A fire safety claim relating to External Wall Insulation (EWI) has succeeded in Martlet Homes Ltd v Mulalley & Co. Ltd  EWHC 1813 (TCC) with the claimant freehold owner recovering from the design and build refurbishment contractor approximately £8 million for the cost of a replacement scheme and, in addition, the costs of a waking watch.
This is the first substantive decision by the Technology and Construction Court (TCC) on recovering costs to repair or replace EWI following the Grenfell tragedy in 2017.
Martlet Homes purchased the freehold from a social housing company in 2017. Prior to Martlet acquiring its interest, refurbishment works had been carried out by the design and build contractor, Mulalley, between 2005 and 2008.
The TCC held that Martlet could recover the cost of a replacement scheme as well as waking watch costs from Mullaley because of the following:
Installation defects (the installation allegation); and, crucially
The insulation did not meet the performance standards in the Building Regulations that applied at the time of the refurbishment (the specification allegation).
The decision follows an earlier decision by the Court of Appeal in January 2022 (which we wrote about here) permitting Martlet to plead both the installation allegation, relating to the fire breaks and the combustible expanded polystyrene insulation (EPS), and that an EWI (here, the StoTherm Classic system) containing EPS should not have been specified in the first place under a design and build contract without evidence that it met the Building Regulations in force at the time.
The EWI was intended to improve thermal protection and waterproofing and give a more attractive finish and was contained in Mullaley's contractor's proposals to the building contract.
However it was held a 1995 BBA certificate was not sufficient evidence to support the specification, without evidence that the Sto system met the performance standards in Annex A of BRE 135, 2003, in accordance with the testing stipulated by BS 8414.
Mulalley defended the claim on the basis it was the Grenfell tragedy that triggered requirement for the Sto system, being combustible, to be removed because it did not meet increased fire safety standards following practical completion (PC) and imposed post-Grenfell.
Additionally it argued that a cheaper repair scheme could be implemented as opposed to a replacement scheme. In other words, it asserted that the goalposts had moved and the replacement was over the top.
To recover the full costs of a replacement scheme, as opposed to a more limited repair scheme which Mulalley argued was all that was necessary to address any defects, Martlet had to amend its case earlier in the proceedings to plead the specification allegation in addition to the installation allegation – something which led to the freeholder's case being described in the judgment as a 'moveable feast'.
As explained in our previous article, the TCC permitted Martlet to add the specification allegation, a decision subsequently endorsed by the Court of Appeal.
The specification allegation turned out to be crucial because:
Pleading the installation defects (i.e., that the EWI had been poorly installed) could only lead to recovery of the costs of repair; whereas
Pleading the specification allegation (i.e., that EWI was the wrong solution) could allow Martlet to recover the costs of replacement.
The earlier permission to plead the specification allegation, therefore, proved to be key, because the TCC held that had Martlet pleaded the installation allegation only, the damages Martlet could recover would have been limited to the cost of repair and the waking watch costs until the EWI cladding had been removed.
Since Martlet was able to pursue the specification allegation too, Martlet was entitled to recover the costs of replacement and the waking watch costs. The latter were considered a reasonable precautionary measure in comparison with the 'more dramatic consequences, both to the residents and to the claimant's finances, had it been necessary to evacuate the residents'.
The decision is one of the first to contain commentary on the evolution of the Building Regulations under s.1 of the Building Act 1984, including those in force at the time of the contract (the Building Regulations 2000, in particular, Regs 4 and 7).
The decision also considers the Building Regulations 2010, BRE 135 (1988 and 2003 editions), Approved Document B (2002 and 2006 editions) and BBA Certificates produced in 1995, 2007, 2012 and 2017.
As set out at the beginning of the judgment (which can be read in full here), the decision is likely to be:
"… of particular interest, since it raises for determination the question whether or not the specification of combustible EWI rendered cladding breached fire safety standards as they existed in the early to mid 2000’s, well before the Grenfell Tower fire".
The decision does not however set in stone success for every similar claim given that:
"…like most other similar cases this case turns very much on the specific contractual provisions and the specific fire safety standards applicable to the particular product chosen as well as on the particular cases pleaded and argued and the evidence called".
This article was authored by Alex Delin, a senior associate in the contentious construction team at Fieldfisher.
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