Claiming Disgorgement Remedy

Question: What can a victim of wrongdoing claim in an Ontario lawsuit when they suffered little or no loss, but the wrongdoer made a profit from the wrongdoing?

Answer:   In Ontario, Denali Paralegal can help you understand that a victim may still ask for disgorgement if the claim is framed under “profiting from wrong” or unjust enrichment principles, even where there was minimal direct loss, because disgorgement is designed to strip ill-gotten gains rather than simply compensate for damages.   Courts commonly consider disgorgement when there is an underlying legal wrong and the ordinary damages remedy is inadequate, and guidance in Pharmascience v. Novartis Pharmaceuticals, 2020 ONSC 6534, explains the “profiting from wrong” approach and how “corresponding deprivation” may be shown when the defendant’s gain was made possible by the wrongful act.   If you think the other side benefited from fraud or other misconduct despite limited losses, contact Denali Paralegal at (877) 414-4377 to discuss whether a disgorgement-focused remedy is appropriate in your situation and how a paralegal can help you move the matter forward in Ontario.

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

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

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.