This is an issue which has been examined quite extensively in the last few eBulletins and is a subject which continues to occupy the Courts.

The most recent case to go before the Courts is Bridge UK.Com Limited v Abbey Pinford PLC [2007] EWHC 728. This case concerned the botched construction of foundations designed to bear the weight of a new printing press. As a result of the failure to complete the work on time, the printing press could not be installed and as such was not operational.

Bridge UK.Com, the Court found, was entitled to damages for losses caused by the delay in completion, including damages for out-sourced work, the cost of transport for the out-sourced work, manufacturing disruption, the cost of wages for the printers engaged for the purpose of operating the new press and for loss of profits and wasted expenditure. It was also entitled to recover loss of profits on the out-sourced work and on the work it was unable to carry out.

The principle was again repeated that wasted management time is recoverable only where the breach has caused a significant disruption to business and where staff have been diverted from their usual activities. In this case, the claimant’s business development director was unable to leave the office to seek new work and this was sufficient to meet that requirement. The value of the loss here was assessed by reference to an hourly rate based on his salary.

In past editions of the eBulletin, we have stressed the need to keep contemporaneous records of management time spent dealing with claims. In this case, such records were not kept and a retrospective schedule was prepared. The Court dealt with the uncertainty of any such schedule by applying a 20% discount to the figure claimed. The Courts may not always be so lenient, particularly in substantial cases, and so records should always be kept.

The delay in constructing the foundations meant that work had to be sent out to third parties but the printing press that could not be used still had to be paid for. Salaries also had to be paid to staff despite the fact that they were sitting idle. The award for loss of profits here was based on the profits which would have been made, had the out-sourced work been done in-house, together with the profits on work which had to be turned away because the press was not working and clients were not willing to have their work out-sourced.