In the Court of Appeal decision of Mulalley & Co Ltd v Martlet Homes Ltd  EWCA Civ 32, the Court was asked to consider whether a construction claim in respect of fire defects could be amended after the limitation period had expired.
Civil Procedure Rule 17.4 permits an amendment to a statement of case where limitation has expired and where the effect of the amendment would be to add or substitute a new claim, but only if the new claim arises out of “the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings”. As limitation is a potential issue for a new of fire defects claims, the case is a timely reminder of the principles. As Lord Justice Coulson noted in the judgment, “The issue that arises here is an important one and may, post-Grenfell, be replicated in analogous situations at blocks of flats across the country”.
Martlet are the owners of five high rise towers in Gosport in Hampshire. The prior owners employed Mulalley to act as the D&B contractor to carry out extensive refurbishment work at the five towers between 2005 and 2008. This included the selection and installation of a proprietary external wall cladding system called the STO system.
Post-Grenfell, Martlet carried out checks on the towers and discovered major fire safety defect. However, limitation was about to expire for four of the towers. Indeed, by the time proceedings were commenced by Martlet, one of the five towers could not be included in the pleadings because the claim was statute barred.
Martlet sued on the basis of ineffective design and workmanship in respect of the fire protection in the STO system. As part of their defence to Martlet’s claim, Mulalley argued that (a) Martlet would have had to replace the cladding in any event; and (b) that the STO system installed complied with Building Regulations at the time the refurbishment work was carried out.
Martlet then sought permission to amend their original Particulars of Claim to identify expressly that the EPS insulation did not comply with building regulations at the time of the contract, and that it was Mulalley’s wrongful choice/selection and subsequent use of the combustible insulation, which caused the loss.
Mulalley objected, on the basis that such amendments (in particular the reference to the selection of the combustible insulation) would amount to a new cause of action which, importantly, did not arise out of the same or substantially the same facts as had been pleaded in the original particulars of claim (i.e. the workmanship issues).
The Court at first instance considered that the proposed amendments amounted to a new claim, but one which nonetheless arose out of the same or substantially the same facts, and permitted Martlet to make the amendments. Mulalley appealed.
In the Court of Appeal, Lord Justice Coulson noted that “on the face of it, there was a reasonably strong case for saying that the amendments to the Particulars of Claim do not amount to a new cause of action. The selection of combustible insulation claim does not rely on any duty or obligation that had not previously been pleaded by Martlet. In particular, precisely the same requirements of the Building Regulations are relied on, and the same loss and damage is claimed”.
Nevertheless, the Court of Appeal felt it was able to say that this was a new cause of action, on the basis that:
- The new allegation was a contingent claim, which arose on the basis of the defence put forward by Mulalley. On this point, Lady Justice Andrews noted that “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 original claim did not involve any allegation that a component part of the STO system, namely the EPS insultation, was of itself an inadequate material or unfit for purpose, whereas the inherent unsuitability of the EPS insulation was at heart of the amended claim;
- Comparing the original claim and amended claim, there was a clear analogy with the Court of Appeal decision of Co-Operative Group Limited v Birse Developments Limited , in which the Court concluded that, where further allegations involve separate and distinct allegations of breach and separate and distinct allegations of loss, they must comprise a new and different cause of action
As regards whether the new claim arose out of the same or substantially the same facts, the Court summed up the position as follows:
“The selection of combustible insulation claim merely identifies a further reason for the replacement of the STO system. It may require a further element of investigation beyond that required by the original Particulars of Claim, but it supplements the existing investigation, rather than doing away with it altogether…”
The appeal court therefore agreed with the decision at first instance and Martlet was given permission to amend its claim.
Limitation can be a vexing issue for parties faced with fire defects. Parliament has sought one way through this by proposing in the Fire Safety Bill to extend limitation for claims under the Defective Premises Act 1972; the Court of Appeal has arguably allowed another route through in allowing claims of this type, once issued, to be amended.
However, it should be noted that the primary question - namely, when does limitation expire- is still critical. The Court cannot come to the assistance of a party that has missed limitation completely.
It should also be noted that the normal rule is for the party amending its claim to pay the costs of the other party in amending its Defence. Although there are exceptions to this rule, it is generally better for a party to plead its claim in full, if it can, than rely on the discretion of the Court under rule 17.4.
Parties who have identified construction defects, and in particular fire defects, arising out of works carried out a number of years earlier should therefore take all appropriate steps to identify the defects, the cause of the defects, and when the cause of action arose. Parties with concerns about limitation should seek immediate legal advice.