


COURT OF APPEAL FOR ONTARIO

CITATION: DBDC Spadina Ltd. v. Walton, 2018 ONCA 60

DATE: 20180125

DOCKET: C62822

Cronk, Blair and van Rensburg JJ.A.

BETWEEN

DBDC Spadina Ltd., and

Those corporations listed on
    Schedule A hereto

Applicants (Appellants)

and

Norma Walton, Ronauld Walton, The Rose &
    Thistle Group Ltd., and Eglinton Castle Inc. and
those corporations listed
    on Schedule C hereto

Respondents (
Respondents
)

and

Those corporations listed
    on Schedule B hereto,                                                            to
    be bound by the result

and

Such other respondents
    from time to time as are on notice of these proceedings and are necessary to
    effect the relief sought

AND BETWEEN

Christine DeJong
    Medicine Professional Corporation

Applicant
    (Respondent)

and

Norma Walton,
    Ronauld Walton, and The Rose & Thistle Group Ltd.,
Prince Edward
    Properties Ltd., St. Clarens Holdings Ltd., and Emerson
    Developments Ltd.

Respondents (
Respondents
)

Peter H. Griffin and Shara N. Roy, for the appellants,
    DBDC Spadina Ltd. and those corporations listed on Schedule A hereto

Rosemary A. Fisher and B. Sarsh, for the respondents,
    Christine DeJong Medicine Professional Corporation and Dennis and Peggy Condos

Mark Dunn, for Schonfeld Inc., Inspector/Manager

A. Blumenfeld, for the respondents, Gideon and Irene
    Levytam

Heard: June 2, 2017

On appeal from the Judgments and Orders of Justice Frank
    Newbould of the Superior Court of Justice, dated September 23, 2016, with
    reasons reported at 2016 ONSC 6018, 40 C.B.R. (6th) 230, and the costs order
    dated November 28, 2016, with reasons reported at 2016 ONSC 7011.

R.A. Blair J.A.:

BACKGROUND

[1]

This appeal arises out of a complex multi-million dollar
    commercial real estate fraud perpetrated by Norma and Ronauld Walton over the
    course of several years.

[2]

The appellants and the respondents are all victims of the fraud. Underlying
    the issues on appeal is a contest between them over who ranks in priority to
    whom in claiming against the proceeds remaining from the sale of certain
    properties acquired as part of the fraudulent scheme.

[3]

In substance, the fraudulent scheme worked in this fashion: the
    Waltons convinced the appellants and respondents, and others, to invest equally
    with them in equal-shareholder, specific-project corporations that would
    acquire, hold, renovate and maintain commercial real estate properties in the
    Toronto area. Instead of investing any significant funds of their own, however,
    the Waltons moved their investors monies in and out of the numerous
    corporations, through their own clearing house  Rose & Thistle Group
    Ltd.  in a shell game designed to avoid their obligations and to further their
    own personal interests.

[4]

The appellant corporations, known as the DBDC Applicants, are
    owned and controlled by Dr. Stanley K. Bernstein. Through them, Dr. Bernstein
    invested approximately $111 million with the Waltons, in 31 projects, between September
    2010 and June 2013. In each instance, the individual DBDC applicant entered
    into an equal shareholding agreement with the Waltons with respect to the
    specific-project corporation that was to acquire and hold the particular
    property. The corporations into which the DBDC Applicants monies were to be
    invested are known as the Schedule B Companies. These investments took the
    form of equity (approximately $2.6 million), shareholder loans ($78.5 million)
    and mortgages ($29.5 million).
[1]


[5]

The respondent, Christine DeJong Medicine Professional
    Corporation (DeJong), is owned and controlled by Dr. Christine DeJong. She
    and her husband, Michael DeJong, invested approximately $4 million with the
    Waltons  Dr. DeJong through DeJong, and Michael through his own corporations.
    Those investments were made in equal shareholder arrangements in substantially
    the same form as those entered into between the Waltons and the DBDC Applicants.
    The specific-project corporations established for the purposes of the DeJong
    investments are included in the group of companies known in the proceedings as
    the Schedule C Companies. The properties acquired by the Schedule C Companies
    are collectively known as the Schedule C Properties.

[6]

The individual respondents, Dennis and Peggy Condos, and Gideon
    and Irene Levytam, made similar, but smaller investments in the same fashion. Their
    interests are also in relation to certain of the Schedule C Companies and the
    Schedule C Properties those companies acquired. The Condos claim is in
    relation to a $160,000 investment in one company. The Levytams claim a net investment
    of $337,000. Prior to the oral hearing of the appeal, the DBDC Applicants and
    the Levytams settled and the Levytams did not participate further in the
    appeal.

[7]

None of the agreements contemplated third-party investors in the
    projects. None permitted the investors monies to be used for anything other
    than the purposes of the specific-project investment.

[8]

The decision under appeal involves parts of Judgments and Orders
    made by Newbould J. on September 23, 2016. It comes at the back end of a
    lengthy and complex oppression remedy application commenced by the DBDC Applicants
    against the Waltons and Rose & Thistle, in October 2013, pursuant to Ontarios
Business Corporations Act
, R.S.O. 1990, c. B. 16. Various Schedule C
    Companies were subsequently added as respondents.

Appointment of the Inspector

[9]

In an endorsement dated October 7, 2013, Newbould J. concluded
    that the Waltons conduct was oppressive and unfairly prejudicial to the DBDC
    Applicants interests in the Schedule B Companies. He appointed Schonfeld Inc.
    as an Inspector over the Schedule B Companies.

Appointment of the Inspector as
    Manager

[10]

After an initial review by the Inspector of the affairs of the
    Schedule B Companies and the conduct of the Waltons, Newbould J. confirmed his
    view that the Waltons conduct had been oppressive, and on November 5, 2013 appointed
    Schonfeld Inc. as Manager of the Schedule B Companies (and the Schedule B
    Properties held by them), thereby taking control of the Schedule B Companies
    away from the Waltons.

The Proceedings Before D.M. Brown
    J.

[11]

In July, 2014, after further review by the Inspector/Manager 
    referred to in more detail below  the DBDC Applicants applied to D.M. Brown J.
    (as he then was), at a hearing in the same proceedings, for various forms of
    relief. The range of relief claimed evolved over the course of the hearing. As
    Brown J. noted, this flowed from the clearer, but still incomplete, picture
    emerging from the expanded scope of the Inspectors role following the October
    2013 Order and its subsequent investigations (at paras. 213-217). By the end of
    the hearing  as outlined by Brown J. in his reasons (at paras. 214 and 240-243)
     the relief sought by the DBDC Applicants included the following:

(a) declarations that the
    DBDC Applicants were entitled to constructive trusts where their funds could be
    traced directly into the purchase of, or the discharge of an encumbrance, with
    respect to a Schedule C Property;

(b) damages as against the
    Waltons personally for civil fraud and fraudulent misrepresentation;

(c) damages against the
    Schedule C Companies, jointly and severally, for all losses suffered by the DBDC
    Applicants in respect of funds advanced to the Schedule B Companies; and

(d) damages in the amount
    of $23.6 million against the Schedule C Companies, jointly and severally, for
    net proceeds diverted from the Schedule B Companies and received by the
    Schedule C Companies.

[12]

The application was opposed by the Waltons.

[13]

At the same time, DeJong (and other related companies controlled
    by the DeJongs) brought a cross-motion asking for the approval of a settlement
    it had reached with the Waltons, and opposing the DBDC Applicants constructive
    trust claim with respect to 3270 American Drive, a Schedule C Property owned by
    the Schedule C Company, United Empire Lands Ltd., in which DeJong had invested.
    Numerous Schedule C investors, including Dr. DeJong, Dennis Condos and the
    Levytams, filed affidavits in support of the Waltons position and in opposition
    to the Applicants claims.

[14]

On August 12, 2014, Brown J. released his decision. He gave full
    and detailed reasons in the course of which he made findings of fact almost
    universally against the Waltons and in favour of the DBDC Applicants and Dr. Bernstein.
    In the end, he concluded, at para. 15, that:

[T]he Waltons did not use the funds advanced to them by the
    [DBDC] Applicants as their contracts required but, instead, the Waltons
    mis-used and mis-appropriated most of the funds advanced to them,
diverting some of the funds to
their own personal
    benefit and
the benefit of their Schedule C Companies
.
    [Emphasis added.]

[15]

It bears repeating that the Schedule C Companies were the
    specific-project corporations with respect to which the Waltons and other investors
     including DeJong, the Condos and the Levytams  had entered into equal shareholder
    agreements in substantially the same form as those entered into between the
    DBDC Applicants and the Waltons with respect to the Schedule B Companies.

[16]

The Inspector gave evidence at the hearing. Brown J. accepted the
    Inspectors evidence with respect to the net transfer of funds from Schedule
    B Companies to Rose & Thistle and from Rose & Thistle to Schedule C
    Companies, and made the following findings of fact:
[2]

(i)

the Waltons directed the
    transfer of a net $23.6 million from the Schedule B Companies accounts to a
    bank account belonging to Rose & Thistle during the period from October
    2010 to October 2013;

(ii)

during the same period, the
    Waltons directed transfers of a net $25.4 million from the Rose & Thistle
    account to the Schedule C Companies;

(iii)

in almost all cases, some of or
    all the amounts advanced to the Schedule B Companies by the DBDC Applicants were
    transferred almost immediately to the Rose & Thistle account; and

(iv)

those transfers of funds from
    the Schedule B Companies to Rose & Thistle constituted breaches of the
    agreements between the DBDC Applicants and the Waltons. These agreements required
    that each Schedule B Company, and the funds advanced to it, be used only to
    purchase, renovate and refinance the specific property owned by the Schedule B
    Company.

[17]

Ms. Waltons expert witness at the hearing had criticized the net
    transfer analysis as unhelpful on the ground that it presented only a
    snapshot tracing which, while accurate in itself, did not reflect the history
    of transfers into and out of Rose & Thistle and any Schedule C Company, and
    therefore lacked precision. Brown J. rejected this evidence. He concluded that
    condemning the Inspectors tracing analysis on this basis amounted to nothing
    more than chipping away at the edges of inter-company transfers which the
    Waltons should never have made [in the first place] (at para. 161).

[18]

In addition to his findings respecting the net transfer
    analysis, Brown J. also found, at paras. 96 and 186-187, that:

(i)

the pooling or co-mingling of
    funds, as described above, was a critical breach of the contractual and
    fiduciary obligations which the Waltons owed to the DBDC Applicants and Dr. Bernstein;

(ii)

the DBDC Applicants were not
    aware that the Waltons were withdrawing funds from the Schedule B Companies
    bank accounts for any purpose other than the costs of the relevant associated
    properties;

(iii)

the DBDC Applicants did not know
    that funds from Schedule B Companies were transferred or diverted to the Rose
    & Thistle clearing house bank account because the Waltons, in particular
    Ms. Walton, deliberately hid those transfers from the Applicants;

(iv)

the Waltons deliberately did not
    tell the DBDC Applicants that they were using funds advanced by the Applicants
    for their own personal purposes and benefit and for the benefit of the Schedule
    C Companies which they owned or controlled; and

(v)

throughout the proceedings,
    Norma Walton

presented herself to the Court
, through her affidavits and through her
    submissions,
as the person who was in
    charge of the entire enterprise
, whether it be the operation of the Schedule B
    Companies, Rose & Thistle or
the
    Schedule C Companies
 (emphasis added).

[19]

In the result, Brown J.:

·

awarded the DBDC Applicants constructive trusts over eight
    Schedule C Properties into which the DBDC Applicants could trace Schedule B
    funds, including the property at 3270 American Drive (which was specifically
    opposed by DeJong);

·

appointed Schonfeld Inc. as Receiver/Manager over the Schedule C
    Properties and any proceeds of sale thereof, and over the bank accounts of the
    Schedule C Companies;

·

dismissed the DeJong request for approval of the settlement with
    the Waltons, finding in fact that the proposed settlement constituted an
    improper and unfair attempt to prefer DeJong over other creditors of the
    Waltons, including Dr. Bernstein;

·

granted the DBDC Applicants a tracing order permitting them to
    trace their funds into and out of the various Schedule B Companies accounts,
    the Rose & Thistle accounts, the Waltons personal accounts, and others, and
    into the Schedule C Companies owning the Schedule C Properties;

·

deferred the issues of the quantum of the DBDC Applicants claim
    for damages as against the Waltons, and the DBDC Applicants $22.6 million
    claim against the Waltons in respect of the Schedule C Companies for unjust
    enrichment, to be determined at a later time; and

·

left undetermined the DBDC Applicants claims for joint and
    several damages against the Schedule C Companies.

[20]

Appeals by Ms. Walton and DeJong from Brown J.s Judgment and Orders
    were dismissed by this Court on September 17, 2015.

[21]

This brings us to the proceedings leading to the present appeal.

The Decision Under Appeal

[22]

On June 3, 2016 Newbould J. (the Application Judge)
[3]
heard the motion and application for deferred relief, as well as the claims for
    joint and several damages against the Listed Schedule C Companies, sought by
    the DBDC Applicants. The relief requested was framed at this point as: (i) a
    claim for damages against the Waltons personally, in the amount of
    $66,951,021.85, plus interest; and (ii) a claim for damages in the amount of $22,680,852
    as against certain of the Schedule C Companies (the Listed Schedule C
    Companies), on a joint and several basis, based on the concepts of knowing
    assistance and knowing receipt in relation to a breach of fiduciary duty.

[23]

At the same time, the Application Judge heard: (i) a
    counter-application by the Waltons claiming damages as against Dr. Bernstein
    personally for diminishing the value of their equity in the Schedule B and C
    Companies by bringing the Inspector and Manager/Receiver motion; (ii) an
    application by DeJong for constructive trust claims in relation to certain
    Schedule C Companies and Properties (or the proceeds of sale of those
    properties) respecting which DeJong had made investments in the form of equity
    or shareholder loans; and (iii) an application by the Condos and Levytams for
    entitlement to sale proceeds as investors in one of the Schedule C Companies
    (Cecil Lighthouse Ltd.).

[24]

On September 23, 2016, the Application Judge released the
    decision under appeal. He:

·

awarded the DBDC Applicants damages in the amount of
    $66,951,021.85, plus interest, as against the Waltons personally, for
    fraudulent misrepresentation, deceit (civil fraud), and breach of fiduciary
    duty, and declared that the damage award would survive bankruptcy;

·

dismissed the DBDC Applicants claim for joint and several
    damages against the Listed Schedule C Companies, concluding that Norma Walton
    was not the controlling mind of the Listed Schedule C Companies and therefore, that
    they could not be liable for knowing assistance or knowing receipt arising out
    of her breach of fiduciary duty;

·

granted DeJong constructive trusts in the aggregate amount of $2,176,045.57
    against four properties owned by four of the Listed Schedule C Companies into
    which the DeJongs had invested;

·

awarded costs against the DBDC Applicants in favour of DeJong,
    the Condos and the Levytams, further particularized in a Costs Endorsement
    dated November 28, 2016; and

·

dismissed the Waltons counter-application for damages.
[4]

[25]

The Application Judge did not determine the claims of the Condos
    or the Levytams, and he did not deal with the DBDC Applicants claim for unjust
    enrichment as such.

[26]

I have read the thorough dissenting reasons of my colleague, van
    Rensburg J.A., and will address her concerns from time to time throughout these
    reasons. I pause here, however, to touch briefly on one aspect of her reasons.

[27]

My colleague devotes considerable time to developing what she
    characterizes as the DBDC Applicants late-breaking claims for damages against
    the Listed Schedule C Companies. As I understand it, she does so to emphasize
    that the record on which liability for damages is sought to be established was
    created in the context of oppression remedy proceedings in which the Listed Schedule
    C Companies were not parties and that there are no new or additional facts to
    support their participation in Ms. Waltons breach of fiduciary duty.

[28]

Respectfully, for purposes of resolving the appeal, I do not
    think much turns on when or how the knowing receipt and knowing assistance
    claims arrived to be dealt with by the Application Judge, and I do not propose
    to examine the record on this point in any more detail than I have done above.
    Suffice it to say, I take a different view of it than my colleague does, not
    only with regard to the extent of DeJongs participation in the proceedings
    prior to the hearing before the Application Judge, but also with respect to
    what issues were before Brown J. and either deferred or not dealt with by him
    and with respect to the need for the Listed Schedule C Companies to have been
    made parties (which Brown J. rejected) before they were.

[29]

These differences have little significance for the outcome of the
    appeal, in my opinion. No one took the position before the Application Judge,
    or before this Court, that the DBDC Applicants claim for joint and several
    damages against the Listed Schedule C Companies, based on knowing assistance
    and knowing receipt, was not properly raised at the hearing before him.
[5]
Nor has it been asserted that the evidence adduced before Brown J. and the
    findings of fact made by him could not be relied upon at the hearing. Indeed,
    the Application Judge himself relied upon them to a great extent.

[30]

More importantly, much of what underlies our disagreement with
    respect to the outcome of the appeal are the differing approaches we take to
    the utility and sufficiency of what the net transfer analysis demonstrates and
    does not demonstrate, not the context in which it was developed.

[31]

The net transfer analysis remains evidence for what it is. No one
    disputes it established a net transfer of $23.5 million out of the Schedule B
    Companies (both Brown J. and the Application Judge made that finding). I
    conclude this evidence is valuable in assessing the Listed Schedule C Companies
    knowing assistance in Ms. Waltons breach of fiduciary duty and in establishing
    damages. My colleague takes a different view. I agree that the net transfer
    analysis was not intended to, and does not, establish the flow of Schedule B
    Companies funds into any particular Listed Schedule C Company account.
[6]
My colleague concludes this is fatal to the knowing assistance claim. For the
    reasons set out below, I disagree.

[32]

As I see it, the resolution of these differences does not depend
    on the history of the evolution of the DBDC Applicants claims.

The Schedule C Companies at Issue
    on Appeal

[33]

In referring to the Listed Schedule C Companies above, I am
    referring to a remaining subset of the Schedule C Companies against which the
    DBDC Applicants continue to pursue their claim for joint and several damages. The
    list includes some of, but not all, the Schedule C Companies that own Schedule
    C Properties against which Brown J. awarded constructive trusts in favour of
    the DBDC Applicants. It also includes the Schedule C Companies that acquired
    the four Schedule C Properties over which the Application Judge granted
    constructive trusts in favour of DeJong. For ease of reference, I will refer to
    those four Schedule C Companies collectively, where appropriate, as the DeJong
    Companies.

[34]

The Listed Schedule C Companies, and the Schedule C Properties
    they hold, are set out on Annexe A to these reasons.

THE ISSUES ON APPEAL

[35]

The issues to be determined on the appeal are whether the
    Application Judge erred:

(a)

in holding that the Listed Schedule
    C Companies are not jointly and severally liable to the DBDC Applicants on the
    basis of knowing assistance and/or knowing receipt;

(b)

in granting DeJong constructive
    trusts over the Listed Schedule C Properties in question; and

(c)

in awarding costs against the
    DBDC Applicants.

[36]

For the reasons that follow, I would allow the appeal.

ANALYSIS

A.

