Plaintiffs have no duty to mitigate their losses

I bet the headline got your attention.  But it’s true: I’ve been looking up the law of mitigation these last few days.  And now the Queensland Court of Appeal’s Acting Justice of Appeal Margaret Wilson, with whom President Margaret McMurdo agreed, has concisely reiterated why in  Pialba Commercial Gardens Pty Ltd v Braxco Pty Ltd & Ors [2011] QCA 148, reproduced below.  Justice of Appeal Muir dissented in the result, but said nothing about the mitigation point. (See also K.R. Handley, ‘Reduction of Damages Awards’ in P.D. Finn (ed.) Essays on Damages, Law Book, 1992, p.116 and Sural SpA v Downer EDI Rail Pty Ltd [2007] NSWSC 1234.)

The thing is, you see, plaintiffs have no obligation to mitigate their losses; it is just that they are not entitled to damages for losses which, had they taken steps to mitigate, they would not have suffered.  So if there are reasons which are good reasons to the plaintiff not to take a step (e.g. they do not want to take a step which is commercially objectively reasonable but might harm their personal relationship with someone whose friendship or custom they value, or they just want the whole dispute over with and want to get relief against the wrongdoer without delay) but which are not objectively reasonable as between plaintiff and defendant, the plaintiff is perfectly entitled to go ahead against the wrongdoer, and take what they can get, leaving it to the defendant to prove that they failed to mitigate, and how things would have been different had they mitigated.

This is what Wilson AJA said in Pialba Commercial Gardens:

    1. In British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd[41] Viscount Haldane LC referred to compensation as the basic principle of damages and continued:

      “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.”

      [40]        Supplementary appeal record volume 3, tab 5, pages 32-33.

      [41]        [1912] AC 673, 689.

    2. Depending on the circumstances, what would be reasonable steps to mitigate loss caused by non-performance of a contractual obligation may include seeking substitute performance.
    3. Although it is commonly said that an injured party has “a duty” to mitigate its loss, as Irvine CJ said in Driver v War Service Homes Commissioner:[42]

      “…This expression, I think, does not mean that he is under any duty in the ordinary sense, towards the party breaking the contract, but that he cannot be said to have really incurred any loss which might have been avoided by his taking such steps as a reasonably prudent man in his position would have taken to avoid further loss to himself; and the best test is, what would such a man do to avoid such a further loss to himself, supposing that, from insolvency of the other party, or from some other reason, he could not get any damages.”

    4. The onus is on the defendant to show that the plaintiff has not fulfilled this duty, and the extent to which it has not.[43]  That onus was not satisfied in this case.

[42]        (1923) 44 ALT 130, 134.

[43]        TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130, 158.

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