Introduction
Martlet Homes Ltd v Mulalley & Co Ltd is a landmark case for the construction industry, it gives an insight into the likely approach that will be taken in future cladding disputes. In particular, legal and construction industry practitioners should be aware of the consequences of relying on BBA Certificates, and the potential for claimants to recover high costs of a waking watch in buildings with unsafe cladding. While the outcome of this case was fact specific, these points carry significant implications for the future.
Background
Five concrete tower blocks were built in the 1960s in Gosport, Hampshire. Two were 16 storeys and 50 metres in height, three were 11 storeys and 30 metres high. Buildings in excess of 18 metres have been subject to special attention in respect of fire safety, owing to the greater fire risk posed to occupiers.
In the early 2000s, a decision was made by the previous owner to refurbish the five towers. This included installation of an external wall insulation ("EWI") system, to improve resistance to cold and damp penetration. On 20 January 2005, the defendant, Mulalley & Co. Limited, was contracted to carry out the refurbishment. The first tower completed construction on 5 December 2006, two more completed on 15 December 2007 and the final two completed on 7 April 2008.
The EWI cladding was a proprietary system known as the StoTherm Classic render system (the "StoTherm Classic"), designed by Sto, a German owned business with a history of expertise in the EWI cladding market. The StoTherm Classic system consisted of an inner layer of expanded polystyrene ("EPS") insulation boards, fixed to the external wall with (in this case) adhesive with supplementary mechanical dowels.
A primary objective of the StoTherm Classic was to provide improved thermal protection, improved waterproofing and a more attractive decorative finish than other systems. However, EPS is a combustible material. Its use creates a fire risk and, in an attempt to mitigate this risk, the StoTherm Classic system incorporated mineral wool fire barriers at every floor above the third storey.
The claimant, Martlet Homes Ltd, owns the freehold of Gosport towers. The tragedy at Grenfell prompted the claimant to carry out an inspection of the cladding system used at the Gosport towers. The claimant contended that it discovered serious installation defects, in particular with respect to the fire barriers. The claimant implemented a regular fire patrol system, known as a "waking watch" and decided to remove the entire EWI system and replace it with a new, non-combustible system. The claimant sought to recover approximately £8 million in damages from the defendant.
The claims
The claimant alleged that the defendant had failed to correctly install the StoTherm Classic system in a manner that ensured it complied with guidance on fire safety under the building regulations (referred to as the "installation breach") and that the system was not suitable for the use on the Gosport towers, as it failed to meet the requirements of fire safety under the building regulations (referred to as the "specification breach").
The contract
There were a number of contract terms which the court detailed in the judgment, which included those which provided that the defendant was (1) responsible for the design and execution of the works, including the completion of the design and the selection of the specifications, (2) obliged to comply with building regulations and (3) obliged to design and construct the works in accordance and in compliance with all relevant and related Agreement certificates and Building Research Establishment reports.
The regulatory background
The Building Regulations 2000
Regulation 4 of the Building Regulations 2000 required building work to be carried out so that it complied with the requirements set out in Schedule 1. Schedule 1 required buildings to be designed and constructed such that:
- the unseen spread of fire and smoke within concealed spaces in its structure and fabric was inhibited (B3(4)); and
- the external walls of the building should adequately resist the spread of fire over the walls and from one building to another, having regard to the height, use and position of the building B(4).
(the "BR Schedule")
Regulation 7 required building work to be carried out with adequate and proper materials.
Approved Documents
Approved Documents provide guidance with respect to the requirements of building regulations. Approved Document B ("ADB") provides guidance on fire safety.
ADB 2002
ADB 2002 stipulates that the external envelope of a building should not provide a medium for fire spread and that insulation material used in ventilated cavities in the external wall construction should be of limited combustibility. Readers of ADB 2002 are referred to the 1988 Building Research Establishment ("BRE") Report "Fire performance of external thermal insulation for walls of multi-storey buildings" ("BRE 135") for advice on the use of thermal insulation material. The ADB provided that where testing standards were referred to, if this was later revised or updated by the issuing standards body the new version should be used. Furthermore, a later edition of the ADB 2002, after 2003, provided that the BRE 135 (1988) had been replaced by the 2003 edition. Consequently, though the BRE 135 (1988) and earlier testing standards were referred to within ADB 2002, the Court held that the later versions applied.
