £1.77 million plus interest. This allocation of liability was based on the contribution principle in the Civil Liability (Contribution) Act, which requires the court to determine what is just and equitable having regard to the extent of each party's responsibility for the damage in question.

The court considered that the principle cause of the remedial works was the fact that Sto marketed and supplied an inherently defective product. Due to the building liability order that Mulalley had against Sto Germany arising from the default judgment, this contribution was passed onto Sto Germany in full.

Key takeaways

This case demonstrates how far reaching the Building Safety Act 202 can be. The court imposed liability on a German parent company of a UK supplier through a building liability order. This may have a significant impact on companies who might seek to shield liability with company structures across different countries.

It also shows that manufacturers can be liable for the majority share of loss, even where the contractor has design responsibility. This provides a powerful basis for contractors seeking a substantial contribution from product manufacturers in cladding claims.

It's also a useful insight to understanding how far the court will assess what is just and equitable. Whilst the judgment focuses on just and equitable under the Civil Liability (Contribution) Act, until such time that there is a body of caselaw considering it specifically in relation to building liability orders, the case gives us useful guidance on key factors to what is considered just and equitable.

Given the purpose of the building liability order procedure is to enable those ultimately responsible for unsafe work to take responsibility for the remedy of the same, it's likely the approach to the just and equitable test under the Civil Liability (Contribution) Act will be very persuasive.

For further information please contact the construction team.