Case Digest: TCC permits owner to make post-limitation amendment to Particulars of Claim to introduce new claim that contractor was in breach of contract by using combustible cladding on owner's tower blocks

Martlet Homes Limited v Mulalley & Co. Limited [2021] EWHC 296 (TCC) concerned a claim brought by the owner of several high rise towers against the contractor, who had carried out refurbishment works to the towers, just before the expiry of the relevant limitation periods. The main issue considered by the TCC was whether or not the owner should be permitted to plead a new argument that the contractor had breached the contract by using combustible expanded polystyrene (“EPS”) insulation boards in cladding the towers.

Factual background

In January 2005, Mulalley & Company Limited (“Mulalley”) entered into a design and build contract with the then owner of five high rise towers in Hampshire to design and carry out refurbishment works, including the design and installation of external cladding (the “contract”). The contract was entered into by way of deed. The works to the various towers achieved practical completion between December 2006 and April 2008.

In December 2019, Martlet Homes Limited (“Martlet”), who is the current owner of the towers, commenced proceedings against Mulalley for negligence and breach of contract in the design and construction of the refurbishment works in respect of four of the towers. Martlet’s claim was brought just before the expiry of the 12 year limitation period. Any claim in respect of the works at the fifth tower was already statute barred.

In its Particulars of Claim, Martlet alleged that Mulalley had breached the contract by defectively installing fire barriers, and had failed properly to fix the insulation boards to the external walls and to repair the existing substrate. Martlet claimed damages of £8 million comprising the cost of remedial works and of a “waking watch” whilst the cladding was being removed from the towers.

In its Defence, Mulalley made a number of admissions of defective workmanship. However, it denied that the alleged breaches had caused any loss because, following the Grenfell Tower fire in 2017, Martlet was, as the owner of the towers, in any event required to replace the combustible EPS boards on the towers to comply with its statutory duties and government advice notes. The true causes of Martlet’s losses, Mulalley argued, were Martlet’s duties under statute and governmental advice on the need to remove combustible cladding systems.

In its subsequent Reply, Martlet pleaded, among other things that, even if Mulalley was right as to causation, it would remain liable because Mulalley had breached the contract by using combustible EPS cladding (the “EPS claim”). Mulalley then applied for the EPS claim to be struck out on the basis that it sought to set up a new claim.

The main issue in these proceedings was whether or not the EPS claim should be struck out from Martlet’s Reply on the basis that it was a new claim, and if so, whether or not Martlet should be permitted to amend its Particulars of Claim to plead its EPS claim.

TCC’s decision

Pepperall J found that the EPS claim was a new claim and, therefore, should be struck out from Martlet’s Reply. However, the judge considered that the EPS claim arose from substantially the same facts as those which Mulalley had put in issue by its Defence, and that there was a proper case for allowing a post-limitation amendment to plead Martlet’s EPS case. Accordingly, Martlet was granted permission to amend its Particulars of Claim.

Analysis

Whilst the central issue in this judgment was whether or not Martlet could introduce a new argument concerning Mulalley’s use of EPS boards, a notable feature of this case is Mulalley’s causation defence, which has potentially significant implications for the construction industry at a time when there is still ambiguity as to who should ultimately bear responsibility for remediation costs in relation to cladding defects.

It remains to be seen how Mulalley’s causation defence will stand up, particularly following the court’s permission for Martlet to amend its Particulars of Claim such that it can now also argue that Mulalley’s use of EPS boards in its cladding system amounted to a breach of contract. However, it will be interesting to see how the substantive issues of this case will finally be determined, and whether any precedent will be set as to how future cases involving the same or similar cladding solutions are to be treated.