Claiming Disgorgement Remedy

Question: When little or no direct loss occurs, can a lawsuit still claim disgorgement of improper profits from wrongdoing in Ontario?

Answer: Yes, in Ontario a claim can seek disgorgement of ill-gotten profits using a “profiting from wrong” unjust enrichment theory where the defendant committed an underlying legal wrong and ordinary damages would be inadequate, as explained in Pharmascience Inc. v. Novartis Pharmaceuticals Canada Inc., 2020 ONSC 6534, para. 19; courts may treat disgorgement as a restitutionary remedy aimed at stripping benefits so the wrongdoer does not profit, and it may be available especially where there was breach of fiduciary duty or breach of trust, with possible availability in exceptional cases involving certain underlying wrongs.   If you are dealing with a fraud, misappropriation, or other misconduct and want to understand whether “profits from wrong” disgorgement may fit your situation, paralegal and property management support through Mole Legal Services can help you evaluate evidence, potential pleadings, and practical next steps across Ontario, call (647) 709-5157 to book a free 15-minute intake call.

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What Can a Victim of Wrongdoing Claim In a Lawsuit If the Victim Was Without the Suffering of a Loss But the Wrongdoer Received a Benefit or Profit From the 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.

Note: Please contact Mole Legal Services by phone at: (647) 709-5157 to discuss any specific questions that you may have.

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.  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 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.