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Reasonable Mitigation Obligations: Involves Duty to Avoid Unnecessary Losses or Damages
Question: What is the duty to mitigate losses in Canadian law, and how does it affect legal claims?
Answer: The duty to mitigate is a principle requiring a harmed party to take all reasonable steps to minimize losses after a breach or wrongdoing, applicable in areas like tort, contract, and employment law. If the harmed party fails to mitigate, the law may reduce their compensation, as only damages directly from the wrongdoer's actions are recoverable. Defendants claiming a plaintiff's failure to mitigate must prove reasonable mitigation opportunities were available. For guidance specific to your case, connect with legal professionals who can help navigate these nuances effectively.
The Duty to Mitigate Including the Standard of Efforts to Do So
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 Law
The Supreme Court very well explained the duty to mitigate within the case of Southcott Estates Inc. v. Toronto Catholic District School Board, [2012] 2 S.C.R. 675, whereas the court said:
[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.
Conclusion
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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