An increasing number of combustible cladding claims are coming before the courts with two important decisions in the first quarter of 2021 concerning timescales for bringing claims. Both decisions address the challenges of litigating years after the events took place. Both actions were issued only shortly before the limitation periods expired, meaning the claims appeared rushed and not clearly pleaded or evidenced. The cases show how the courts are trying to strike a balance between ensuring defendants understand the claims they have to answer without claimants losing their chance of a trial.
The first case, Martlet Homes Ltd v Mulalley and Co Ltd  EWHC 296 (TCC), concerns five high rise towers in Hampshire owned by Martlet Homes Limited (“Martlet”). In 2005 Martlet contracted with Mulalley & Company Limited (“Mulalley”) to refurbish the towers. The works included the design and installation of external cladding using combustible expanded polystyrene (“EPS”) insulation boards. A 12-year limitation period applied to the contract (as it was entered by deed) and the works were certified practically complete in sections between 2006 and 2008.
Days before the limitation period expired on two of the five towers, by which time claims for one of the blocks were already statute barred, Martlet issued court proceedings against Mulalley for negligence and breach of contract, claiming damages for the remedial works and fire patrols. By the time the Particulars of Claim were served, the limitation period had expired on all five towers, meaning no new proceedings could be brought.
Martlet’s Particulars of Claim raised specific breaches of the design and build contract regarding defects in the towers’ fire barriers, inadequate fixing of the insulation boards, and inadequate repair of the underlying substrate. Martlet did not initially argue that Mulalley was in breach of contract by having used combustible EPS insulation boards.
In its Defence, Mulalley denied the alleged breaches and argued no loss had been caused because Martlet was required to replace the cladding, in its capacity as owner with responsibilities under the Regulatory Reform Fire Safety Order 2005, following the issue of government advice notes after the Grenfell Tower fire
In its Reply Martlet advanced a new claim and argued that the use of combustible EPS insulation boards by Mulalley did not comply with the Building Regulations and was in breach of contract. Martlet also pleaded further breaches of Mulalley’ s design obligations. This was the first time that Martlet claimed the cladding itself was in breach of contract. Martlet also argued that even if Mulalley’ s causation defence was successful, Martlet was still entitled to recover its losses due to Mulalley’ s breaches.
Mulalley applied to strike out the EPS claim in the Reply on grounds it raised a new claim, contending that such cause of action could not be advanced in a Reply and that the claim was time barred. In response, Martlet sought to amend its Particulars of Claim to plead its EPS case.
The second claim, Naylor & Ors v Roamquest Ltd & Anor  EWHC 567 (TCC), concerns a mixed residential and commercial development, comprising eleven tower blocks, known as New Capital Quay in Greenwich, London. The Claimants are leasehold owners of flats in six of the blocks. The First Defendant was the developer and freehold owner of the property. The Second Defendant carried out the design and construction of the development.
The development was built between 2009 and 2014. The external envelope of the tower blocks was constructed using aluminium composite (Alucobond) cladding and timber rainscreen cladding with Kingspan K15 insulation. Following the Grenfell Tower fire, testing confirmed the external envelope had no flame retardant properties and failed to comply with the Building Regulations.
Although the Claimant’s benefit from a NHBC new homes guarantee which should cover the replacement of the combustible cladding and waking watch costs, there are uninsured losses such as increased building insurance premiums, lost rental income, alternative accommodation costs, damages for distress and inconvenience, the reduced value of the Claimant’s homes plus losses which cannot yet be specified.
The Defendants commenced remedial works in 2018. The Claimants subsequently issued proceedings against the Defendants for recovery of their uninsured losses.
In response to the strike out application, the Technology and Construction Court (“TCC”) confirmed that claims must be pleaded in the Particulars of Claim rather than in the Reply. That was clear from the Civil Procedure Rules, by the fact that replying to a defence was optional and that no party could serve a statement of case after a reply without the court's permission. Although the TCC struck out that part of the Reply where Martlet pleaded using combustible EPS insulation boards was a contractual design fault (as that was a new cause of action), it gave permission for Martlet to advance the EPS claim through an amended Particulars of Claim. In granting permission to amend, the TCC said it did not matter whether the limitation period had expired because the new claim arose from the same facts already in issue.
