Abstract
Canadian law sometimes allows gain-based remedies for certain wrongful acts. There is a strong suggestion that gain-based remedies are available in the common law provinces for torts and perhaps breaches of contract, but the courts have been hesitant. Common law provinces have also been willing to award gain-based remedies for breaches of confidence, in the court’s discretion. In the context of infringements of intellectual property rights, which is federal law, the legislation makes clear that gain-based remedies are available, although again this is in the discretion of the court. In both common law and Quebec civil law, in situations where one person is managing the property or affairs of another in a fiduciary capacity, improper gains must be surrendered, although it is arguable that the law ascribes rights acquired by the manager to the principal as the correct legal implementation of the parties’ relationship, rather than as a remedy for wrongdoing.
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- 1.
The spheres of competence are set out in ss. 91–5 of the Constitution Act, 1867. There are also three territories, which exist by virtue of federal legislation, but which are treated for most purposes as separate jurisdictions at the provincial level. They have their own legislative assemblies and legislate by delegation in areas that belong to the provincial level.
- 2.
Constitution Act, 1867, s. 92(13).
- 3.
By s. 6 of the Supreme Court Act, R.S.C. 1985, c. S-26, at least three of the nine judges of the Supreme Court of Canada must be appointed from Quebec. By convention, the number of Quebec judges is exactly three. Another convention is that when an appeal turns principally on a matter of pure civil law, the Court hears the appeal in a panel of five that includes the three Quebec judges, so that those with civilian expertise form a majority.
- 4.
Maddaugh and McCamus (2004), at 24–2, footnote 4. Another way to read the claim is simply that disgorgement for wrongdoing is part of the law of restitution; this uses “restitution” in a wide sense that goes beyond restitution for unjust enrichment (giving back) and extends to disgorgement for wrongs (giving up).
- 5.
The idea seems to be that gain-based remedies for wrongdoing require proof of wrongdoing, but may at the same time be independent inasmuch as they might be available even if the plaintiff cannot prove all of the elements of a civil wrong. Maddaugh and McCamus (2004), at 24–2, footnote 4 assert at one and the same time that wrongdoing is required, but that the breach of a legal duty is not required. In Aronowicz v Emtwo Properties Inc., 2010 ONCA 96, 98 O.R. (3d) 641, the Ontario Court of Appeal said, in the context tort claims (at [82]): “Whether the claim exists as an independent cause of action or whether it requires proof of all the elements of an underlying tort aside, at the very least, waiver of tort requires some form of wrongdoing.”
- 6.
This element of a “corresponding deprivation” has been asserted many times by the Supreme Court of Canada; for example, Peel (Regional Municipality) v Canada, [1992] 3 S.C.R. 762, 98 D.L.R. (4th) 140; Garland v Consumers’ Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629.
- 7.
- 8.
Soulos v Korkontzilas, [1997] 2 S.C.R. 217 held, in the context of the constructive trust, that some such trusts are based on unjust enrichment and some are based on capturing the profits of wrongdoing.
- 9.
- 10.
C.C.Q., arts. 1493–4.
- 11.
C.C.Q., arts. 1699–1707.
- 12.
See the discussion in Edelman (2002), Chap. 1.
- 13.
For example, C.C.Q., arts. 1611 ff.
- 14.
Whiten v Pilot Insurance Co., 2002 SCC 18, [2002] 1 SCR 595 at [94]. The Court indicated (at [78]–[83]) that such damages are not available for a “pure” breach of contract, but only if there was a “independent actionable wrong”. Somewhat confusingly, however, the breach of a contractual duty of good faith satisfies this requirement.
- 15.
C.C.Q., art. 1621.
- 16.
Charter of Human Rights and Freedoms, C.Q.L.R. c. C-12, art. 49.
- 17.
Consumer Protection Act, C.Q.L.R. c. P-40.1, art. 272.
- 18.
One example is the British Columbia Civil Forfeiture Act, S.B.C. 2005, c. 29.
- 19.
Some statutes, both federal and provincial, may provide for the disgorgement (or forfeiture) of gains acquired from activity that is criminal or otherwise prohibited by public law. To take one example, the Ontario Securities Act, R.S.O. 1990, c. S.5, ss. 127(1)10 and 128(3)15 allow disgorgement orders for gains acquired in breach of that Act.
- 20.
- 21.
- 22.
Canson v Broughton, [1991] 3 S.C.R. 534; Hodgkinson v Simms, [1994] 3 S.C.R. 377.
- 23.
- 24.
FHR European Ventures LLP v Cedar Capital Partners LLC, [2014] UKSC 45, [2014] 3 W.L.R. 535, at [33], [46].
- 25.
