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Damages - Disgorgement (2). Hoy v. Expedia Group, Inc.
In Hoy v. Expedia Group, Inc. (Div Court, 2024) the Divisional Court dismissed an appeal from a denial of a class action certification motion, here one grounded heavily in the Consumer Protection Act (CPA) 'misleading representations' provisions. The class action plaintiffs here only sought "disgorgement, nominal damages or punitive damages".
Here the court considers 'disgorgement' as a CPA remedy, while also examining the central CPA remedy of 'rescission':[2] The motion judge found that, for the purpose of certification, the Defendants had engaged in unfair practices that violated consumer protection legislation. The Plaintiffs filed expert evidence that these unfair practices caused harm in two major ways. First, as put by the motion judge, “consumers are deprived of the opportunity to identify alternative accommodations because they are coerced by the unfair practices to foreshorten a more comprehensive search” (Hoy v. Expedia Group Inc., 2022 ONSC 6650, at para. 80). Second, the Defendants’ unfair practices caused economic harm in the form of injury to the operation of the marketplace in which the Plaintiffs were operating. The Plaintiffs did not seek compensation for any loss that they may have suffered individually as a result of the Defendants’ unfair practices. In other words, they did not seek compensatory damages. Instead, they sought nominal damages, punitive damages and disgorgement.
[3] The motion judge found that the remedies available were governed by the consumer protection statutes and that, in the instant case, it was plain and obvious that those statutes did not support the Plaintiffs’ claim for disgorgement, nominal damages or punitive damages. According to the Plaintiffs, the motion judge made a number of errors of law when he made this finding.
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[26] The motion judge concluded that the Plaintiffs could have satisfied the cause of action criteria for their claims in relation to Ontario consumer protection legislation, but that they failed to do so because they were not seeking what the statute provides as a remedy. According to the motion judge the statute only provides for the following remedies – rescission, compensatory damages in lieu of recission and, in addition, punitive damages.
[27] According to the motion judge, disgorgement was not available as a remedy because the CPA does not provide for such a remedy. However, he held that even if the remedy was not excluded as a matter of statutory interpretation, the remedy would not be available. According to the certification judge, the Supreme Court of Canada in Atlantic Lottery v. Babstock, 2020 SCC 19, [2019] S.C.R. 420, has made it clear that such a remedy would not be available to the Plaintiffs in this case. As put by the certification judge:[196] Returning to the case at bar, if Justice Brown’s analysis is applied to the statutory causes of action under the Competition Act or to the Consumer Protection Act causes of action, disgorgement would not be an available remedy, the claim is doomed to fail. It is doomed to fail for the same reason that the claim in the Atlantic Lottery case was doomed to fail. There is no connection between the disgorgement and the alleged harm suffered by class members from the statutory tort and the Plaintiffs have intentionally adopted a litigation strategy to avoid having to prove damages. Disgorgement is not a cause of action, it is a remedy for certain types of wrongdoing, not including breaches of consumer protection statutes. In the immediate case, there is no justification for a gains-based remedy; the claim is doomed to fail. ....
Did the Motion Judge Err when he found that disgorgement was not a remedy under consumer protection legislation?
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[47] Section 18 of the CPA is the section that specifies the remedies that are available to a consumer if a person has engaged in an unfair practice.Rescinding agreement
18(1) Any agreement, whether written, oral or implied, entered into by a consumer after or while a person has engaged in an unfair practice may be rescinded by the consumer and the consumer is entitled to any remedy that is available in law, including damages.
Remedy if rescission is not possible
(2) A consumer is entitled to recover the amount by which the consumer’s payment under the agreement exceeds the value that the goods or services have to the consumer or to receive damages, or both, if rescission of the agreement under subsection (1) is not possible,
(a) Because the return or restitution of the goods is no longer possible; or
(b) Because rescission would deprive a third party of the right in the subject-matter of the agreement that the third party has acquired in good faith and for value. [48] In this case rescission is not possible and, therefore, the applicable section is s. 18(2).
