Claiming Disgorgement Remedy

Question: Can I sue in Ontario to claim disgorgement of improper profits when a wrongdoing benefited the wrongdoer but caused little or no direct harm?

Answer: In Ontario, a paralegal can help you evaluate whether your claim can seek disgorgement, a restitution remedy that strips ill-gotten gains rather than compensating for losses. Disgorgement may be available under a “profiting from wrong” unjust enrichment theory if you can show an underlying legal wrong and that ordinary damages are inadequate, with Pharmascience Inc. v. Novartis Pharmaceuticals Canada Inc., 2020 ONSC 6534 supporting the framework for when courts order disgorgement.   In practice, courts often grant disgorgement for breaches of fiduciary duty or breach of trust, and in exceptional cases for certain crimes, breach of contract, or torts where “corresponding deprivation” can be proven as the defendant’s gain being made possible by the wrong.   If you want to pursue this in Ontario, Freed Legal Services can review your facts and outline next steps by phone at (800) 716-1897.

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Is There a Type of Legal Compensation Available From a Wrongdoer Who Profits From 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

There are some circumstances in which a wrongdoer receives a benefit or profit from the wrongdoing and yet the victim is without a corresponding harm or loss.  Generally, under legal principles akin to no harm, no foul concepts, a legitimate lawsuit permits compensation for the loss or harm suffered by the victim; however, in some circumstances it is proper to claim disgorgement of benefits or profits received by the wrongdoer.

The Law

The availability of the remedy of disgorgement was well explained within the case of Pharmascience Inc. v. Novartis Pharmaceuticals Canada Inc., et al, 2020 ONSC 6534, wherein it was said:

Explained Principles

There may be circumstances where a person commits a criminal fraud or a civil fraud, among other wrongs, without causing harm or loss to the wronged person and yet benefits or profits arise in favour of the wrongdoer.  Courts, seeking to discourage wrongful conduct, may order that the ill gotten gains be disgorged, meaning taken away, from the wrongdoer and granted to the victim.  Essentially, disgorgement remedy is used to ensure that a wrongdoer fails to benefit or profit from acts of wrongdoing especially in circumstances where the victim was unharmed, or suffered only little harm, by the misconduct of the wrongdoer.

Summary Comment

Disgorgement is a restitutionary remedy rather than a compensatory remedy, meaning that the law applies disgorgement as a matter of fairness rather than as a matter of making a victim whole for loss or harm suffered by the victim.