The BRE 135 (2003 edition)
This document updated and built upon the earlier 1988 version. One of its purposes was to update previous advice by providing a method of assessing the fire performance of particular cladding systems. BRE 135 (2003) did not identify the particular circumstances where compliance with the performance standard it introduced was mandatory. That was said to be a matter for regulators and for specifiers. The court considered the clear implication of the guidance is that, unless and until the regulators acted, it would be a decision for individual specifiers on individual projects whether or not to adopt the performance standard provided in the guidance.
The 2003 version contains a section titled "fire performance design principles for external cladding systems", which states "innovative designs and variations in material selection and design can only be fully assessed by full-scale testing". The footnote to the words "full-scale testing" referred to BS 8414-1.
BBA Certificates
The British Board of Agrément was a body established by the UK Government in 1966 and is accredited by the United Kingdom Accreditation Service to provide product conformity certification.
The StoTherm Classic, when it was installed on the Gosport Towers, had a BBA certificate issued in 1995. The defendant sought to place reliance on the certificate. However, the court considered that, although BBA certificates may be used as an aid to establish the suitability of a material, they could not be used as a "guarantee" or "passport" to compliance with building regulations.
The breaches
The installation breach
The court found in favour of the claimant in respect of the installation breaches, concluding there was a significant and serious problem in respect of the way the system was installed.
The specification breach
Considering its findings in respect of the installation breach, the specification breach was treated on a hypothetical basis by the court.
The claimant's position was that, amongst other things, the StoTherm Classic system as specified did not comply with building regulations, as it did not adequately resist the spread of fire over the walls of the building. The claimant argued that the onus was on the defendant to establish that the StoTherm Classic system conformed with the advice provided in BRE 135 (2003). Ultimately, this meant demonstrating that the system had passed a BS 8414-1 test when tested against the BRE 135 (2003) performance criteria.
The court considered that BRE 135 (2003) contained a recommendation and/or advice that the default position for a system such as the StoTherm Classic, comprising a combination of combustible thermoplastic EPS insulants and an organic surface render, which thus created an obvious fire risk and a heightened fire risk for high-rise residential tower blocks, was that it should not be specified for use in such buildings unless it had been shown to meet the Annex A performance standard in accordance with the test method set by BS 8414-1.
The court considered that it would not have been possible, once BRE 135 (2003) had been published, for the conscientious specifier to satisfy themselves the StoTherm Classic could be used for the Gosport towers without having met the Annex A performance criteria. There was no evidence the defendant had satisfied itself that the system had met the criteria and was compliant with the fire safety requirements under the building regulations.
Remedial costs and waking watch
The court considered that, had the claimant succeeded only on the installation breach case it could only have recovered the costs incurred referable to repairing the installation defects and not the costs of replacement. However, since the claimant succeeded on the specification breach case, it was entitled to recover the costs incurred referable to the replacement scheme.
Another key issue in dispute was the amount the claimant was entitled to recover, in particular, the claimant's waking watch costs, which amounted to £2,987,205.93 and whether or not this loss was too remote.
The court considered that the defendant, as an experienced contractor with access to designer advice, must have been taken to know the importance of fire safety when selecting and installing external cladding in high-rise residential buildings. The defendant argued that the waking watch costs were caused by the unusual facts and fallout of the Grenfell Tower fire and that the use of waking watch was not common pre-Grenfell. The defendant alleged that he would not have expected many reasonably competent design and build contractors to have been aware in 2005 of a waking watch being used.
The court did not accept this. The judge considered that "a sensible company in the position of the defendant, had it applied its mind in 2005 to the probable consequences of there being a serious fire safety risk in the Gosport towers as a result of…combustible EPS insulation in the EWI cladding…would have appreciated that it was a serious possibility that until permanent remedial works were undertaken there would be a need for temporary measures to be taken to ensure that there was no fire-safety related risk to the residents of these high-rise buildings in the meantime".
In the circumstances, the court found in favour of the claimant in respect of the waking watch costs.
Comment
The case provides a helpful summary of the key regulatory provisions to be considered in fire safety claims. The decision will be welcomed by property owners who seek to recover costs of replacing unsafe cladding and provides useful guidance for those who wish to recover waking watch costs. The decision will be particularly helpful in disputes arising out of defects discovered in StoTherm Classic and similar EWI systems. On the other hand, construction industry companies have been put on notice about the danger of relying on BBA Certificates alone when selecting and installing construction products.
This blog is part of a series published by Howard Kennedy LLP on the Building Safety Act. For more information please contact Jim Fairlie, Sharon Stark or Stuart Duffy. For other blogs, please click here.
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