It is well established that the legal costs of pursuing a claim are potentially recoverable by the winning party. However, when a business is involved with a claim there will often be other costs. Time spent by a business dealing with a case itself such as instructing solicitors, collecting evidence and preparing witness statements can be, in very limited circumstances, claimed as part of its costs but what about the time which is spent investigating and remedying a breach?
It is often time consuming to investigate and remedy a breach. In such a situation senior management and other staff are often diverted from their usual tasks and this can have an impact upon the business. It is therefore a welcome relief that such sums are now being recognised as claims for wasted management costs and are a legitimate head of damages.
In order to make such a claim, a party must establish to the court the details of the staff and time diverted on these tasks. It must be shown that the breach caused a significant disruption to the business by diverting staff or management away from their usual activities. Whether there has been a disruption to the business will depend on the facts. For example, the employee may be undertaking an activity that had to be done in any event. It is not necessary to show that there was a loss of profit but if that was the case it would indicate that there was disruption to the business and that staff were diverted from their usual roles.
It is also worth noting that diverted staff do not usually have to be engaged in in profit-making activities for a business to successfully make a claim for their time (for example, administrative staff). The court will infer that had the staff not been diverted, the activities they would have otherwise done would, directly or indirectly, have generated revenue in an amount at least equal to the costs of employing them during that time. Therefore, damages awarded will usually reflect the cost of the wasted time and the salary of the employee rather than any loss of profits.
The fact an employee has been diverted can be shown through the investigations and remedial work which had to be undertaken in relation to the breach. Therefore, if a business wishes to claim for wasted management time, contemporaneous records should be maintained of work undertaken. A good record will be a daily time sheet or detailed diary entry. Records kept should show why an employee was chosen for the task and what work they would have otherwise been doing. It should also note if the employee’s tasks were diverted elsewhere. Recording this information together with details of the time spent and the tasks that were undertaken will assist in establishing a claim for wasted management time.
In the absence of contemporaneous records other evidence may be accepted by the court. In some instances a retrospective assessment of the time will be accepted. However, this is not ideal as the court will be reasonably cautious in its approach and may apply a discount.
It can be difficult to distinguish between work which relates to the claim and work which is attributable to remedying the breach. Detailed records will help clarify the position and strengthen a party’s claim for wasted management time. Further advice and a template for staff to record their time can be provided by Clarke Willmott.