What Could Happen If Someone Fails to Mitigate Losses?

The Duty to Mitigate Requires the Person Harmed to Take Reasonable Steps to Limit the Harm. Failing to Mitigate May Reduce the Sum Recoverable Via Litigation.

Duty to Take Steps to Reasonably Minimize Losses The law despises waste and the doctrine of mitigation, being the duty to mitigate, is the mechanism that imposes an obligation upon a harmed party to take reasonable steps to minimize or control avoidable losses.  This principle applies in all matters of law including tort law, contract law, employment law, construction law, among various others matters.  The doctrine of mitigation was explained well whereas it was said in general by the Supreme Court in Southcott Estates Inc. v. Toronto Catholic District School Board[2012] 2 S.C.R.  675 that:

[23] This Court in Asamera Oil Corp. v. Seal Oil & General Corp., 1978 CanLII 16 (SCC), [1979] 1 S.C.R. 633, cited (at pp.  660-61) with approval the statement of Viscount Haldane L.C.  in British Westinghouse Electric and Manufacturing Co.  v. Underground Electric Railways Company of London, Ltd., [1912] A.C.  673, at p.  689:

The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but this first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps.

[24] In British Columbia v. Canadian Forest Products Ltd., 2004 SCC 38 (CanLII), [2004] 2 S.C.R.  74, at para.  176, this Court explained that “[l]osses that could reasonably have been avoided are, in effect, caused by the plaintiff’s inaction, rather than the defendant’s wrong.” As a general rule, a plaintiff will not be able to recover for those losses which he could have avoided by taking reasonable steps.  Where it is alleged that the plaintiff has failed to mitigate, the burden of proof is on the defendant, who needs to prove both that the plaintiff has failed to make reasonable efforts to mitigate and that mitigation was possible (Red Deer College v. Michaels, 1975 CanLII 15 (SCC), [1976] 2 S.C.R. 324; Asamera; Evans v. Teamsters Local Union No.  31, 2008 SCC 20 (CanLII), [2008] 1 S.C.R.  661, at para.  30).

[25] On the other hand, a plaintiff who does take reasonable steps to mitigate loss may recover, as damages, the costs and expenses incurred in taking those reasonable steps, provided that the costs and expenses are reasonable and were truly incurred in mitigation of damages (see P.  Bates, “Mitigation of Damages: A Matter of Commercial Common Sense” (1992), 13 Advocates’ Q.  273).  The valuation of damages is therefore a balancing process: as the Federal Court of Appeal stated in Redpath Industries Ltd.  v. Cisco (The), 1993 CanLII 3025 (FCA), [1994] 2 F.C.  279, at p.  302: “The Court must make sure that the victim is compensated for his loss; but it must at the same time make sure that the wrongdoer is not abused.” Mitigation is a doctrine based on fairness and common sense, which seeks to do justice between the parties in the particular circumstances of the case.

Accordingly, the duty to mitigate requires a harmed person to minimize the harm suffered.  Failure to minimize the harm may, and likely will, reduce the sum that the wrongdoer will owe the harmed person in a determination of liability at a court Trial.  As was explained above by the Supreme Court in the Southcott Estates case, where a failure to mitigate occurs, it is the failure of the Plaintiff to act reasonably to minimize the loss that caused a portion of the harm.  Simply said, where the Defendant does something wrong resulting in harm to the Plaintiff, the Defendant is responsible only for the portion of the harm that arises directly due to the wrongdoing of the Defendant and where a portion of the harm occurs or accrues because the Plaintiff failed to minimize that harm, the Plaintiff is at blame for the portion of the harm. 

Summary Comment

A Plaintiff (or Defendant within a counterclaim) is required to mitigate by taking reasonable steps to keep losses at a minimum.  Where a Plaintiff fails to reasonably take steps to minimize losses, it is the inaction of the Plaintiff rather than the wrongdoing of the Defendant that caused such losses.  Where failure to mitigate is alleged by the Defendant, it is the Defendant who holds the duty to prove that the Plaintiff failed to mitigate and that a reasonable opportunity to mitigate was available; furthermore, the duty upon the Plaintiff is to take reasonable steps in the effort to mitigate rather than take steps to perfectly mitigate and a Defendant is unable to use the vision of hindsight to argue what the possible opportunities to mitigate were available to the Plaintiff.  Again, the duty is to act reasonably without expectations of perfection.

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