Have you found that your employees' time has effectively been 'lost' or 'wasted' because, instead of being engaged in the work for which they were employed, they have had to spend time dealing with difficulties which have arisen because of someone else's breach of contract or negligence? For example, a landlord may have to invest staff time clarifying levels of arrears of rent or service charges payable by tenants as a result of a managing agent's failure to properly account for monies received or paid out. Indeed, often it is necessary to invest such time if only to mitigate further losses.

The question is often asked whether those wasted costs can be recovered from the other side as part of the damages claimed.

The Court of Appeal decision in Aerospace Publishing Ltd and anr v Thames Water Utilities Ltd [2007] EWCA Civ 3 has affirmed the right of a party to recover such costs. This case concerned the time spent by employees in trying to salvage and reconstitute an archive of historic and unique photographic and literary works relating to the aviation industry. These works had been damaged by a flood to the premises occupied by Aerospace.

The Court held that it was necessary to distinguish between staff time spent on matters which related to the preparation of the claim from that spent trying to salvage the works and reconstitute the collection. It might be possible to claim the former as part of the costs of the litigation but the latter could be claimed as damages. The Court gave clear guidance on the evidence required to support such a claim. It held:

(a) the fact that staff time had been diverted to investigate or mitigate the alleged wrong and the extent to which the time had been diverted had to be proved by evidence;

(b) the Claimant would also have to show that the diversion of this time caused a significant disruption to its business; and

(c) though the recovery of wasted staff time should ordinarily be claimed by reference to loss of revenue, if that was not possible, the Court might infer from the disruption that, had the staff not had to spend their time investigating or mitigating the loss, the time would have been spent in activity which would have generated revenue for the business and which would have been at least equal to the cost of their employment.

In the Aerospace case, the Court found that the Claimant had shown that its business had been significantly disrupted and that the time spent by its employees was, therefore, recoverable.

In the more recent case of Bridge UK Com Limited v Abbey Pynford plc [2007] EWHC 728, the Court awarded damages to the Claimant for both wasted staff time and loss of profit. In making the claim for lost staff time, the Claimant had retrospectively calculated the time spent by an employee by reference to the documents created by the employee at the time. Although the Court accepted that there was an element of uncertainty in this evidence, it awarded damages by reference to the employee's salary but discounted the award by 20% to reflect the uncertainty in the evidence.

In considering the claim for damages for loss of profit, the Court accepted that the Claimant had suffered a loss of profit. However, it noted that certain expenses would have been incurred by the Claimant in any event in carrying on its business which would have to be taken into account in determining damages. Although the Court had no evidence of the extent to which certain expenses related to the profits the Claimant would have earned, the Court awarded the Claimant 50% of the expenses it incurred.

Although the Court in Bridge was prepared to make an award of damages in the absence of detailed evidence of the time spent by the employee and the extent to which expenses where directly related to the profits of the business, it should not be assumed that the Court would always take such an approach. This means that a party should, as far as is possible, try to record all time spent by staff engaged in any activity necessary to deal with issues arising out of the other side's breach of contract or negligence and should record this time in a detailed and contemporaneous manner. This should include not only the time but a description of the work done. Though it may be possible to reconstitute these records after the event, this introduces an element of uncertainty which is likely to result in the damages being reduced.

In supporting a loss of profit claim, it is necessary to adduce evidence of the difference in the profits, the expenses which would be incurred in any event in carrying on the business and which of those expenses relate to the profits normally generated as well as any additional costs which may be incurred in trying to mitigate the loss.