Reconsidering Disgorgement for Wrongs
Nobody should be permitted to profit by wrongdoing: this sentiment has compelling
intuitive appeal. Despite this, profits disgorgement1(or stripping the defendant of ill-
gotten gains) turns out to be a remedy with surprisingly limited application. This
may soon change. Both the Law Commission2and the judiciary3have indicated
support for wider recognition of the remedy; so too have academics.4However, few
would suggest the remedy ought to be available for all profit-generating wrongs,5
and here lies the difficulty. As yet no theory satisfactorily explains which wrongs
should give rise to disgorgement and which should not. Sometimes the focus has
been on the character of the wrong; at other times it has been on the moral
culpability of the wrongdoer. More importantly, and more worryingly, no theory
explains when the remedy should strip the defendant of every penny of the ill-gotten
gain and when something less – generally ‘expenses saved’ or ‘use value’ – should
suffice. This article re-assesses existing law and suggests that an alternative analysis
may provide some answers.
Put briefly, this article makes two claims. The first is based on an examination of
existing case law. It is that true disgorgement (stripping the defendant of every
penny of an ill-gotten gain)6is available only when the defendant has breached an
obligation of ‘good faith or loyalty’.7These obligations form a class which is
conceptually distinct from obligations arising in contract, tort or unjust enrichment.
ßThe Modern Law Review Limited 1999 (MLR 62:2, March). Published by Blackwell Publishers,
108 Cowley Road, Oxford OX4 1JF and 350 Main Street, Malden, MA 02148, USA.
* Department of Law, London School of Economics.
I would like to thank Peter Birks, Michael Bryan, Gareth Jones and Ewan McKendrick, and participants at
the International Conference on the Law of Restitution, University of Tel Aviv, May 1998, for their
thought-provoking comments on an earlier draft of this paper.
1 ‘Disgorgement’, rather than ‘restitutionary damages’, is used so as to better differentiate between this
remedy and the remedy of restitution for subtractive unjust enrichment (‘restitution’): see L. Smith,
‘The Province of the Law of Restitution’ (1992) 71 Can Bar Rev 672, 683–694.
2 Law Commission Report (No 247): Aggravated, Exemplary and Restitutionary Damages (1997),
recommendations 7–9 and Draft Bill, clause 12, suggesting that the common law ought to be allowed
to develop unimpeded, but that, in addition, restitutionary damages (their preferred term) ought to be
available where the defendant’s wrong (other than a breach of contract) was committed with
‘deliberate and outrageous disregard of the plaintiff’s rights’.
elaboration) that disgorgement for breach of contract might be appropriate where the breach consisted
in doing exactly what the contract expressly prohibited or in delivering shortfall performance.
4 See, eg, G. Jones, Goff & Jones: The Law of Restitution (London: Sweet & Maxwell, 4th ed, 1993)
(‘Goff & Jones’) 714–734; P. Birks, An Introduction to the Law of Restitution (Oxford: Clarendon
Press, rev ed, 1989) (‘Birks’) 326–327 (provided the defendant’s breach is cynical); Sir William
Goodhart QC, ‘Restitutionary Damages for Breach of Contract’  RLR 3; P. Jaffey,
‘Restitutionary Damages and Disgorgement’  RLR 30, 40 and ‘Disgorgement and
Confiscation’  RLR 92, 93, 96; H. McGregor, ‘Restitutionary Damages’ in P. Birks (ed),
Wrongs and Remedies in the Twenty-First Century (Oxford: Clarendon Press, 1996) 209 (but only if
the defendant’s breach is deliberate, cynical and with a view to profit).
5 See ns 2–4, above. Goff & Jones, 721, come close to this, suggesting that the remedy ought to be
available whenever the profit could not have been generated ‘but for’ the breach.
6 ‘Ill-gotten’ imposes an important limiting qualification: the remedy of disgorgement strips only those
gains derived as a result of the proven breach of duty.
7 The terminology is not elegant, but it will suffice. As is made clear later, the expression is intended to
have a wider compass than fiduciary duties and equitable duties of confidence.