Background:
Heather Anne Stewart advanced a $600,000 loan to 6551450 Manitoba Ltd., where Susan Margaret Auch’s holding company was the majority shareholder. The funds were misused for personal expenses instead of their stated business purpose. A 2022 court ruling found Auch personally liable, and after exhausting appeals, she filed for bankruptcy in 2024, listing Stewart as a primary creditor with an outstanding judgment of approximately $1.155 million (including accrued interest).

Legal Issues:
Stewart applied under Section 178(1)(e) of the Bankruptcy and Insolvency Act (BIA) to prevent Auch’s debt from being discharged, arguing it resulted from fraudulent misrepresentation. Auch contended that her husband, not she, made the representations regarding the loan. Stewart also sought relief under Section 69.4 to lift the bankruptcy stay on proceedings.

Court’s Analysis & Ruling:
The court found that Auch, as the controlling mind of 6551450 Manitoba Ltd., knowingly directed the misuse of funds and was complicit in the fraudulent misrepresentation made by her husband. It ruled that the debt remains payable despite bankruptcy, as it fell under the fraud exception in Section 178(1)(e). The request under Section 69.4 was denied.

Amount:

• Total Outstanding Judgment (as of bankruptcy filing): Approximately $1.155 million (includes $600,000 loan plus accrued interest)

Outcome & Costs:
The court ruled in favor of Heather Anne Stewart, ensuring that Susan Margaret Auch remains liable for the full amount. Stewart was awarded tariff costs for the application.