A great deal time can be taken up dealing with the consequences of a wrongful act. For example, a business may need to spend time investigating the extent of monies stolen by a fraudster, re-building damaged customer relationships or rectifying physical damage to property.
Can the business claim compensation from the defendant for the time that staff have had to spend time on such tasks?
The answer is: it depends.
Damages or costs?
A successful result at trial will usually result in an award of (a) damages, and (b) costs. In some circumstances, wasted staff time may be recoverable as a head of damages (on the basis that it represents loss caused by the defendant’s wrongful act). In some – more limited – circumstances, wasted staff time may be recoverable as part of the costs that are awarded to the claimant, along with their legal representatives’ costs.
Claiming for staff time as part of your damages
The aim of compensatory damages is to put the claimant back in the position that they would have been in, had the defendant not committed the wrongful act. In some cases, a claimant may be able to establish a quantifiable claim for loss of revenue which was caused by the diversion of staff to deal with the consequences of the defendant’s wrongful act. In those cases, the claimant can include that lost revenue as part of its claim for damages against the defendant.
This will not be possible, however, if the causal link between wasted staff time and a drop in revenue is not sufficiently clear. In those cases, a claimant may want to claim for wasted staff time based on hourly rates. This is permitted by the courts. The claimant must bear in mind, however, that the burden is on them to establish – and prove with evidence – their entitlement. There are four main components to proving entitlement to damages for wasted staff time.
- Firstly, a claimant must show that staff time has in fact been diverted, in order to deal with the issues caused by the defendant. This will not be assumed. A witness statement explaining the staff member’s usual tasks, how they were diverted from those onto other tasks, and how this was caused by the actions of the defendant, would be useful. Time spent by the claimant instructing and liaising with its solicitors cannot be claimed for as damages (although in some circumstances, it may be recoverable as part of the claimant’s claim for costs – see below).
- Secondly, a claimant must show how much staff time has been diverted. Evidence of this could be timesheets, or file notes of the dates, amount of time and tasks carried out. Those timesheets or notes should be exhibited to a witness statement, along with confirmation of who made the note, and when.
- Thirdly, the claimant has to establish that the diversion caused significant disruption to its business. This is likely to be easier to show where it is the time of a senior manager that was diverted, rather than the time of a more junior staff member. Evidence of business disruption could be records showing a drop in revenue, or the loss of customers.
- Fourthly, the claimant must put a figure on the value of the wasted staff time, and be able to justify that figure. One way of arriving at a sensible hourly rate might be to use the staff member’s annual salary as a starting point, then pro-rata it to arrive at an hourly rate.
If a claimant has not, so far, kept timesheets or records of the time spent, it should do the best with what it does have. Courts are frequently willing to take a broad-brush approach to the quantification of these claims, and will take a view based on the sort of evidence that the claimant could reasonably have been expected to have obtained. What will not be acceptable is hourly rates seemingly plucked out of the air, with little or scant evidence of how either those hourly rates, or the number of hours claimed, were arrived at.
Claiming for staff time as part of the costs of the claim
The usual rule in court proceedings is that ‘costs follow the event’. In other words, the successful party generally gets its costs paid by the unsuccessful party. This general rule is subject to many caveats and limitations, however, and the costs that a successful party can recover are now more limited than ever before.
At various stages of a claim – including at the end of an interim application, when the court is considering the parties’ costs budgets, and upon detailed assessment following conclusion of the claim – the court may be required to make a decision about how much of the successful party’s costs the unsuccessful party should pay. A claim for costs is likely to include solicitors’ fees, barristers’ fees, court fees, expert’s fees and any other disbursements (e.g. travel expenses and fees for obtaining documents from the Land Registry).
A successful party cannot claim from its opponent its own time spent dealing with the litigation. This means that staff time spent instructing solicitors, dealing with disclosure of documents and preparing witness statements will generally not be recoverable from the other side, regardless of the outcome of the court claim. There are, however, a few exceptions to this rule:
- If the successful party has employed an in-house lawyer who has worked on the claim, then the costs of that in-house lawyer can be recovered from the unsuccessful party.
- If expert evidence was required in the case, and the most suitable and convenient expert to use was one of the successful party’s own employees, then the successful party can recover the costs of their ‘in-house expert’. This will include an amount representing an appropriate portion of the expert’s salary (based on their time spent on the expert report), materials and any out-of-pocket expenses (but not any amount in respect of the party’s own overheads).
- If the successful party was a solicitor representing themselves, then they can claim for their own time dealing with the claim.
The opportunities for claiming for staff time as part of a costs claim are therefore very limited. Further, courts will want to be comfortable that staff costs dealing with the litigation are not ‘snuck in’ under any damages claim. Care should therefore be taken to identify, and exclude from any damages claim, staff costs which represent dealing with the litigation, rather than dealing with the other consequences of the defendant’s wrongful act.
What’s the key to a successful claim?
The key to a successful damages claim for wasted staff time is preparation and documentation. A claimant must show the court how the actions of the defendant resulted in the need for staff to spend time identifying and addressing problems, and how this diverted them from more productive activities. And crucially, the claimant must provide clear evidence as to how that has translated into the actual sum being claimed for wasted staff time, otherwise that element of the claim will fail.
How Moore Barlow can help
We have a team of experienced commercial dispute solicitors who will provide you with specialist advice, explain your options and help you to decide how you want to approach the situation. We focus on resolution allowing you to avoid going to court where possible but where this is not possible, we will put you in the best position to achieve a successful outcome at court.
You can have complete confidence in our experienced team who will provide you with the highest quality service across this specialist legal area. Our team will work hard to understand your situation and achieve the best solution for you and your business. Contact us today.