KNOWING RECEIPT

[37]

A stranger to a trust or fiduciary relationship may be liable
    under the doctrine of knowing receipt if the stranger receives trust property
    in his or her own personal capacity with constructive knowledge of the breach
    of trust or fiduciary duty. It is a recipient-based claim arising under the law
    of restitution: see
Citadel General Assurance Co. v. Lloyds Bank Canada,
[1997]
    3 S.C.R. 805, at para. 48.

[38]

I agree with the Application Judge that a claim for knowing
    receipt cannot be made out here. The DBDC Applicants chose not to pursue their
    rights under the tracing order granted by Brown J. They are not able to  nor
    do they seek to  demonstrate the receipt of any particular funds by any
    particular Schedule C Company other than the funds with respect to which Brown J.
    previously granted constructive trusts.

[39]

Accordingly, I will not conduct a separate analysis of the
    knowing receipt claim, but will refer to it, where appropriate, in the
    discussion about the claim for knowing assistance.

B.

KNOWING ASSISTANCE

(1)

General Considerations

[40]

A stranger to a trust or fiduciary obligation may also be liable in
    equity on the basis of knowing assistance where the stranger, with actual
    knowledge, participates in or assists a defaulting trustee or fiduciary in a
    fraudulent and dishonest scheme. The rationale underlying this category of liability
    is that actual knowledge of and assistance in the fraudulent conduct is
    sufficient to bind the strangers conscience so as to give rise to personal
    liability: see
Air Canada v. M & L Travel Ltd
., [1993] 3 S.C.R.
    787, at p. 812. Fraudulent and dishonest conduct for these purposes means the
    taking of a risk by the trustee or fiduciary to the prejudice of the
    beneficiary where the risk is known to be one which there is no right to take:
    see
Air Canada
, at pp. 815, 826.
[7]

[41]

Knowing assistance and knowing receipt are both doctrines arising
    in equity. However, there is a fundamental difference between the two types of
    liability. Knowing receipt liability is restitution-based and falls within the
    law of restitution; its essence is unjust enrichment. Knowing assistance,
    however  sometimes referred to as accessory liability  is fault-based and
    is concerned about correcting matters related to the furtherance of fraud: see
Gold
    v. Rosenberg
, at para. 41;
Citadel General
, at paras. 46-48. I
    shall return to this distinction later in these reasons.

[42]

The criteria for establishing a claim for knowing assistance in
    the breach of a fiduciary duty were summarized by this Court in
Harris v.
    Leikin Group Inc.
, 2011 ONCA 790, at para. 8, and again in
Enbridge
    Gas Distribution Inc. v. Marinaccio
, 2012 ONCA 650, 355 D.L.R. (4th) 333, at
    para. 23. They are the following:

(i)

there must be a fiduciary duty;

(ii)

the fiduciary  in this case,
    Ms. Walton  must have breached that duty fraudulently and dishonestly;

(iii)

the stranger to the fiduciary
    relationship  in this case, the Listed Schedule C Companies  must have had
    actual knowledge of both the fiduciary relationship and the fiduciarys
    fraudulent and dishonest conduct; and

(iv)

the stranger must have participated in or assisted
    the fiduciarys fraudulent and dishonest conduct.

(2)

The Issues In Applying The Criteria

[43]

In determining whether the foregoing criteria have been met and
    whether the Listed Schedule C Companies are to be held jointly and severally liable
    for damages arising from knowing assistance in the breach by Ms. Walton of her
    fiduciary duties to the DBDC Applicants, there are three overarching questions
    to be answered:

(i)

Was Norma Walton the directing
    and controlling mind of the Listed Schedule C Companies for purposes of the
    transactions through which her fraud was perpetrated, such that her knowledge
    and conduct in that regard may be attributed to the Companies as their
    knowledge and conduct?

(ii)

If the answer to that question
    is yes, does it follow that the knowledge and participation requirements for
    knowing assistance have been met with respect to those Listed Schedule C
    Companies utilized by Ms. Walton in the course of perpetrating her scheme?

(iii)

If the answer to the foregoing
    question is yes, are the Listed Schedule C Companies nonetheless able to
    avoid joint and several liability in damages on the basis that knowing
    assistance liability, having its roots as an equitable doctrine, ought not to
    apply here?

[44]

My answer to the first and second questions is Yes and to the third
    is No. I say that for the following reasons.

(3)

Application of the Criteria

(a)

Fiduciary Considerations

[45]

As the Application Judge concluded, there is no issue in the
    present case that Ms. Walton owed a fiduciary duty to the DBDC Applicants and
    Dr. Bernstein, or that she fraudulently breached that duty. At para. 47 of his
    reasons, he found that:

There is no question that Ms. Walton knowingly breached her
    fiduciary obligations to the [DBDC Applicants] and that she knowingly took a
    risk with the money belonging to the Schedule B Companies that she had no right
    to take. Her activity in so doing was fraudulent and dishonest.

[46]

No one contests this finding. Indeed, at the hearing before the
    Application Judge, the Schedule C investors all relied upon the same
    submission, and the same type of relationship on their part. DeJong continues
    to do so in asserting its claim for a constructive trust in the Listed Schedule
    C Properties that were the subject of its cross-motion.

[47]

The Application Judges finding is well-supported on the
    evidence. Ms. Walton owed a fiduciary duty to Dr. Bernstein and the DBDC
    Applicants arising out of their contractual relationship, viewed in the context
    of their overall relationship and the manner in which the co-investments
    strategy was to be carried out.

[48]

A contractual relationship does not necessarily give rise to
    fiduciary duties, obviously, but it may, depending on the nature of the
    relationship and the overall relationship between the parties. In
Korea
    Data Systems (USA), Inc. v. Aamazing Technologies Inc.,
2015 ONCA 465, 126
    O.R. (3d) 81, at para. 74, this Court reiterated the criteria for a fiduciary
    relationship, as set out by the Supreme Court of Canada in
Frame v. Smith
,
    [1987] 2 S.C.R. 99, at p. 136,
Hodgkinson v. Simms
, [1994] 3 S.C.R.
    377, at p. 462, and
Galambos v. Perez,
2009 SCC 48, [2009] 3 S.C.R.
    247, at para. 66: (i) the fiduciary has scope for the exercise of some
    discretion or power; (ii) the fiduciary can unilaterally exercise that power or
    discretion so as to affect the beneficiarys legal or practical interests; (iii)
    the beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary
    holding the discretion or power; and (iv) there exists an express or implied
    undertaking by the fiduciary to act in accordance with the duty of loyalty reposed
    in him or her.

[49]

Here, the nature of the responsibilities and duties (and
    opportunities) created by the contractual structure, together with the nature
    of the factual relationship as it developed, put Ms. Walton in that category.
    It was the discretion and power left to her under the contracts that created
    the opportunities for her to utilize the various corporations that she
de
    facto
or otherwise controlled and the vulnerability of the DBDC Applicants
    (and the DeJongs and others) to the very things that happened.

[50]

It is true that Dr. Bernstein, through the DBDC Applicants, made
    his contributions directly to the Schedule B Companies (for the most part)
    rather than handing the money over to Ms. Walton, but given the contractual and
    corporate structuring of the investments program, it was tantamount to doing
    that very thing. As Brown J. found, at para. 161, The [Waltons] had complete
    control over all of the funds.
[8]

[51]

The liability of the Listed Schedule C Companies  the
    strangers to the fiduciary relationship in this scenario  therefore turns on
    a determination of the third and fourth requirements for knowing assistance:
    their actual knowledge of the fiduciary relationship and the fraudulent breach,
    and their participation or assistance in the breach itself. The resolution of
    those issues depends primarily on whether Ms. Walton acted as the directing and
    controlling mind of the Schedule C Companies in question, such that her actions
    may appropriately be attributed to them for these purposes.

(b)

The Application Judges Decision

[52]

The Application Judge dismissed the DBDC Applicants claim on the
    basis that Ms. Walton was not the directing and controlling mind of the Listed
    Schedule C Companies, and accordingly that her knowledge and conduct could not
    be taken to be their knowledge and conduct for the purpose of the knowing
    assistance claim. He did not focus, therefore, on the participation element.

[53]

The Application Judge arrived at this decision because of the
    provisions in the Schedule C shareholder/investment agreements entered into
    between the Waltons and the Schedule C investors. Under those agreements:

(a)

the Waltons and the investors
    were each to be 50% owners of the shares and each held 50% of the positions on the
    board of directors;

(b)

the company into which the
    investments were to be made was to be used solely for the property to be
    purchased;

(c)

the Waltons were to be
    responsible for the management, supervision and renovation of the property, as
    well as finance, bookkeeping, and all active roles required to complete the
    Project;

(d)

any significant decisions that
    differed from the project plan required more than 50% shareholder approval; and

(e)

if the parties disagreed on how
    to manage, supervise and complete construction of the project, there was to be
    mandatory mediation and arbitration.

[54]

The Application Judge went on to conclude, at paras. 51-53:

Thus, in so far as the Schedule C Companies are concerned and
    their investors,
Ms. Walton may have acted as if she was
    the sole decision maker in the Schedule C Companies, but she was not
.
    She and her husband were 50% owners with the right to exercise 50% of the
    significant decisions. There is no evidence that the other investors were aware
    of the fraudulent conduct of Ms. Walton.



It would be contrary to the Schedule C
    investor agreements to hold that Ms. Walton could cause the Schedule C
    investors to be a party to her fraudulent dealings with Dr. Bernstein.
Thus
    I cannot find that the Schedule C Companies are liable to the [DBDC Applicants]
    for knowing assistance. [Emphasis added.]

[55]

Respectfully, I do not think this conclusion is sustainable either
    in law or in fact on this record.

[56]

The error of law arises in two respects. First, the Application
    Judge failed to recognize that, for purposes of attribution and determining
    whether a person is the controlling mind and will of a corporation with respect
    to a particular transaction or series of transactions, the formal governing
    structure established by the contractual and corporate documentation is not
    dispositive. What matters is the factual reality of the situation and whether Norma
    Walton was acting within the field of operation assigned to [her] and carrying
    out [her] assigned function[s] with respect to the corporations at the time
    she used them as vehicles to perpetrate her fraud: see
Canadian Dredge and
    Dock Company Limited v. R.
, [1985] 1 S.C.R. 662, at pp. 685, 714.

[57]

Secondly, the Application Judge mistakenly focused on whether it
    was appropriate to hold that Ms. Walton could cause the Schedule C investors
    to be a party to her fraudulent dealings with Dr. Bernstein. Respectfully,
    that was not the right question. The pertinent question was whether Ms. Walton
    had caused the Schedule C Companies
to participate in her
    fraudulent dealings
.

[58]

The errors of fact, or of mixed fact and law, consist of the
    Application Judges failure to find, on this record: (i) that Ms. Waltons
    position as the sole active director, officer and manager of the Listed Schedule
    C Companies, for all practical purposes, and her conduct and knowledge with
    respect to them, met the legal test for the directing and controlling mind of
    those companies; and (ii) that the Listed Schedule C Companies participated in
    the fiduciary breach. I turn to these issues now.

(c)

Norma Walton Was the Directing and Controlling Mind Of the Listed Schedule
    C Companies For These Purposes

[59]

A corporation is an abstract legal entity and has no mind or will
    of its own. Consequently, for civil and criminal purposes, its mind or will is found
    in the natural person or persons acting as the directing mind or will of the
    corporation: the ego or alter ego of the corporation; the centre of the
    corporate personality. This theory of corporate identification or
    attribution was first developed by Viscount Haldane L.C. in
Lennards
    Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd
., [1915] A.C. 705, at pp. 713-714,
    a case involving civil fault and negligence. It was explored at length in the
    criminal context by Estey J. in
Canadian Dredge
, at pp. 677-685, and
    has been found to be equally applicable in a civil action in Canada:
Standard
    Investments Ltd. v. Canadian Imperial Bank of Commerce
(1985), 52 O.R.
    (2d) 473 (C.A.), at para. 55, leave to appeal refused, [1986] S.C.C.A. No. 29.

[60]

The corporate identification doctrine was aptly summarized  in
    the civil context, but with the acknowledgement that the alter ego doctrine
    applies with no divergence of approach in civil and criminal matters  by
    Nourse L.J. in
El Ajou
, at pp. 695-696:

This doctrine, sometimes known as the alter ego doctrine, has
    been developed, with no divergence of approach, in both criminal and civil
    jurisdictions, the authorities in each being cited indifferently in the other. A
    company having no mind or will of its own, the need for it arises because the
    criminal law often requires mens rea as a constituent of the crime, and the
    civil law intention or knowledge as an ingredient of the cause of action or
    defence. In the oft-quoted words of Viscount Haldane LC in
Lennards
    Carrying Co. Ltd v. Asiatic Petroleum Co Ltd
:

My Lords, a corporation is an abstraction. It has no mind
    of its own any more than it has a body of its own; its active and directing
    will must consequently be sought in the person of somebody who for some
    purposes may be called an agent, but
who is really the
    directing mind and will of the corporation, the very ego and centre of the
    personality of the corporation
.

The doctrine attributes to the company the mind and will of the
    natural person or persons who manage and control its actions. At that point, in
    the words of Millett J:
[9]

Their minds are its mind; their intention its intention;
    their knowledge its knowledge
. It is important to emphasize that
management and control is not something to be considered
    generally or in the round. It is necessary to identify the natural person or
    persons having management and control in relation to the act or omission in
    point


Decided cases show that, in regard to the requisite status and
    authority,
the formal position, as regulated by the
    companys articles of association, service contracts and so forth, though
    highly relevant, may not be decisive
. Here Millett J adopted a pragmatic
    approach. In my view he was right to do so. [Emphasis added; citations omitted.]

[61]

The Application Judge quoted from the foregoing passage in
El
    Ajou
. However, he stopped at the words Their minds are its mind; their
    intention its intention; their knowledge its knowledge. Significantly, he
    appears to have overlooked the emphasis placed by the court on the importance
    of identifying the natural person or persons having
management
    and control in relation to the act or omission in point
 (emphasis
    added), and the recognition that the formal position, as established in the
    corporate and other related documentation, though highly relevant,
may not be decisive
 (emphasis added). As Iacobucci J.
    put it in
Rhône v. Peter A.B. Widener
, [1993] 1 S.C.R. 497, at p. 521,
    [t]he courts must consider who has been left with the decision-making power in
    a relevant sphere of corporate activity. See also
Meridian Global Fund
    Management Asia Ltd. v. Securities Commission
, [1995] 2 A.C. 500, at p. 507.

[62]

This omission appears to have led the Application Judge to accept
    the formal position set out in the terms of the Schedule C Company
    shareholder agreements as dispositive of whether Ms. Walton was the controlling
    and directing mind of those corporations. The passage from his reasons, cited
    in para. 54 above, confirms that to be the case.

[63]

In reality, however, no one other than Ms. Walton did anything or
    made any decisions respecting the flow of funds that were utilized for the
    acquisition, management, construction and financing of the Schedule C
    Properties. That under the formal corporate documentation and
    shareholder/investor agreements the investors were 50% shareholders and, with
    the Waltons, directors of the Listed Schedule C Companies, and were
    contractually entitled to be consulted on significant decisions that differed
    from the project plan, is of little import when in the here and now the
    Waltons were fraudulently ignoring their obligations to the investors and were
    keeping them in the dark, and when the investors  based on their trust of the
    Waltons and the terms of their agreements  were leaving all management matters
    to the Waltons.

[64]

Had the Application Judge not adopted the approach that he did,
    he would have appreciated that, on any view of the evidence in these
    proceedings  including, it seems, even her own  Ms. Walton was the directing
    and controlling mind of the Listed Schedule C Companies for purposes of the
    acquisition, construction, renovation, financing and management of the Schedule
    C Properties held by the Schedule C Companies and, more particularly, with
    respect to the transfer of source funds from the investors and, in some cases,
    the re-casting of corporate shareholding structuring necessary to effect those
    purposes. Respectfully  adopt[ing] a pragmatic approach, to borrow the expression
    employed in
El Ajou
 it is not open on this record to hold that Ms. Walton
    was not the alter ego and directing and controlling mind of the Listed Schedule
    C Companies, acting within the field of operations delegated to her and as
    the primary representative  through whom [the corporation] act[ed], sp[oke]
    and [thought] for these purposes:
Canadian Dredge
, at p. 682;
R.
    v. St. Lawrence Corp. Ltd.,
[1969] 2 O.R. 305 (C.A.), at p. 317.

[65]

Even the Application Judges own findings reflect his
    acknowledgement that, as a factual matter, Ms. Walton was acting as the sole
    decision-maker for the corporations. He found, at para. 51, that Ms. Walton
    may have acted as if she was the sole decision maker in the Schedule C
    Companies, but she was not. Further, he noted, at para. 71, that Ms. Walton
    managed the day to day affairs of the business and that the investment of
    DeJong was under the complete control of the Waltons.

[66]

That Ms. Walton not only acted as if she were the sole decision
    maker in the Schedule C Companies but was in fact and reality that sole
    decision maker, is amply founded in the record, and in the previous findings in
    the same proceedings made by Brown J. and by the Application Judge himself:

(a) Ms. Walton was a director of
    each of the Schedule C Companies and, from all accounts, the only active
    director and officer.

(b) As found by Brown J. in the
    earlier portion of these same proceedings:

(i) The Schedule C
    Companies were owned and controlled by the Waltons;

(ii)
Norma Walton presented herself to the court
, through her
    affidavits and through her submissions,
as the person who
    was in charge of the entire enterprise
, whether it be the operation of
    the Schedule B companies, Rose & Thistle or
the
    Schedule C Companies
[emphasis added];

(iii) Neither
    Ronauld Walton nor the Chief Financial Officer of Rose & Thistle had come
    forward to say that the improper transfers of monies out of the Schedule B
    Companies were the result of directions or orders given by someone other than
    Norma Walton (from which he inferred that they were not); and

(iv) Ms. Walton
    simply did as she saw fit irrespective of her legal obligations and ignored
    the contractual language that bound her.

(c) The shareholder agreements respecting
    the Schedule B Companies (in which the DBDC Applicants were involved) and the
    Schedule C Companies (in which the Respondents were involved) all provided that
    the Waltons were to be responsible for the management, supervision and
    renovation of the projects.

(d) Ms. Walton deposed before Brown J. that
she
was managing the jointly-owned portfolio of the
    companies, and that she used Rose & Thistle as a clearing house account to
    smooth cash flow across the portfolio.

While the specific reference to the
    jointly-owned portfolio of companies was to the Schedule B Companies in which
    the Waltons and Dr. Bernstein each held a 50% interest, Ms. Walton also acknowledged
    that the funds Dr. Bernstein was advancing to the Schedule B Companies were
    being pooled amongst those companies, then transferred to Rose & Thistle
    and also to the Schedule C Companies.

The Schedule C investors  including the
    DeJongs, the Condos and the Levytams  were unaware this was occurring and did
    not provide any direction or input in these actions.

(e) The Application Judge himself accepted
    the findings of Brown J., including the finding that in many cases the funds
    invested by the DBDC Applicants had been transferred to the Schedule C
    Companies and that the Schedule C Companies were controlled by the Waltons.

(f) The Application Judge noted that he
    could not determine into which companies Schedule B money went,
[i]n light of the way in which Ms. Walton transferred money
    around between the Schedule B and C corporations.
[Emphasis added.]