For example, it is well-known that fiduciaries cannot reduce their liability by showing that the gain could never have been acquired by the beneficiary (Regal (Hastings) Ltd. v Gulliver (1942), [1967] 2 A.C. 134 (H.L.)). Similarly, the fiduciary must give up his gains even if he did not act against the beneficiary’s interest, but rather aligned his interest with the beneficiary so that both profited (Boardman v Phipps, [1967] 2 A.C. 46 (H.L.)). Again, the fiduciary cannot reduce his liability by showing that he could have acquired the gain in a non-wrongful way (Murad v Al-Saraj [2005] EWCA Civ 959). All of these principles show that the obligation to give up the gain is primary and does not depend on proof that the gain is connected to a wrongful act.
- 26.
In Soulos v Korkontzilas, [1997] 2 S.C.R. 217, an agent acquired an estate in land that his principal wished to acquire, by concealing the vendor’s willingness to negotiate. The value of the estate later declined. Nonetheless, a constructive trust was declared, requiring the agent to convey the estate to the principal in exchange for the price he had paid.
- 27.
The same principle is thus capable of explaining fiduciaries’ obligations to disclose information about their fiduciary management; again, this obligation does not depend on wrongdoing but arises from the relationship.
- 28.
[2007] 2 S.C.R. 177, noted by Valsan and Smith, (2008).
- 29.
The majority held that Strother could keep the (substantial) profits that he acquired after leaving Davis; at this point, the conflict was “spent”. This was arguably more generous to Strother than traditional equitable doctrine. The majority, however, declined to allow Strother any allowance in respect of what his own skill and experience had contributed, although he was allowed to deduct expenses he had incurred.
- 30.
See Cumyn (2013).
- 31.
Arts. 2138, 2143, 2146–7, 2184.
- 32.
Arts. 2200, 2204, 2238. Partners are also mandataries towards the partnership (i.e. towards one another) (art. 2219), just as common law partners are mutual agents.
- 33.
Arts. 322–6. The Code states that directors are mandataries of the legal person (art. 321); this however is a legal error, since a mandatary acts under the direction of the mandator, while directors are the ones who decide how the legal person shall act (see Cantin Cumyn (2007), at 234; Cantin Cumyn (2009), at 363–4. The corresponding error is often made in the common law, when it is said that directors are agents of the corporation.
- 34.
Arts. 1309–14, 1366. Cantin Cumyn argues (ibid.) that the Code’s regime of administration of the property of others should be seen as the common law governing all situations where one person holds powers over the legal sphere of another. See generally Cantin Cumyn and Cumyn (2014).
- 35.
Art. 1278.
- 36.
Bank of Montreal v Ng, [1989] 2 S.C.R. 429.
- 37.
Lefebvre v Filion (2007), [2008] R.J.Q. 145 (S.C.). The court referred to Bank of Montreal v Ng and also Soulos v Korkontzilas (noting, however, that there are no constructive trusts in Quebec law).
- 38.
This provision also therefore reflects the approach mentioned above for the common law: the duty to account for everything received in the course of the fiduciary management is not one that arises out of wrongdoing.
- 39.
Gravino v Enerchem Transport Inc., 2008 QCCA 1820, [2008] R.J.Q. 2178. There is an unofficial translation into English in Welling et al. (2010), 377. The trial judge ordered disgorgement of profits. The Court of Appeal confirmed the jurisdiction to make such an order, but held (with reference to common law and civilian cases and commentary) that the opportunity taken by the departed corporate managers was sufficiently remote that they were not liable to disgorge.
- 40.
In Quebec civil law, a claim based on breach of confidence would fall under the general regime of extracontractual liability for civil wrongs (responsabilité civile) or contractual liability; as such, and since there are no relevant codal provisions authorizing gain-based remedies, the plaintiff is limited to a claim for compensation of loss. There is a particular disposition (C.C.Q., art. 1612) on the calculation of compensation for the infringement of trade secrets, but it does not authorize a gain-based remedy.
- 41.
[1989] 2 S.C.R. 574.
- 42.
Cadbury Schweppes Inc. v FBI Foods Ltd., [1999] 1 S.C.R. 142.
- 43.
See for example, Murphy Oil Co. v Predator Corp., 2006 ABQB 680 and Minera Aquiline Argintina SA v IMA Exploration Inc. 2007 BCCA 319.
- 44.
See for example GasTOPs Ltd. v Forsyth 2012 ONCA 134.
- 45.
See for example, Zoic Studios BC Inc. v Gannon, 2012 BCSC 1322.
- 46.
Lac Minerals Ltd. v International Corona Resources Ltd., [1989] 2 S.C.R. 574.
- 47.
