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

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

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

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 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.