[67]

In the face of the foregoing, it was a palpable and overriding
    error on the part of the Application Judge, respectfully, to find that Ms.
    Walton was not in fact and reality the directing and controlling mind of the
    Schedule C Companies. The corporate documentation and contractual framework had
    little, if any, bearing on how the Schedule C Companies, and the Listed
    Schedule C Companies in particular, operated, except to provide Ms. Walton with
    her entrée to the corporate levers necessary to work the Waltons scheme.

[68]

In those circumstances, her knowledge and conduct can be attributed
    to the corporations. Ms. Walton exercised complete management and control over
    all relevant actions executed by the Schedule C Companies. To paraphrase from
El
    Ajou
,

for these purposes her mind was their mind; her intention,
    their intention; her knowledge, their knowledge. She was the person through
    whom the corporations
acted
, spoke and thought for
    these purposes:
Canadian Dredge,
at p. 682. In short, her perpetration
    of the scheme was their participation in the scheme.

(d)

Application of the
Canadian Dredge
Criteria

[69]

The Respondents argue that, even so, this is insufficient to fix
    the Listed Schedule C Companies with Ms. Waltons knowledge and fraudulent
    conduct for purposes of establishing civil responsibility, because the criteria
    set out in
Canadian Dredge
 albeit in the context of criminal
    responsibility  have not been met. At pp. 713-714 of that decision, Estey J.
    said:

[I]n my view the identification doctrine only operates where
    the Crown demonstrates that the action taken by the directing mind (a) was
    within the field of operation assigned to him; (b) was not totally in fraud of
    the corporation; and (c) was by design or result partly for the benefit of the
    company.

[70]

Before turning to these criteria, I think it is useful to
    recognize the setting in which they are being considered. The case law has
    applied
Canadian Dredge
in the criminal and civil contexts without
    discrimination. In my view, it does not follow, however, that the criteria need
    be applied in a rigid, identical, fashion in all circumstances. The burden of
    proof is less onerous in civil cases. This particular civil case involves a
    complex multi-real estate transaction investment fraud, perpetrated over an extended
    period of time, and implicating numerous corporate actors (operating at the
    instance of the fraudster) and numerous victims. In these circumstances, it
    makes sense that, of the
Canadian Dredge
criteria, (b) and (c) at
    least may be approached in a less demanding fashion than would be the case were
mens rea
for purposes of establishing criminal responsibility in play.

[71]

Contrary to the view expressed by my colleague, I do not think it
    is the case in such circumstances that the claimant must necessarily show
    evidence of each companys individual benefit from the scheme (at para. 234).
    As noted earlier, and as I shall explain more fully below, liability for
    knowing assistance is fault-based rather than receipt-based and does not
    require the defendant to have obtained a benefit from the defaulting
    fiduciarys breach. To apply criterion (c) of
Canadian Dredge
 by
    design or result partly for the benefit of the company  too strictly therefore
    makes little sense, as it would risk muddying the distinction between the two
    categories of claim.

[72]

In addition, as I develop below, there are sound policy reasons
    for not adopting the narrower view favoured by my colleague. This is consistent
    with the approach recently taken by the Supreme Court of Canada in
Livent
.
    The Court declined to adopt a rigid application of the
Canadian Dredge
criteria in the context of a civil case, emphasizing that the corporate
    identification doctrine is one having its roots in policy considerations: see
Livent
,
    at paras. 100-104.

[73]

In my view, policy considerations support a more flexible
    approach in complex and large, multi-corporation, multi-party fraud cases such
    as the present one, for the reasons I set out below. I do not think, in these
    circumstances, that it matters whether the flexibility is applied at the
    criteria-application phase or the overall-equitable consideration stage of the
    analysis.

(i)

Acting Within the Assigned Field of Operation

[74]


Canadian Dredge
confirms that the attribution of an
    employee/managers conduct or knowledge to a corporation does not turn on
    whether the individual was acting within the scope of his or her employment
    or was off on a frolic of their own in the tortious sense of vicarious liability.
    The test is whether the directing mind is acting within the scope of his [or
    her]
authority

in the sense of acting in the
    course of the corporations business
,

or

with 
reference
    to the field of operations delegated to the directing mind
,

or


within the scope of the area of the work assigned to him [or her]

    (underlining in original; italics added): at pp. 684-685.

[75]

Here, for all the reasons articulated earlier in this decision
    leading to the conclusion that Ms. Walton was the directing and controlling
    mind of the Listed Schedule C Companies, she falls squarely within that
    category of individual.

[76]

In her capacity as the person in charge of the entire
    enterprise, Ms. Walton was acting well within the field of operations
    delegated to her by the shareholder agreements of the Schedule B and C Companies,
    their corporate structures (she was a director and officer), and the conduct of
    the parties. It was her responsibility to complete the transactions by which
    the Schedule C Properties were acquired by the Schedule C Companies, to manage
    the projects, and to arrange for the necessary financings and re-financings.
    That she breached the shareholder agreements by not obtaining the necessary
    consents from the investors and by not providing accurate and timely
    information, that she breached her fiduciary obligations to the DBDC Applicants
    and Dr. Bernstein by misusing and misappropriating the funds they invested in
    the Schedule B Companies, that she breached her obligations to the Respondents
    as well in relation to their investments in the Schedule C Companies, and that
    she perpetrated her fraud on both the Applicants and the Respondents by
    betraying their trust and exercising the corporate powers left to her  none of
    these considerations detracts from the reality that in fact and in law she was
    acting within the field of operations and the area of corporate management
    delegated and assigned to her. Her fraudulent actions in directing the flow of
    monies in and out of the various corporations were carried out within the
    framework of her delegated responsibilities.

[77]

The first
Canadian Dredge
criterion is met.

(ii)

Fraud/Benefit of the Corporation

[78]

The second and third
Canadian Dredge
criteria may be
    considered together. They require that the action taken by the directing mind
    not be totally in fraud of the corporation and that, by design or result, it be
    partly for the benefit of the corporation. In my view, as noted earlier, their
    application may be approached in a broader fashion in circumstances such as these,
    than would be the case in a criminal law context.

[79]

That said, I am satisfied the actions of Ms. Walton do meet those
    requirements, nonetheless. The Listed Schedule C Companies were not totally
    defrauded and, indeed, benefitted at least partly from Ms. Waltons actions.

[80]

Although some of their investors monies were misapplied and
    misused in breach of Ms. Waltons fiduciary duties  as were the investments of
    the DBDC Applicants  the Listed Schedule C Companies nevertheless acquired
    properties, as they were intended to do and as part of the investment
    arrangements. As a result of Ms. Waltons net transfer of at least $23.6
    million from the Schedule B Companies to Rose & Thistle and the net
    transfer of $25.4 million from Rose & Thistle to the Schedule C Companies,
    the latter acquired funding necessary for their ongoing operations; Brown J.
    accepted the Inspectors conclusion that the DBDC Applicants investments in
    the Schedule B Companies [were] a major source of funds for the [Schedule C]
    Companies. The record shows that each of the Listed Schedule C Companies
    either received from or transferred to Rose & Thistle monies or
    monies-worth, during the relevant period. Given the co-mingling of funds, it is
    not possible to trace the complete path of all these transactions; however, Ms.
    Walton herself acknowledged that Rose & Thistle was the clearing house
    for the movement of funds as between the Schedule B Companies, Rose &
    Thistle, and the Schedule C Companies.

[81]

My colleague suggests that a
specific
benefit flowing to
    each Listed Schedule C Company must be identified in order to affix the
    companies with Ms. Waltons knowledge for purposes of knowing assistance. As I
    mentioned briefly earlier in these reasons, there are sound policy reasons, in
    my view, for not adopting a narrow approach on this, and other, issues relevant
    to this appeal. My colleagues approach, in effect, incorporates a tracing
    requirement into the knowing assistance claim, collapsing the distinction
    between knowing assistance and knowing receipt where corporate actors are used
    to assist in breach of fiduciary duty. To do so would mean that justice could
    not properly be done in many cases of massive, multi-corporation, multi-party
    fraud because  as this case demonstrates  the fraudulent co-mingling of funds
    renders it impossible to accomplish that task with the degree of precision
    required for knowing receipt, unjust enrichment or constructive trust.

[82]

My colleagues approach is also influenced
by her view that the

Listed
Schedule C Companies are, themselves,
    victims of the fraud. If that were the case, it may be a consideration in
    determining whether liability may be avoided on overall equity grounds,
    discussed further below. However, I do not think it has much bearing on the
    directing and controlling mind analysis or on the analysis of whether the
    Listed Schedule C Companies in fact assisted and participated in the fraudulent
    breach of fiduciary duty. In addition, as I shall explain later, I do not view
    the Listed Schedule C Companies as being victims of the fraud; rather, their
    investors are the victims of the fraud.

[83]

In
    my view, the foregoing factors are sufficient to meet the second and third
Canadian
    Dredge
criteria, for purposes of establishing that Ms. Walton was the
    directing and controlling mind of the Listed Schedule C Companies, in the
    circumstances of this civil fraud case.

(iii)

The
    Listed Schedule C Companies Participated in or Assisted Ms. Waltons Fraudulent
    Conduct

[84]

It flows from the foregoing that the participation/assistance
    requirement for the claim of knowing assistance has been met as well.

[85]

Ms. Walton crafted and choreographed a scheme to enable her and
    her husband to stay ahead of their obligations to provide 50% of the funding
    for the acquisition of the properties and to otherwise enrich themselves
    personally at the expense of their investors. Focusing on Dr. Bernsteins
    circumstances, Brown J. described the fraud, at para. 278, as the system
    created by the Waltons to circulate and mis-use the [DBDC] Applicants funds. Unbeknownst
    to DeJong, the Condos and the Levytams, it was created to circulate and misuse
    their funds as well.

[86]

Ms. Walton utilized the Schedule C Companies as actors in the
    process of orchestrating her shell game through the Rose & Thistle
    clearing house account. Funds were co-mingled, when they were supposed to be
    kept project-specific. Investors funds (of both the DBDC Applicants and the Respondents)
    were diverted from their intended project or projects to finance the
    acquisition or operations of other projects, or to benefit the Waltons
    personally. Sometimes this was done on the pretext that the Waltons had made
    their contributions through a phantom equity increase in the value of the
    property previously acquired by them. Sometimes it was done on the pretext that
    their contributions had been made in the form of assignment or purchaser agency
    fees, or management fees, or construction and maintenance costs.
[10]
On other occasions, Ms. Walton arranged for the investors to receive preferred
    shareholding positions in different corporations, purportedly in exchange for
    investments made in other investment projects (without revealing that those
    earlier investments had already been lost).

[87]

With two possible exceptions, the record shows that each of the
    Listed Schedule C Companies either received monies directly from or transferred
    monies directly to Rose & Thistle during the relevant period, and were
    therefore engaged as corporate actors in an arrangement that, at the end of the
    day, resulted in a net transfer of over $23 million
from
the DBDC
    Applicants and a net transfer of over $25 million
to
the Schedule C
    Companies.

[88]

The two possible exceptions are St. Clarens Holdings Ltd. and
    Emerson Developments Ltd., the owners of adjoining properties at 777 St.
    Clarens Ave. and 260 Emerson Ave. in Toronto. Nonetheless, the record
    demonstrates that these two corporations were also engaged as actors in the
    overall fraudulent scheme.

Participation by St.
    Clarens/Emerson

[89]

Although title to the two properties was taken in the names of
    the two corporations, respectively, the purchase involved a single transaction.
    In July, 2013, a Walton numbered company entered into an agreement of purchase
    and sale with the owners of the two properties. It is said that an $80,000
    deposit was paid at the time, although the source of those funds is not clear
    from the record. In October, 2013, the Walton numbered company assigned the
    agreement of purchase and sale to Rose & Thistle. Rose & Thistle agreed
    to pay an assignment fee of $225,000 and to reimburse the Walton company for
    the $80,000 deposit.

[90]

On November 18, 2013, the Waltons and DeJong entered into the
    standard type of 50/50 shareholder/management agreement described earlier in
    these reasons with respect to the St. Clarens/Emerson properties. That
    agreement stated that the Waltons had previously entered into an agreement of
    purchase and sale regarding the properties, and had previously provided an
    $80,000 deposit along with due diligence fees of approximately $50,000 related
    to the purchase. A Capital Required document associated with the purchase
    indicated that there was a Purchaser agency fee of $225,000 included as part
    of the purchase costs. Dr. DeJong swore that this fee was never discussed with
    or disclosed to her. The Application Judge accepted this evidence.

[91]

The St. Clarens/Emerson transaction closed on November 26, 2013
    with Rose & Thistle apparently assigning the original agreement of purchase
    and sale to the purchasing corporations. Apart from the possible $80,000
    deposit provided initially by the Walton numbered company  whether those funds
    came from the Rose & Thistle clearing house account is not known  the
    Waltons made no further contributions to the $665,000 shareholder loan they
    were required to contribute. DeJong advanced its $665,000 to St. Clarens
    Holdings and those funds were used to pay the balance due on closing for both
    properties of $252,397.91.

[92]

How the remainder of the DeJong advance was used is not known
    either. While it is not completely clear from the record whether Ms. Walton
    caused the $225,000 Purchaser agency fee  or, assignment fee as it was
    initially characterized in the assignment agreement  to be made in cash to
    Rose & Thistle or to the Walton numbered company, at the very least it is
    clear that St. Clarens Holdings assumed an accrued liability for the purchaser
    agency fee and accepted responsibility to reimburse the Waltons for the $80,000
    deposit.

[93]

The Application Judge found that the payment of $225,000 was
    clearly deceitful and in breach of the fiduciary duties owed by them to DeJong.
    This finding was undoubtedly open to him on the record.

[94]

The point of dwelling on the St. Clarens/Emerson transaction is
    not to analyse whether the corporations benefitted from the fraudulent
    scheme. Indirectly they benefitted because they acquired the properties in the
    course of the scheme. Perhaps they benefitted from the payment of the agency
    fee, which may or may not have represented a justifiable expense; we do not
    know. DeJong suffered a loss because,
vis-à-vis
DeJong, the
    undisclosed fee constituted a deceitful breach of the Waltons fiduciary duties
    to it.

[95]

The point of dwelling on the St. Clarens/Emerson transaction is
    to show that, even though the purchasing Listed Schedule C Companies may not
    have either received monies directly from or transferred monies directly to
    Rose & Thistle, the transaction permitted Ms. Walton to skim off the
    $225,000 unbeknownst to DeJong. It illustrates yet another way in which Ms.
    Walton engaged the Listed Schedule C Companies as actors in her overall
    fraudulent undertaking in breach of her fiduciary obligations to both the DBDC
    Applicants and DeJong.

[96]

Improper as they were, each of these transactions  together with
    all the other in-and-out transactions  required a corporate act of one form or
    another. As the directing mind of the Listed Schedule C Companies for these
    purposes, Ms. Waltons acts were their acts, and the Companies accordingly
    participated in or assisted Ms. Walton in her breach of fiduciary duties to the
    DBDC Applicants.

Additional Arguments Raised
    Against Finding Participation/Knowledge

[97]

For purposes of the participation and knowledge analyses, it
    matters little, in my view, that the DBDC Applicants are unable to demonstrate
    the receipt of any
particular
Schedule B Company funds by any
particular
Listed Schedule C Company (other than the funds with respect to which Brown J.
    previously granted constructive trusts). It is therefore of little significance
    that the net transfer analysis was not intended to, and does not, establish
    such a connection.

[98]

My colleague places considerable emphasis on these points. As she
    puts it, at para. 185 of her analysis, for example, the net transfer analysis
    was never intended to be used for the purpose of establishing a claim by the
    DBDC Applicants against the property of other defrauded investors, and, at
    para. 195, [t]he net transfer analysis does not show where the money went
    after it was transferred into Rose & Thistle, or that any of the net money
    ended up in any particular Walton-controlled account (including any Listed
    Schedule C Company account).

[99]

Respectfully, these concerns are misplaced in the context of a
    claim for knowing assistance.

[100]

First, as I have emphasized, they conflate knowing assistance
    with knowing receipt. If it were necessary to demonstrate the
receipt
of funds by the defendant in order to establish
    a claim for knowing
assistance
, there would be no
    need for the knowing assistance remedy. The claim of knowing assistance is
    designed to capture circumstances where knowing receipt, unjust enrichment,
    or a constructive trust on some other basis cannot be established, but where a
    fault-based remedy is appropriate to compensate for the defendants knowing
    assistance in the perpetration of a fraudulent and dishonest breach of
    fiduciary duty. This is one of those cases. In addition, as mentioned above,
    there are sound policy reasons for not importing a tracing requirement as a
    necessary component of the knowing assistance claim.

[101]

Secondly, while the net transfer analysis may not have been
    suitable for purposes of tracing Schedule B Company funds into particular
    Listed Schedule C Company accounts, it clearly established a net
outflow
from the Schedule B Companies accounts of $23.6
    million. Both Brown J. and the Application Judge made that finding. This is
    relevant for all the various reasons recited above, as well as for the measure
    of the DBDC Applicants damages.

[102]

Nor do I share the view that the Listed Schedule C Companies were
    not participants in Ms. Waltons fraudulent breach because they were victims of
    the same fraudulent scheme and were merely used by Ms. Walton as conduits or
    pawns in the perpetration of that scheme, without the demonstration of receiving
    any benefit themselves.

[103]

My colleague acknowledges that the Listed Schedule C Companies
    may have participated in Ms. Waltons overall fraudulent scheme, in the sense
    that they were used by her in the shell game to co-mingle investor funds, and
    to avoid making her own contributions (at para. 231). She acknowledges that knowing
    assistance does not require a defendant to have received a benefit for these
    purposes (at para. 234). Yet, she concludes that the net transfer analysis
    does not provide the evidence that they participated in her breach of fiduciary
    duty to the DBDC Applicants so as to attract personal liability for knowing
    assistance (at para. 231), and that the issue of benefit is relevant here
    because Ms. Waltons conduct was in fraud of the very entities sought to be
    made liable for knowing assistance (at para. 234).

[104]

This approach conflates the Companies with their investors and
    preferred shareholders, however. It also overlooks the finding that Ms. Walton
    was the controlling and directing mind of the companies and that her intentions
    and conduct were theirs. The
Listed Schedule C
    Companies are not defrauded victims of Ms. Waltons fraudulent scheme; their
    investors and preferred shareholders are the defrauded victims. And, as noted
    above, they did benefit generally from the perpetration of the overall fraud.
    T
he Companies acquired the properties they were created to acquire. They
    received the funds enabling them to do so. As Brown J. found, the DBDC
    Applicants
 investments were used to fund their ongoing
    operations and provided a major source of funds for the Walton Schedule C
    Properties/Companies (at para. 269). It was the way in which the investors
    funds (the DBDC Applicants, as well as those of DeJong and others) were
    fraudulently co-mingled and moved amongst the entire portfolio of properties
    and projects that constituted the fraud. However, it was fraud perpetrated on
    the investors, not on the Listed Schedule C Companies.

