Duty to mitigate

How BC law treats it

Mitigation is not a duty owed to the other party. It is a limit on recoverable damages. The injured party must take reasonable steps to reduce its loss after a breach, and it cannot recover loss that reasonable steps would have avoided. The burden is on the defendant to prove both that the plaintiff failed to take reasonable steps and that those steps would have reduced the loss (Southcott Estates Inc v Toronto Catholic District School Board, 2012 SCC 51). Southcott also held that a plaintiff seeking specific performance is not automatically excused from mitigating. Unless the property or asset is unique, a buyer whose purchase falls through may be expected to look for a substitute. Single purpose companies are held to the same standard. In employment, a dismissed employee claiming reasonable notice must make reasonable efforts to find comparable work, and income earned during the notice period reduces damages. In some cases the employee may be expected to accept an offer to keep working for the same employer (Evans v Teamsters Local Union No 31, 2008 SCC 20). For commercial leases, Highway Properties Ltd v Kelly, Douglas & Co, [1971] SCR 562 allows a landlord whose tenant repudiates the lease to terminate and claim damages for lost future rent. A landlord taking that route must make reasonable efforts to re-let, and the damages are reduced by what it earns or should have earned.

What it means for your business

Mitigation affects almost every damages claim a business makes or defends. A company that sits on its hands after a supplier defaults, or a landlord that leaves premises empty, may recover far less than its actual loss. On the defence side, gathering evidence that the claimant could have reduced its loss is often the most effective way to cut a damages award. Mitigation costs, such as fees to find a replacement supplier, are usually recoverable. Example: A Burnaby distributor's supplier cancels a contract mid-term. The distributor must try to source replacement product at reasonable prices, and it can claim the extra cost of the replacement but not losses it could have avoided by buying elsewhere.

Risks and common mistakes

Waiting for the litigation to finish before taking any steps to replace the lost contract, tenant or job. Keeping no records of mitigation efforts, which makes them hard to prove at trial. Assuming a claim for specific performance excuses the plaintiff from looking for an alternative. Forgetting to claim reasonable mitigation expenses as part of damages. Defending a claim without gathering evidence of what the plaintiff could have done to reduce the loss.