Although Mulalley argued that amending the Particulars of Claim would cause prejudice by having to investigate new issues and obtain additional factual and expert witnesses, the TCC rejected that argument. They said the real prejudice was the potential loss of a limitation defence. As the same facts are to be litigated in any event, Martlet’s amendments were allowed.
In Naylor the TCC recognised the claim had been issued prematurely to avoid limitation difficulties and lacked the benefit of expert evidence. The claim referred to potential defects without identifying the nature, extent and location of the alleged defects to enable the Defendants to know the case they have to meet. Although the defects claim was deficient, the Claimants would be allowed to remedy the deficiency by amendment and plead a proper case. It would be wrong to strike out the defects claim entirely without giving the Claimants an opportunity to correct their deficiencies.
Part of the claim included losses from the reduced value of their homes. The Claimant’s say the values of their homes may be diminished by the stigma of being in combustible cladding blocks. Immediately after the Grenfell fire, it is claimed that lenders were refusing to lend on such buildings and valuers were being instructed to value flats in such developments at £nil. That stigma, and the corresponding reduction in the value of their homes, could well continue after the repairs are complete and despite the blocks having never been affected by fire. The TCC accepted there could be an arguable case to recover losses based on the reduced value of their homes but it was too early to tell.
The Claimants were also concerned there could be other uninsured losses which they cannot yet specify, particularly in advance of the remedial works being complete. The TCC said that the Claimants should try harder to identify these losses so the Defendants could understand the case they have to answer. In the meantime, pending a trial on all the evidence, the TCC would be unable to determine whether the Claimants have standing to recover all or part of the damages claimed.
Martlet and Naylor are the latest in a series of recent cases, including RG Securities (No.2) Ltd v (1) Allianz Global Corporate & Specialty CE, (2) Building Lifeplans Ltd, (3) R Maskell Ltd  EWHC 1646 (TCC) (discussed here) where the courts have enabled combustible cladding claims to proceed, rather than being struck out or time barred before consideration on its merits.
The TCC was not persuaded that Mulalley might suffer prejudice in having to investigate, 13 to 16 years after the events, why the EPS cladding system had been chosen, or that Mulalley might struggle to pass on liability due to its own limitation issues. Rather, the TCC adopted a broad view in assessing whether a new cause of action arose from the same facts in the existing pleadings. Although Mulalley succeeded in having Martlett’s EPS claim struck out of the Reply, that proved a hollow victory because Mulalley was allowed to bring its EPS claim by amended Particulars of Claim.
In Naylor, if the strike out had succeeded, the Claimants would have been time barred from bringing further claims against the Defendants and their entitlement to recover would be lost. The TCC was reluctant to allow this in the absence of a full trial of the issues.
These cases suggest the courts are accommodating to having combustible cladding claims decided on their merits rather than being struck out after an early interim application. There are no doubt sound policy reasons for this approach. If residents or owners are unable to recover the costs of replacing unsafe cladding from those responsible, there is an increased risk that liability for remedial works costs will remain with residents through increases to serve charges. In this scenario, the burden falls on those without the financial ability to pay, with some residents being left with no alternative but to sell their homes.
As a result of the ongoing Grenfell Tower public inquiry we are only starting to understand the facts around the combustible cladding scandal. The conclusions from the inquiry will assist in apportioning responsibility in the civil litigation which will inevitably follow the inquiry’s findings. Given the timescales involved, by the time the facts become clear many claims could be time barred. Should that occur, this would only add to a sense of injustice if those who might otherwise be culpable are found not to be held accountable. Although there will always be longstops to bringing combustible cladding claims, the courts have shown willingness to allow claims to be decided on their merits where possible. These latest judgments confirm that while justice will be delayed, it may still be forthcoming.
This article was first published on the University of Oxford’s Housing after Grenfell Blog.