[105]

Ms. Waltons breach of fiduciary duty to the DBDC Applicants was
    to cause the funds they invested in the Schedule B Companies to be diverted out
    of those Companies for her own personal use. That the Schedule C investors or
    the Schedule C Companies were also the objects of a similar co-mingling and
    diversion of their funds, is not important for the participation and
    knowledge requirements of the knowing assistance analysis, in my view. For
    the Listed Schedule C Companies to be found liable on that basis, it need not
    be shown that they assisted directly in acts involving the diversion of
    Schedule B Companies funds
into
the Listed
    Schedule C Companies accounts. It need only be shown that they knowingly
    assisted in Ms. Waltons fraudulent and dishonest scheme to divert monies
out of

the Schedule B Companies accounts. It is the overall
    fraudulent scheme, and the Listed Schedule C Companies knowing assistance in
    the perpetration of that shell game that provides the prism through which
    liability for this claim must be determined. The policy considerations
    respecting cases such as this, referred to above, support this analysis, in my
    view.

[106]

It is not an answer to say that a similar claim for joint and
    several damages might be asserted against the Schedule B Companies on the same
    basis. No one is asserting such a claim in these proceedings. And, although the
    Schedule C investors were also victimized in the scheme, it must be remembered
     as found by Brown J., and accepted by the Application Judge  that net funds
    of $23.6 million
flowed out of the Schedule B Companies
into Rose
    & Thistle, and net funds of $25.4 million
flowed out of Rose &
    Thistle

into the Schedule C Companies
. It is the DBDC Applicants,
    not the Schedule C Companies, that suffered the net losses.

[107]

DeJong and the other Respondents raise an additional argument.
    They submit that the fact they had no knowledge of the scheme or breaches
    personally, or in their capacities as lenders to or shareholders of the
    Schedule C Companies, shields the Listed Schedule C Companies from liability
    for knowing assistance. However, it is the knowledge of the
corporation
that is relevant to the establishment of liability, not the knowledge of the
    corporations creditors, shareholders, or its directors or officers other than
    the directing mind. As noted above, the issue is not whether the co-investors
    were co-opted into participating in the scheme; the issue is whether the
    Schedule C Companies knowingly assisted Ms. Walton in carrying out the scheme.

[108]

This principle is illustrated by both
Canadian Dredge
and
El Ajou
.

[109]

In
Canadian Dredge
, the corporation was found to be
    criminally liable on the basis that the knowledge and conduct of its directing
    minds were attributed to it for that purpose, notwithstanding that innocent
    investors might be penalized: see p. 694. At p. 685, Estey J. noted that:

Acts of the ego of a corporation taken within the assigned
    managerial area may give rise to corporate criminal responsibility, whether or
    not there be formal delegation;
whether or not there be
    awareness of the activity in the board of directors or the officers of the
    company
; and, as discussed below,
whether or not
    there be express prohibition
. [Emphasis added.]

[110]

If the existence of an express prohibition forbidding a directing
    mind to do an act is not sufficient, by itself, to avoid corporate criminal
    responsibility, the breach of a shareholder agreement on the part of the
    directing mind cannot be sufficient to avoid corporate civil responsibility. The
    fact that Ms. Walton was carrying out the transactions for a corrupt purpose,
    and not advising her co-investors of the details, does not, in my view, affect
    the attribution of her intentions and actions to the Listed Schedule C
    Companies: see
Meridian Global
, at p. 511.

[111]

In
El Ajou
, a civil case involving corporate liability
    for knowing receipt, the owners of the corporation were completely unaware of
    the fraud perpetrated by the director, who had
de facto
management and
    control in respect of the fraudulent transaction. Nonetheless, the corporation
    was found to be liable.

[112]

The Respondents seek to distinguish
El Ajou
on the basis
    that it applied knowing receipt as opposed to knowing assistance, and that
    constructive knowledge is sufficient to ground liability for the former while
    actual knowledge is required for the latter. In my view,
El Ajou
is
    not distinguishable on that basis. There is nothing to suggest that the
    knowledge the court was attributing to the corporation in that case was
    constructive knowledge. Rather, what was imputed to the corporation was the
actual
knowledge of the directing mind. As Nourse L.J. noted, at p. 695, the person
    found to be the directing mind of the corporation (a Mr. Ferdman) freely
    admitted
that he knew
[of the fraudulent
    transactions in question] (emphasis added). This is the language of actual
    knowledge, not that of constructive knowledge. Constructive knowledge arises
    when a person has knowledge of circumstances that would indicate certain facts
    to a reasonable person, or knowledge of circumstances that would put an honest
    and reasonable person on inquiry: see
Air Canada,
at p. 812
;
    Citadel General
, at para. 22. It was the actual knowledge of Mr. Ferdman
    that was attributed to the corporation as its knowledge.

(e)

The Requirements for Knowing Assistance are Met Here

[113]

For all these reasons, I am satisfied that the DBDC Applicants
    have established the necessary components for a claim of knowing assistance in
    a breach of fiduciary duty: (i) Ms. Walton owed a fiduciary duty to the DBDC
    Applicants; (ii) she breached that duty; (iii) the Listed Schedule C Companies,
    as strangers to the fiduciary relationship, had actual knowledge of both the
    fiduciary relationship and the fraudulent and dishonest conduct of the fiduciary,
    because in the circumstances Ms. Waltons mind was their mind, her intent their
    intent, and her knowledge their knowledge; and (iv) for similar reasons, the Listed
    Schedule C Companies participated in or assisted Ms. Waltons fraudulent and
    dishonest conduct.

C.

JOINT AND SEVERAL LIABILITY FOR DAMAGES

[114]

The Respondents make an additional argument, based on equitable
    grounds. They submit that to give effect to the claim for damages based on knowing
    assistance in the circumstances of this case would be to:

[Stretch] the bounds of equity in ways not contemplated by the
    goals of restitutionary proprietary remedies. That is particularly so in the
    face of investors that actually put funds into these particular Schedule C
    Companies.

[115]

The argument is misconceived in this context, however. It
    conflates a claim for damages with a claim for a proprietary remedy and, in
    particular, the claim for knowing assistance with the claim for knowing receipt.
    As I shall explain more fully, knowing assistance is not a remedy grounded in
    the principles of restitution or proprietary remedies. The DBDC Applicants are
    not seeking, at this stage, a restitutionary or proprietary-based remedy in
    respect of any of the Schedule C Properties (over and above the constructive
    trusts earlier granted by Brown J. with respect to certain of those Companies).
    They seek only a remedy in damages.

[116]

Brown J. granted the DBDC Applicants a tracing order against the
    Listed Schedule C Companies to further the evidence available to support their
    claim for unjust enrichment. By the time the issue came before the Application
    Judge, however, the DBDC Applicants had decided to forego the tracing exercise
    and any claim to a proprietary interest in the Schedule C Properties held by those
    companies. Instead, they asserted only their claim for damages on a joint and
    several basis for knowing assistance and/or receipt.

[117]

As noted earlier in these reasons, liability for knowing
    assistance  unlike knowing receipt  does not depend upon the receipt of
    property, and the measure of recovery does not depend upon the value of any
    property obtained by the stranger as a result of the breach of the fiduciarys
    obligations. Whereas the essence of liability for knowing receipt is unjust
    enrichment, the gravamen of liability for knowing assistance is simply knowing participation
    or assistance in the breach in furtherance of the defaulting trustee or
    fiduciarys fraudulent and dishonest conduct:
Gold v. Rosenberg
, at
    para. 41;
Citadel General
, at paras. 46-47.

[118]

La Forest J. addressed this dichotomy in
Citadel General
,
    underscoring the importance of distinguishing between the knowing assistance
    and knowing receipt claims, and their underpinnings. After referring to a
    passage from the judgment of Millett J., the judge of first instance in the
Agip
    (Africa) Ltd.
case, La Forest J. said, at paras. 46-47:

In other words, the distinction between the two categories of
    liability is fundamental: whereas the accessorys liability is fault-based,
    the recipients liability is receipt-based. In an extrajudicial opinion,
    Millett J. described the distinction as follows:

the liability of the accessory is limited to the case
    where the breach of trust in question was fraudulent and dishonest; the liability
    of the recipient is not so limited. In truth, however, the distinction is
    fundamental; there is no similarity between the two categories.
The accessory
is a person who either never received the
    property at all, or who received it in circumstances where his receipt was
    irrelevant. His
liability cannot be receipt-based. It is
    necessarily fault-based, and is imposed on him not in the context of the law of
    competing priorities to property, but in the application of the law which is
    concerned with the furtherance of fraud
. [Footnotes omitted.]

Tracing the Proceeds of Fraud [(1991), 107 L.Q.R. 71],
supra
,
    at p. 83.

The same view was expressed by the Privy Council in
Royal
    Brunei Airlines Sdn. Bhd. v. Tan
, [1995] 3 W.L.R. 64, at p. 70: 
Different considerations apply to the two heads of liability. Recipient
    liability is restitution-based; accessory liability is not
. These
    comments are also cited with approval by Iacobucci J. in
Gold
,
supra
,
    at para. 41. [Emphasis added.]

[119]

In a scholarly article written prior to his appointment to the
    bench, Intermeddlers or Strangers to the Breach of Trust or Fiduciary Duty
    (1998) 21 Advocates Q 94, at p. 107, Paul M. Perell put it this way:

To be liable for knowing assistance, the stranger
must have actual knowledge
of the trustees or
    fiduciarys dishonest or fraudulent act
but, beyond being
    shown to have participated in that design
, the third party  need not
    necessarily be shown to have acted in a fraudulent or dishonest fashion. And
the stranger need not have taken or held any property
.
    [Emphasis added.]

[120]

The Respondents argue that they were innocent investors who had
    no knowledge of Ms. Waltons fraudulent and dishonest ways, and that in the
    contest between two sets of equally innocent victims of the Waltons fraud it
    would not be equitable to grant an award of damages in favour of the DBDC
    Applicants, thereby placing Dr. Bernstein and his companies, as judgment
    creditors, in a more advantageous position over them as shareholders of the Listed
    Schedule C Companies or as creditors. The Application Judge appears to have
    accepted this contention, noting at para. 51 of his reasons that [t]here is no
    evidence that the other investors were aware of the fraudulent conduct of Ms.
    Walton, and stating, at para. 52 that:

The issue raised by the [DBDC Applicants] is not a contest
    between Dr. Bernstein and the Waltons. It is a contest between Dr. Bernstein
    and the investors in the Schedule C Companies who suffered from the same
    misconduct as did Dr. Bernstein. Ms. Walton knowingly breached her fiduciary
    obligations to the Schedule C Companies and the Schedule C investors.

[121]

That is not the point, however. As noted earlier, it is the knowledge
    of the Listed Schedule C Companies  the strangers to the fiduciary
    relationship in this case  rather than the knowledge of their investors or
    shareholders that is relevant in assessing the claim for knowing assistance. And,
    to repeat the words of Millett J., cited with approval in
Citadel General
,
    at para. 46, liability for knowing assistance is necessarily fault-based, and
is imposed on [the knowing accessory] not in the context of the
    law of competing priorities to property, but in the application of the law
    which is concerned with the furtherance of fraud
 (emphasis added).

[122]

It is because of the distinction between the underpinnings of the
    knowing assistance and knowing receipt claims that the knowledge requirement is
    different  actual knowledge, for knowing assistance; constructive knowledge,
    for knowing receipt. But it is also for this reason, in my opinion, that
    discretionary considerations pertaining to the application of a trust-imposed
    proprietary remedy are of considerably less significance when the claim of the
    knowing assistance plaintiff arises, as it does here, in damages.

[123]

While I need not go so far as to say that a court may never
    exercise a discretion to decline a remedy where the four criteria for
    establishing liability for knowing assistance have been met, I find it hard to
    conceive of a case where  in the face of a defendants participation or assistance
    in a fraudulent and dishonest scheme perpetrated by a fiduciary and with actual
    knowledge of both the fiduciary relationship and the fraudulent and dishonest
    scheme  a court would do so. It is the role of equity and the courts to guard
    against such an outcome and not to sanction such conduct.

[124]

It is true here that the Schedule B Companies money cannot be
    directly traced into the Listed Schedule C Companies (with the exception of
    those against which Brown J. awarded a constructive trust). However, these
    Listed Schedule C Companies transferred money to and from Rose & Thistle as
    a part of the scheme orchestrated by the Waltons or assumed liability in favour
    of Rose & Thistle as part of the scheme. As well, it is worth repeating
    that the Schedule C Companies were significant net beneficiaries in the flow of
    funds emanating from the pooling and co-mingling of the various investors
    monies.

[125]

Because I do not view the Listed Schedule C Companies as
    themselves victims of the fraud, I see no basis for excusing them from fault
    on the ground that they were simply caught up in, and used, as part of the
    wrongdoers wrongful scheme. They remained, nonetheless, participants and
    actors in the perpetration of that scheme. Nor do I think it significant, as my
    colleague notes, that the DBDC Applicants have adopted the practical choice of
    pursuing only those Schedule C Companies that may have assets against which to
    recover. While reasons relating to the likelihood of recovery under a judgment
    or order may explain why proceedings are taken against certain parties, those
    reasons should not be confused with reasons underlying liability giving rise to
    the judgment. In the result, I do not see any overriding equitable
    considerations that militate against application of the knowing assistance
    remedy in the circumstances of this case.

[126]

For these reasons, I am satisfied that, once it is determined
    that the Listed Schedule C Companies knowingly participated in the fraudulent
    and dishonest breach of fiduciary duty by the Waltons, the DBDC Applicants are
    entitled to an award of damages against them as knowing accessories to the
    breach. As I have explained above, the Listed Schedule C Companies did so
    because Ms. Waltons knowledge and actions are to be attributed to them as their
    own.

[127]

The appropriate measure of damages in the circumstances is the
    loss caused to the DBDC Applicants by the dishonest fiduciarys fraudulent
    scheme arising from the participation and assistance of the Listed Schedule C
    Companies in that scheme. That is because liability for knowing assistance is
    fault based and is measured by the loss flowing from the fault. As Perell
    summarized it in the article cited earlier in these reasons, at p. 113:

One very significant difference arising from the different
    rationales is that the beneficiarys recovery from knowing receipt may be less
    than the recovery from knowing assistance. This follows because, under the
    doctrine of knowing receipt, the defendants liability is measured by his
    unjust enrichment while,
under the doctrine of knowing
    assistance, the defendants liability is measured by the plaintiffs injury
    consequent to the trustees misconduct.
The plaintiffs injury may
    exceed the defendants benefit. [Emphasis added.]

[128]

In this case, the loss is measured by the net transfer to the
    Schedule C Companies, globally, of $22.6 million.

[129]

Once it is established that the Listed Schedule C Companies are
    each liable for knowingly assisting Ms. Walton in the global scheme in breach
    of her fiduciary obligations to the DBDC Applicants, it follows in the
    circumstances that the Listed Schedule C Companies are jointly and severally
    liable for the losses sustained: see
Enbridge Gas
, at para. 31. In
    that case, this Court upheld the trial judges finding that the defendants were
    jointly and severally liable for the full extent of the losses sustained by
    Enbridge even though the defendants played different roles in assisting in the
    fraud and received unequal portions of the misappropriated funds. I see no
    basis for departing from that same line of reasoning.

[130]

While the DBDC Applicants are entitled to an award of damages in
    the amount of $22.6 million against the Listed Schedule C Companies, they are
    not entitled to make a double recovery. The net transfer analysis was prepared
    in relation to the Schedule B and Schedule C Companies. Brown J. awarded
    constructive trusts in favour of the DBDC Applicants against eight Schedule C
    Properties, for a total of $8,128,325 (of which, we are advised, the amount of
    $1,192,150 has been recovered). The constructive trusts were awarded in cases where
    the Inspector was able to trace funds from a Schedule B Company, through Rose
    & Thistle, and into a Schedule C Company, and the Schedule C Company used those
    funds in respect of a Schedule C Property. Those funds were necessarily part of
    the larger $23.6 million (less a $1 million reduction for management fees) that
    was transferred out of the Schedule B Companies.

[131]

It follows, therefore, that any amounts actually recovered by the
    DBDC Applicants pursuant to the constructive trusts awarded by Brown J. must be
    applied in reduction of the damage award. I understand the DBDC Applicants to
    accept that conclusion.

[132]

In the result, I would give effect to the ground of appeal
    respecting the DBDC Applicants claim for damages against the Listed Schedule C
    Companies on a joint and several basis, subject to the foregoing caveat.

D.

THE DEJONG CLAIM FOR CONSTRUCTIVE TRUSTS

[133]

The Application Judge granted constructive trusts in favour of
    DeJong over four Schedule C Properties owned by the four DeJong Companies in
    the following amounts:

3270 American Drive (United Empire Lands Ltd.)                  $769,543.60

324 Prince Edward Drive (Prince Edward Properties)  $741,501.97

777 St. Clarens Avenue (St. Clarens Holdings Ltd.)/                              
    260 Emerson Avenue (Emerson Developments Ltd.)     $665,000.00

Total     
       $2,176,045.57

[134]

These properties have since been sold, and the Manager holds the
    proceeds from their sale. The DeJong constructive trust against 3270 American
    Drive ranks subsequent to the constructive trust earlier granted by Brown J. in
    favour of the DBDC Applicants. It exhausts the funds currently held by the
    Manager from the sale of that property. The amounts granted as constructive
    trusts in favour of DeJong respecting the remaining three properties also
    exhaust the funds available from their sale. On that basis, the DeJongs would thus
    recover more than 50% of their lost investments.
[11]


[135]

The DBDC Applicants contest these constructive trust
    dispositions. They submit that the Application Judge erred in granting the
    constructive trusts in favour of DeJong, arguing that:

(a)

there was no unjust enrichment
    at the expense of the DeJong Companies resulting from the misappropriation of
    the DeJong investments;

(b)

the diverted DeJong investments
    could not be linked to the acquisition, preservation, maintenance or
    improvement of any property owned by a DeJong Company;

(c)

DeJong had other available
    remedies as against the Waltons and the DeJong Companies; and

(d)

the interests of other
    creditors and third parties would be adversely affected by the award of a
    proprietary remedy in priority to all other claims.

[136]

The Application Judge did not grant constructive trusts over the
    properties owned by the DeJong Companies on the basis of unjust enrichment. In
    the case of 3270 American Drive, this was because the equity funds advanced by DeJong
    for the purchase of that property were diverted elsewhere and not used for that
    purpose (it was Dr. Bernsteins investments that were improperly diverted and
    used to purchase 3270 American Drive, leading to the granting of a constructive
    trust in the DBDC Applicants favour over the property). In the case of 324 Prince
    Edward Drive, 260 Emerson Avenue and 777 St. Clarens Avenue, the DeJong monies
    were utilized, in part, for the purchase of the respective properties, but this
    did not constitute an unjust enrichment because the funds were intended to be
    used for that purpose.

[137]

Instead, the Application Judge granted constructive trusts in
    favour of DeJong against the foregoing properties as a remedy for breach of
    fiduciary duty. In doing so, he relied upon the well-accepted principle that a
    constructive trust remedy is not restricted to circumstances in which there has
    been an unjust enrichment, but may be imposed as well to hold persons in
    different situations to high standards of trust and probity and prevent them
    from retaining property which in good conscience they should not be permitted
    to retain, and can aris[e] on breach of a fiduciary relationship:
Soulos
    v. Korkontzilas
, [1997] 2 S.C.R. 217, at paras. 17 and 19.

