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Cladding claims and post-limitation amendments

Posted: 09/03/2021

Last year there were two Technology and Construction Court (TCC) cases on the very topical issue of limitation in fire safety cladding claims. Sportscity v Countryside Properties [2020] EWHC 1591 (TCC) and RG Securities v R Maskell [2020] EWHC 1646 (TCC) both concerned summary judgment applications by developers against building owners on the contention that the owners’ claims were out of time for limitation purposes. You can read our summaries on these cases by clicking on the case names above, and our accompanying short article here.

Last month the court handed down another judgment in a cladding claim in Martlet Homes Limited v Mulalley & Co. Limited [2021] EWHC 296 (TCC). Similarly to the previous cases, this concerned an interim application concerning limitation and, also like the others, the case is important reading for all those who find themselves having to grapple with claims arising from the complex world of unsafe cladding on a high-rise building.

Facts of the case

Martlet Homes Limited (Martlet) is the owner of high-rise residential towers in Hampshire. In December 2019, it issued court proceedings against Mulalley & Co. Limited (Mulalley), the contractor that had designed and installed the external cladding on the buildings between 2006 and 2008. It was common ground that the claim had been issued and served right up against the deadline for limitation.

In its particulars of claim, Martlet alleged various defects with the cladding (including in respect of fire cavity barriers) and sought £8 million in damages for remedial works and waking watch costs. In its defence, Mulalley admitted the existence of some defects but denied that any breaches by it had caused any loss. It argued that any losses suffered by Martlet would have been incurred regardless of defects for which Mulalley was liable, because Martlet had to replace the cladding on the buildings in any event as it contained combustible expanded polystyrene (EPS), which made it non-compliant with the new Building (Amendment) Regulations 2018 (introduced in the fallout from the Grenfell Tower fire). In essence, therefore, Mulalley argued that the claim would fail the ‘but for’ test of causation. Within its formal reply, Martlet denied this causation defence, whilst arguing (in the alternative) that Mulalley was also in breach of contract for specifying a cladding system containing EPS in the first place.

Mulalley applied to court to strike out this allegation of breach of contract in the reply. It argued that this design allegation amounted to a new claim by Martlet (i.e. one not included in the original particulars of claim) and, as such, it could not be raised for the first time in a reply. The court agreed with Mulalley. This design allegation was a new claim and the law is clear that new claims cannot simply be pleaded by way of a reply; instead the correct approach is for a claimant to seek to amend its original particulars of claim. The court therefore struck out the new claim within the reply.

However, likely in anticipation of such any decision, Martlet had already made an application to amend its particulars of claim to include the new claim, and the court therefore went on to consider this application. As limitation had now expired on Martlet’s new claim, the test to be applied by the court was that for post-limitation amendments. This meant that the new claim would only be allowed to proceed if it arose out of the same facts or substantially the same facts as the existing claim (and the court considered it should exercise its discretion to allow the amendment).

The court confirmed that to determine this question requires a consideration of the facts raised not just by the original particulars of claim but also by the defence. Mulalley’s defence raised the question of the true cause of the cladding system replacement (i.e. asserting it was the presence of a system with EPS not being compliant with the current Building Regulations). As such, the court was satisfied that Martlet’s amendment to focus on the original specification of that system did arise from substantially the same facts as Mulalley put in issue in its defence. Moreover, the court decided to exercise its discretion to allow the amendment, notwithstanding Mulalley’s objections to having to investigate the new claim so long after the project (including any potential limitation problems for any related ‘pass down’ claims to its supply chain).

When considering its discretion, the court highlighted that there had actually been a previous adjudication between the parties in 2019, which had very much foreshadowed both Mulalley’s causation defence and Martlet’s reply to it. As such, Mulalley had been on notice since 2019 that attention in any subsequent court proceedings may involve the original specification of a system containing EPS.

Case comment

As we explained in our articles last year, limitation is often a crucial issue in cladding claims (and it is likely to become even more so going forward). There is no substitute for investigating the feasibility of claims as soon as possible and taking all necessary steps to protect the limitation position. This case serves as another reminder of this message.

Moreover, whilst ultimately the claimant was allowed to amend post limitation, this is never an enviable position for building owners to find themselves in. If limitation is looming, they should strive to assess and develop their factual and technical cases over unsafe cladding so they can plead all properly supportable cases in advance of limitation expiring. As the court noted in this case, to do otherwise is a risky approach.

Finally, the case is also significant for highlighting a possible causation defence that might be advanced by defendants in cladding claims based around the often thorny question of whether remedial works are required to remedy defects for which the defendant is liable and/or to ensure compliance with the current Building Regulations requirements (albeit the merits of such a defence are yet to be determined by the court).

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