Can wasted time be claimed as damages?

15 Apr 2014

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When dealing with a claim for financial loss, a party may claim damages for wasted staff time if those staff have been diverted from their usual activities to undertake work to deal with the consequences of a breach of contract (AEW Architects).

However, consideration will need to be given as to whether the additional work necessitated by a breach of contract was sufficiently limited in extent such that the time spent cannot sensibly be regarded as having suffered a loss, e.g. the employee in question had to do it or the employee(s) were so underemployed that the company did not suffer any loss simply because they had to work a bit more (this was considered in Balmoral Group).

Where an innocent claimant establishes its cause of action, it can recover any management time reasonably spent dealing with the consequences of the breach (AEW Architects).

What evidence will I need to provide?

The authorities were reviewed by the Court of Appeal in Aerospace Publishing, which outlines the general propositions relating to claims for wasted time. A party must:

establish the fact that staff time was diverted
set out the extent of the time diverted
provide evidence to show the extent of the time diverted
provide evidence that the diversion of staff time caused significant disruption to the claimant's business

Generally, if the above are shown, it will be reasonable to infer that, had the disruption not occurred, staff would have applied their time to activities that would, directly or indirectly, have generated revenue for the claimant. In Aerospace Publishing Wilson LJ said:

'Even though it may well be that strictly the claim should be cast in terms of a loss of revenue attributable to the diversion of staff time, nevertheless in the ordinary case, an unless the Defendant can establish the contrary, it is reasonable for the court to infer from the disruption that, had their time not been thus diverted, staff would have applied it to activities which would, directly or indirectly, have generated revenue for the Claimant in an amount at least equal to he costs of employing them during that time.'

From a practical perspective it can be difficult to provide records to show the extent of the time diverted. However, an absence of such records does not preclude recovery for wasted time (Horace Holman Group). Depending on the circumstances of the case, a retrospective assessment of the diverted time can be a valid method of calculation. Note that due to the uncertainty arising from such an assessment, a reasonably cautious approach may be adopted (AEW Architects) or a discount applied (Bridge UK.Com).

Examples of how parties have demonstrated wasted time successfully include the following:

memory of events—being reconstructed to produce the evidence required (Horace Holman Group)
percentage basis—used to represent the estimated proportion of time that relevant employees had to spend dealing with the consequences of the breach; the percentages were reasonable having regard to the magnitude of the problem (Balmoral Group)
retrospective assessment—undertaken by a person closely involved with and taking a particular interest in the consequences of the breach; the person was well placed to know how much time was spent at least in a general and broad sense (AEW Architects)

Note: it is not possible to recover an uplift. This was considered in Bridge UK.Com in which a 25% uplift was sought. This was described as an 'opportunity cost' and was not recoverable.

How are claims for damages for wasted time quantified?

Claims for this type of damage are not quantified in relation to loss of profits. They will typically be quantified by reference to the cost of the employees' wasted time and the salaries paid to those employees. Claims have been calculated by reference to the relevant employees' hourly rate (Bridge UK.Com) or daily rate (AEW Architects).

It is not necessary to show that the employees whose time was diverted, as a result of the breach, were involved in profit-making activities, nor is there any requirement to distinguish between profit-makers and non-profit-makers (Horace Holman Group and R + V Versicherung).

Part of the Lexis®PSL Dispute Resolution Q & A series. Click here for a free one week trial of Lexis®PSL.