Claiming Disgorgement Remedy

Question: Can I sue in Ontario to ask for disgorgement of improper profits when I was wronged but did not suffer a corresponding loss?

Answer: Access Ontario Legal Services can help you assess whether a disgorgement (restitutionary) remedy is available to strip a wrongdoer of ill gotten gains under a “profiting from wrong” theory, typically where the defendant committed an underlying legal wrong and ordinary damages are inadequate, such as in cases involving a breach of fiduciary duty or breach of trust, and in exceptional situations where the wrong is a crime, breach of contract, or tort; in Pharmascience Inc. v. Novartis Pharmaceuticals Canada Inc., 2020 ONSC 6534, the court explains when disgorgement may be ordered and how “corresponding deprivation” can be shown as the gain being made possible by the wrongful act rather than a direct transfer of wealth   If you are in Ontario and want to evaluate your options, contact Access Ontario Legal Services at (905) 302-1851 to discuss your facts with a paralegal.

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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.