Mulalley & Co. Limited v Sto Limited and Sto SE & Co. KGaA [2026] EWHC 1552 (TCC)

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Mulalley & Co. Limited v Sto Limited and Sto SE & Co. KGaA

[2026] EWHC 1552 (TCC) | High Court of Justice, Business and Property Courts of England and Wales, Technology and Construction Court (KBD)

Before Mr Justice Pepperall | Heard 1 May 2026 | Handed down 22 June 2026

Interactive Process Flow | Assessment of a cladding contribution claim after default judgment

Case Analysis Process Flow

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1. Case Overview

Case: Mulalley & Co. Limited v Sto Limited and Sto SE & Co. KGaA [2026] EWHC 1552 (TCC)
Court: High Court of Justice, Business and Property Courts of England and Wales, Technology and Construction Court (KBD)
Judge: Mr Justice Pepperall
Hearing Date: 1 May 2026
Judgment Date: 22 June 2026
Case No: HT-2024-000427

Mulalley sought to recover from the Sto group the reasonable cost of remedying an unsafe StoTherm Classic external cladding system installed at Parkside Court. Sto Limited was in administration. Default judgment had been entered against its German parent under a Building Safety Act 2022 building liability order, leaving quantum, causation and the just and equitable contribution to be assessed (paragraphs 1-8).

Central Legal Test: Mulalley had to prove its loss by evidence despite the default judgment. The assessment was confined to loss caused by the pleaded defects. Under section 2(1) of the Civil Liability (Contribution) Act 1978, the contribution had to be just and equitable by reference to the seriousness and causative relevance of each party's responsibility (paragraphs 6-8 and 17).

Underlying Works

Chelmer Housing Partnership engaged Mulalley in 2006 to design and build refurbishment works at Parkside Court, including external cladding. Mulalley specified the StoTherm Classic System through its cladding subcontract (paragraphs 2-3).

Settlement and Claims

After the Grenfell Tower fire, Chelmer identified defective cladding. Mulalley agreed in December 2022 to replace it and make payments. It claimed a contribution from Sto Limited and a building liability order against Sto Germany (paragraph 3).

Default Judgment

Sto Germany did not defend the claim. Default judgment for damages to be assessed was entered on 8 December 2025. It also took no part in the assessment hearing (paragraphs 4-5).

2. Procedural History

Liability Fixed

The default judgment fixed liability on the pleaded case. Sto Germany could not advance a position inconsistent with the Particulars of Claim, but Mulalley still had to prove the amount of its loss (paragraph 6).

Evidence

Mulalley relied on factual evidence from its commercial team and solicitor, together with the expert report of quantity surveyor Tom Taylor. There was no defence evidence (paragraph 5).

3. Defendant's Position

Sto Germany did not appear and served no evidence. The court nevertheless tested whether the claimed costs were incurred, caused by the pleaded defects, reasonable, and properly attributable as a contribution (paragraphs 5-8).

No Participating Defence

No factual or expert case was advanced for Sto Germany at the assessment hearing.

Judicial Scrutiny Remained

Default judgment did not make the pleaded figure recoverable automatically. The court assessed proof, causation, reasonableness and apportionment.

4. Claimant's Position

Mulalley relied on gross incurred costs, expert sampling and adjustment, and the pleaded findings that Sto marketed and supplied an inherently defective system. It sought a 90% contribution (paragraphs 8-21).

Costs Incurred

The pleaded claim was £2,403,846. Mr Taylor analysed gross costs of £3,733,837.96 and assessed actual incurred costs at £3,431,633.53 after reductions (paragraphs 8-11).

Causation Adjustment

Mr Taylor stripped out work unrelated to the Sto defects and assessed £2,086,826.65. Counsel then excluded settlement legal costs, reducing the figure to £2,025,499.62 (paragraphs 12-13).

Contribution Sought

Mulalley argued that Sto's design and supply responsibility justified a 90% contribution, by analogy with design liability ordinarily borne by an architect (paragraph 18).

5. Court's Analysis

Proved Expenditure

The court accepted the expert analysis and found total costs of £3,431,633.53 had been incurred (paragraphs 9-11).

Causative Loss

After excluding costs outside the defective render system and legal costs of settlement, the recoverable remedial expenditure was £2,025,499.62 (paragraphs 12-13).

Reasonable Remediation

There was no evidence of unreasonable expenditure or a cheaper technical solution. The contractor had a direct financial interest in efficient remediation, and the principal cost categories fell within expected ranges (paragraphs 14-16).

Sto's Primary Responsibility

The fixed liability included supply of a system that failed the Building Regulations, misleading statements and an inherently defective product. The principal cause was Sto's marketing and supply, although Mulalley retained some responsibility (paragraphs 19-21).

87.5% Apportionment

Taking fault and causative responsibility together, the court fixed Sto's just and equitable contribution at 87.5%, rather than the 90% sought (paragraph 21).

6. Decision and Outcome

Winner: The Claimant (Mulalley & Co. Limited) succeeded.

Result: Judgment was entered for Mulalley against Sto Germany for £1,772,312.17, representing 87.5% of £2,025,499.62. Interest was awarded at the specified commercial and judgment rates. Mulalley received standard-basis costs, with £175,000 on account; indemnity costs were refused (paragraphs 22-24). The Second Defendant (Sto SE & Co. KGaA) did not succeed on this application.

Practical Effect: The building liability order made Sto Germany answer for the contribution attributed to the insolvent UK supplier. Mulalley recovered most, but not all, of the causatively adjusted and reasonable remediation cost.

Damages

£1,772,312.17 was awarded against Sto Germany (paragraph 22).

Interest

Interest was awarded at 1% over base for the relevant pre-judgment periods and at 8% on the unpaid £1.2 million interim payment from 8 December 2025 (paragraph 23).

Costs

Costs were ordered on the standard basis, with £175,000 on account. Non-participation and failure to pay the interim sum did not take the case outside the norm for indemnity costs (paragraph 24).

7. Key Legal Principles and Practice Points

Default Quantum

A default judgment fixes liability on the pleaded basis, but the claimant must still prove loss and cannot simply recover the pleaded figure (paragraph 6).

Causation Before Apportionment

Costs unrelated to the pleaded defect must first be excluded. The contribution percentage is then applied to the causatively relevant loss.

Reasonableness of Remedial Cost

Actual expenditure is the starting point, and courts are slow to criticise reasonable remedial decisions with hindsight, while still examining expert and factual evidence (paragraphs 14-16).

Just and Equitable Contribution

Section 2(1) requires consideration of both comparative fault and causative relevance, not a mechanical allocation by party type (paragraphs 17-21).

Practice Implications

For Claimants:
Separate proof of expenditure, defect-related causation, reasonableness and contribution. Provide traceable cost records and independent expert adjustments, including candid deductions for unrelated work.

For Defendants:
Failure to participate does not prevent judicial scrutiny, but it leaves the claimant's properly supported factual and expert evidence unanswered. Engage early where quantum, causation or apportionment can be challenged.

General Practice Points:
In cladding contribution claims, calculate the compensable remedial loss before applying the contribution percentage. Do not apply apportionment to gross project expenditure that includes unrelated work or legal costs.

Legal Disclaimer

This interactive process flow is provided for educational and professional development purposes only and does not constitute legal advice. The content reflects interpretations and analyses that may not apply to specific circumstances. Contract interpretation depends on specific wording, jurisdiction, and factual context. Always consult qualified legal professionals before making decisions based on this content. SCCSI and its contributors accept no liability for reliance on this material.