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Amendments to cladding pleading permitted by Court of Appeal

Alex Delin
27/01/2022

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United Kingdom

On Monday of this week, the Court of Appeal handed down its decision in Mulalley & Co. Ltd v Martlet Homes Ltd upholding the first instance decision of Pepperall J, that the Respondent be granted permission to amend its Particulars of Claim out of time pursuant to CPR 17.4(2).  The decision allows the Claimant to include an allegation that the Defendant/Appellant’s use of combustible cladding material for tower block refurbishment in 2005-2008 was in breach of the provisions of its design and build contract. Although the amendment represents a new cause of action, it was held that it arose out of the same or substantially the same facts that had already been pleaded in the Particulars of Claim and put in issue by the Defence.
 
The case concerns five high rise towers in Hampshire which were owned by Martlet Homes Ltd (the Employer).  Martlet appointed Mulalley & Co. Ltd (the Contractor) as its design and build contractor to undertake extensive refurbishment works to the tune of circa £15 million in January 2005. Practical completion of the blocks occurred between December 2006 and April 2008. Over ten years after the last of these dates, in December 2019, the Employer sued the Contractor for negligence in respect of various alleged defects in the fire barriers, fixing insulation boards and repairing the existing substrate. Only two of the towers could survive such a claim being days within the 12 year limitation period (the remaining towers being time-barred for any such claim and the design and build contract written by deed).  
 
The Contractor served a Defence in June 2020, raising a point that, following the Grenfell Tower tragedy, the Employer was required to replace the combustible expanded polystyrene (EPS) pursuant to its duties as building owner under the Regulatory Reform (Fire Safety) Order 2005 in any event. The Employer served a Reply to the Defence on 9 July 2020 arguing that if the Defence were correct the Contractor was in breach of contract by using combustible EPS in the cladding of the towers. The Contractor sought to strike out that allegation, arguing this was essentially a fresh cause of action raised in a Reply following the expiry of the limitation period. In response to the Contractor's strike out application pursuant to Civil Procedure Rule 3.4 (2) (a), the Employer prepared and served a draft Amended Particulars of Claim to argue that, first, the order for strike out the Contractor sought ought to be dismissed and, second, an amended version can be permitted to be served in any event.
 
The submission of a Reply under the TCC Guide was considered as well as Practice Direction 16 which effectively says a reply to a defence must not being in a new claim or be inconsistent with an earlier statement of case. Civil Procedure Rule 17.4 also provides amendments may be allowed "…only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings". Consideration was given to Hobhouse LJ's, as he then was, decision in Lloyds Bank plc v Togerts, The Times [1997] which set out the policy being parties ought to be able to rely on any cause of action which substantially arises from facts to already be litigated. As a result, Pepperall J struck out the additions to the pleading but permitted the Employer to amend its Particulars of Claim regardless of the expiry of the limitation period.
 
It was that decision which the Contractor appealed to the Court of Appeal. The judgment released on 24 January 2022 dismissed the Appeal and commended Pepperall J's reasoning. The Court of Appeal heard whether a new cause of action was even being pleaded given the EPS insulation was the subject of the original pleaded breaches of contract. The Court of Appeal decided it was given that it was a contingent claim upon the Contractor's causation argument raised in the Defence and the "practical realities of the old case and the new". Nevertheless it arose out of substantially the same facts already in issue and therefore caught by Civil Procedure Rule 17.4. The trial, on the amended Particulars of Claim, is due to be heard in March 2022.
 

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