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[50] Section 18(2) makes it clear that a consumer is entitled to “damages” as a remedy if rescission of the agreement is not possible. As the Plaintiffs point out, it does not limit the word “damages” to compensatory damages. However, the leading authority for the remedies available under s. 18(2) of the CPA is the Ontario Court of Appeal’s decision in Ramdath v. George Brown College of Arts and Technology, 2015 ONCA 921, 329 D.L.R. (4th) 490. In that case the Court of Appeal found as follows at para. 90:GBC argued, both at trial and on appeal, that to claim and be awarded damages under s. 18(2), a consumer still needs to establish causation. I agree. However, the necessary causal link is the link between the damages and the agreement, i.e. that the consumer suffered damages that flowed from entering into an agreement after or while an unfair practice was occurring. [51] In this case, as set out above, the motion judge found that:There is no evidence the Plaintiffs or the Class Members did not receive the accommodation they booked. There is no evidence that the Plaintiffs or the Class Members received accommodation that was less in quality than promised. There is no evidence that in any particular case, or on a class-wide basis, that alternative qualitative similar accommodations were available that would meet Class Member’ needs equally well at a lower cost, or that would better meet Class Members’ subjective needs. [52] Just as there is no evidence of this kind of loss, there is no pleading that the Plaintiffs suffered any loss of this kind.
[53] In other words, the Plaintiffs have not established a causal link between the agreements they entered into and any damages they suffered. The Plaintiffs assert that they have established a causal link between the unfair practices and the damage to the market. This too is a goal of consumer protection legislation.
[54] In Richard v. Time Inc. 2012 SCC 8, [2012] 1 S.C.R. 265, the Supreme Court of Canada discusses the purposes and objectives of the Quebec consumer protection legislation as follows:[160] The C.P.A.’s first objective is to restore the balance in the contractual relationship between merchants and consumers. This rebalancing is necessary because the bargaining power of consumers is weaker than that of merchants both when they enter into contracts and when problems arise in the course of their contractual relationships. It is also necessary because of the risk of informational vulnerability consumers face at every step in their relations with merchants. In sum, the obligations imposed on merchants and the formal requirements for contracts to which the Act applies are intended to restore the balance between the respective contractual powers of merchants and consumers.
[161] The C.P.A.’s second objective is to eliminate unfair and misleading practices that may distort the information available to consumers and prevent them from making informed choices. Most of the measures imposed by the legislature to achieve this objective are found in Title II of the C.P.A., which we discussed above.
[162] The legislature’s intention in pursuing these two objectives is to secure the existence of an efficient market in which consumers can participate confidently. [Cites omitted] ....
[55] The expert evidence provided by the Plaintiffs (which was not contradicted by the Defendants) speaks to the ways in which the unfair practices at issue undermined “the existence of an efficient market in which consumers can participate confidently”. If this is the primary objective of consumer protection legislation, that objective would, according to the Plaintiffs, be enhanced, rather than undermined, if a wider range of damages were available to the court to drive home the message that unfair practices will not be tolerated.
[56] The problem with this submission is that the motion judge’s position, that the focus of the remedies in s. 18 is on the damages suffered by the consumer (not the market) by virtue of the fact that they entered into an agreement while the unfair practice was occurring, is supported by para. 90 (discussed above) of the Court of Appeal’s decision in Ramdatth.
[57] The Plaintiffs point to another paragraph of Ramdath, which they argue confirms that disgorgement is an available remedy under s. 18(2) of the Act - para. 94. In that paragraph the Court of Appeal states:[94] …In his text, The Law of Damages, referred to by the trial judge, Professor Waddams discusses the measure of damages in statutory remedies for misrepresentation, including the Ontario Consumer Protection Act. He explains that the language of s. 18(2) that prescribes the compensation entitlement for a plaintiff, together with the availability of punitive and exemplary damages in s. 18(11), give a court” complete flexibility to award whatever damages would be appropriate at common law” including the restitutionary measure. [58] The Plaintiffs rely on this paragraph to support their assertion that the motion judge erred in finding that it is plain and obvious that disgorgement is not available as a remedy under the CPA. However, while Ramdath does suggest that restitutionary remedies are available under s. 18(2), it makes it clear that the measure of damages sought must be “appropriate at common law. “
[59] While the Plaintiffs argued in oral submissions that because their claim was one under s. 18(2) of the CPA, there was no need to consider the leading authority on whether and when disgorgement is available at common law, we disagree. Not only does Ramdath reference the common law as a marker for whether a remedy is available, so does s. 18(1) of the Act, which contains the most inclusive references to remedies, namely, “any remedy that is available in law.”