[138]

However, in
Indalex Ltd., Re
, 2013 SCC 6, [2013] 1
    S.C.R. 271, the Supreme Court of Canada revisited the factors to be taken into
    account by a court when imposing a constructive trust as a remedy for breach of
    fiduciary duty. Speaking for the majority on this point, Cromwell J. held at
    para. 227 that a remedial constructive trust for a breach of fiduciary duty is
    only appropriate if the wrongdoers acts give rise to an identifiable asset
    which it would be unjust for the wrongdoer (or sometimes a third party) to
    retain.
[12]
Concurring on this point, Deschamps J. affirmed, at para. 78, that [i]t is
    settled law that proprietary remedies are generally awarded only with respect
    to property that is directly related to a wrong or that can be traced to such
    property.

[139]

The decision whether to impose a constructive trust is
    discretionary, and there is no question that a judge of first instance is
    entitled to considerable appellate deference in the exercise of that
    discretion, absent an error in principle. Respectfully, I have come to the
    conclusion that the Application Judge erred in principle in two respects when
    he imposed a constructive trust in favour of DeJong in these circumstances:
    first, in his failure to apply the
Indalex
principle that the fiduciarys
    wrongful acts must give rise to an identifiable asset; secondly, in his failure
    to give effect or consideration to the interests of other creditors and third
    parties, and to the fact that DeJong had other remedies available to it.

(1)

The Application Judge Failed to Apply
Indalex


[140]

Drawing upon the Courts earlier decision in
Soulos
,
    Cromwell J. in
Indalex
, at para. 228, reiterated the four conditions
    that must be present before a remedial constructive trust may be ordered for
    breach of fiduciary duty:

(1) The defendant must have been under an equitable obligation,
    that is, an obligation of the type that courts of equity have enforced, in
    relation to the activities giving rise to the assets in his hands;

(2) The assets in the hands of the defendant must be shown to
    have resulted from deemed or actual agency activities of the defendant in
    breach of his equitable obligations to the plaintiff;

(3) The plaintiff must show a legitimate reason for seeking a
    proprietary remedy, either personal or related to the need to ensure that
    others like the defendant remain faithful to their duties; and

(4) There must be no factors which would render imposition of a
    constructive trust unjust in all the circumstances of the case; e.g., the
    interests of intervening creditors must be protected.

[141]

Referring to (2) above, Cromwell J. went on to add, at para. 230:

To satisfy the second condition, it must be shown that
the breach

resulted in
the assets being in [the
    wrongdoers] hands,
not simplythat there was a
    connection between the assets and the process in which [the wrongdoer]
    breached its fiduciary duty
. [Underlining added; italics in original.]

[142]

Here, the confusion arises because, while part of the DeJong
    investments were wrongfully diverted by Ms. Walton from the DeJong Companies to
    other uses (that could not be identified because of the pooling and co-mingling
    of funds), significant portions of the investments were used for precisely the
    purposes for which they were intended: they were utilized in the acquisition of
    the four DeJong Properties identified above. In short, the wrongdoing
vis-à-vis
DeJong did not give rise to the acquisition of those assets, although overall
    there may have been a connection between them and the process through which
    the wrongdoing took place.

[143]

The Application Judge does not appear to have taken these
    considerations into account in arriving at his decision to impose a
    constructive trust in favour of DeJong, yet they posed a clear impediment to
    the courts ability to do so in the circumstances, in my view. It is not enough
    to say that DeJong monies were used in the acquisition of the properties (the
    monies were intended to be used for that purpose). Nor is it sufficient to say
    for purposes of imposing a proprietary remedy  as the Application Judge does 
    that Ms. Walton breached her fiduciary obligations to DeJong by wrongfully
    transferring monies
out of
the DeJong Companies (the wrongful transfer
    did not give rise to an identifiable asset); or that the Waltons failed to
    comply with their agreements to provide capital for the acquisitions (those
    failures, similarly, did not result in the acquisition of the properties); or
    that they failed to comply with their obligations to manage the properties (a
    failure to manage would not generally give rise to a proprietary claim); or,
    simply, that the breach of fiduciary obligation led to the loss of the DeJong
    investments (the breach did not lead to the loss of the properties in question).

(2)

The Application Judge Failed to Consider the Circumstances

[144]

The DBDC Applicants submit as well that in an insolvency context (as
    is the case here) the availability of other remedies and the adverse impact of
    imposing a proprietary remedy on other creditors and parties need to be taken
    into account in determining whether to impose a constructive trust. The
    Application Judge did not do so, they argue.

[145]

There are other creditors in the proceedings. A summary of the
    proposed payments accepted to date in the Claims Process indicates that the Receiver/Manager
    has accepted approximately $60,000 in secured claims (principally from the Canada
    Revenue Agency) and approximately $205,000 in unsecured claims.
[13]
These claims are dwarfed by the claims at issue in these proceedings: Dr.
    Bernstein and the DBDC Applicants claim approximately $66 million against the
    Waltons and an included $22.6 million against the Listed Schedule C Companies;
    approximately $4 million is claimed by DeJong; and $160,000 by the Condos.
[14]
The claims by Dr. Bernstein and the DBDC Applicants themselves similarly dwarf
    the DeJong and Condos claims.

[146]

It is significant that DeJong and the Condos did not advance
    their funds directly on the acquisition of the properties. They advanced their
    monies to the Schedule C Companies, either as equity investments (the Condos in
    Cecil Lighthouse; DeJong in United Empire Ltd.), or as shareholder loans
    (DeJong in respect of Prince Edward Properties, St. Clarens Holdings and Emerson
    Developments).
[15]
They each have remedies in those respective capacities.

[147]

With a minor exception concerning the St. Clarens and Emerson
    companies, the Waltons shares in the DeJong Companies have been cancelled,
    leaving DeJong as the overwhelming majority shareholder of United Empire,
    Prince Edward Properties, St. Clarens and Emerson. Those corporations owned the
    Schedule C Properties against which DeJong is claiming constructive trusts, and
    whose proceeds from sale are currently being held by the Manager. DeJong
    remains an unsecured creditor on the basis of its shareholder loans, and may well
    have a personal remedy against the Waltons. Granting a constructive trust over
    the properties, as a remedy for breach of fiduciary duty, would enable DeJong
    to leapfrog over other creditors in its capacity as a lender by obtaining a
    proprietary remedy not available to other creditors.

[148]

Although the Application Judge did not refer specifically to the relevance
    of other creditors or other remedies available to DeJong, I am not prepared to
    assume that he ignored them, experienced Commercial List judge that he was.
    Indeed, I suspect that these factors were the very ones driving his decision.
    He would well have recognized that the claims of the DBDC Applicants would
    overwhelm those of DeJong in an insolvency competition. Although the DBDC
    Applicants outstanding losses exceed $66 million and their recovery has been
    limited to only approximately $13 million, they have nonetheless made
some
recovery. DeJong will recover very little in a priorities contest among
    creditors.

[149]

In my view, however, it is not enough to say, simply, that,
    because different groups of investors have been victims of an overall
    fraudulent scheme involving the acquisition of various commercial properties,
    and one group of investors is entitled to a constructive trust against certain
    of those properties to which their funds can be traced, the other group of
    investors is in equity entitled to a proprietary remedy against those or other
    properties in order to achieve some similar recovery in an attempt to be
    equitable. I do not see the foregoing factors as justifying the imposition of a
    proprietary remedy, for the benefit of the latter group of investors/creditors
    and to the prejudice of others, where the fiduciary breach did not directly
    relate to the acquisition of the properties in question.

[150]

For these reasons, I conclude that the granting of constructive
    trusts in favour of DeJong over the properties owned by the DeJong Companies
    cannot stand.

E.

THE COSTS
    AWARD

[151]

Given my conclusions with respect to the joint and several
    damages award and the constructive trust issues, it follows that the costs
    award below will need to be reconsidered.

DISPOSITION

[152]

For the foregoing reasons, I would allow the appeal and set aside
    the parts of the Judgments and Orders of the Application Judge, dated September
    23, 2016, holding that the Listed Schedule C Companies are not jointly and
    severally liable to the DBDC Applicants, granting constructive trusts in favour
    of DeJong, and awarding costs against the DBDC Applicants in favour of DeJong,
    the Condos and the Levytams. In their place I would order that:

(a)

the Listed Schedule C Companies
    are jointly and severally liable to the DBDC Applicants in the amount of
    $22,680,852, subject to the provision that any amounts recovered by the DBDC
    Applicants on account of the constructive trusts ordered by Brown J. in
    relation to Schedule C Properties shall be applied in reduction of that amount;

(b)

the respondent Christine DeJong
    Medicine Professional Corporation is not entitled to constructive trusts over
    the properties known as 3270 American Drive, Mississauga, Ontario; 324 Prince
    Edward Drive, Toronto, Ontario; 777 St. Clarens Avenue, Toronto, Ontario; and
    260 Emerson Avenue, Toronto, Ontario; and

(c)

leave be granted to appeal the
    costs portion of the Judgments and Orders and the costs order, and that the
    costs order be set aside and remitted for reconsideration in view of the
    foregoing dispositions.

[153]

If the parties are unable to agree on the costs below, and
    because the Application Judge has since retired, the parties may make succinct
    written submissions to this Court respecting those costs within 30 days of the
    receipt of this decision.

[154]

This has been a contest between innocent victims of a fraud. I do
    not think this is an appropriate case for costs on the appeal.

R.A. Blair J.A.

I agree E.A.
    Cronk J.A.

van Rensburg J.A.
    (Dissenting):

OVERVIEW

[155]

I have had the opportunity to read the detailed
    and thoughtful reasons of my colleague, Blair J.A. With respect, and for the
    reasons that follow, I am unable to agree with his proposed disposition of the
    DBDC Applicants appeal.

[156]

I agree that Norma Walton was in breach of the fiduciary
    duties she owed to the DBDC Applicants, a point of departure that was not
    disputed by anyone on the appeal. And I agree with my colleagues conclusion,
    and that of the Application Judge, that the DBDC Applicants are unable to
    establish the liability of the Listed Schedule C Companies for knowing receipt.

[157]

Where I part company with my colleague, is in
    his conclusion that the Listed Schedule C Companies participated in or assisted
    Ms. Walton in the breach of her fiduciary duties to the DBDC Applicants, and in
    awarding damages of $22.6 million against these ten companies.

[158]

In my opinion, liability for knowing assistance
    in this case cannot be made out. It accepts, as evidence of both the Listed
    Schedule C Companies participation in Ms. Waltons breach of fiduciary duty,
    and the measure of the appellants damages, the net transfer analysis, a
    summary of cash transfers that was performed by the Inspector at an earlier
    stage in the oppression proceedings against the Waltons, for an entirely
    different purpose. It equates a Listed Schedule C Companys participation as a
    victim in Ms. Waltons shell game to participation in a breach of fiduciary
    duty. It imputes to the Listed Schedule C Companies Ms. Waltons conduct and
    intent, where her actions defrauded them, and were for her own personal
    benefit. And it uses as a measure of damages the sum of $22.6 million, which does
    not correspond with any proven benefit to or harm caused by any Listed Schedule
    C Company, but is simply the net amount transferred in a three-year period from
    the Schedule B Companies to Rose & Thistle (without regard for its source
    or whether any of the funds ended up in a Listed Schedule C Company).

[159]

A judgment for $22.6 million against the Listed
    Schedule C Companies would enable the DBDC Applicants to share as unsecured
    creditors in the proceeds of sale of each of ten Schedule C Properties, after
    satisfying the constructive trust claims they have made out against some of the
    properties. This judgment, which purports to reflect the collective losses of
    the 29 DBDC Applicants, will overwhelm the claims of the investors in the ten
    Listed Schedule C Companies, who were victims of the Waltons in the same way as
    the appellants. As my colleague notes, this is a priorities dispute, however,
    the effect of a judgment for damages in their favour is that the DBDC
    Applicants will receive the lions share of the net proceeds of sale of
    properties to which, except for the funds that have been traced and in respect
    of which they have already been awarded constructive trusts, they made no
    contribution.

[160]

I cannot agree with this result. In my view, the
    participation element of the fault-based claim of knowing assistance is not
    made out on this record. And, in this case of first impression for our court - where
    a claim of knowing assistance in a breach of fiduciary duty is made by one
    group of defrauded investors against another similarly situated group - there
    is no reason to expand the equitable claim of knowing assistance beyond its
    proper bounds.

[161]

I would therefore dismiss the DBDC Applicants
    appeal after concluding that they are not entitled to judgment for $22,680,852
    or for any amount against the Listed Schedule C Companies for knowing receipt
    or knowing assistance in Norma Waltons breaches of fiduciary duty to the DBDC
    Applicants.

OUTLINE OF THESE REASONS

[162]

I will begin my discussion by identifying two
    general concerns that will serve to inform later parts of my analysis.

[163]

First, the knowing receipt and knowing
    assistance claims were late-breaking add-ons to the oppression proceedings
    against the Waltons. I do not agree that they were, as the DBDC Applicants
    contend, part of the deferred relief that was already before Brown J. It is
    important to recall what was at issue and determined in the earlier proceedings
    to ensure that the Listed Schedule C Companies are not simply carried along as
    part of the collective wrong of the Waltons against the DBDC Applicants, and so
    that the focus, as it should be, is on whether any or all of the Listed
    Schedule C Companies was a knowing participant in Ms. Waltons breaches of the
    fiduciary duties she owed to the DBDC Applicants. As such, I find it necessary
    to review the proceedings leading up to the decision under appeal.

[164]

Second, since the DBDC Applicants claims
    against the Listed Schedule C Companies depend on the courts acceptance of the
    net transfer analysis, its purpose and limitations must be understood. The
    net transfer analysis served a specific function in the oppression proceedings,
    to demonstrate the Waltons fraud on the DBDC Applicants. I will explain why it
    was never intended to serve as the basis for personal claims against the Listed
    Schedule C Companies, and why, in my view, it is ill-suited to this purpose.

[165]

After addressing these two related contextual
    points, I will turn to the two claims on appeal. I will explain briefly why I
    agree with my colleague that the DBDC Applicants cannot succeed in their claim
    of knowing receipt. I will then turn to knowing assistance and explain why I am
    unable to agree that the Listed Schedule C Companies are liable for having
    knowingly assisted in Ms. Waltons breaches of the fiduciary duties she owed to
    the DBDC Applicants.

THE EVOLUTION OF THE DBDC
    APPLICANTS CLAIMS AND THE LATE-BREAKING CLAIMS FOR DAMAGES AGAINST THE LISTED
    SCHEDULE C COMPANIES

[166]

The point of departure is that the DBDC
    Applicants and the Listed Schedule C Companies (and their investors) were all
    victims of the fraud perpetrated by the Waltons.
[16]
The DBDC Applicants are 29
    investment companies controlled by Dr. Bernstein that, in turn, invested in the
    34 single-purpose Schedule B Companies, which were to acquire, hold and
    maintain commercial real estate properties. Dr. Christine DeJong and her
    husband, Michael, and Dennis and Peggy Condos and other investors did the same,
    through their personal investment companies, investing in the ten Listed
    Schedule C Companies.
[17]

[167]

As my colleague describes the scheme, at para.
    3, instead of investing their required 50% in the investment companies, the
    Waltons moved money among the accounts of the investment companies and their
    personal accounts, using as a clearing house the bank account of their
    wholly-owned company Rose & Thistle, in a shell game designed to avoid
    their obligations and to further their own personal interests.

[168]

The contest throughout the proceedings, except
    for the recent chapter that is the subject of this appeal, was exclusively
    between the DBDC Applicants and the Waltons. The proceedings, commenced in 2013
    as an oppression application, sought to establish the Waltons fraud and to
    obtain an accounting and recovery of the monies they advanced and lost. As
    such, the respondents were the Waltons, Rose & Thistle and Eglinton Castle
    Inc. (the Walton respondents). The Schedule B Companies (in which Dr.
    Bernstein, through the DBDC Applicants, invested with the Waltons) were listed
    in a schedule to the Notice of Application and named as respondents to be bound
    by the result (hence their definition as Schedule B Companies). And 16
    properties into which the Waltons were alleged to have diverted the DBDC
    Applicants money (including their home on Park Lane Circle) were identified in
    a schedule to the Notice of Application (hence their definition as Schedule C
    Properties). Other parties who may have invested in those properties
    (including the DeJongs, the Condos and the Levytams) were not parties to the
    proceedings, as the DBDC Applicants only sought to trace their funds into the
    Waltons interests in such properties.

[169]

When the case came before Brown J. in July 2014
    (with reasons released August 12, 2014), it was a chapter in the on-going
    litigation between Dr. Bernstein and the Waltons concerning the need for the
    respondents to account for funds, and to be held accountable for funds,
    invested by Dr. Bernstein and his companies with them (Brown J. Reasons, at
    para. 2). None of the Schedule C Companies were parties to the proceedings at
    this point,
[18]
although the court considered a motion by Dr. DeJongs corporations seeking
    relief in respect of one Schedule C Property, 3270 American Drive, Mississauga,
    in which they had invested, including seeking approval of a settlement
    agreement with the Waltons.

[170]

Brown J. considered the evidence, including the Inspectors
    reports and net transfer analysis (discussed below) and, after rejecting
    almost all of the Waltons evidence contending that the DBDC Applicants funds
    had been used for legitimate purposes, he concluded that the Waltons were
    liable to the DBDC Applicants for damages for breach of contract, unlawful
    misappropriation and unjust enrichment. Because the measure of damages for
    each cause of action would be different, Brown J. deferred the assessment of
    damages to another day for further argument.

[171]

Brown J. also granted constructive trusts in
    respect of eight Schedule C Properties into which the Inspector had traced
    money from the DBDC Applicants. This relief was opposed by the Waltons, who
    filed and relied on the affidavits and statements of Dr. DeJong and 30 other
    investors, attesting to the value of their investments in five Schedule C
    Properties.
[19]
Brown J. appointed the Inspector as Receiver or Manager with power to sell the
    Schedule B Properties and the Schedule C Properties. At para. 271 he stated:

While at this point of time the tracing analysis has not
    progressed to the stage to enable the granting of specific, fixed amount
    constructive trusts over the other Schedule C Properties, the evidence
    justifies the appointment of a receiver over all Schedule C Properties in order
    to sell them and deal with the competing claims against the proceeds of sale,
    including the Applicants' strong claims of constructive trusts over the
    remaining Schedule C Properties.

[172]

Brown J. ordered the Schedule C Companies that
    owned the Schedule C Properties to provide the manager with full access to
    their books and records, so that a full tracing of the [DBDC Applicants]
    funds [could] occur (at para. 278). Until that point, the Inspector/Manager
    did not have access to any Schedule C Company accounts.

[173]

Brown J. also appointed the Inspector as the
    Waltons receiver
noting, at
    para. 231, that the appointment was necessary
to ensure that the Waltons could not dispose of their Schedule C property

until proper consideration [could] be given to [the
    DBDC applicants] claims and

the respective interests
    of all creditors of the Waltons.

[174]

Brown J. anticipated that the DBDC Applicants,
    armed with the Receivers additional powers, would seek to trace their funds
    into additional Schedule C Properties, apart from the ones in which
    constructive trusts were already awarded, and that the Receiver, after selling
    the properties, would deal with the claims. He left the issue of priority of
    claims between creditors in respect of the proceeds of disposition of a
    Schedule C Property to be addressed in the claims process
for that
    Property.
He refused to enforce the settlement agreement
    between the Waltons and the DeJongs and concluded that the legal entitlement,
    if any, of the DeJongs, as preferred shareholders, to the proceeds from the
    sale of 3270 American Drive should be dealt with in the claims process for that
    property

(at paras.
    263, 271 and 289).

