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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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

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

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 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.