Claiming Disgorgement Remedy

Question: Is it possible to claim disgorgement (a payment of ill-gotten profits) from a wrongdoer in Ontario when the victim’s losses are small or the wrongdoer’s gain is large?

Answer: In Ontario, a paralegal at Caruso Legal Services can help you understand when you may sue for disgorgement under the “profiting from wrong” theory of unjust enrichment, where an underlying legal wrong exists and ordinary damages may be inadequate, even if your direct losses are limited; as explained in Pharmascience Inc. v. Novartis Pharmaceuticals Canada Inc., 2020 ONSC 6534, disgorgement is typically reserved for breaches like fiduciary duty or breach of trust, but in exceptional cases may be ordered for other wrongs where a “corresponding deprivation” can be shown (for example, the defendant’s gain was made possible by the wrongful act against you) and the goal is fairness and deterrence rather than making you whole; if you think someone profited from fraud or another misconduct in Ontario, call (289) 271-0488 for a practical next-step discussion.

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 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.