Where staff must be diverted from their usual tasks, damages for significant disruption caused to the business may be recoverable. This must not be confused with time spent by your staff preparing for court proceedings. Damages for business disruption will not extend to time “lost” building your case against the Defendant. They are limited to time spent dealing with the direct effects of the wrongdoing.
For example, a flood that damages your materials caused by the Defendant might require you to redeploy your staff to restore the business. To the extent you can show that, consequently, staff were unable to perform their usual revenue-generating activities, you may be able to recover damages for your losses.
It is, however, not that straightforward. It is a question of significant disruption. For example, staff diversion will be better absorbed in a multi-national organisation than in a small company and will therefore be less likely to qualify as ‘significant disruption’.
Furthermore, you must provide sufficient evidence that it was necessary to divert staff from their usual tasks and to what extent. You must then show it was this necessary diversion that caused significant disruption and evidence the consequential. I.e. had you not been forced to divert your staff they would have been engaged on revenue-generating activities and, consequently, revenue is lost. If this can be shown, it will usually be inferred that the revenue that would have been generated is at least as much as the cost of employing the staff on the re-deployment.
In some circumstances, it may be practical (and consistent with your duty to mitigate loss) to contract third parties to minimise the effect of disruption so your staff focus on their usual activities. In this case, and based on the same principles above, the costs of contracting extra staff are recoverable. Of course, notwithstanding the requirement to mitigate loss, there may be reasons of confidentiality, for example, that render contracting third parties undesirable.
Points to consider
Successful claims are relatively rare owing to evidential difficulties. So, a degree of foresight from an early stage is necessary to obtain good evidence of causation and loss.
If staff are diverted to mitigate loss or resolve issues, it is essential that you log what they did and the time incurred. Similarly, if they are required, log all time spent by and costs of employing third party contractors, whether used to resolve issues or replace diverted staff. The same consideration applies to loss of business (a contract for example) as result of staff diversion, damages for which are also recoverable. The more detailed the evidence, the better your chances of success.
Better yet, there are pre-emptive measures you can implement at an even earlier stage to facilitate a claim. When negotiating contracts, you can alert the other side – by negotiating a term or giving written notice, that their breach of contract may cause significant disruption to your business by way of staff diversion, loss of revenue or even a client. If they know of these potential consequences and the likely loss that will follow you will be more likely to make a successful recovery.
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George Masefield- Solicitor- A City Law Firm