The arguments are fully set out in Maddaugh and McCamus (2004), at Chap. 25. In Quebec civil law, there are no relevant codal provisions authorizing gain-based remedies for breach of contract; as such the plaintiff is limited to a claim for compensation of loss.
- 48.
- 49.
- 50.
The decision was applied to grant a disgorgement remedy for breach of contract in Amertek Inc. v Canadian Commercial Corp. (2003), 229 D.L.R. (4th) 419 (Ont. S.C.J.), additional reasons at (2003), 39 B.L.R. (3d) 287 (Ont. S.C.J.), further reasons at (2003), 39 B.L.R. (3d) 290 (Ont. S.C.J.); however, this decision was reversed on the ground (inter alia) that there was no breach of contract, (2005), 76 O.R. (3d) 241, 256 D.L.R. (4th) 287 (C.A.), and leave to appeal to the Supreme Court of Canada was refused (2005), 219 O.A.C. 400 (note) (S.C.C.).
- 51.
[1974] 1 W.L.R. 411 (Ch.).
- 52.
See Arbutus Park Estates Ltd. v Fuller (1976) 74 D.L.R. (3d) 257 (B.C.S.C.).
- 53.
1999 BCCA 273.
- 54.
2009 CanLII 55310 (Ont. Sup. Ct. J.), appeal dismissed, 2011 ONCA 115.
- 55.
2012 NUCJ 11 (Nunavut Ct. Jus.). Nunavut is one of the three territories in northern Canada.
- 56.
The obligations that the doctrine of honour of the crown entails have recently been explained by the Supreme Court in Manitoba Metis Federation Inc. v Canada (Attorney General), 2013 SCC 14 at [73].
- 57.
Note 57 at [210].
- 58.
Note 57 at [322], [334].
- 59.
Patent Act, R.S.C. 1985, c. P-4, s.57(1); Trade-marks Act, R.S.C. 1985, c. T-13, s.53.2; Copyright Act, R.S.C. 1985, c. C-42, s. 34.
- 60.
Copyright Act, R.S.C. 1985, c. C-42, s. 35.
- 61.
AlliedSignal Inc. v Du Pont Canada Inc. (1995), 184 N.R. 113, 61 C.P.R. (3d) 417 (Fed. C.A.) at [77]; Wellcome Foundation Ltd. v Apotex Inc., [1992] FCJ No. 1194 (T.D.) at [16].
- 62.
See Hughes et al. (2005), at §53, and Monsanto Canada Inc. v Schmeiser, [2004] 1 S.C.R. 902 at [101].
- 63.
Lubrizol Corp. v Imperial Oil, [1996] 3 F.C. 40 (C.A.) at [37].
- 64.
Strother, above note 28 at [76].
- 65.
AlliedSignal Inc. v Du Pont Canada Inc., above, note 61 at [77], and Merck & Co v Apotex Inc. 2006 FCA 323 at [127].
- 66.
Merck & Co. v Apotex Inc., ibid at [134]–[135], and Valence Technology Inc. v Phostech Lithium Inc., 2011 FC 174, at [234].
- 67.
- 68.
Monsanto Canada Inc. v Schmeiser, above, note 62 at [102].
- 69.
Lubrizol Corp. v Imperial Oil, above, note 55 at [9].
- 70.
Above note 62.
- 71.
Ibid at [103].
- 72.
Bayer v Apotex Inc., 2002 CanLII 18194 (Ont. C.A.).
- 73.
- 74.
There is an argument to the effect that many of these cases actually concern not gain, but a form of compensation: not compensation for a loss suffered, but compensation for the value of a right that was misappropriated. See Stevens (2007), Chap. 4.
- 75.
Above, section “Scope”.
- 76.
Civil procedure belongs to the provincial level of legislative competence.
- 77.
See for example the Class Proceedings Act, S.O. 1992, c. 6, s.5.
- 78.
As of July 2012 only 17 class actions had gone to a full trial in Ontario despite hundreds being launched. Ontario Law Commission, Review of Class Actions in Ontario (2013) http://www.lco-cdo.org/class-actions-issues-to-be-considered.pdf, at 12.
- 79.
(2004) 72 O.R. (3d) 296 (Sup. Ct. J.), (2006) 85 O.R. (3d) 665 (Ont. Div Ct.), leave to appeal refused 2007 CanLII 11902; settlement approved, 2011 ONSC 128.
- 80.
Pro-Sys Consultants Ltd. v Microsoft Canada CIE, 2013 SCC 57 at [93]–[97]; Aronowicz v Emtwo Properties Inc., 2010 ONCA 96 at [82] (see above, note 5); Koubi v Mazda Canada Inc. (2012), 35 B.C.L.R. (5th) 74 (C.A.), leave to appeal refused 2013 CanLII 1178.
