protecting funds on a rainy day

“Man is condemned to be free; because once thrown into the world, he is responsible for everything he does.”

– Jean-Paul Sartre, Being and Nothingness1

Judges, lawyers and academics often speak of a ‘duty’ to mitigate loss.

This language should be abandoned. There is no duty to mitigate loss. To believe there is leads one into error.

The conventional interpretation of the rules on mitigation is that when D wrongs C, C becomes obliged to mitigate her loss.2 That is said to be justified by the need to prevent economic waste by incentivising C to minimise the harm she sustained because of D’s wrong. And so, if C does not take reasonable steps to avoid loss that can be avoided, C will not be entitled to claim compensation for that loss.3

However, this interpretation simply does not fit with the rules on mitigation. For example:

  • C takes reasonable but unsuccessful steps to mitigate her loss. She can recover the costs of taking, or increased loss caused by her having taken, those steps.4 But if C is obliged to take reasonable steps to reduce her loss, there seems to be no obvious reason to allow her to claim the cost of, and increased loss associated with her doing badly that which she was obliged to do well.
  • C knows that D will breach her duty in the future. She could easily prevent the loss that will be caused by the breach by taking steps in advance of the event which causes the loss. However, if she decides not to take those reasonable steps to prevent the loss, she can still recover that loss in damages.5 But if the duty to mitigate loss was justified by the need to prevent waste, there would be no reason for it not to arise before D wronged C if C could reasonably prevent the loss caused by that breach. And yet, C’s duty to mitigate loss does not arise until D breaches her obligation.6
  • D renounces a contract with C. An order of damages would have been an adequate remedy for C. Nevertheless, C affirms and delivers an unwanted performance. If there was a duty to mitigate justified by the need to avoid waste, C would have been obliged to terminate when D renounced. But, as a matter of law, she can claim the agreed sum.7 There seems to be no reason to allow C to claim the agreed sum for doing what, on the conventional account, she was obliged not to do.

There is also no broad policy in the law of remedies that claimants should mitigate their loss to avoid waste.

Suppose C contracts for D to build on her land a ‘grotesque folly’ for misguided artistic reasons which would diminish the value of her land and its neighbourhood.8 D repudiates the contract. C gets X to build the folly on her land instead. C’s actions have caused economic waste.

D’s breach of contract would have left C and her neighbours better off had C not gotten X to build the folly. Nevertheless, C can claim from D the cost of X building the folly and is not treated as having breached her obligation to mitigate loss.9 But if the rules on mitigation were justified by a policy of avoiding economic waste, C should not be entitled to claim the cost of X building the folly because it caused additional economic loss to her and her neighbours.

Indeed, the very concept of ‘obligation’ is not appropriate for the rules on mitigation. Suppose D unlawfully terminates C from her job. C spends the next six months travelling. C is not entitled to damages for loss of earnings for any time longer that reasonably necessary to secure alternative employment.10

However, it would seem odd to say that this is because she has broken an obligation owed to D by having failed to secure alternative employment as soon as possible. Has C, by going travelling abroad, wronged D?11 How did D’s unlawful termination of C confer on her a right to demand that C not go travelling? If C is bound by an obligation to mitigate, but it is not owed to D, to whom is it owed?

Most importantly, the conventional interpretation presupposes that, if the rules on mitigation did not exist, C could recover for increased loss or forgone gains caused by her unreasonable conduct. That is because, if C could not recover that loss even if there were no rules on mitigation, the rules on mitigation would not be needed.

That means that the conventional account must claim that it is generally a sufficient condition of D being liable for C’s loss that D had factually caused that loss, even though C’s own unreasonable conduct also caused that loss.

That is, of course, not the law. D is not liable for losses she has caused for which she is not responsible.12 Suppose a doctor (D) negligently advises a patient (C) with a shoulder injury that she is fit to go mountain climbing. During the climb, a rock falls from the summit and kills C. If D had advised C that she was unfit to climb, D would be alive. D caused C’s death. But D is not responsible for C’s death.

