Claiming Disgorgement Remedy

Question: Is disgorgement available in Ontario when a wrongdoer profits from wrongdoing even if the victim did not suffer a measurable loss?

Answer:   Disgorgement may be available in Ontario through an unjust enrichment “profiting from wrong” theory when a plaintiff can show an underlying legal wrong and that ordinary damages are inadequate, with courts often reserving disgorgement for breaches of fiduciary duty or trust but allowing it in exceptional cases involving other wrongs like certain torts, crimes, or breach of contract, as described in Pharmascience Inc. v. Novartis Pharmaceuticals Canada Inc., et al, 2020 ONSC 6534; in other words, disgorgement is a restitutionary remedy meant to prevent the wrongdoer from keeping ill-gotten gains rather than strictly compensating for a loss; if you are dealing with a situation where someone profited from misconduct without clear damages, Woodcock Legal Services can help you assess whether a disgorgement claim is viable and how to frame the evidence and remedies, call (613) 334-6721 for professional legal services in Ontario.

Can a Lawsuit Claim Improper Profits Gained By a Wrongdoing?

When a Wrongdoer Benefits or Profits From a Wrongdoing, the Victim of the Wrongdoing May Claim Disgorgement of the Benefits or Profits From the Wrongdoer.

Understanding Disgorgement Remedy Principles Involving Restitution For Wrongdoings Resulting In Ill Gotten Gains

In some circumstances a wrongdoer may receive a benefit or profit arising from the wrongdoing while little, if any, loss or harm arises to the victim of the wrongdoing. Whereas the law generally forbid a person from suing unless a loss or harm has occurred per no harm, no foul principles, a valid lawsuit may involve claims for the illegitimate benefits or profits arising from the misconduct of the wrongdoer.

The Law

Disgorgement remedy, as a stripping of ill gotten gains from a wrongdoer, was well explained within the Pharmascience Inc. v. Novartis Pharmaceuticals Canada Inc., et al, 2020 ONSC 6534, case wherein it was stated:

Explained Principles

Imagine a situation where a person commits a criminal fraud or a civil fraud upon another person.  In some circumstances, the victim may experience little harm or was able to mitigate all or most of the harm that resulted from the fraud and thus little loss, if any occurs; however, the wrongdoer may have significantly benefited or profited from the fraud.  The law, applied by the courts, seeking to discourage and deter wrongful conduct, may order that the benefits or profits be disgorged from the wrongdoer and provided to the victim.  In this way the remedy of disgorgement ensures that the wrongdoer fails to benefit or profit from the wrongdoing and is, presumably, discouraged and deterred from engaging in wrongful conduct.

Summary Comment

Disgorgement is a form of restitution rather than compensation whereas disgorgement is applied in law as a matter of fairness rather than as a means for making whole the losses or harms of a victim.