The duty to mitigate loss arises as soon as an individual or business suffers loss at the hands of a professional adviser and can give rise to much confusion and uncertainty. In this article, and using case examples, we examine the nature of the duty and how it operates in practice.
The nature of the duty to mitigate
The duty to mitigate has long been recognised by the courts and is rooted in the common law. It serves as a counter-weight on the scales of justice, balancing the interests of claimants seeking to recover compensation for the losses they have incurred, with those of defendants from whom it is payable.
Principally, the duty requires claimants to take all reasonable steps to avoid the losses arising as a result of a professional’s mistakes and to take no unreasonable action which would exacerbate those losses. Should claimants fail in this regard, the court will prevent them from recovering those losses which were unreasonably incurred.
The duty to mitigate is not exacting and in deciding whether or not a claimant has failed to comply with it, the court will often afford a claimant a reasonable degree of latitude. In Banco de Portugal v Waterlow & Sons Ltd, Lord Macmillan put it this way:
“Where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty.”
Although the principle is commonly expressed in terms of ‘duty’, it should be noted that this is as much for convenience as anything else. Strictly speaking, claimants are not possessed of a legally enforceable obligation, owed either to themselves or another, to mitigate their loss. Instead, they are prohibited from recovering such loss or damage as they elect to incur or fail to avoid.
A classic and authoritative statement of the principle was given in Dunkirk Colliery Co v Lever in 1878. Here James LJ said:
“What the [claimants] are entitled to is the full amount of the damage which they have really sustained by a breach of the contract; the person who has broken the contract not being exposed to additional cost by reason of the [claimants] not doing what they ought to have done as reasonable men, and the [claimants] not being under any obligation to do anything otherwise than in the ordinary course of business.”
Failing to comply with the duty to mitigate
When responding to claims for professional negligence, it is not uncommon for defendants to allege that claimants have failed to mitigate their loss. However, whether or not such an allegation is valid is a question of fact, to be determined having regard to all the circumstances of the case. It is not a question of law.
Moreover, the onus is on defendants to prove that claimants have failed to comply with their duty to mitigate: it is not for claimants to prove that they have so complied. For defendants, who have already been found to be at fault and to have caused the claimants loss this can be a challenging, but not necessarily insurmountable, task.
To guard against a finding that they have failed to comply with their duty to mitigate, claimants should always pause to consider what action (legal or otherwise) they could take, as well as what action they could desist in taking, in order to reduce the amount of financial loss they might suffer as a consequence of the professional’s mistake and, in either case, what the consequence of doing so might be.
Regardless of the perceived gravity of the professional’s mistake, if it is later determined by the court that the claimant failed to take reasonable steps to mitigate or avoid financial loss, it is likely to reduce any compensation award to that lesser sum that would have been suffered had such steps been taken. In some cases, the court may decline to award compensation at all.
Accounting for benefits secured
A secondary strand to the duty to mitigate concerns the accountability of benefits secured by claimants as a result of any avoidance action actually taken.
Irrespective of whether or not a duty to take a particular form of mitigatory action arises, if such action is taken to avoid some or all of the loss that would otherwise have arisen, and it is successful, claimants will usually be required to give credit for it. Claimants will not usually be permitted to recover losses which they have been able to avoid.
The costs of mitigation
In seeking to mitigate their loss, claimants will frequently incur additional expense and, in the context of professional negligence, often additional professional fees.
In some cases, such as those involving litigation against a third party, these additional costs may be awarded against, and recovered from, that third party. But even then, it is rare that all such costs will be recovered.
Where costs are incurred in taking reasonable steps to mitigate a loss, those costs are generally recoverable as damages from the professional, in addition to any residual losses. This is so even if the mitigatory action taken has been unsuccessful and/or has served to exacerbate the overall loss.
Professional continuing to act
One issue that frequently arises in professional negligence claims, is whether the professional who made the mistake should be permitted to take any further action, either to correct the mistake made or to reduce its financial effect. This should be considered carefully and on a case-by-case basis.
Some of the factors which are likely to be relevant in deciding whether or not to permit the professional to continue to act are:
- Whether the professional’s duty to act in the best interests of their clients, and not to prefer their own interests over those of their clients, may be compromised;
- Whether the professional may reasonably be considered as competent to act, having regard to their historic conduct and/or the nature of the further action contemplated;
- What prejudice, financial or otherwise, may be caused by allowing the professional to act;
- The effect it may have on any later allegation raised by the professional, that there has been a failure to mitigate.
To enable clients to make a fully informed decision on this issue, and to avoid the risk of falling foul of professional conduct obligations, a professional would usually be expected to advise their clients to consider obtaining independent legal advice.
Professional negligence case examples
There is a plethora of case examples in which the duty to mitigate has arisen. These range across the litigation spectrum. However, each of the cases summarised below arose in the context of a professional negligence claim.
Pilkington v Wood
In Pilkington the claimant had instructed the defendant solicitor in relation to the purchase of a residential property in Hampshire. However, a defect existed in the vendor’s title to the property, which could have been, but was not, discovered by the defendant prior to the purchase.