[175]

The DBDC Applicants contend that the attendance
    before Newbould J. in June 2016 was for deferred relief. This is true, but only
    in the sense that Brown J. had deferred the determination of the DBDC
    Applicants damages against the Waltons. There was no deferred relief in
    respect of the Listed Schedule C Companies, because they were not yet parties
    to the litigation and no claims for damages had been asserted against them when
    the matter was before Brown J. While Brown J. granted a motion to amend the
    Notice of Application, it was not until the Notice of Application was amended
    by Newbould J. that the Listed Schedule C Companies were joined as parties, a
    cause of action was pleaded, and damages were claimed against them.
[20]

[176]

In his reasons dated September 23, 2016,
    Newbould J. concluded, at para. 32, that the Waltons committed civil fraud and
    fraudulent misrepresentation that caused Dr. Bernstein to invest his funds into
    the Schedule B Companies. He awarded damages of $
66,951,021.85 plus
    interest against the Walton respondents. In granting an order that the judgment
    would survive bankruptcy under ss. 178(1)(d) and (e) of the
Bankruptcy and
    Insolvency Act
, Newbould J., relying on certain of Brown J.s earlier
    findings, concluded, at para. 35, that the liability of the Waltons arose from
    their fraud while acting in a fiduciary duty to Dr. Bernstein, as well as from
    their fraudulent misrepresentation that caused them to obtain property (at
    para. 36).

[177]

As for their remedy in relation to the Schedule
    C Properties, instead of quantifying their unjust enrichment claim against the
    Waltons by conducting a further tracing as Brown J. had envisaged, the DBDC
    Applicants sought to add the Listed Schedule C Companies as respondents to the
    proceedings, and to advance claims for damages against them based on knowing
    receipt and knowing assistance in the Waltons breach of fiduciary duty.

[178]

The claims against the Listed Schedule C
    Companies were not pursued in the conventional manner through an action, with pleadings
    and documentary and oral discovery. Rather, the claims were added to the
    oppression proceedings, and set out in a proposed Third Fresh as Amended Notice
    of Application (at paras. 1(jj), 2 and 3(rr) to (ccc) and (kkk) to (uuu)). The
    amendments allege, under Unjust Enrichment, that the Waltons, in breach of
    their fiduciary duties, diverted and misappropriated the DBDC Applicants
    funds, and that various Walton-owned companies, including the Listed Schedule
    C Companies, were knowing recipients of funds obtained as a result of the
    Waltons breaches of fiduciary duty against them.

[179]

Under the heading Knowing Assistance, the DBDC
    Applicants allege that the Listed Schedule C Companies had actual knowledge of
    (or were reckless or wilfully blind to) the Waltons breaches of fiduciary duty
    owed to the DBDC Applicants, and that they jointly assisted in the breaches.
    They assert, as part of their knowing assistance claim, that
each
    Listed Schedule C Company received property from the DBDC Applicants
as a result of the Waltons breach of fiduciary duties, having
    knowledge that the property was transferred in breach of a fiduciary duty.

[180]

The claim is for $22.6 million jointly and
    severally against the Walton respondents and the Listed Schedule C Companies,
    or in the alternative for an order awarding specific damages against each of
    seven of the Listed Schedule C Companies.
[21]

[181]

The record on which the DBDC Applicants seek to
    establish the Listed Schedule C Companies liability for damages was created in
    the context of oppression proceedings involving the Waltons, at a time when the
    Listed Schedule C companies were not parties. The DBDC Applicants did not
    advance any new evidence to support the participation of these added
    respondents in Ms. Waltons breaches of her fiduciary duties, which is
    essential to any finding of knowing assistance. Rather, they relied on evidence
    already before the court about the Waltons fraud, certain findings of Brown
    J., and especially the net transfer analysis.

[182]

Thus, instead of pursuing the further tracing
    that Brown J. had anticipated would follow his appointment of the Waltons
    receiver, the DBDC Applicants claimed damages against the ten Listed Schedule C
    Companies, with a view to sharing in the proceeds of sale of their ten properties.
    The net proceeds now in the hands of the Receiver against which the DBDC
    Applicants seek to share as unsecured creditors are:

3270
    American Drive
, owned by United Empire Lands Ltd.: $656,362
    (after full payment of the DBDC Applicants constructive trust claim);

324 Prince
    Edward Drive
, owned by Prince Edward Properties
    Ltd.: $580,623;

777 St.
    Clarens Avenue
, owned by St. Clarens Holdings Ltd.:
    $431,603;

260 Emerson
    Avenue
, owned by Emerson Developments Ltd.: $172,376;

24 Cecil Street
, owned by Cecil
    Lighthouse Ltd.: $812,510;

0 Luttrell
    Avenue
, owned by Bible Hill Holdings Inc.: $6,235
    (subject to a DBDC Applicants constructive trust);

2 Kelvin
    Avenue
, owned by 6195 Cedar Street Ltd.: $11,497
    (subject to a DBDC Applicants constructive trust);

30 and 30A
    Hazelton Ave
., owned by Atala Investments Inc.:
    $17,942;

66 Gerrard
    Street East
, owned by The Old Apothecary Building
    Inc.: $86,480; and

346 Jarvis
    Street, Suite F
, owned by 1780355 Ontario Inc.: $0
    (already subject to a DBDC Applicants constructive trust).

[183]

This chapter of the proceedings is, as my
    colleague points out, a priorities dispute. The DeJongs were investors in the
    Schedule C Companies that acquired the first four properties listed above. The
    Condos invested in the company that acquired the Cecil Street property. The
    DBDC Applicants are unable to trace their funds into these properties, so they
    are seeking damages against the individual companies. The only way they can
    share in the proceeds of properties in which they have been unable to trace
    their own funds is as unsecured judgment creditors of the Listed Schedule C
    Companies, which requires that they establish liability for knowing receipt or
    knowing assistance. Both causes of action, for their success, depend almost
    entirely on the courts acceptance of the net transfer analysis, to which I now
    turn.

THE NET TRANSFER ANALYSIS

[184]

The DBDC Applicants rely on the net transfer
    analysis as a cornerstone of their knowing assistance claim: both as evidence
    of the participation of the Listed Schedule C Companies in Ms. Waltons
    breaches of her fiduciary duties and for the amount of their damages. My
    colleague accepts the net transfer analysis in concluding that the
Canadian
    Dredge
test is met (at paras. 80 and 83), as the point of
    departure for determining the participation of the Listed Schedule C Companies
    in the fraudulent scheme (at paras. 84 and 87), and as the measure of the DBDC
    Applicants damages for knowing assistance (at para. 128).

[185]

As I will explain, the net transfer analysis was
    never intended to be used for the purpose of establishing a claim by the DBDC
    Applicants against the property of other defrauded investors and, as I see it,
    it does not provide the foundation for their claim for knowing assistance.

[186]

The net transfer analysis is
based on a summary
    of cash transfers between Schedule B Company accounts and Rose & Thistle
    that was attached as a schedule to the Inspectors fourth interim report. The
    analysis is dated December 31, 2013 and covers transactions between September
    2010 and October 2013. The Inspector acknowledged that it was not intended to
    account for all of the dealings between the various accounts from inception,
    and stated in his fifth report that the tracing charts[were] intended to
    provide a snapshot of activity at a particular point of time and funds
    transferred to or from the relevant company outside of the time period [were]
    not captured (Brown J., at para. 159).

[187]

The cash transfer summary shows that,
    cumulatively, Rose & Thistle received $23.6 million more from the Schedule
    B Companies accounts than it transferred to such accounts. This is the net
    transfer amount.

[188]

The Inspector also looked at cash transfers
    between Rose & Thistle and all of the other Walton-controlled accounts
    other than Schedule B Company accounts. These 54 accounts the Inspector and
    Brown J. referred to as both Walton Accounts and Schedule C Company
    Accounts.

[189]

The Schedule C Company accounts included Norma Waltons personal
    account (into which the Inspector identified a net transfer of $5.4 million
    from Rose & Thistle), Walton Advocates (into which the Inspector traced a
    net transfer of $1.6 million from Rose & Thistle), and several Rose &
    Thistle accounts (into which the Inspector traced a net transfer of more than
    $6.4 million). The Schedule C Company accounts also included those of th
e single-purpose investment companies set up by the Waltons (other
    than the Schedule B Companies), including the accounts of eight of the ten
    Listed Schedule C Companies.
[22]

[190]

The net transfer analysis showed that, during
    the same three-year period, cumulatively and on a net basis, the amount of
    $25.4 million was transferred into the Walton-controlled accounts (other than
    the Schedule B Company accounts) from Rose & Thistle.

[191]

Taking the largest 53 advances by the DBDC
    Applicants to the Schedule B Companies, the Inspector examined the activity in
    the relevant Schedule B Company bank account immediately following the advance
    and looked for any contemporaneous transfer of funds from the relevant Schedule
    B Company account to the Rose & Thistle bank account. Then he examined the
    Rose & Thistle bank account to ascertain what activity occurred following
    the receipt of funds transferred in from the Schedule B account, and in particular,
    whether there was any contemporaneous transfer of funds from the Rose &
    Thistle account to a Schedule C Company account (Brown J., at para. 17). The Inspector
    noted that, while funds could be traced directly in seven instances to the
    purchase of specific Schedule C Properties, in most cases monies were
    intermingled.

[192]

Before Brown J. the DBDC Applicants relied on
    the net transfer analysis to obtain proprietary remedies against certain
    Schedule C Properties. Brown J. recognized that the net transfer analysis
    supported the conclusion that the DBDC Applicants had a strong claim for unjust
    enrichment
against the Waltons in respect of the Schedule C
    Properties
(at paras. 227, 231, 264 and 268). He granted
    constructive trusts over those properties where the Inspector established that
    soon after the transfer of money from a Schedule B Company account, a Schedule
    C Property was purchased, that is, where the Schedule B monies were traced into
    a Schedule C Property.
[23]

[193]

Brown J.s findings based on the net transfer
    analysis are summarized by my colleague at para. 16, as follows:

(i)
the Waltons directed the transfer of a net $23.6
    million from the Schedule B Company accounts to a bank account belonging to
    Rose & Thistle during the period from October 2010 to October 2013;

(ii)   during
    the same period, the Waltons directed transfers of a net $25.4 million from the
    Rose & Thistle account to the Schedule C Companies;

(iii)    in
    almost all cases, some or all of the amounts advanced to the Schedule B
    Companies by the DBDC Applicants were transferred almost immediately to the
    Rose & Thistle account; and

(iv)  those
    transfers of funds from the Schedule B Companies to Rose & Thistle
    constituted breaches of the agreements between the DBDC Applicants and the
    Waltons.

[194]

The net transfer analysis does not, as the DBDC Applicants
contend, demonstrate that $22.6 million of the funds
    misappropriated from the DBDC Applicants were diverted to the use and benefit
    of the Schedule C Companies (DBDC Applicants Factum, at para. 57). There are
    a number of reasons why I conclude that the net transfer analysis does not
    support the claims against the Listed Schedule C Companies.

[195]

First, the $22.6 million amount consists of the net amount
    transferred from Schedule B Company accounts to Rose & Thistle (less $1
    million credited to the Waltons for proper expenses). Except as has been
    accounted for by constructive trust, the net transfer analysis does not show
    where the money went after it was transferred into Rose & Thistle, or that
    any of the net money ended up in any particular Walton-controlled account
    (including any Listed Schedule C Company account).

[196]

Contrary to what is pleaded by the DBDC Applicants, the $22.6
    million does not represent the extent to which any Schedule C Company or even
    the Schedule C Companies as a whole, were enriched by the DBDC Applicants
    monies diverted from the Schedule B accounts.

[197]

Second, although the net transfer analysis also indicates that
    Schedule C Company accounts received a net transfer of $25.4 million, this is
    simply the net amount that was transferred from Rose & Thistle to all 54
    Walton-controlled accounts, other than the Schedule B Company accounts. It does
    not identify the source of the money coming from Rose & Thistle into a
    Schedule C Company Account. Without a proper tracing, no particular Schedule C
    Company account can be said to have received the benefit of Schedule B Company
    monies. Where a tracing has occurred, a constructive trust have been awarded.

[198]

My colleague states, at para. 80, that as a result of these net
    transfers, the Schedule C Companies acquired funding necessary for their
    ongoing operations and he refers to Brown J. accepting the Inspectors
    conclusion that 
the [DBDC] Applicants investment in the
    Companies was a major source of funds for the Walton Companies. At the time
    this finding was made by Brown J., however, the Inspector did not yet have
    access to the Schedule C Company accounts, and therefore did not consider the
    funds invested by others, such as the DeJongs and the Condos, into the Schedule
    C Properties, transfers between the Schedule C Company accounts, and the
    movement of funds between such accounts and Rose & Thistle. Even if it
    could be said that the Walton or Schedule C Companies as a whole acquired
    funding for their operations, this tells us nothing about what was happening in
    the account of any specific Schedule C Company, including all of the Listed
    Schedule C Companies (which of course had also received funds from their
    investors).

[199]

As I see it, the central problem with using the
    net transfer analysis as a basis for a claim against the Listed Schedule C
    Companies, is that it treats all Walton-controlled accounts in the same way,
    and as a collective, when the investors in the Listed Schedule C Companies (which
    are only a subset of the Walton-controlled companies or accounts)
were
    equally victims of the Waltons fraud.
The Waltons used a
    number of corporate entities to perpetrate their fraud on the appellants and
    the respondents  the corporate entities were the pawns in their shell game.
    Some were entirely Walton-controlled, and others were investment companies set
    up in the same way as the DBDC Applicants Schedule B Companies, to be co-owned
    by investors. The DBDC Applicants point to the net funds that were transferred
    from Rose & Thistle to a
ll Schedule C Company accounts as a
    collective, but then target only ten such companies, the ones with valuable
    property and other defrauded investors, for the purpose of their knowing
    assistance claim.

[200]

My colleague, at para. 106,
    considers it significant 
that net funds
    of $23.6 million
flowed out of the
    Schedule B Companies
into Rose &
    Thistle, and net funds of $25.4 million
flowed out of Rose & Thistle

into the Schedule C Companies.


He concludes that i
t is the DBDC Applicants, not the Schedule C Companies, that suffered the
    net losses.

[201]

In my view, the net transfers into and out of Rose & Thistle
    do not assist in establishing the liability of the Listed Schedule C Companies.
    Because it was designed to show the DBDC Applicants losses, the net transfer
    analysis sets up, on one side of the ledger, the accounts of the DBDC
    Applicants Schedule B Companies, and on the other, the 54 other
    Walton-controlled accounts. It stands to reason that the DBDC Applicants
    suffered the net losses, when compared to all of the Walton-controlled
    accounts. Th
e DBDC Applicants invested much more than the
    Waltons and more than any other investor. If the Waltons failed to make their
    capital contributions and were siphoning money to their own personal accounts
    as well as moving investor money around, it follows that the amount transferred
    to Rose & Thistle by the Schedule B Companies would be more than the amount
    paid out by Rose & Thistle to such companies.

[202]

The DBDC Applicants invoke the net transfer
    analysis as a measure of their collective losses against the Listed Schedule C
    Companies as a subset of the 54 Schedule C Companies. In fact, the net transfer
    analysis shows that, when the DBDC Applicants Schedule B Companies are
    considered individually, at least nine of them were
net
    beneficiaries
of transfers from Rose & Thistle.
[24]
And, w
hen the
    Schedule C Companies are considered individually, an amount going into a
    Schedule C Company account could as easily have been money from another
    Schedule C Company account. The money cannot be traced from a Schedule B
    Company account.

[203]

At paras. 57 to 59 of his reasons, the Application Judge
    identified the shortcomings in the net transfer analysis where he stated:

[Referring to the example of 6195 Cedar Street Ltd.], there is
    no proof where Rose & Thistle obtained the money that was transferred to
    6195 Cedar Street Ltd. It may have come from one of Dr. Bernstein's companies.
    It may not have. It may have come from investors in the Schedule C Companies
    whose money was transferred to Rose & Thistle. The report does not state
    where the money came from. The same can be said for all of the Schedule C
    Companies that the applicants seek a judgment against for knowing receipt of
    trust funds. Moreover, the schedule was as of a point in time and whether the
    balance changed over time is not known as no analysis was done.

What happened to the money transferred to the Schedule B and C
    Companies by Rose & Thistle is not in evidence. On the hearing before Brown
    J., the applicants were able to establish that Dr. Bernstein's funds went into
    several Schedule C Properties and a constructive trust was ordered in favour of
    the applicants in respect of those properties. No constructive trust was
    ordered with respect to the property of the Schedule C Companies that the
    applicants now seek a judgment against, which I take to be recognition that the
    applicants did not have evidence that their money went into those properties.
    In paragraph 13 of his formal judgment of August 12, 2014, Brown J. ordered
    that the applicants were permitted to trace funds provided by the applicants
    into and through the accounts of the Schedule B Companies into the Schedule C
    Companies. However the applicants did not undertake any such tracing.
The
    applicants have not established that it was the applicants' money that was
    received by the Schedule C Companies in question.

In light of the way in which Ms. Walton transferred money
    around, I could not without a tracing analysis hold that Dr. Bernstein's money
    ended up in the Schedule C Companies against which the applicants now seek a
    judgment. [Emphasis added.]

[204]

I agree entirely with these comments. In my opinion, not only
    does the net transfer analysis fail to establish the receipt by the Listed
    Schedule C Companies of DBDC Applicants funds for the purpose of knowing
    receipt, it also cannot support the claim against them for knowing assistance.
    Yet, the DBDC Applicants rely on the net transfer analysis as evidence of the
    Listed Schedule C Companies participation in Ms. Waltons breach of fiduciary
    duties and as the measure of their damages. I turn now to the substance of
    their claims.

A.

THE KNOWING RECEIPT CLAIM

[205]

My colleague concludes, and I agree, that the
    DBDC Applicants have failed to make out a claim for knowing receipt. Knowing
    receipt here refers to the receipt by the Listed Schedule C Companies of
    monies belonging to the DBDC Applicants that were entrusted to Ms. Waltons
    control, and diverted in breach of her fiduciary duties.

[206]

At paras. 56 to 59 of his reasons, the Application
    Judge rejected the knowing receipt claim after referring to and rejecting the net
    transfer analysis, which was relied on by the DBDC Applicants. Without a
    tracing analysis he could not find that the DBDC Applicants money (other than
    what was already accounted for by constructive trust) ended up in the Listed
    Schedule C Companies.

[207]

In their appeal to this court, the DBDC
    Applicants continue to assert that knowing receipt was made out. They contend
    that the Application Judge made a palpable and overriding error in concluding,
    on a balance of probabilities, that the Listed Schedule C Companies did not
    knowingly receive funds misappropriated from the DBDC Applicants. Importantly,
    they continue to rely on the net transfer analysis as providing such evidence
    (see paras. 65 to 71 of their factum).

[208]

The rejection of the DBDC Applicants knowing
    receipt claim recognizes that the net transfer analysis does not demonstrate
    the receipt of their funds by the Listed Schedule C Companies. As my colleague
    notes, the DBDC Applicants have been unable to demonstrate the receipt of any
    particular funds by any particular Schedule C Company other than the funds with
    respect to which Brown J. previously granted constructive trusts (at para. 38).

