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10-July-2007
Time is money
Everyone knows that Solicitors charge for the time they spend on matters. For us time is literally money. However, this can be taken further for businesses that suffer losses in dealing with claims. What happens for example when a company’s employee has to divert time into investigating a claim for example re-organising internal resources and taking staff away from their usual duties’. Recent cases suggest that in certain circumstances, wasted internal costs for a business can be recoverable.
In a case involving Thames Water Utilities, a flood occurred to business premises as a result of a burst water main belonging to Thames Water. As part of the claim, the business, Aerospace Publishing claimed money paid to its staff for work that they had to carry out as a direct result of the flood. Thames Water defended on the basis that these were full time employees and Aerospace would have had to pay their wages whether or not there had been a flood. The argument against that was that had it not been for the flood, those employees would have been able to carry out their normal duties and would have generated revenue for the business.
The Court of Appeal considered this point and concluded that as a matter of principle, internal costs of staff being diverted as a result of a breach of contract or claim in negligence were recoverable. This is not to say however that this is carte blanche for any business to bring claims because the onus is very much on the company to prove the loss. In brief, what a claim would have to show.
A further case related to the negligent installation of a printing press at business premises, which caused delay to the Claimant who was a commercial printing and mailing business. In that case, the Claimant claimed loss of time for the Business Development Director who gave evidence that he had spent a substantial amount of hours dealing with the problems claiming an hourly rate together with an uplift described as an “opportunity cost”. In that case, the High Court accepted that time would have been spent marketing the business if it had not been for the installation problems. The calculation was imprecise but held to be a valid method of calculation. Again as a matter of principle the cost of this waste of time was recoverable and because it was imprecise, the High Court reduced the number of hours that could be recovered and disallowed the 25% uplift. This still resulted in the Claimant recovering 62.5% of its overall claim, which amounted to £3,000.00.
The conclusion is that the cost of wasted staff time is recoverable and it is not necessary to show that there has been additional expenditure or loss of profit. Contemporaneous records of work undertaken are the best evidence of a loss. How it is to be calculated is not precise but unless the Defendant can prove otherwise, the Court is likely to accept a retrospective calculation of time spent by a witness to prove the loss at an amount equal to the cost of employing diverted staff for as long as they were diverted.
These are important decisions. It leaves the way clear for companies to bring claims for time wasted caused by claims. If as a business you are contemplating such a claim then it is important that the time spent is well recorded and supported by appropriate documents and witness evidence.
ENDS
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