While negligence was admitted by the defendant, he alleged that by not pursuing legal proceedings for breach of covenant against the vendor of the property, the claimant had failed to mitigate his loss.
Giving judgment in the High Court, Harman J. held that the duty to mitigate did not go so far as to oblige an injured party, even under an indemnity, to embark on a complicated and difficult piece of litigation against a third party, as was being advocated here. Accordingly, there had been no failure to mitigate by the claimant.
Walker v Geo. H. Medlicott & Son (A firm)
In Walker the claimant was a disappointed beneficiary under the will of his late aunt. In a claim for professional negligence, he alleged that the defendant firm of solicitors instructed by his aunt to draft her will, had failed to include a specific devise of her house in his favour.
While the defendant solicitors admitted that they owed a duty of care to the third party claimant, they denied that they had been negligent in preparing the will. On appeal, they further alleged that in failing to pursue a claim for rectification of the will, the claimant had failed to mitigate his loss.
In a unanimous judgment, the Court of Appeal held that there were no grounds upon which to interfere with the judge’s decision at first instance, that the claimant had failed to adduce sufficient evidence upon which to base a finding of negligence. However, further and more pertinently, the court held that by not first pursuing rectification proceedings, which required essentially the same evidence and which were regarded as desirable on policy grounds, the claimant had also failed to mitigate his alleged loss.
Iggleden & Iggleden v Fairview New Homes (Shooters Hill) Ltd
In Iggleden the claimants had purchased a new-build residential property from the defendant developers. Shortly thereafter, a range of defects manifested themselves, a number of which were significant. This in turn led to a protracted dispute between the parties as to the extent of the defects and the scope of the works required to rectify them.
Legal proceedings were eventually issued by the claimants seeking by way of damages, the costs of undertaking the rectification works. In response, the defendant alleged that the claimants had failed to mitigate their loss by not accepting the defendant’s offer to undertake all necessary works without charge.
In the Technology & Construction Court, HHJ Coulson QC held it was not unreasonable of the claimants to say that they did not want the defendant to return to the property to undertake further work. He further held that it would take a relatively extreme set of facts for it to make it appropriate to deny a homeowner financial compensation for admitted defects and leave him with no option but to employ the self-same contractor to carry out the necessary rectification works.
Herrmann v Withers LLP
In Herrmann the claimants had instructed the defendant firm of solicitors on the purchase of a residential property in Kensington, London, for £6.8 million. Although the solicitors had advised the claimant that the property enjoyed a statutory right to use a nearby communal garden, such entitlement was subsequently disputed by members of the garden committee.
The defendant solicitors denied that they had been negligent and alleged that in failing to accept an offer of a 50-year licence for £25,000 from the garden committee, the claimants had failed to mitigate their loss.
Giving judgment in the High Court, Newey J. held that the defendant had been negligent in failing to warn the claimants that the statutory right enjoyed by the property was uncertain. However, he further held that in failing to accept the garden committee’s offer, the claimants had acted unreasonably and failed to mitigate their loss. He therefore reduced the damages he awarded to the claimants, which included (i) the estimated costs of negotiating the licence; (ii) the diminution in the value of the property; (iii) the legal costs arising from the dispute with the garden committee; and (iv) damage for distress and inconvenience.
Conclusion
As the above case examples demonstrate, arguments over the duty to mitigate can be extremely fact sensitive and complicated. For this reason, it is often wise to seek independent legal advice at an early stage.
Some of the advantages of seeking independent advice are that it can enable claimants to:
- Identify those legal options that may be available to them to mitigate their loss;
- Determine the lengths that must be gone to in order to comply with the duty to mitigate and, thereby, avoid later criticism from the court;
- Take action to extinguish or reduce their financial loss in a time and cost efficient way;
- Assess the wider implications of allowing the professional at fault to continue acting and, in particular, whether, and if so to what extent, this may cause prejudice;
- Counter any assertion that they have failed to mitigate their loss, on the basis that they acted in reasonable reliance upon the advice of a professional third party.
Generally, the reasonable costs incurred in obtaining independent legal advice on the options that may be available to mitigate any loss caused, or likely to be caused, are recoverable as damages from the negligent professional.
Further legal assistance
While this article is intended to both raise awareness and offer insight into the duty to mitigate in professional negligence claims, it should not be relied upon as a substitute for formal legal advice.
As professional negligence solicitors we act for clients nationwide, to resolve claims against a wide range of professionals, including claims against solicitors, accountants, insurance brokers and surveyors.
If you are considering bringing a claim for professional negligence, and if you believe that the value of your claim is likely to exceed £100,000, we would be happy to discuss the matter with you.
Most of our clients fund their claims under a private retainer and almost all our instructions commence on this basis. However, in some cases and where requested, we may then be able to offer an alternative form of funding.
To arrange an initial consultation with us, and in the first instance, please complete our Contact Form or email us at mail@pnclegal.com.
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