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Damages - Disgorgement (3). Donegani v. Facebook, Inc.
In Donegani v. Facebook, Inc. (Div Ct, 2026) the Divisional Court dismissed an appeal, this brought against the dismissal of the appellant's "motion to certify the action as a class proceeding under the Class Proceedings Act, 1992", this where the proceeding was grounded in allegations that the defendant tech corporation had "misused their data by making it available to certain third-party applications without their consent".
The court considers the damage issue of 'disgorgement', here while considering it as a common issue in the proposed class proceeding:[66] In Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19 at paras. 51 and 61 (“Atlantic Lottery”), the Supreme Court of Canada held that disgorgement for breach of contract is exceptional relief. It is not available at the plaintiff’s election to obviate matters of proof. Rather, it is available only where other remedies are inadequate and only where the circumstances warrant such an award, such as when the plaintiff has a legitimate interest in preventing the defendant’s profit-making activity. Circumstances of inadequacy arise when the nature of the claimant’s interest is such that it cannot be vindicated by other forms of relief. This may arise where, for example, the plaintiff’s loss is impossible to calculate or where the plaintiff’s interest in performance is not reflected by a purely economic measure. However, compensatory damages are not inadequate merely because a plaintiff is unwilling, or does not have sufficient evidence, to prove loss. Inadequacy flows not from the availability of evidence, but from the nature of the claimant’s interest. See Atlantic Lottery at paras. 53, 59-61.
[67] The motion judge stated the correct legal test with respect to common issues and disgorgement. Again, the Appellants have not articulated an error of law that could be extricated from the motion judge’s application of the legal principles to the facts of this case. Therefore, the applicable standard of appellate review is palpable and overriding error. . Hogg v. Chief Executive Officer
In Hogg v. Chief Executive Officer (Ont Div Ct, 2025) the Ontario Divisional Court dismissed an appeal, here brought against a decision of a "panel of the Capital Markets Tribunal (the “Panel”) [that] found that the appellants committed two frauds contrary to the Securities Act, R.S.O. 1990, c S. 5. Additionally, the Panel found that the sale of tokens, without a prospectus and registration amounted to further breaches of the Securities Act.[1] Among the remedies ordered, Mr. Hogg was held jointly and severally liable for a portion of the disgorgement of the lost funds".
Here the court considers Securities Act penalties, focussing on 'disgorgement':[108] An appeal court will only interfere with a tribunal’s sanctions and costs decision if they have made an error in principal or if the penalty is clearly unfit: College of Physicians and Surgeons of Ontario v. Peirovy, 2018 ONCA 420, 143 O.R. (3d) 596, at para. 38; Kitmitto v. Ontario (Securities Commission), 2024 ONSC 1412 (Div. Ct.), at para. 170.
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[112] I find no error in principle made by the Panel. I do not agree that the Panel erred by assuming jurisdiction over Token distributions outside of Ontario or that they failed to address this issue. Mr. Hogg, an Ontario resident, was the driving force behind the development of the Tokens at issue. He was found to be the directing mind, in addition to being the majority shareholder, of Arbitrade Bermuda which structured and ran the business related to the tokens. The Panel was well aware their power to order the appellants to disgorge to the Commission amounts obtained had to be a result of the non-compliance with Ontario securities law. The Panel was satisfied that the transactions, wherever they took place, had sufficient connection to Ontario. This finding was open to them to make on the evidence given the connection of the parties and their actions to Ontario.
[113] I also disagree with the appellants’ submission that the disgorgement order was excessive and unfair. The purpose of disgorgement is not to punish. Rather its purposes include ensuring public confidence in the markets is maintained and deterring non-compliance with securities law by removing the prospect of receiving and retaining moneys from noncompliance: s.127(1)10 of the Securities Act. The Panel looked at the underlying facts and circumstances of the case and determined that the sanctions imposed were proportional to the conduct of the parties. Deference should be afforded to the Panel’s discretionary decision: Katebian, at para. 103; Aziz v. Ontario (Securities Commission, Chief Executive Officer), 2024 ONSC 4691 (Div. Ct.), at para. 84, leave to Ont. C.A granted.
[114] Disgorgement may be ordered on a joint and several basis where there is sufficient direction and control between the entities: Katebian, at paras. 100-103, 105. As discussed above, the Panel did not err in making the factual finding that Mr. Hogg was performing the functions of an “officer” or “director”. Consequently, the decision to make Mr. Hogg jointly and severally liable to the corporate entities was reasonable to ensure individuals are not sheltered from sanctions if they orchestrate misconduct through a corporation they direct and control: Phillips v. Ontario Securities Commission, 2016 ONSC 7901, 135 O.R. (3d) 771, (Div. Ct.), at para. 74; Aziz, at para. 94.
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