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List of Cases
Canada
3464920 Canada Ltd. v Strother, [2007] 2 S.C.R. 177
AlliedSignal Inc. v Du Pont Canada Inc. (1995), 184 N.R. 113, 61 C.P.R. (3d) 417 (Fed. C.A.)
Amertek Inc. v Canadian Commercial Corp. (2003), 229 D.L.R. (4th) 419 (Ont. S.C.J.), reversed (2005), 76 O.R. (3d) 241, 256 D.L.R. (4th) 287 (C.A.), leave to appeal refused (2005), 219 O.A.C. 400 (note) (S.C.C.)
Arbutus Park Estates Ltd. v Fuller (1976) 74 D.L.R. (3d) 257 (B.C.S.C.)
Aronowicz v Emtwo Properties Inc., 2010 ONCA 96, 98 O.R. (3d) 641
Bank of Montreal v Ng, [1989] 2 S.C.R. 429
Bayer v Apotex Inc., 2002 CanLII 18194 (Ont. C.A.)
Beloit Canada Ltd. v Valmet Oy, (1992), 144 N.R. 389, 45 C.P.R. (3d) 116 (C.A.)
Cadbury Schweppes Inc. v FBI Foods Ltd., [1999] 1 S.C.R. 142
Canson v Broughton, [1991] 3 S.C.R. 534
Cassano v Toronto-Dominion Bank, 2007 ONCA 781
Garland v Consumers’ Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629
GasTOPs Ltd. v Forsyth 2012 ONCA 134
Gravino v Enerchem Transport Inc., 2008 QCCA 1820, [2008] R.J.Q. 2178
Hodgkinson v Simms, [1994] 3 S.C.R. 377
Huttonville Acres Ltd. v Archer, 2009 CanLII 55310 (Ont. Sup. Ct. J.), appeal dismissed, 2011 ONCA 115
Jostens Canada Ltd. v Gibsons Studio Ltd., 1999 BCCA 273
Lac Minerals Ltd. v International Corona Resources Ltd., [1989] 2 S.C.R. 574
Lefebvre v Filion (2007), [2008] R.J.Q. 145 (S.C.)
Lubrizol Corp. v Imperial Oil, [1996] 3 F.C. 40 (C.A.)
Manitoba Metis Federation Inc. v Canada (Attorney General), 2013 SCC 14
Merck & Co v Apotex Inc. 2006 FCA 323
Monsanto Canada Inc. v Schmeiser, [2004] 1 S.C.R. 902
Minera Aquiline Argintina SA v IMA Exploration Inc. 2007 BCCA 319
Murphy Oil Co. v Predator Corp., 2006 ABQB 680
Nunavut Tunngavik Inc. v Canada (Attorney General) 2012 NUCJ 11 (Nunavut Ct. Jus.)
Peel (Regional Municipality) v Canada, [1992] 3 S.C.R. 762, 98 D.L.R. (4th) 140
Pro-Sys Consultants Ltd. v Microsoft Canada CIE, 2013 SCC 57, [2013] 3 S.C.R. 477
Serhan Estate v Johnson & Johnson, (2004) 72 O.R. (3d) 296 (Sup. Ct. J.), (2006) 85 O.R. (3d) 665 (Ont. Div Ct.), leave to appeal refused 2007 CanLII 11902; settlement approved, 2011 ONSC 128
Soulos v Korkontzilas, [1997] 2 S.C.R. 217
Smith v Landstar Properties Inc., 2010 BCSC 843
Valence Technology Inc. v Phostech Lithium Inc., 2011 FC 174
Wellcome Foundation Ltd. v Apotex Inc., [1992] FCJ No. 1194 (T.D.)
Whiten v Pilot Insurance Co., 2002 SCC 18, [2002] 1 SCR 595
Zoic Studios BC Inc. v Gannon, 2012 BCSC 1322
United Kingdom
Attorney General v Blake, [2001] 1 A.C. 268 (H.L.)
Boardman v Phipps, [1967] 2 A.C. 46 (H.L.)
FHR European Ventures LLP v Cedar Capital Partners LLC, [2014] UKSC 45, [2014] 3 W.L.R. 535
Murad v Al-Saraj [2005] EWCA Civ 959
Regal (Hastings) Ltd. v Gulliver (1942), [1967] 2 A.C. 134 (H.L.)
Wrotham Park Estates v Parkside Homes Ltd., [1974] 1 W.L.R. 411 (Ch.)
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Smith, L., Berryman, J. (2015). Disgorgement of Profits in Canada. In: Hondius, E., Janssen, A. (eds) Disgorgement of Profits. Ius Comparatum - Global Studies in Comparative Law, vol 8. Springer, Cham. https://doi.org/10.1007/978-3-319-18759-4_16
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