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Limitation and Cladding Claims: An Impenetrable Defence?

Following the tragic events at Grenfell, many construction professionals have been (or may yet be) the subject of claims in respect of work performed at developments some time in the past. Owing to the passage of time, one of the possible defences available to those professionals (and, indeed, their liability insurers) is that of limitation.

A limitation defence might be raised, for example, to the entirety of a claim brought against a professional if the defendant considers it was issued out of time. However, a limitation defence can also arise where a claimant, having already commenced proceedings against a defendant in respect of a cause of action that is not time barred, seeks then to amend their claim to introduce a new cause of action (say, by way of a Reply) which, by the time that new cause of action is pleaded, may now itself be time barred.

The recent case of Mulalley & Co. Ltd V Martlet Homes Ltd considered whether a claimant can do so.

The Facts

Martlet Homes Ltd (“Martlet”), the owner of five high-rise towers brought an action against Mulalley & Co. Ltd (“Mulalley”) who performed refurbishment works, including the design and installation of the external cladding to the towers. Practical completion of the works to the various towers was achieved between 5 December 2006 and 7 April 2008.

The proceedings were issued on 11 December 2019, just prior to the expiry of the 12 year limitation period (the contract was entered into by deed) and the works in respect of one of the tower blocks was already statute barred.

Martlet alleged that Mulalley was negligent and in breach of contract and claimed damages of around £8 million in respect of remedial works. The allegations related to defects in the fire barriers; a failure to properly fix the insulation boards to the external walls; and a failure to properly repair the existing substrate.

In its Defence Mulalley denied that the alleged breaches of contract had caused any loss because it argued that following the tragic fire at Grenfell Tower in June 2017, Martlet was in any event required to replace the combustible expanded polystyrene (“EPS”) cladding fitted to the towers. Martlet served a Reply arguing that even if Mulalley was right as to causation, it would remain liable because Mulalley was in breach of contract in using the combustible EPS insulation boards in cladding the towers.

Mulalley brought an application to strike out that part of the Reply relating to breach of contract in using EPS on the basis it raised a new claim and Martlet could not do that by way of a Reply. Martlet resisted the order, but in the alternative sought permission to amend its Particulars of Claim to plead its EPS case.

The Issue

Due to limitation having expired, the amendment of the Particulars could only be allowed if it did not represent a new cause of action, or if it arose out of the same or substantially the same facts already raised in the case.

The Decision at First Instance

Pepperall J found that the amended claim was a new cause of action. The relevant paragraphs of the Reply were struck out on the basis new claims must be added by amending the Particulars of Claim and cannot simply be pleaded by way of Reply.

However, by reason of the defence, the Judge found the amended Particulars arose out of the same, or substantially the same facts as were in issue in the case. Accordingly, the amendments to the Particulars of Claim were allowed.

The Decision of the Court of Appeal

The Court of Appeal upheld the Judge’s decision on both issues.

Lord Justice Coulson said that what was set out in Mulalley’s Defence demonstrated beyond doubt that the selection of combustible insulation claim arose out of the same or substantially the same facts as were already in issue and that this was the result of both the way in which Mulalley had chosen to defend themselves against the design allegations and from a consideration of Mulalley’s separate causation defence.

Whether or not the original design complied with the contract, and in particular whether or not the EPS insulation was in accordance with the Building Regulations was said to be already in issue in the case and had been expressly put in issue by Mulalley in their Defence, in considerable detail, in answer to the original allegations of negligent design.

Lady Justice Andrews concurred with Lord Justice Coulson and said it would be invidious if a defendant, having deliberately put in issue the compliance of the building design with the Regulations in force at the time of construction, could escape the consequences of an adverse finding on that issue by using limitation as a shield against a claim relying upon the non-compliance.

The takeaway

Where limitation is an issue, the question of whether a new (and possibly time barred) claim arises out of the same or substantially the same facts as a claim already made in time is an important one.

For claimants, this Court of Appeal decision reinforces the need to consider limitation in respect of all allegations that they might wish to put to a defendant at the earliest opportunity, and, where limitation is a concern, to fully articulate their case in the Particulars of Claim where possible. Though, as in this case, the Courts may provide salvation where new allegations arise, doing so may avoid costly disputes such as this one.

For defendant contractors (and their liability insurers), this case demonstrates the possibility of new causes of action being raised and added to a claim outside a prima facie limitation period, potentially broadening the case they thought they had to meet. Where contractors are reliant upon insurers in such proceedings, those contractors will, of course, wish to ensure that any such “new” allegations are covered in much the same way as the “old” ones. Whether they are so will depend upon the language of the contractor’s policy, and the scope of the notification made to it.

It is difficult to imagine circumstances in which new allegations might arise from facts already pleaded and accepted by a liability insurer for cover, but which are not then treated by the insurer as forming part of the original claim. Stranger things have, however, happened in a hard market.

Kristy Luff
Indemnity Legal
27 January 2022

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