The reason for D’s duty of care was to protect C against injuries caused by medical conditions affecting her physical constitution. It was not to protect C against rock falls. Although D caused C’s death, she was not responsible for it, and is not obliged to compensate her estate or family for their tragic losses.13

Given the explanatory weakness of the conventional interpretation, it is not surprising that some judges have recognised that there is no ‘duty’ to mitigate loss. In Pialba Commercial Gardens v Braxco Pty Ltd [2011] QCA 148, Wilson JA stated that there was strictly no ‘duty’ to mitigate loss on the part of an injured party.14

Why, then, do judges persist in saying that there is a duty to mitigate when there is no such duty? That is because, it is conjectured, no judge has given us a sufficient reason why D is not responsible for loss she caused C but that C might have avoided which fits with the positive law. The closest is Sotiros Shipping Inc and Aeco Maritime SA v Sameiet Solholt, The Solholt [1983] 1 Lloyd’s Rep 605, in which the Court of Appeal held:

“A plaintiff is under no duty to mitigate his loss, despite the habitual use by the lawyers of the phrase ‘duty to mitigate’. He is completely free to act as he judges to be in his best interests. On the other hand, a defendant is not liable for all loss suffered by the plaintiff in consequence of his so acting. A defendant is only liable for such part of the plaintiff’s loss as is properly to be regarded as caused by the defendants’ breach of duty.”15

This approaches the true reason for the rules on mitigation. But the court falls into error in saying that D is not liable for C’s loss because it is not ‘properly to be regarded as caused by’ D’s breach of duty. That is because in all cases of mitigation there is no doubt that D caused C’s loss, for otherwise one would not need to invoke the rules on mitigation at all.

Take our unemployed traveller. Her loss of earnings over the course of the six months she went travelling was caused by D’s breach of obligation. That is because, if the breach had not occurred, C would still be employed by D. And we cannot give the same reason that we did for our negligent doctor because the very reason for D’s obligation was to enable C to earn a living.

The reason that D is not liable for loss caused by C’s own unreasonable conduct is because she is simply not responsible for those losses. D’s breach of obligation has changed the course of C’s life. It will not be the same. But C is free to make her own decisions in the modified choice situations arising in her life path. These choices are under C’s control, not D’s.

If, among the options available, she makes an unreasonable decision increasing her loss, or forgoing opportunities for gain, as a responsible moral agent, that decision is on her own account. That she would not have been in that choice situation were it not for the D’s breach of obligation is just not a reason for D to be responsible for the consequences of C’s unreasonable decisions. D’s breach of obligation did not pre-determine the manner in which C responds to her available choices.

This explains why:

  • C can recover for the cost of taking reasonable, but unsuccessful, steps to mitigate.16 D caused those losses and is responsible for them. C would not have needed to take those steps were it not for D’s breach of obligation. And C had no obligation to mitigate loss. So, there is no contradiction in allowing her to claim the cost of doing badly that which she was already obliged to do well.
  • C is not required to mitigate her loss before D’s breach of obligation.17 That is because, until D breaches her obligation, C has sustained no loss at all. C cannot mitigate that which does not exist. Though C might take action that prevents those losses from being suffered in the event D wrongs C, C is entitled to conduct her affairs in the expectation that D will do what she is obliged to do.
  • If D renounces a contract, C is entitled to affirm the contract, continue to deliver an unwanted performance, and claim the agreed sum.18 C was never obliged to mitigate her loss by terminating the agreement, and so there is no inconsistency in allowing her to claim the agreed sum.

Understanding the rules on mitigation requires us to grasp the idea that, when we have been wronged, though our lives have been changed, we still have control over our own decisions. There is no duty for us to take reasonable steps to reduce our loss, either for our own benefit or that of our wrongdoer.

We are free to do what we will with our own lives. However, with that freedom comes responsibility for how we choose to respond to the modified choice situations brought about by another’s wrong. And, for better or worse,19 because we control our decisions, we alone are responsible for their outcomes.

