Mulalley v Sto: High Court orders assessment of cladding contribution before building liability order

The High Court has declined to enter default judgement for a specified sum in a cladding dispute between Mulalley & Co Limited and Sto Limited, ruling that the contribution payable by the manufacturer must first be assessed before its liability can be extended to its German parent company under a building liability order.

In Mulalley & Co Limited v Sto Limited & Anor [2026] EWHC 2681 (TCC), Mr Justice Constable held that the fact a claimant had identified a precise sum in its pleadings did not establish entitlement to recover that amount as a contribution under the Civil Liability (Contribution) Act 1978. The court instead ordered default judgement, with the amount of the contribution to be assessed.

The dispute arose from refurbishment works undertaken by Mulalley in 2005, when it acted as design and build contractor for a residential development. The works included installing the StoTherm Classic external wall insulation system, supplied and specified by Sto UK, which contained combustible expanded polystyrene insulation and an organic render.

Following investigations after the Grenfell Tower fire, defects were identified in the cladding. In 2022, the Technology and Construction Court found in Martlet Homes Ltd v Mulalley & Co Ltd [2022] EWHC 1813 (TCC) that the system failed to comply with the functional requirements of the Building Regulations. Mulalley was ordered to pay Martlet Homes £10.8m, including damages, interest and costs.

Mulalley subsequently pursued a contribution from Sto UK, alleging liability for the same damage under section 149 of the Building Safety Act 2022, which addresses liability for past defaults relating to cladding products.

After Sto UK entered administration in January 2025, Mulalley obtained permission to join its parent company and sole shareholder, Sto SE & Co KGaA, seeking a building liability order under section 130 of the 2022 Act. Sto Germany failed to acknowledge service or file a defence, prompting Mulalley to apply for default judgement.

The application raised a question about the meaning of a “specified amount of money” under CPR Part 12. Mulalley argued that, because its particulars of claim expressly identified the full £10.8m judgment sum, default judgement could be entered for that amount.

Mr Justice Constable considered competing approaches in Merito Financial Services Ltd v Yelloly [2016] EWHC 2067 (Ch) and Edward v Okeke [2023] EWHC 2932 (KB). The former supported a broader interpretation of specified monetary claims, while the latter emphasised the distinction between a sum expressly claimed and damages requiring assessment.

The judge found that the underlying judgment sum and the contribution sought were legally distinct. Although the former was fixed and identifiable, the contribution under section 2(1) of the 1978 Act depended on what the court considered just and equitable, having regard to the extent of the defendant’s responsibility for the damage.

The claim against Sto Germany raised a further question under section 130 of the 2022 Act: whether it was just and equitable to make Sto UK’s liability also a liability of its parent. That determination did not follow automatically from Sto Germany’s failure to defend the proceedings.

The court also considered the earlier decision in Mulalley & Co Ltd v Sto Ltd and Sto SE & Co KGaA [2026] EWHC 1552 (TCC), involving a separate development and the same corporate parties. In that case, the court assessed Sto’s contribution at 87.5% after considering the parties’ respective responsibility for the defects and remedial costs.

Mr Justice Constable directed that the contribution in the present proceedings be assessed before the monetary extent of any liability attaching to Sto Germany is determined. He also required any application by Sto Germany to set aside the default judgement to be made within 28 days of service of the order.

The court declined to resolve the wider question of whether the Civil Procedure Rules intended the expression “specified amount of money” to depart substantively from the former distinction between liquidated and unliquidated claims, leaving that issue open for future determination.