Case: Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38 ; (1998) 192 CLR 603
Outcome: applied
second and third defences, in substance, raise issues of causation and of mitigation. There have been no submissions made on the applicable legal principles, but neither are they controversial for present purposes. It is well accepted that (i) the party claiming compensation for loss has the onus of showing the loss was caused by the breach relied upon; (ii) the criteria of causation applied is a common sense one; and (iii) "the act [or conduct] of the claimant may be considered so unreasonable that it operates to break the chain of causation with the consequence that the claimant recovers nothing" for loss thereafter: Furmston (ed), The Law of Contract , 8.86 (3 rd ed, 2007); see also Mallesons Stephen Jacques v Trenorth Ltd [1998] VSCA 58 ; [1999] 1 VR 727 ; Cheshire and Fifoot's Law of Contract , [23.34]-[23.35], [28.38] (9 th Aust ed). As for mitigation, damages are not recoverable for any loss which could have been prevented by the reasonable mitigating action of the injured party: Cheshire &amp; Fifoot , at [23.41]; Carter on Contract [41-340]; see also Farnsworth, Contracts , &#167;12.12. It is for the party in breach to show the claimant has failed to mitigate its damage: TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd [1963] HCA 57 ; (1963) 180 CLR 130 at 138. The claimant is not required to take all possible steps to mitigate its loss, but only those which are reasonable: Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38 ; (1998) 192 CLR 603 at [134] . While an innocent claimant is under no positive duty to take action to mitigate losses resulting from another's breach of contract, that party may not recover damages for that breach in respect of losses which it might reasonably have been expected to avoid: see generally Furmston (ed), at 8.96-8.103; Cheshire and Fifoot's Law of Contract , [23.41]-[23.44] (9 th Aust ed, 2008); Carter on Contract , 41-340 ff. The onus of proof is upon the party in breach to show that the claimant ought reasonably to have taken certain mitigating steps: Wenkart v Pitman (1998) 46 NSWLR 502. The claimant is not bound to take all possible steps to mitigate its loss, only those which are reasonable: Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38 ; (1998) 192 CLR 603 at [134] . As noted in Furmston (ed) at 8.100-8.101, many of the reported cases which have considered whether the claimant has acted reasonably to reduce its loss have involved the refusal of offers made by the party in breach. While it will be regarded as unreasonable to require a claimant to take steps which are likely to injure its commercial reputation: James Finlay &amp; Co Ltd v NV Kwik Hoo Tong Handel Maatschappij [1929] 1 KB 400 ; Metal Fabrications (Vic) Pty Ltd v Kelcey [1986] V R 507 ; in commercial contracts, as Scrutton LJ commented in Payzu Ltd v Saunders [1919] 2 KB 581 at 589, "it is generally reasonable to accept an offer from the party in default. However, it is always a question of fact." In judging what is reasonable in relation to such offers in a commercial matter, the claimant can be expected to view the matter dispassionately without "indulgence in far-fetched resentment": Payzu , at 586.