Claiming Disgorgement Remedy

Question: Can I ask a court to order disgorgement when a defendant profited from wrongdoing in Ontario?

Answer: Yes, in Ontario you may be able to seek disgorgement (a restitution remedy) when a defendant “profits from wrong” and the ordinary damages remedy for the underlying wrong is inadequate, even if you did not suffer a direct, measurable loss.  Courts often reserve disgorgement for breaches of fiduciary duty or breach of trust, but in exceptional cases it can be available for certain underlying wrongs such as a crime, breach of contract, or tort, focusing on removing ill-gotten gains tied to corresponding deprivation, as explained in Pharmascience v. Novartis Pharmaceuticals, 2020 ONSC 6534, 2020 ONSC 6534.  If you are considering this remedy, discuss your facts with Forseti Legal Services by calling (705) 806-7577 for a quick Ontario paralegal consultation.

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Is There a Type of Legal Compensation Available From a Wrongdoer Who Profits From 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.

Note: Please contact Forseti Legal Services by phone at: (705) 806-7577 to discuss any specific questions that you may have.

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

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

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.