Last Updated: , 71 days ago.
When little or no direct loss occurs, can a lawsuit still claim disgorgement of improper profits from wrongdoing in Ontario?
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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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.
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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:
[19] Under the “profiting from wrong” theory of unjust enrichment, disgorgement may be available if the defendant has committed “an underlying legal wrong against a plaintiff, and the ordinary damages remedy for the underlying wrong is inadequate”. As the Court of Appeal noted, disgorgement in these cases is typically reserved for when there has been a breach of fiduciary duty or a breach of trust. However, in exceptional cases, disgorgement as a restitutionary remedy can also be granted where the “underlying legal wrong” is a crime or a breach of contract or a tort.[6] In cases premised on “profiting from wrong”, the concept of “corresponding deprivation” takes on a slightly different meaning. A plaintiff may be able to prove a corresponding loss by showing that the defendant’s gain was “made possible” by the defendant’s wrongful act towards the plaintiff rather than proving a direct or indirect transfer of wealth.[7]
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.
NOTE: A significant quantity of online searches featuring “lawyers near me” or “best lawyer in” typically indicate a pressing need for competent legal assistance rather than a specific professional designation. In Ontario, paralegals who are licensed are governed by the same Law Society that supervises lawyers, allowing them to represent clients in specific litigation scenarios. Advocacy, analytical skills, and procedural expertise are fundamental to this position. Mole Legal Services provides legal representation within its licensed scope, focusing on strategic positioning, evidence preparation, and effective advocacy aimed at securing prompt and favourable outcomes for clients.
