In Mulalley & Co. Ltd v Sto Ltd & Sto SE & Co. KGaA [2026] EWHC 1552 (TCC), the Technology and Construction Court (TCC) assessed quantum on a contribution claim brought by a main contractor against the German parent of a cladding system supplier, following a default judgment that the parent had not defended.

The judgment provides a worked example of how courts quantify remedial costs and contribution in post-Grenfell cladding claims under the Building Safety Act 2022 (BSA) and the Civil Liability (Contribution) Act 1978.

Key takeaways:

  • It illustrates the TCC’s approach to quantifying remedial costs and contribution (here, 87.5% / £1,772,312.17) in a cladding claim where the product supplier’s parent did not participate.
  • It demonstrates the practical reach of Building Liability Orders under s.130 BSA 2022 against overseas parent companies when a UK subsidiary is insolvent.
  • It confirms that even after default judgment the claimant must prove loss by evidence and that the defendant cannot dispute the pleaded basis of liability.

Building Liability Orders and the background to the claim

Since the Grenfell Tower tragedy, main contractors who have settled cladding claims increasingly seek contributions from product suppliers. The BSA provides two key mechanisms: s.149 contribution claims and s.130 Building Liability Orders (BLO) (allowing liability to be imposed on an “associated” parent company where the direct subsidiary cannot meet it).

Here, Mulalley’s UK supplier (Sto Limited) entered administration in January 2025, so Mulalley pursued a BLO against the German parent, Sto SE & Co. KGaA. Sto Germany did not acknowledge service, file a defence, or participate at any stage. The TCC entered default judgment on 8 December 2025 for damages to be assessed.

Important procedural point:

All findings about the product’s defects and Sto’s conduct arose because the default judgment was not contested, they were not tested at a merits-based trial. On an assessment of damages after default, the Particulars of Claim act as “a proxy for the judgment, setting out the basis of liability” and the defendant cannot dispute that basis. The claimant must still prove quantum by evidence.

The cladding dispute: summary

In 2006, Chelmer Housing Partnership engaged Mulalley under a design-and-build contract to refurbish Parkside Court, Chelmsford (a 54-flat tower block and new 27-flat podium), including design and installation of external cladding.

Mulalley subcontracted the cladding works specifying the StoTherm Classic K system. Post-Grenfell, Chelmer identified defects. Mulalley settled with Chelmer on 22 December 2022, agreeing to remove and replace the entire cladding system and pay sums to Chelmer. The system was fully removed.

The unchallenged pleaded case (deemed established via the default judgment, which Sto Germany did not contest) alleged: Sto failed to supply a product complying with Building Regulations functional requirement B4(1) and regulation 7, made misleading statements, and the system was inherently defective, causing the flats to be unfit for habitation.

How the Court calculated contribution and quantum

The Court assessed quantum across four issues.

First, expert evidence assessed total costs at £3,431,633.53 (a reduction of approximately £302,000 from the gross claim of £3,733,837.96), which the Court accepted.

Second, on causation, the defective Sto render system accounted for 85.83% of tower external wall works and 69.03% of overall development works. After applying these percentages and stripping legal costs, recoverable loss was determined to be £2,025,499.62, which the Court accepted.

Third, on reasonableness, there was no evidence of unreasonable expenditure and no alternative technical solution was identified. The Court noted that Mulalley had a direct financial interest in efficiency and avoiding gold plating and accordingly accepted the costs as reasonable.

Fourth, turning to contribution under section 2(1) of the Civil Liability (Contribution) Act 1978, the Court assessed what would be a “just and equitable” contribution. Counsel compared Sto to an architect responsible for a design defect (which typically attracts contribution in the range of 67–80%). Based on the unchallenged default-judgment findings, the Court found that the principal cause of the defect was that Sto’s standard detail included a layer of combustible insulation over fire barriers. The Court assessed contribution at 87.5%, resulting in a judgment of £1,772,312.17 plus interest.

What this means for construction supply chains

s.130 building liability orders can reach overseas parents. Where a UK subsidiary is insolvent, the BSA provides a route to the parent with significant financial consequences if the parent does not engage. From a claimant’s perspective, this extends recovery options beyond the immediate contracting party and may incentivise earlier settlement discussions.

For overseas parent companies, however, this creates potential exposure that may not have been anticipated when structuring UK operations and raises questions about the scope of “association” and the adequacy of procedural safeguards when claims are pursued across jurisdictions. Manufacturers and suppliers may wish to review corporate structures and insurance arrangements in light of this extended reach, whilst claimants should factor the availability of Building Liability Orders into their litigation strategy.

Non-engagement carries a heavy price

Failing to defend resulted in all pleaded allegations becoming established and a contribution of 87.5%, (an amount above typical architect design-liability ranges). Parties served with BSA claims should note the cost of inaction.

Quantum methodology

The judgment provides a practical template:

  1. Prove costs by expert evidence
  2. Apportion by causation
  3. Demonstrate reasonableness
  4. Assess the just and equitable contribution percentage.

The findings about the StoTherm Classic K system and Sto’s conduct arose solely from an uncontested default judgment against a non-participating parent. They were not the product of a contested trial. The position could be materially different where a supplier fully engages.

Practical implications

  • Building Liability Orders can extend liability to overseas parent companies.
  • Non-participation in proceedings can have severe consequences.
  • The judgment provides a practical framework for assessing contribution and remedial costs in cladding claims.

If you have any queries on this article, please get in touch with Brett Mason.