[209]

In my opinion, just as the net transfer analysis
    cannot demonstrate receipt by a Schedule C Company of any DBDC Applicants
    monies, it cannot provide support for the claim of knowing assistance. Yet, as
    I will explain, acceptance of the net transfer analysis is essential if the
    DBDC Applicants are to establish the participation and damages elements of
    this claim.

[210]

I turn now to the knowing assistance claim.

B.

THE KNOWING ASSISTANCE CLAIM

(1)

Elements
    of the Equitable Wrong

[211]

The elements of knowing assistance in a breach
    of fiduciary duty were described by this court in
Harris v. Leikin
, at para. 8, as: (1)
a fiduciary duty; (2) a fraudulent and
    dishonest breach of the duty by the fiduciary; (3) actual knowledge by the
    stranger to the fiduciary relationship of both the fiduciary relationship and
    the fiduciary's fraudulent and dishonest conduct; and (4) participation by or
    assistance of the stranger in the fiduciary's fraudulent and dishonest conduct.

(2)

The
    Fraudulent and Dishonest Breach of Ms. Waltons Fiduciary Duties to the DBDC
    Applicants

[212]

The point of departure in determining the
    liability of the Listed Schedule C Companies for knowing assistance is to
    identify the breaches of fiduciary duty in which they are alleged to have
    participated or assisted.

[213]

The Application Judge accepted, at para. 34, that
    the diversion of funds out of the Schedule B Companies by the Waltons for their
    own purposes was in breach of their fiduciary duties, and, at para. 47, that
    when she knowingly took a risk with the money belonging to the Schedule B
    Companies that she had no right to take, Ms. Waltons activity was fraudulent
    and dishonest. My colleague has explained how the duties would have been owed by
    Ms. Walton to the DBDC Applicants, notwithstanding that the relationship was
    contractual, an analysis I am prepared to accept.
[25]
The existence and dishonest
    breaches of the fiduciary duties owed by Ms. Walton to the DBDC Applicants are
    not contested on appeal.

[214]

It is particularly important in this case, where
    the alleged participants were also victims of the Waltons fraud, to keep the
    focus on the specific breaches of fiduciary duty in which they are alleged to
    have participated, rather than the overall fraud in which the Waltons were
    engaged. The overall fraudulent scheme involved Ms.
Waltons breaches of
    her fiduciary duties to
both
the DBDC Applicants and the respondents
    (as my colleague notes at paras. 76, 80, 85 and 95). For the purpose of the
    wrong of knowing assistance, however, the focus must be on the breach of
    fiduciary duties owed to the DBDC Applicants, otherwise the risk is that Ms.
    Waltons use of the Listed Schedule C Companies in the shell game will be considered
    sufficient to mark them as participants for the purpose of the knowing
    assistance claim.

[215]

My colleagues analysis of what the Listed
    Schedule C Companies are alleged to have done as participants focuses on
    their involvement in the overall fraudulent scheme, including as victims of
    that scheme. This leads him to conclude, at para. 68, that Ms. Waltons
    perpetration of the scheme was their participation in the scheme. In order
    for the Listed Schedule C Companies to be liable as accessories to that breach,
    they must have done something to participate in the breach of fiduciary duty
    which is,
as the DBDC Applicants have pleaded, and the Application Judge
    found, the diversion of their funds out of the Schedule B Companies for the
    Waltons personal use.
It is to the element of participation
    that I now turn.

(3)

The
    Listed Schedule C Companies Did Not Participate or Assist in Ms. Waltons
    Breaches of Fiduciary Duty to the DBDC Applicants

[216]

Liability for knowing assistance in a breach of
    fiduciary duty is fault-based. It requires an intentional wrongful act on the
    part of the stranger or accessory, to knowingly assist in the fraudulent and
    dishonest breach of fiduciary duty. Participation in a breach of fiduciary duty
    for the purpose of knowing assistance requires that the accessory 
participated
    in or assisted the fiduciary's fraudulent and dishonest conduct:
Enbridge
    Gas Distribution Inc. v. Marinaccio
,
    at para. 23.

[217]

All of the knowing assistance cases cited by the parties involved
    specific harmful conduct by the stranger that assisted in the breach of
    fiduciary duty or breach of trust. In
Air Canada v. M & L Travel Ltd.
, the accessory stopped payment of trust funds, opened an account
    and attempted to transfer the funds into the new account. In
Enbridge
    Gas Distribution Inc. v. Marinaccio
, the accessories
    prepared invoices, opened bank accounts, arranged for wire transfers and accepted
    cash. In
Agip (Africa) Ltd. v. Jackson et al.
,
    the accessory concealed a self-interested transaction, and played the role of a
    disinterested arms length vendor. And in
Locking v. McCow
an, 2016 ONCA 88 (a pleadings case), the accessory was alleged to
    have set up company structures and controlled the fraudulent movement of money
    out of the payee companies.

[218]

By contrast here, the DBDC Applicants do not
    point to any conduct by any or all of the Listed Schedule C Companies as their
    participation in the Walton breach of fiduciary duty  except to repeat the
    same allegation as in respect of knowing receipt: the Schedule C Company
    Respondents received property from the Applicants as a result of the Waltons
    breach of their fiduciary duties owed to the Applicants, and that they each
    received this property from the Applicants having knowledge that the property
    was transferred in breach of a fiduciary duty: Third Fresh as Amended Notice
    of Application, at paras. 3(ttt) and (uuu).
[26]


[219]

While my colleague does not make the finding sought by the DBDC
    Applicants  that each Listed Schedule C Company received their property  he
    is nevertheless satisfied that participation is made out. With respect, I
    disagree.

[220]

First, as I have already noted, my colleagues focus is on the
    overall fraud, and not the diversion of the DBDC Applicants funds to the
    Waltons personal use. At para. 57 of his reasons, he characterizes the
    pertinent question as whether Ms. Walton caused the Schedule C Companies to
    participate in her fraudulent dealings. He answers the participation
    question at para. 86, by saying that Ms. Walton 
utilized the Schedule C
    Companies as actors
in the process of orchestrating her shell game through
    the Rose & Thistle clearing house account, and he then describes how she
    co-mingled and diverted the funds of both the DBDC Applicants and the Listed Schedule
    C Companies, using various pretexts. Again, at para. 95, he refers to the
    Listed Schedule C Companies as actors in Ms. Waltons overall fraudulent
    undertaking in breach of her fiduciary obligations to both the DBDC Applicants
    and DeJong.

[221]

The Listed Schedule C Companies may have participated in the
    general sense in the Waltons fraudulent scheme or arrangement when money was
    moved to and from their accounts, in the same way money was moved to and from
    the Schedule B Company accounts.
The actions of the Listed
    Schedule C Companies were the same as those of the Schedule B companies  they
    were conduits and used as part of the Waltons shell game.
All of the
    victims of Ms. Waltons fraud, including the Listed Schedule C Companies, may
    well have been
used by her
in the overall fraud, but, in my view, that
    does not equate to their participation in the dishonest breach of fiduciary
    duty to the DBDC Applicants so as to attract personal liability for damages.


[222]

Second, in finding participation, my colleague relies on the net
    transfer analysis to point to the collective benefit of the Waltons
    arrangement to the Schedule C Companies. In his view, the Schedule C Companies
    were significant net beneficiaries, they acquired properties as intended and
    they benefitted at least partly from Ms. Waltons actions (at paras. 79, 80
    and 124). He states, at para. 80, that, based on the net transfers of monies
    from the Schedule B Companies to Rose & Thistle and from Rose & Thistle
    to the Schedule C Companies, the latter acquired funding necessary for their
    ongoing operations and he refers to Brown J.s acceptance of the conclusion
    that the DBDC Applicants investments in the Schedule B Companies [were] a
    major source of funds for the [Schedule C] Companies (which as I have noted
    was a finding made without reference to the Schedule C Company accounts).

[223]

With respect, I disagree with the acceptance of the net transfer
    analysis to support a finding of participation. The net transfer analysis only
    establishes that the
collective
of the 54 Walton-controlled accounts
    (consisting of all accounts controlled by the Waltons other than those of the
    Schedule B Companies) benefitted from the Waltons overall fraud, during the
    three-year period considered by the Inspector. It does not prove that any one
    or more of the ten Listed Schedule C Companies received a benefit or that this
    enabled them to acquire properties (except where constructive trusts were
    already imposed). Nor does the net transfer analysis demonstrate that any
    Listed Schedule C Company participated in Ms. Waltons diversion of the DBDC
    Applicants funds.

[224]

Third, even when my colleague considers the individual Listed
    Schedule C Companies (at paras. 87 to 96), he does not identify any evidence of
    their participation or assistance in the breach of fiduciary duty to the
    DBDC Applicants. Instead he refers to transfers from their accounts to and from
    Rose & Thistle, saying that, with two possible exceptions, each either
received
    from

or transferred to
Rose & Thistle monies or monies-worth
    during the relevant period, and that this both meets the test for the second and
    third elements of
Canadian Dredge
and for the participation/knowing
    assistance requirement (at paras. 80, 83, 84, 95 and 96). I respectfully
    disagree.

[225]

Prince Edward Properties Ltd. is the Listed Schedule C Company in
    respect of which there was a net transfer from its account
to
Rose
    & Thistle of $520,850 during the three-year period covered by the net
    transfer analysis. Only $100 was transferred the other way. There is no
    evidence that it benefited from or participated in the diversion of the DBDC
    Applicants funds (or even that it was a beneficiary of the Waltons overall
    fraud). There is no evidence of net Schedule B Company monies being transferred
    into this Listed Schedule C Company account, or that they were used to acquire
    its property, 324 Prince Edward Drive.

[226]

The two exceptions referred to by my colleague are St. Clarens Holdings
    Ltd. and Emerson Developments Ltd., where there is no evidence of
any
transfer
    of funds between their accounts and Rose & Thistle account, let alone any
    evidence of a transfer of the DBDC Applicants funds into these entities. In
    fact, as the respondents point out, since the Schedule C Properties, 777 St.
    Clarens Avenue and 260 Emerson Avenue, were acquired after the Inspector was
    appointed, and the Waltons had no access to the DBDC Applicants funds, no DBDC
    Applicant monies could have found their way into these Schedule C Companies, or
    been used to acquire their properties.

[227]

My colleague acknowledges that there is no evidence of any
    transfer between Rose & Thistle and these companies, and, at paras. 90 to 93,
    he describes how they were defrauded by Ms. Walton. He concludes that Ms.
    Waltons acts in defrauding these Listed Schedule C Companies engaged the
    Listed Schedule C Companies as actors in her overall fraudulent undertaking,
    that each of these transactions required a corporate act, and that Ms.
    Waltons acts were their acts, and the Companies accordingly participated in or
    assisted Ms. Walton in her breach of fiduciary duties to the DBDC Applicants
    (at para. 96). With respect, I disagree that participation is made out here. It
    would mean that being a defrauded entity, as part of a larger fraud, can
    constitute knowing assistance in the fraudsters breach of fiduciary duty to
    another fraud victim.

[228]

Even in the case of the seven Listed Schedule C Companies where
    the net transfer analysis shows a net transfer of monies from Rose &
    Thistle to their individual accounts during the relevant period (United Empire
    Lands Ltd., Bible Hill Holdings Ltd., 6195 Cedar Street Ltd., Cecil Lighthouse
    Ltd. and The Old Apothecary Building Inc., Atala investments Inc. and 1780355
    Ontario Inc.), this is not evidence of that company benefiting from, or in any
    other way participating in, Ms. Waltons breach of fiduciary duty, which is her
    diversion of funds from the DBDC Applicants. As we have seen, the net transfer analysis
    does not take into account monies that were invested directly from the Schedule
    C Company investors, including the investors in the Listed Schedule C Companies,
    or transfers between Schedule C Company accounts.

[229]

The only benefit that is demonstrated here is a
    net benefit to the Schedule C Companies as a collective, from the transfer of
    Rose & Thistle monies. I have already identified what I view as the limits
    of the net transfer analysis. Even if more money flowed from Rose & Thistle
    into a Listed Schedule C Company than what that company paid to Rose &
    Thistle, this is not evidence that the Listed Schedule C Company benefited from
    or participated in the specific breach of fiduciary duty, which was the
    diversion of the DBDC Applicants funds from their intended purpose.

[230]

The actions my colleague relies on for the
    Listed Schedule C Companies participation, are that the Listed Schedule C
    Companies received and paid monies to Rose & Thistle (and in some cases
    were simply defrauded by the Waltons). In my view, this conduct does not rise
    to the level of knowing assistance by the Listed Schedule C Companies in a
    breach of a fiduciary duty any more than it would engage the Schedule B
    Companies in such a breach. They were not participants acting in their own
    right to further a breach of fiduciary duty. They were
used by
the Waltons as part of a fraudulent scheme. In this regard the
    Schedule B companies and the innocent investor Schedule C Companies are on an
    equal footing.

[231]

As such, while the Listed Schedule C Companies
    may have participated in Ms. Waltons overall fraudulent scheme, in the sense
    that they were used by her in the shell game to co-mingle investor funds, and
    to avoid making her own contributions, the net transfer analysis does not
    provide the evidence that they participated in her breach of fiduciary duty to
    the DBDC Applicants so as to attract personal liability for knowing assistance.
    Nor is there any other evidence of their participation. In my opinion, the DBDC
    Applicants claim against the Listed Schedule C Companies should fail for this
    reason alone.

(4)

The
    Knowledge Element

[232]

As the authorities such as
El Ajou
instruct, it is necessary to identify the natural person or persons having
    management and control
in relation to the act or omission in point


(at p. 695)
.

Here, the determination of whether Ms. Waltons fraudulent
    intent is to be attributed to a Listed Schedule C Company depends on the
    wrongful act the company committed. Because of my conclusion on the participation
    issue, I do not propose to say anything about my colleagues discussion of the
    knowledge element, except to indicate that I take issue with two points: the result
    of applying the three
Canadian Dredge
criteria
    for the corporate identification doctrine in this case, and my colleagues
    suggestion that the second and third criteria should be approached in a less
    demanding fashion.

[233]

One of the reasons that my colleague
    specifically addresses whether each Listed Schedule C Company received a
    benefit is to meet the requirements of
Canadian Dredge
for attaching liability to a corporation for the fault of its
    directing mind. As he notes, at para. 69,
Canadian Dredge
instructs that where a corporations alleged wrongdoing involves
    fraud by its directing mind, the court must be satisfied that (i) the directing
    mind was acting within her assigned field of operation, and that her actions (ii)
    were not totally in fraud of the Listed Schedule C Company, and (iii) were by
    design or result partly for the benefit of the corporation.

[234]

My colleagues analysis shows that there are
    difficulties meeting these requirements in this case (even if the alleged wrong
    was participation in Ms. Waltons overall fraud) because the scheme was for the
    Waltons personal benefit and defrauded the Listed Schedule C Companies, and
    because the evidence of each companys individual benefit from the scheme is
    questionable. While it is true, as my colleague notes, that knowing assistance
    does not require a defendant to have received a benefit, the issue of benefit
    is relevant here because Ms. Waltons conduct was in fraud of the very entities
    sought to be made liable for knowing assistance, and there is no other act of
    participation alleged. And, the overall net benefit to the Schedule C Companies
    is central to the DBDC Applicants claim. Without a tracing of Schedule B
    Company money into their accounts, there is no evidence that any of the Listed
    Schedule C companies benefited from the diversion of the DBDC Applicants funds
    by Ms. Walton.

[235]

My colleague suggests, at para. 70, that the
    second and third criteria of
Canadian Dredge
should be
approached in
    a less demanding fashion, because this is a civil case, where the burden of
    proof is less onerous, and because of the nature of the case (
a complex
    multi-real estate transaction investment fraud, perpetrated over an extended
    period of time, and implicating numerous corporate actors (operating at the
    instance of the fraudster) and numerous victims).

[236]

With respect, I disagree. When the
Canadian Dredge
criteria
    have been accepted and applied in civil cases, this has occurred without relaxing
    the criteria for finding a corporation is liable for a wrong, when its
    directing mind is acting fraudulently (see, for example,
Standard
    Investments Ltd. v. Canadian Imperial Bank of Commerce
, at p. 493 and
Golden
    Oaks Enterprises Inc. (Trustee of) v. Lalonde
, 2016 ONSC 5313, 133 O.R.
    (3d) 513, at paras. 127-131).

[237]

I
do not accept that the adoption of a less
    demanding standard is warranted here. As I see it, neither the civil burden of
    proof nor the nature and extent of the fraud would justify a less rigorous
    approach if the Listed Schedule C Companies are to be fixed with responsibility
    for the conduct of their director, Ms. Walton.
[27]
Knowing assistance in the breach of a fiduciary duty is a serious wrong that
    requires actual and not constructive knowledge by the participant. The
    investors in the Listed Schedule C Companies did not themselves know about or
    cause the companies to participate in Ms. Waltons breach of fiduciary duty.
    The rationale for the claim is that the participants
actual knowledge
    of and assistance in the fraudulent conduct is sufficient to bind the
    strangers conscience so as to give rise to personal liability:
Air Canada
    v. M & L Travel Ltd
., at p. 812.
I see no
    justification in the circumstances of this case to lessen the requirement for
    knowledge before one victim of a fraud is tagged with the conduct of a
    fraudster. The conduct here was in fraud of the Schedule B Companies and their
    investors, the DBDC Applicants,
and
the Listed
    Schedule C Companies and their investors, and was for the personal benefit of
    the Waltons.

(5)

The
    Damages Award of $22.6 Million is Arbitrary and Not a True Measure of Damages
    for Knowing Assistance

[238]

Finally I turn to the question of damages. I disagree with my
    colleagues conclusion that the measure of damages for knowing assistance in
    this case is $22.6 million, and that the Listed Schedule C Companies are liable
    jointly and severally for this amount.

[239]

Under the doctrine of knowing assistance, the defendants
    liability is measured by the plaintiffs injury consequent to the trustees
    misconduct: see the P. Perell article, cited by my colleague at paras. 119 and
    127. This is because the wrong is in acting as an accessory to the principal
    breach, and the accessory is liable jointly and severally
with the
    principal wrongdoer.
This is why the accessories in the
Enbridge Gas
case
    acknowledged that, if liable, the damages would be the full amount paid by
    Enbridge as a result of the principals scheme and not just their share of the
    profit (at para. 50).

[240]

Here, instead of asserting that the Listed Schedule C Companies
    are liable together with the Waltons for the
$
66.9
    million amount awarded as damages for breach of fiduciary duty, the DBDC
    Applicants claim $22.6 million, which they say is the portion of that amount
    which the Schedule C Company respondents knowingly assisted the Waltons in
    diverting to the benefit of the Schedule C Companies. My colleague accepts
    this measure of damages when he states, at para. 128, that the loss is
    measured by the net transfer to the Schedule C Companies, globally, of $22.6
    million.

[241]

In my view, the $22.6 million amount, which is based on the net
    transfer analysis, is not a true measure of the damages for which the Listed
    Schedule C Companies could be liable to the DBDC Applicants for knowing
    assistance. It does not correspond with the loss caused by the actions of the
    fiduciary, or even with the loss caused by, or benefit to, some or all of the
    Schedule C Companies. It is simply the net amount transferred between the
    Schedule B Company accounts and Rose & Thistle (less $1 million credited to
    the Waltons).