[60] In Atlantic Lottery, the Supreme Court of Canada discusses the availability of the disgorgement remedy in the context of a motion to certify a class action against the government agency that approved the operation of video lottery terminal games in Newfoundland and Labrador. The plaintiffs claimed that these terminals were inherently dangerous and deceptive, leading to a risk of addiction and suicidal ideation. In a 5 to 4 decision the Court found that the claim disclosed no reasonable cause of action.
[61] In that case the plaintiffs claimed disgorgement as a remedy. They did so because they asserted, as the Plaintiffs in this case do, that they were unable to calculate their compensatory damages because the terminals at issue do not create records for particular customers. Thus, according to the plaintiffs, the defendant’s conduct may have contributed to their lack of evidence on the issue of compensatory damages.
[62] What emerges from Atlantic Lottery is that disgorgement is not a restitutionary remedy. As put by the Court at para. 24:In sum, then, restitution for unjust enrichment and disgorgement are two types of gain-based remedies. Each is distinct from the other: disgorgement requires only that the defendant gained a benefit (with no proof of deprivation to the plaintiff required), while restitution is awarded in response to the causative events of unjust enrichment where there is correspondence between the defendant’s gain and the plaintiff’s deprivation. [Cites omitted]. [63] What also emerges from Atlantic Lottery is that disgorgement is a remedy that is awarded in certain limited circumstances – most often in situations where the cause of action is founded on a breach of fiduciary duty. In the tort context, the remedy raises the following concern:[34] The difficulty is not just normative, although it is at least that. The practical difficulty associated with recognizing an action in negligence without proof of damages becomes apparent in considering how such a claim would operate. As the Court of Appeal recognized, a claim for disgorgement is available to any plaintiff placed within the ambit of risk generated by the defendant would entitle any one plaintiff to the full gain realized by the defendant. No answer is given as to why any particular plaintiff is entitled to recover the whole of the defendant’s gain. Yet corrective justice, the basis for recovery in tort, demands just that: an explanation as to why the plaintiff is the party entitled to a remedy. Tort law does not treat plaintiffs “merely as a convenient conduit of social consequences” but rather as “someone to whom damages are owed to correct the wrong suffered.” A cause of action that promotes a race to recover by awarding to the first plaintiff who arrives at the courthouse steps undermines this fundamental principle of tort law. [Cites omitted]. [64] While the Plaintiff’s action is not an action in tort, the concern raised about extending the remedies available under s. 18(2) to disgorgement when there is no evidence of harm to the individual consumer is, as the motion judge recognized, relevant. Why should the Plaintiffs be entitled to the full gain realized by the Defendant when they have not established that they have suffered any harm by virtue of the Defendants’ conduct? It is also worth noting that the conduct at issue in s. 18(2) is similar to the conduct at issue in a negligent misrepresentation claim.
