The Courts Approach to Fire Safety Defect Disputes
Wednesday 4th January 2023
The question of how to deal with fire safety defect issues has dogged the construction industry in the post-Grenfell era.
Legal advice is being sought on these issues far more, and at a far earlier stage than it ordinarily may be on other disputes relating to defective work. There is no “one size fits all” approach to considering liability in relation to fire safety defect issues. Every dispute will turn on any number of details, such as the specific nature of the alleged defect, what testing and certification were available for that product, the time the contract was entered into, the precise wording of the specification and the obligations under the building contract to name a few.
What then, do we have certainty over? Well, the courts have so far issued one decision which gives us some transferrable principles.
Martlet Homes Ltd v Mulalley & Co Ltd [2022] EWHC 1813 (TCC)
Mulalley were the design and build contractor engaged to install cladding onto residential tower blocks in 2005. There were defects with both the installation and the design (specification) of the cladding:
- Installation Defect – Mulalley had not installed the cladding correctly as the horizontal fire barriers at each floor level were inadequately fixed, and the EPS insulation boards were inadequately fixed to the walls behind. Both the mechanical and adhesive fixings were therefore inadequate. Mulalley admitted responsibility for those defects.
- Specification Defect – the cladding Mulalley specified used highly combustible EPS insulation. Mulalley insisted that was compliant with Building Regulations at the time. The Court disagreed and found that this design was fundamentally deficient and was insufficient to prevent a fire, in breach of the contract and Building Regulations.
Martlet succeeded on both points and the Judge awarded the costs of replacing the full cladding system.
What are the lessons we can apply elsewhere?
1. How do we calculate the applicable losses?
Unlike most construction disputes, the loss to the claimant may not necessarily be the cost of the repair scheme undertaken. This is effectively a way for the Court to overcome issues around legal causation in circumstances where many people will be carrying out wholescale replacement of cladding systems.
The loss a property owner suffers is the diminution (reduction) in value of the property itself as a result of it becoming fundamentally unsafe to inhabit. That loss can be measured by the necessary remedial works, however that may be different to the remedial works actually undertaken.
For example, if Martlet’s only case was the installation defects, it would not have needed to replace the whole cladding system to remedy the breach of contract. It would, however, have done so anyway in the post-Grenfell knowledge that the cladding was so dangerous. The Judge held that in such a case, because the loss is the diminution in property value, the cost of the works to remedy the actual defect is recoverable, even if that is not the remedial works that were actually carried out.
2. “The whole industry used similar products!”
This is something that is commonly relied on by contractors but is an argument that the Judge was less than sympathetic towards.
The judge did not believe it was sufficient to discharge the duty of reasonable skill and care just by virtue of the fact others were making the same mistake. It must be shown that there was a logical and rational basis for using that product or system – i.e. some form of testing showed that the product complied with the relevant Building Regulations.
External certificates, such as the BBA Certificate, cannot be taken as a guarantee of compliance with Building Regulations in the absence of any testing to prove that they actually are compliant.
3. Which party needs to rely on testing?
If the contractor has an obligation to comply with the relevant Building Regulations and the claimant can show that the contractor has not obtained evidence that any products specified did, then that is all the claimant needs to show. The claimant would not have to produce evidence that, if tested, it would not have met the performance criteria.
The contractor could rely on testing to show that, if it had undergone testing, the product would have passed the necessary criteria to show the breach of contract was causatively irrelevant to any loss.
4. “Waking watch” costs are recoverable
The Court held that on-site security costs are recoverable. They are reasonably foreseeable, as if anyone thought about what would happen in the event that serious fire safety defects were discovered, they would expect some form of temporary measures to put in place. In any event, it is effective mitigation against a full-scale evacuation of a building.
Summary
Fire safety defect disputes are highly technical and turn on the specific details in each case, so the decision in Martlet is not necessarily indicative of all cases to come.
That said, the Courts have given a pretty clear steer that contractors will not find much sympathy and Judges will be fairly creative in ensuring claimants can recover the costs of remedial works, even if it is not for the full amount of the remedial works actually undertaken.
With the new Building Safety Act extending limitation periods, contractors may face significant liabilities due to historic fire safety defects for some time to come.
