A recurrent theme of the last few eBulletins has been whether, and to what extent, the cost of management and staff time can be recovereed in litigation. In the last edition, we examined the case of R&V Verischerung AG v Risk Insurance & reinsurance Solutions SA & Others [2006} EWHC 1705. In that case, the Court found that lost management time was a distinct head of damage and costs could be recovered even if no loss of profit, business or revenue could be shown.

The recent case of Aerospace Publishing Limited and Another v Thames Water Utilities Limited [2007] EWCA Civ 3 has set down some further important guidelines and the result is that it may now be easier to recover staff costs in litigation.

In this case, flooding caused by a burst pipe, resulted in the loss and damage of an archive of historic material, including photographs and artwork, relating to aviation. The archive was damaged by water escaping from a Thames Water main. Thames Water admitted liability for the flood but disputed the amount of damages claimed. The publishing company claimed staff costs incurred by seven employees in salvaging and reorganising the archive. The Court of Appeal reviewed the previous authorities, which have been examined in earlier eBulletins, and provided clarification o fthe law. The conclusion of the Court of Appeal was that:

  • the fact and extent of the diversion of staff time has to be established and evidence needs to be put forward accordingly;
  • evidence needs to be put forward showing that the diversion caused a significant disruption to business;
  • unless the defendant can provide evidence to the contrary, the Court will infer from the disruption that had the staff time not been diverted, it would have been applied to activities which would have been generated income for the claimant in an amount at least equal to the costs of employing staff during that time.

It will be necessary to provide evidence to show that the diversion has caused a "significant disruption" to the business. Quite what will amount to a "significant disruption" is unclear and could form the basis of further Court decisions.

It is important to note that the Courts will require evidence showing that staff have been diverted from their normal activities. Time spent in preparing the Court claim does not count for these purposes. It is the time spent investigating and/or mitigating the relevant tort or breach of contract that is important.

As set out in previous eBulletins, it is important to keep detailed records of the time spent by each member of staff and of how and why the staff are diverted from their normal activities. A case may not come to Court for prehaps several years after the problem occurred and so clear records are essential if staff time is to be recovered.