[65] In Maginnis v. FCA Canada Inc., 2021 ONSC 3897 (Div. Ct.), the Divisional Court found as follows with respect to the availability of disgorgement for claims under the CPA:[45] While the motion judge did not discuss disgorgement of profits, that remedy is not available under the Consumer Protection Act. Nor would disgorgement of profit be available in this case at common law. As the Supreme Court of Canada stated in Atlantic Lottery, above, disgorgement of profits is only available for certain causes of action, such as breach of fiduciary duties, and it is not an independent cause of action (at paras. 27, 30). In order to make out a claim for disgorgement, the appellants must first prove an actionable misconduct. Claims in negligent misrepresentation, conspiracy to injure and breach of the Competition Act require proof of consequential harm, and the motion judge found there was no evidence of compensable harm after the repair. [66] In Atlantic Lottery, all the judges accepted that the plaintiffs might have a cause of action in breach of contract. However, as put by the majority at para. 49:But that is of no moment here, since the plaintiffs have made it clear… that they seek only non-compensatory remedies for breach of contract, namely disgorgement and punitive damages. Whether the plaintiffs’ breach of contract claim discloses a reasonable cause of action should be considered in light of the remedies the plaintiffs actually seek. The question to be decided here, then, is whether these remedies are available to the plaintiffs, assuming the truth of their pleadings. [67] While not framed as a breach of contract claim, the Plaintiffs rely on a case where disgorgement was awarded for an interest unconnected with any harm to the Plaintiffs themselves when the court found that the defendant had breached their contract with the plaintiff.
[68] As the motion judge found, Atlantic Lottery is clear that disgorgement is available for breach of contract only in exceptional circumstances where a) the nature of the plaintiff’s interest is such that it cannot be vindicated by other forms of relief; and b) the circumstances warrant making such an award (e.g., where the plaintiff has a legitimate interest in preventing the defendant’s profit-making activity).
[69] The minority in Atlantic Lottery found that the first part of the test was satisfied because compensatory damages might be inadequate since the video terminals that were the subject of the action did not create the necessary records to calculate such damages. The Plaintiffs in the case at bar make a similar argument. However, as the motion judge noted, the majority in Atlantic Lottery disagreed finding that “compensatory damages are not inadequate merely because a plaintiff is unwilling, or does not have sufficient evidence, to prove loss” (para. 60).
[70] According to the majority, “inadequacy flows not from the availability of evidence, but from the nature of the claimant’s interest.”
[71] An example of a case where the nature of the claimant’s interest was seen as potentially justifying a remedy of disgorgement is that at play in Nunavut Tunngavik Incorporated v. Canada (Attorney General), 2014 NUCA 2 (CanLII), 2014 NUCA 02. This case is referred to in Atlantic Lottery and is the case relied upon by the Plaintiffs. That case concerned an appeal from a partial summary judgment granted in favour of the plaintiff awarding it restitutionary damages for a breach by Canada of the Nunavut Land Claims Agreement. The breach at issue concerned a covenant to establish a system of statistical monitoring. The plaintiff claimed restitutionary damages and the judge below ordered Canada to disgorge the savings it had accrued from the delayed performance of its monitoring obligations. In upholding this finding, the Nunavut Court of Appeal found:[88] [Canada] received valuable consideration for the covenant to establish a system of statistical monitoring. If it could simply refuse to perform that covenant and argue that it need not pay any damages because none could readily be established, it would potentially deprive the Inuit of many of the intended benefits of the Land Claims Agreement. In the context of a land claims treaty, insulating the contracting government from any consequences of a breach of a covenant like this is legally unacceptable. As a result, the case management judge was correct in concluding that the respondent is not limited to a claim for nominal damages. Some appropriate measure of damages must be found. [72] The Plaintiffs submit that the damage to the market identified by their expert, Dr. Duke, is analogous to the harm to the Inuit people at issue in the decision from the Nunavut Court of Appeal. The mere fact that this harm may be difficult to quantify does not mean that it should go unpunished.
[73] The nature of the Plaintiffs’ interest in the case at bar is not analogous to the nature of the plaintiff’s interest in the case from the Nunavut Court of Appeal. The nature of their interest is most analogous to that of a plaintiff in a negligent misrepresentation claim. This is very different from a party to a land claim agreement.