Christopher Stackpoole is a Clarendon Scholar reading for a Master of Philosophy in Law at the University of Oxford. The views that he expresses are his own.

1 Jean-Paul Sartre, Being and Nothingness (Trans. Hazel E Barnes, Washington Square Press 1984), 23.
2 In this article, ‘C’ signifies the ‘claimant’ or ‘plaintiff’, ‘D’ signifies the ‘defendant’, and ‘X’ signifies a third party.
3 MSC Mediterranean Shipping Co SA v Cottonex Anstalt [2015] EWHC 283, [111] (Leggatt J). See also: David Campbell and Donald Harris, ‘In defence of breach: a critique of restitution and the performance interest’ (2002) 22 Legal Studies 208, 220; Edwin Peel, Treitel’s Law of Contract (14th edn, Sweet & Maxwell 2015), 21-018; Hugh Beale (ed), Chitty on Contracts (33rd edn, Sweet & Maxwell 2019), 27-015; Andrew Burrows, Remedies for Torts, Breach of Contract and Equitable Wrongs (4th edn, OUP 2019), 412-414.
4 Koch Marine Inc v D’Amica Società di Navigatione, The Elena d’Amico [1980] 1 Lloyd’s Rep 75, 80; James Edelman (ed), McGregor on Damages (20th edn, Sweet & Maxwell), 9-102.
5 Shindler v Northern Raincoat Co [1960] 1 WLR 1038, 1048; Jones & Anor v Edwards & Anor (1994) 3 Tas R 350, 357.
6 Ibid.
7 White & Carter (Councils) Ltd v McGregor [1962] AC 413 (Lords Reid, Tucker and Hodson). See also: J & S Chan Pty Ltd v McKenzie [1994] ANZ ConvR 610 (ACTSC).
8 For a discussion of this example, see: Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344, 359-361.
9 Ibid.
10 Shindler (n5).
11 Obviously not: Driver v War Service Homes Commissioner (1923) 44 ALT 130, 134; Darbishire v Warran [1963] 1 WLR 1067, 1075.
12 Scope of responsibility is sometimes described as ‘scope of liability’ or ‘legal causation’. The essential idea is that even if a breach of obligation causes a loss to the defendant, the claimant will not be liable for that loss unless it is within the scope of the purpose of the obligation: see South Australian Asset Management Corporation & Ors v Eagle Star Insurance Co Ltd [1997] AC 191, 213-214 (Lord Hoffmann); endorsed in Wallace v Kam [2013] HCA 19, [24], [37]. See also: Chappel v Hart [1998] HCA 55, [65]-[66] (Gummow J), [118]-[119] (Heydon J); Modbury Triangle Shopping Centre Pty Ltd v Anzil [2000] HCA 61, [40]; Rosenberg v Percival [2001] HCA 18, [85].
13 SAAMCO (n 12), 213-214 (Lord Hoffmann).
14 Pialba Commercial Gardens Pty Ltd v Braxco Pty Ltd [2011] QCA 148, [97]. See also: Driver (n 11), 134.
15 Sotiros Shipping Inc and Aeco Maritime SA v Sameiet Solholt, The Solholt [1983] 1 Lloyd’s Rep 605, 608. See also: Borealis AB v Geogas Trading SA [2010] EWHC 2789 (Comm) [42]-[50].
16 Above, n4.
17 Above, n5.
18 Above, n7.
19 Sometimes it is for the worse. See Jean-Paul Sartre, Existentialism is Humanism (Trans. Carol Macomb, Yale University Press 2007), 32: ‘[i]n life man commits himself and draws his own portrait, outside of which there is nothing. No doubt this thought may seem harsh to someone who has not made a success of his life.’ Perhaps his anguish would be lessened if he believed that, as his lot was partly determined by external events or the agency of others, he is not responsible for his station in life. But, if that were true, it would reduce the scope for moral responsibility to an extensionless point, such that no man could be the proper subject of blame for his wrongs or praise for his virtues.

Share this article

Leave a Reply

Your email address will not be published. Required fields are marked *

Search by keyword