What Does It Mean 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.

Understanding the Duty to Mitigate By Minimizing Losses Including the Required Standard of Efforts to Do So

Lawsuit Document In a conscientious society, reasonably minded persons prefer to avoid waste; and accordingly, the law imposes the principle of mitigation, being a duty to mitigate, upon a harmed party. The duty to mitigate imposes a requirement upon a harmed person to act reasonably by taking steps that reduce or control losses and applies to all areas of law.

The Law

The duty to mitigate was articulated well by the Supreme Court within the case of Southcott Estates Inc. v. Toronto Catholic District School Board[2012] 2 S.C.R. 675 where it was said 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, mitigation requires the minimizing of harm. Failure to minimize the harm is a failure to mitigate and may reduce sums that a wrongdoer owes to the person harmed whereas when a failure to mitigate occurs, it is the person who was harmed and failed to reasonably minimize loss that caused some of the harm.  The wrongdoer is liable only for the portion of harm caused by the wrongdoer. Examples of mitigation include, among other things, the reasonable efforts of a wrongfully dismissed employee to seek fresh employment or for the victim of an injury to attend rehabilitation rather than to allow injuries to fester while loss of income for time off work accrues needlessly. 

Summary Comment

The law required that a Plaintiff (or a Defendant within a counterclaim against the Plaintiff) took reasonable steps to mitigate, meaning reduce, losses.  When a person failed to take reasonable steps to mitigate (reduce losses), the law will disallow claims, or the amounts within claims, that arose because of the failure to mitigate whereas the law views the losses that arise from the failure to mitigate as caused by the inaction of the victim rather than by the action of the wrongdoer. When a Defendant to a lawsuit seeks to argue failure to mitigate as a defence strategy, the Defendant must include such an allegation with the defence pleading documents and it is the Defendant that must prove that the Plaintiff had a reasonable opportunity to mitigate the losses and failed to do so. However, the Plaintiff is without a requirement to mitigate perfectly and must only take such steps that are reasonable at the time that the loss is occurring rather than as may appear possible at a later date through hindsight.

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