[74] In short, as the motion judge correctly found, Atlantic Lottery has confirmed that disgorgement for breach of contract at common law is to be reserved for cases where there are exceptional circumstances. The motion judge made no error when he found that the circumstances of the Plaintiff’s claim were not exceptional enough to qualify for such relief at common law. . Ponce v. Société d’investissements Rhéaume ltée
In Ponce v. Société d’investissements Rhéaume ltée (SCC, 2023) the Supreme Court of Canada considered a Quebec fact situation where corporate officers ('presidents'), hearing of third party interest in purchasing shares in the corporation, hid the interest from their shareholders and then purchased the shares personally to resell them to the third parties at a profit. Through this time there was also an 'incentive pay agreement' between the officers and the shareholders, which "governed the parties’ relationship and entailed implied obligations for the presidents."
In these quotes the court considers a disgorgement remedy for breach of contractual good faith, here a 'disloyal' failure to disclose essential business information in a self-interested manner:(1) Availability of Disgorgement of Profits as a Remedy
(a) Disgorgement of Profits Where There Is an Obligation of Loyalty in the Exercise of a Power
[92] The appellants are certainly right on one point: as a general rule, disgorgement of profits does not have the same compensatory function as an award of damages as a remedy for breach of a contractual obligation. “Reparation” in civil liability is intended to compensate for loss sustained or profit lost (art. 1611 C.C.Q.). In contrast, other remedies are aimed at “restitution” and involve returning what has been received. As such, they do not have this compensatory aspect that reparation does in the law of liability (on this distinction, see the comments of Professor Pascal Fréchette, particularly at pp. 14 and 135). As for disgorgement of profits — which straddles restitution and compensation in the law of liability, and which was recognized by this Court in Kuet under the Civil Code of Lower Canada — the conditions for its application, which are somewhat uncertain in positive law, are disagreed upon by the parties in this case.
[93] To begin, the appellants are correct in stating that disgorgement of profits is, in principle, available only where a person is charged with exercising powers in the interest of another: a mandatary and an administrator must hand over the property when the administration ends, and this [translation] “normal restitution” would encompass the profits accrued during the administration (Fréchette, at p. 154; see also Cantin Cumyn (2012), at p. 22). For example, because an administrator of the property of others exercises the powers attached to their office for the benefit of others, any profit resulting from the exercise of those powers, along with the administered property, returns to the administered patrimony when the administration ends (arts. 1365 and 1366 para. 1 C.C.Q.). In this regard, the first part of art. 1366 para. 1 C.C.Q. provides that an administrator of the property of others must hand over to the beneficiary all that the administrator has received in performing the obligation of loyalty attached to their duties, even if the beneficiary has not sustained any injury (see L. Smith and J. Berryman, “Disgorgement of Profits in Canada”, in E. Hondius and A. Janssen, eds., Disgorgement of Profits: Gain‑Based Remedies throughout the World (2015), 281). Moreover, under the second part of art. 1366 para. 1 C.C.Q., an administrator “is also accountable for any personal profit or benefit he has realized by using, without authorization, information he had obtained by reason of his administration”. In this exceptional case, disgorgement of profits sanctions the breach of the administrator’s obligation of maximalist loyalty, from a perspective farther removed from restitution (Cantin Cumyn and Cumyn, at para. 376). Even in such a case, disgorgement of profits differs, as I will endeavour to explain, from the traditional sanction of damages, which depends on proof of injury.
[94] These two remedies are indeed conceptually distinct. Disgorgement of profits, which is more restitutionary in its focus, is in principle meant to ensure compliance with the obligation of maximalist loyalty owed by a person on whom a power is conferred. An award of damages, on the other hand, serves to compensate the victim of a fault for the injury sustained and thus reflects a compensatory logic related in part to contractual loyalty under art. 1375 C.C.Q. As some authors explain, disgorgement of profits is therefore different from damages, as it is [translation] “not in keeping with the compensatory function of civil liability” (Fréchette, at p. 161; see also Grégoire (2010), at pp. 50‑51).
