Reclaiming management time lost in dispute

Disputes are best avoided but, if you find yourself in conflict with another party, even if you don’t imagine the matter might end up in court, it is worth keeping track of how much time the dispute is costing you and your business - just in case.

The direct legal costs of a case are easily quantifiable, such as lawyers’ and court fees.  What is not so easy to assess is how much the case is costing your business in terms of the time spent putting the ‘wrong’ right, or the time that might better be spent pushing the business forward instead of dealing with the dispute.

But, in certain circumstances, these costs can be recouped since the Court of Appeal accepted in 2007 that damages for lost management time can be recovered over and above the other losses that are being claimed. 

Examples of the type of management time that have been recovered are:

• staff costs for salvage work after a flood at an aviation and military record archive, where otherwise the staff would have been engaged preparing material for publication for profit;
• managerial and supervisory time spent overseeing dredging operations that should have been carried out by the other party in the claim;
• time spent by employees struggling to work with a software system that was not fit for purpose; and
• staff time spent investigating a conspiracy to defraud.

By contrast, the courts have not allowed the time of an employee sent abroad twice to supervise the sale of some bitumen, because there was no true disruption to the business concerned

To claim for the cost of wasted staff time you must properly establish that the wasted time was actually spent on investigating and/or mitigating the relevant loss and some significant disruption to the business, in other words that staff have been significantly diverted from their usual activities.  

Evidence from the time is far more persuasive than an after-the-event reconstitution.  This is clear from a 2007 case where the claim was for 128 hours of management time (at £48 per hour) “dealing with the problems caused by the defendants”, but because the claimant had to reconstruct this from records after the event, the judge discounted the claim by 20%.

The best course is to collate and record evidence of wasted staff time as soon as the dispute rears its ugly head (but still hope you never actually need to rely on it!).

Autumn 2009