[242]

And even if it could be assumed that all of the $22.6 million
    transferred to Rose & Thistle was a net gain to the Schedule C Companies,
    this is simply the amount by which all of the Walton-controlled accounts, other
    than the Schedule B Company accounts, would have benefited. As we have seen (at
    para. 189 above), it includes over $12 million of net transfers to Ms. Walton
    personally, to Walton Advocates, and to other Rose & Thistle companies.

[243]

Two of the Listed Schedule C Companies (Emerson and St. Clarens)
    received no funds from Rose & Thistle under the net transfer analysis, and
    one (Prince Edward) transferred considerably more money to Rose & Thistle
    than it received (see paras. 225 and 226). Even considered as a collective, the
    Listed Schedule C Companies received only the net amount of
$4,367,204
    from Rose & Thistle, according to the net transfer analysis.

[244]

Finally, if the net amount transferred from the
    DBDC Applicants to Rose & Thistle to the Schedule C Companies could be a
    proper measure of damages, the $22.6 million figure includes and therefore
    double counts the amounts the DBDC Applicants were awarded for their
    constructive trust claims (a total of $8,128,325: Brown J. at para. 264). The
    constructive trusts resulted from a tracing of DBDC Applicants funds into
    specific Schedule C Properties with reference to the transfers shown on the net
    transfer analysis. These diversions of funds into specific Schedule C
    Properties have already been accounted for, and would need to be deducted from
    the $22.6 million damages award.
[28]
I say this, not because I view the $22.6 million amount as a proper measure of
    the DBDC Applicants damages against the Listed Schedule C Companies,
    individually or as a collective, but to further emphasize that it is an
    arbitrary and purely convenient number that emerges from the net transfer analysis,
    an analysis that was never intended to inform a claim for knowing assistance.

(6)

Equity
    Does Not Support the Knowing Assistance Claim

[245]

My colleague recognizes that knowing assistance is an equitable doctrine,
    however he rejects the argument that equity should not intervene in this case.
    In my view, there are important equitable concerns here that should prevent the
    court from finding the Listed Schedule C Companies liable for damages for
    knowing assistance.

[246]

First, the Listed Schedule C Companies would be subject to an
    award of damages that is based on equitable grounds when they themselves are
    victims of the same fraudulent conduct.
The liability of the
    stranger in a knowing assistance claim is fault-based. To the extent that any fault
    could be found here, it results from being caught up in or used as part of the
    wrongdoers fraudulent scheme.

[247]

Second, the Listed Schedule C Companies are tagged with damages
    based on the full extent to which all of the Walton-controlled companies (that
    is all the Schedule C Companies) benefited. The DBDC Applicants have chosen to
    proceed only against the ten Listed Schedule Companies for the full amount of
    the net transfer from Rose & Thistle to all of the Walton-controlled or
    Schedule C Companies. The DBDC Applicants contend that they have limited their
    relief to these companies based on the work of the receiver/manager and for
    efficiency (
DBDC Applicants Factum
, at para. 16).
    This is not a satisfactory explanation  the reality is that these are the only
    entities that have assets or proceeds worth pursuing. Even if the full $22.6
    million could be accepted as a measure of their loss from the conduct of the
    Schedule C Companies (if it were assumed that all of the net monies flowing
    into the Schedule C Companies came from the DBDC Applicants, which as I stated
    earlier is not supported on the evidence), this includes over $12 million of
    net transfers to Ms. Walton personally, to Walton Advocates, or to other Rose
    & Thistle companies. To place the entire burden of the claim on the ten
    Listed Schedule C Companies, overwhelming the claims for losses of the
    investors in those companies, in my view, would be an unjust result.

[248]

Finally, I conclude that the knowing assistance remedy should not
    be utilized in these exceptional circumstances
 where one
    group of defrauded investors seeks to obtain judgment sounding in knowing
    assistance against another group that has been defrauded in a similar manner.
    The DBDC Applicants were able to trace certain funds into the purchase of
    Schedule C Properties, including five of the Listed Schedule C Company
    properties and to obtain a constructive trust that gives them priority over the
    proceeds of sale of such properties. I agree with my colleague that the remedy
    of constructive trust, as argued by DeJong, is not available as a matter of
    law, and that the Application Judge erred in giving DeJong priority over the
    proceeds of four properties on that basis. That said, there is no question that
    DeJongs money went into the purchase of these properties (and indeed the Application
    Judge found, and my colleague accepts, that its advances were as shareholder
    loans, and that it is a creditor for the full amounts it claims). In my view,
    it would be unfair for DeJongs claims to its advances, which can be traced,
    but not in a way that would justify a constructive trust, to be obliterated by
    a damages claim of $22.6 million by the DBDC Applicants, without any evidence
    that their funds were used in any way (except where a tracing has occurred) to
    acquire these properties. This result alone is such that the equitable claim of
    knowing assistance should be denied in this case.

CONCLUSION

[249]

For these reasons, I would dismiss the appeal of
    the DBDC Applicants with respect to the knowing receipt and knowing assistance
    claims. I would allow their appeal of the DeJong constructive trust awards
    essentially for the reasons outlined by my colleague. In the circumstances,
    however, my proposed disposition would result in the priorities over the Listed
    Schedule C Properties being determined by the Receiver without regard to any
    claim to such proceeds by the DBDC Applicants, except to the extent of their
    constructive trusts.

Released: January 25, 2018

K. van Rensburg
    J.A.


SCHEDULE
    A COMPANIES

1.

Dr. Bernstein Diet Clinics Ltd.

2.
2272551
    Ontario Limited

3.
DBDC Investments Atlantic Ltd.

4.
DBDC Investment Pape Ltd.

5.
DBDC Investments Highway 7 Ltd.

6.
DBDC Investments Trent Ltd.

7.
DBDC Investments St. Clair Ltd.

8.
DBDC Investments Tisdale Ltd.

9.
DBDC Investments Leslie Ltd.

10.
DBDC Investments Lesliebrook Ltd.

11.
DBDC Fraser Properties Ltd.

12.
DBDC Fraser Lands Ltd.

13.
DBDC Queens Corner Inc.

14.
DBDC Queens Plate Holdings Inc.

15.
DBDC Dupont Developments Ltd.

16.
DBDC Red Door Developments Inc.

17.
DBDC Red Door Lands Inc.

18.
DBDC Global Mills Ltd.

19.
DBDC Donalda Developments Ltd.

20.
DBDC Salmon River Properties Ltd.

21.
DBDC Cityview Industrial Ltd.

22.
DBDC Weston Lands Ltd.

23.
DBDC Double Rose Developments Ltd.

24.
DBDC Skyway Holdings Ltd.

25.
DBDC West Mall Holdings Ltd.

26.
DBDC Royal Gate Holdings Ltd.

27.
DBDC Dewhurst Developments Ltd.

28.
DBDC Eddystone Place Ltd.

29.
DBDC Richmond Row Holdings Ltd.

SCHEDULE B COMPANIES

1.

Twin Dragons Corporation

2.

Bannockburn Lands Inc. / Skyline  1185
    Eglinton Avenue Inc.

3.

Wynford Professional Centre Ltd.

4.

Liberty Village Properties Ltd.

5.

Liberty Village Lands Inc.

6.

Riverdale Mansion Ltd.

7.

Royal Agincourt Corp.

8.

Hidden Gem Developments Inc.

9.

Ascalon Lands Ltd.

10.

Tisdale
    Mews Inc.

11.

Lesliebrook
    Holdings Ltd.

12.

Lesliebrook
    Lands Ltd.

13.

Fraser
    Properties Group

14.

Fraser
    Lands Ltd.

15.

Queens
    Corner Corp.

16.

Northern
    Dancer Lands Ltd.

17.

Dupont
    Developments Ltd.

18.

Red
    Door Developments Inc. and Red Door Lands Ltd.

19.

Global
    Mills Inc.

20.

Donalda
    Developments Ltd.

21.

Salmon
    River Properties Ltd.

22.

Cityview
    Industrial Ltd.

23.

Weston
    Lands Ltd.

24.

Double
    Rose Developments Ltd.

25.

Skyway
    Holdings Ltd.

26.

West
    Mall Holdings Ltd.

27.

Royal
    Gate Holdings Ltd.

28.

Royal
    Gate Nominee Inc.

29.

Royal
    Gate (Land) Nominee Inc.

30.

Dewhurst
    Development Ltd.

31.

Eddystone
    Place Inc.

32.

Richmond
    Row Holdings Ltd.

33.

El-Ad
    (1500 Don Mills) Limited

34.

165
    Bathurst Inc.

SCHEDULE
    C PROPERTIES

1.

3270 American Drive, Mississauga, Ontario

2.

0 Luttrell Ave., Toronto, Ontario

3.

2 Kelvin Avenue, Toronto, Ontario

4.

346 Jarvis Street, Suites A, B, C, E and F,
    Toronto, Ontario

5.

1 William Morgan Drive, Toronto, Ontario

6.

324 Price Edward Drive, Toronto, Ontario

7.

24 Cecil Street, Toronto, Ontario

8.

30 and 30A Hazelton Avenue, Toronto, Ontario

9.

777 St. Clarens Avenue, Toronto, Ontario

10.

252 Carlton Street and 478 Parliament Street,
    Toronto, Ontario

11.

66 Gerrard Street East, Toronto, Ontario

12.

2454 Bayview Avenue, Toronto, Ontario

13.

319-321 Carlaw, Toronto, Ontario

14.

260 Emerson Ave., Toronto, Ontario

15.

44 Park Lawn Circle, Toronto, Ontario

16.

19 Tennis Crescent, Toronto, Ontario

17.

646 Broadview Avenue, Toronto, Ontario

Annexe
    A

Listed Schedule C Companies/Properties





Schedule C Company

Corresponding Schedule C Property



1.

United Empire Lands Ltd.

3270 American Drive, Mississauga, Ontario



2.

Bible Hill Holdings Inc.

0 Luttrell Ave., Toronto, Ontario



3.

6195 Cedar Street Ltd.

2 Kelvin Avenue, Toronto, Ontario



4.

Prince Edward Properties Ltd.

324 Prince Edward Drive, Toronto, Ontario



5.

Cecil Lighthouse Ltd.

24 Cecil Street, Toronto, Ontario



6.

Atala Investments Ltd.

30 and 30A Hazelton Avenue, Toronto, Ontario



7.

St. Clarens Holdings Ltd.

777 St. Clarens Avenue, Toronto, Ontario



8.

The Old Apothecary Building Inc.

66 Gerrard Street East, Toronto, Ontario



9.

1780355 Ontario Inc.

346 Jarvis Street, Suite F, Toronto, Ontario



10.

Emerson Developments Ltd.

260 Emerson Ave., Toronto, Ontario







[1]
The mortgages are not directly at issue in these proceedings.



[2]

Brown J.s findings remain operative because they were made in
    the same oppression remedy proceedings involving the same parties and the same
    issues; he had simply postponed a decision on the matters now under appeal,
    which were subsequently heard by Newbould J. following Brown J.s appointment
    to this Court.



[3]
Brown J. had been appointed to this Court in the interim.



[4]
The Waltons filed a Notice of Appeal from the orders of the Application Judge.
    Their appeal was dismissed for delay on March 20, 2017.



[5]
These same observations apply with respect to the counter-application of DeJong
    for constructive trusts, which was asserted for the first time before the
    Application Judge.



[6]
Other than those relating to Schedule C Properties against which constructive
    trusts were ordered.



[7]
Other Canadian and British authorities in which the principles relating to
    knowing assistance and knowing receipt are outlined and developed include
    the following:
Gold v. Rosenberg
, [1997] 3 S.C.R. 767, at paras. 30-36,
    per Iacobucci J. (dissenting, but not on this point);
Citadel General
;
Barnes
    v. Addy
(1874), L.R. 9 Ch. App. 244;
Agip (Africa) Ltd. v. Jackson
,
    [1992] 4 All E.R. 451 (C.A.);
El Ajou v. Dollar Land Holdings plc,
(1993), [1994] 2 All E.R. 685 (C.A.).



[8]
In general, my colleague accepts the foregoing analysis, but suggests there are
    difficulties in asserting a claim through the Schedule B Companies because
    their losses were caused by the fraudulent actions of an insider, Ms. Walton,
    and that the claim could be met with an
ex turpi causa
defence: see
Livent
    Inc. v. Deloitte & Touche
, 2017 SCC 63, varying 2016 ONCA 11. The DBDC
    Applicants are the claimants, however, and their controlling and directing mind
    is that of Dr. Bernstein. There is no fraud on the part of Dr. Bernstein to be
    attributed to the DBDC Applicants. In these circumstances, there is little
    likelihood an
ex turpi causa
defence would arise, in my opinion. Nor was
    it argued.



[9]

The judge of first instance in
El Ajou
.



[10]
Brown J. found that the Waltons had proved only $1 million in management fees
    and construction costs, out of a total $30 million they had claimed.



[11]
Even with full recovery on the constructive trusts granted in their favour, the
    DBDC Applicants (and Dr. Bernstein) will have recovered about 28% of their
    $81.6 million in lost investments ($81.6 million, less $11.8 million recovered
    prior to the hearing before the Application Judge, less $2.99 million in equity
    already returned, less $8.1 million in constructive trusts, assuming no overlap).



[12]
McLachlin C.J. and Rothstein J. concurred with Cromwell J. In separate reasons,
    Deschamps J. (Moldaver J. concurring) agreed with Cromwell J.s reasoning on
    this point. LeBel J. (Abella J. concurring) dissented.



[13]
This is excluding the DeJong claims accepted against St. Clarens Holdings and
    Emerson Development.



[14]
The claim of the Levytams has been resolved.



[15]
The Application Judge found that, if he had not granted constructive trusts, he
    would have held that the DeJong advances with respect to those companies were
    made by way of shareholder loans. That characterization is supported by the
    record, and I accept it.



[16]
My colleague suggests that, while the investors in the Schedule C Companies
    were victims of Ms. Waltons fraudulent scheme, the Schedule C Companies were
    not victims. I respectfully disagree. The Waltons were in breach of their
    fiduciary duties to the Schedule B Companies when they diverted funds from
    these specific-purpose corporations (Brown J., at paras. 261 and 264). To the
    extent they engaged in the same conduct in relation to the Listed Schedule C
    Companies, the Waltons were in breach of their fiduciary duties to these
    parties as well. As such, the investors, and the single-purpose investment
    companies they were investing in, were all victims of Ms. Waltons fraudulent
    scheme.



[17]

Christine DeJong Medicine Professional Corporation invested in
    United Empire Lands Ltd., Prince Edward Properties Ltd., St. Clarens Holdings
    Ltd. and Emerson Development Ltd., while the Condos and the Levytams invested
    in Cecil Lighthouse Ltd. The other investors in the remaining Listed Schedule C
    Companies did not participate in the proceedings, which is not surprising
    considering the small amount of net proceeds generated by the sale of these
    Listed Schedule C Company properties.



[18]
In fact, according to Dr. DeJong, the fact of the proceedings became known to
    the DeJongs and various other investors only after some 20 orders had already
    been made in the proceedings.



[19]

The investors whose affidavits and statements were filed by
    the Waltons were not parties to the proceedings in their own right. Only DeJong
    participated in the proceedings, making submissions at the hearing before Brown
    J., seeking to uphold a settlement with the Waltons and opposing the relief
    sought in respect of the Schedule C Properties. See para. 263 of Brown J.s
    reasons.



[20]
See the Order of Newbould J. dated September 23, 2016, paras. 3,4, and 5 and
    Appendix A.
I respectfully disagree with my colleagues
    summary (at para. 11) of the relief claimed by the DBDC Applicants when they
    were before Brown J. At para. 241 of his reasons, Brown J. referred to an
    amended draft judgment the DBDC Applicants put before the court containing
    several paragraphs of relief in relation to the Schedule C Properties,
    including the claims referred to by my colleague, which were for joint and
    several liability of the Walton respondents and the Schedule C
    Companies/Properties for net proceeds diverted from the Schedule B Companies.
    However, there is no other reference in Brown J.s reasons to any claim for any
    amount of money by the DBDC Applicants against the Schedule C Companies, or to
    an amendment of the application to permit such a claim to be made.



[21]
The specific claims are against 1780355 Ontario Inc., 6195 Cedar Street Ltd.,
    Atala Investments Ltd., Bible Hill Holdings Inc., Cecil Lighthouse Ltd., The
    Old Apothecary Building and United Empire Lands Ltd., in amounts that
    correspond with the net transfers from Rose & Thistle to each company
    account between October 2010 and October 31, 2013, less any constructive trust
    amount already awarded.



[22]
The Listed Schedule C Companies St. Clarens Holdings Ltd. and Emerson
    Developments Ltd. are not included in the net transfer analysis.



[23]
Brown J. found that the following amounts of the DBDC Applicants funds were
    used to purchase or discharge encumbrances on Schedule C Properties: 14 College
    St.: $1,314,225; 3270 American Drive: $1.032 million; 2454 Bayview: $1.6
    million; 346E [346F] Jarvis St.: $937,000; 44 Park Lane Circle: $2.5 million; 2
    Kelvin Street: $221,000; 0 Trent [0 Luttrell]: $152,900; and 26 Gerrard Street:
    $371,200. He granted constructive trusts in favour of the DBDC Applicants in
    respect of each of these properties for the proportionate share of the purchase
    price that these amounts represented at the date of purchase and for any
    proportionate share of the increase in value to the date of realization (at
    paras. 264-267).



[24]
Bannockburn Lands Inc., Cityview Industrial Ltd., Dupont Developments Ltd.,
    Leslie Lands, Liberty Land, Northern Dancer Lands Ltd., Queens Corner Corp.,
    Tisdale Mews Inc. and Twin Dragons Corporation.



[25]
Brown J. found that
Ms. Walton was in breach of the fiduciary
    duties she owed as a director of the Schedule B Companies. The problem with
    asserting a claim through these entities however is that because their losses
    were caused by the fraudulent actions of an insider, the claim could be met
    with a defence of
ex turpi causa.
See, for example,
Livent Inc. v.
    Deloitte & Touche
, 2016 ONCA 11, appeal allowed in part, 2017 SCC 63.



[26]

My colleague suggests that I have conflated knowing assistance
    with knowing receipt by requiring a benefit to have been received by a Listed
    Schedule C Company before knowing assistance is made out. While knowing
    assistance and knowing receipt are distinct wrongs, in this case the DBDC
    Applicants themselves rely on the same alleged fact  the diversion of their
    monies into the Listed Schedule C Properties  to support both claims. No other
    form of participation is alleged.



[27]

In
Livent,
in any event, the Supreme Court of Canada
    expressed the view that courts retain the discretion to refrain from applying
    the corporate identification doctrine where, in the circumstances of the case,
    it would not be in the public interest to do so (at para. 104). There is no
    policy reason for the corporate identification theory to apply to impose
    liability on the Listed Schedule C Companies for Ms. Waltons fraudulent
    breaches of fiduciary duty to the DBDC Applicants.



[28]

This is not a question of double recovery, which my colleague
    seeks to address at para. 130. Rather, the Listed Schedule C Companies could
    not have been the beneficiaries of amounts already accounted for by their tracing
    into specific properties in the constructive trust claims, and the inclusion of
    these amounts in their damages would double count such amounts.