[95] The respondents assert that in Kuet, this Court extended the scope of the remedy of disgorgement of profits beyond just cases in which a party exercises a power (R.F., at paras. 84‑85). More particularly, they argue that Kuet made disgorgement of profits a remedy to sanction a person who has committed a fault for financial gain and breached the requirements of good faith in contractual matters (paras. 84 and 88). The appellants, on the other hand, give Kuet a much narrower scope. Noting that the bank in that case had sustained no injury due to the conduct of its foreign currency trader, who had made personal profits in the performance of his duties, the appellants say that Kuet does not permit the scope of the exceptional remedy of disgorgement of profits to be extended beyond cases in which the debtor at fault was required to subordinate their own interests to those of their creditor (A.F., at para. 101). This interpretation of Kuet leads the appellants to conclude that disgorgement of profits is not available as a remedy in this case because, as we know, the appellants did not breach an obligation of “maximalist” loyalty given that they were not charged with exercising powers in the respondents’ interest. Accordingly, the appellants say, the breach of the obligation of contractual loyalty they were found to have committed can give rise only to damages as compensation for proven injury, not to disgorgement of profits. However, the respondents have not proved such injury.
[96] I agree with the appellants that Kuet should not be given an interpretation that departs from the foundations of the law of civil liability. That judgment, when properly read, indicates that the remedy of disgorgement of profits is not available to a court where there has simply been a breach of the obligation of good faith by a person who is not subject to an obligation of loyalty in the exercise of a power. Kuet therefore provides no basis to support disgorgement of profits to the respondents as a remedy.
[97] It is true, as the respondents note, that Gonthier J. relied on the precept that “no one should profit from his own wrongdoing” in deciding to award disgorgement of profits (Kuet, at p. 439). That said, Gonthier J. did not base his reasoning solely on that adage, which might have suggested that he tied disgorgement of profits simply to a breach of good faith. He took care to ground his decision to award disgorgement of profits in an analogy with the obligation of a mandatary to turn over profits to the mandator, since the specific relationship between the bank and its currency trader in that case was similar to mandate.
[98] A brief overview of the facts of the case is necessary to fully appreciate this reality. In Kuet, a bank’s chief foreign currency trader had taken advantage of his position to make secret arrangements with his clients. Under those arrangements, he was to conduct foreign exchange transactions for their benefit and, in return, keep a percentage of the profits made. When the bank was made aware of those unauthorized activities, it brought a civil action against the currency trader, who by that point had made more than $600,000 in profits. Because the plaintiff bank had not suffered any loss, it did not seek damages but rather disgorgement of the profits made by the trader.
[99] Upon concluding his analysis, Gonthier J. allowed the bank’s claim and ordered the trader to turn over the profits he had made. That conclusion did not rest solely on the trader’s misconduct but thus related “rather to the underlying function and relationship between the parties to the contract” (p. 436). The strong resemblance between that relationship and the one arising under a contract of mandate, due to the control exercised by the trader over the bank’s affairs, was what led Gonthier J. to require the trader to account for all that he had received in the context of his administration (see the analysis proposed by Professor Fréchette, at pp. 10 and 155‑56). Gonthier J. based that disgorgement of profits, by analogy, on art. 1713 of the Civil Code of Lower Canada (see today art. 2184 C.C.Q.), a provision applicable first and foremost to mandataries that required them to deliver all that they had received under the authority of their mandate to the mandator, even if it was not due (p. 436).
[100] Professor Fréchette, commenting on the case, is therefore right to emphasize the parallel between the role of mandatary and the representative position held by the currency trader and in noting that this Court required the trader [translation] “to account for all that he had received in the context of his administration, in keeping with the general logic of the rules of mandate” (p. 155). Similarly, Professors Cantin Cumyn and Cumyn, at para. 376, take the view that Gonthier J. required specific performance of an obligation to hand over profits, an obligation analogous to that of a mandatary or administrator of the property of others (arts. 1366 para. 1, 2146 para. 2 and 2184 C.C.Q.). It was thus the existence of an obligation of maximalist loyalty in the context of exercising a power that justified disgorgement of profits in Kuet even though the bank had sustained no injury. I note that in Abbas‑Turqui v. Labelle Marquis Inc., 2004 CanLII 26082 (Que.), which concerned a fault committed by a contracting party for financial gain in the context of a sale, the Court of Appeal took care to distinguish Kuet based on this same logic (see para. 13).
