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Last edited 27 Oct 2020

Mitigation of loss

Lawyers often refer to the claimant's duty to mitigate their loss. To talk about duty is probably adopting too high a standard of conduct; it is probably more helpful to consider mitigation in terms of reasonableness.

In Sotiros Shipping Inc. and Another v Sameiet Solholt (1983), it was suggested that 'A plaintiff was under no duty to mitigate his loss, despite the habitual use by lawyers of the phrase "duty to mitigate". He was completely free to act as he judged to be in his best interest. On the other hand, a defendant was not liable for all the loss suffered by the plaintiff in consequence of his so acting. A defendant was only liable for such part of the plaintiffs loss as was properly to be regarded as caused by the defendant's breach of duty.’

Essentially therefore a claimant will not be allowed to recover damage which could have been avoided had the claimant acted reasonably. The burden of proof rests on the defendants to show that the claimant behaved unreasonably. The level of behaviour is one to be decided on the facts of each particular case although as a general rule the courts tend to favour the claimant and are often unimpressed with defendants' attempts to demonstrate that, with the benefit of hindsight, the claimant's behaviour was unreasonable. For example, the courts do not expect a claimant to do anything other than that which is in the ordinary course of a business (see Dunkirk Colliery Co v. Lever).

If a claimant's reasonable attempts to mitigate the loss fail and result in additional loss or damage, such losses or damage may be recoverable from the defendant (see Banco de Portugal v. Waterlow & Sons Ltd). However, if the claimant takes greater steps than they need have done and these result in a reduction of the loss and damage, then the defendant is entitled to the benefit of that reduction.

Mitigation is often described as the mirror image of the rules of remoteness and also the rules of assessment. That is to say the courts often disregard strict application of the rules and are more concerned to answer what has been described as the real question, namely what is the loss to the claimant. In the end the question seems to come down to a very short point. The cost is a loss if it is shown to be a loss', per Megarry VC in Tito and Others v Waddell and Others (1977) (The Ocean Island case).