[101] I conclude that the principles spoken to in Kuet cannot be usefully transposed to this case. Of course, it might be said that by concealing the interest expressed by IA, the appellants, like the currency trader in Kuet, breached the obligation of good faith imposed on them through the combined effect of arts. 1434 and 1375 C.C.Q. But unlike the defendant in Kuet, the appellants were not required to turn over profits, as a mandatary or administrator would be, because they were not charged with exercising powers in the respondents’ interest.
[102] Accordingly, I am of the view that unlike the relationship that existed in Kuet but like the one in Abbas‑Turqui, the specific relationship between the appellants and the respondents cannot ground disgorgement of the profits made by the appellants as a remedy.
(b) Disgorgement of Profits Where There Is No Exercise of Power
[103] In addition to Kuet, the respondents rely on Uni‑Sélect inc. v. Acktion Corp., 2002 CanLII 41226 (QC CA), [2002] R.J.Q. 3005, arguing that in that case the Quebec Court of Appeal ordered disgorgement of profits where a fault was committed for financial gain but there was no exercise of power in the interest of another. In Uni‑Sélect, the contracting party at fault had purchased a company in violation of a non‑competition clause. Faced with the trial judge’s finding that injury had not been proved, the Court of Appeal held that the injury was equivalent to the profits made by the contracting party at fault (paras. 58‑63). The Court of Appeal thus reversed the trial judge’s factual determination, stating that the [translation] “benefit in the marketplace” derived by the contracting party at fault, that is, the profits it made, “inevitably caused, in [this] context, a loss for the [aggrieved contracting party]” (para. 59). For this reason, it declared that the beneficiary of the non‑competition clause [translation] “must be compensated for this loss” pursuant to art. 1611 C.C.Q. (para. 59; see also para. 36). The respondents are therefore incorrect in arguing that the Court of Appeal in Uni‑Sélect ordered the contracting party at fault to disgorge profits for a purpose other than compensation and without any proof of injury. Accordingly, insofar as it was established that the profits realized were equivalent to the injury caused by the contracting party’s wrongful conduct, disgorgement of profits in Uni‑Sélect was justified as compensation for fault. The respondents certainly cannot rely on that case to obtain disgorgement of profits directly, in the absence of an obligation of maximalist loyalty.
[104] Independently of the foregoing, the respondents argue that disgorgement of profits can be a non‑compensatory remedy that is available in the case of conduct [translation] “that truly deviates from that of an honest, prudent contracting party” (R.F., at para. 100). But as I have said, it must be recognized that they are above all seeking disgorgement of profits based on the compensatory function of this remedy, since they are claiming the profits made by the appellants as the “equivalent” of the gain of which they were allegedly deprived because the appellants unlawfully appropriated the business opportunity. As the motion to institute proceedings clearly indicates, the disgorgement of profits sought by the respondents is more akin to damages, which are in keeping with the general principles of civil liability (motion to institute proceedings, at para. 57.1). Unlike the bank in Kuet, the respondents say that they have sustained “serious loss”. They are therefore seeking disgorgement of profits as compensation for that injury caused by the breach of the appellants’ obligation of “contractual” loyalty. It follows that there is no need, in the context of the facts of this case, to decide whether disgorgement of profits is available to a court as a confiscatory and [translation] “rather novel” sanction in the absence of such injury (see Lluelles and Moore, at No. 2037; G. Viney, “La condamnation de l’auteur d’une faute lucrative à restituer le profit illicite qu’il a retiré de cette faute”, in B. Moore, ed., Mélanges Jean‑Louis Baudouin (2012), 949).
[105] In sum, I am of the view that disgorgement of profits without regard to injury is not an appropriate remedy in this case. The sanction requested is to compensate for a wrong. The demand is not simply for restitution of profits, much less for disgorgement of profits for a confiscatory or punitive purpose, a remedy that would potentially deviate from the general law of civil liability. It is thus appropriate to assess, on the basis of the respondents’ alternative argument, the quantum of the damages to be awarded to them to compensate for the loss they claim to have suffered.
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