American Axle & Manufacturing, Inc. v. Durable Release Coaters Limited, 2010 ONCA 652
CITATION: American Axle & Manufacturing, Inc. v. Durable Release Coaters Limited, 2010 ONCA 652
DATE: 20100909
DOCKET: M39122 (C52409)
COURT OF APPEAL FOR ONTARIO
Blair J.A. (In Chambers)
BETWEEN
American Axle & Manufacturing, Inc.
Plaintiff (Respondent)
- and -
Durable Release Coaters Limited and Diane Lund
Defendants (Appellants)
A N D B E T W E E N:
Durable Release Coaters Limited
Plaintiff by Counterclaim (Appellant)
- and -
American Axle & Manufacturing, Inc.
Defendant by Counterclaim (Respondent)
Jeanie DeMarco, for American Axle
Diane Lund in person No one appearing for the corporate appellant Durable Release
Heard: September 9. 2010
ENDORSEMENT
[1] On June 11, 2010 Newbould J. granted judgment against Durable Release and Ms. Lund jointly in the amount of approximately $620,000.00 plus pre-judgment interest at the rate of 6.3% compounded semi-annually, plus costs. The total of principal and interest now totals approximately $1,003,000.00. The trial judge subsequently fixed costs of $430,000.00, ruling that Ms. Lund was jointly responsible for $200,000.00 of that amount. Durable’s counterclaim was dismissed.
[2] Durable Release and Ms. Lund appealed. American Axle now moves for an order lifting the automatic stay pending appeal with respect to the payment of the judgment monies, together with, or in the alternative, an order for security for costs.
[3] The lift of stay argument is premised primarily on the central characteristic of this case, namely that there has never been any serious contest that the principal sum claimed of ± $697,000.00 always belonged to the plaintiff. The monies comprised GST related funds to which parties agreed American Axle (an American Tier 1 auto supplier) was entitled and which were collected on its behalf by Durable Release. It is contested whether the trial judge was correct in ordering pre-judgment interest at 6.3% instead of at the CJA rate of 3%, and that it be payable at a compounded rate.
[4] The evidence is that Ms. Lund, the sole shareholder, officer and director of Durable Release caused the corporation to pay the GST funds for other purposes. Newbould J. found that there was an agency relationship giving rise to a fiduciary relationship between the corporate parties and that those obligations were breached and that Ms. Lund was personally liable for having “knowingly assisted” Durable Release in the breach of its fiduciary obligations.
[5] Why should Durable Release and Ms. Lund enjoy the fruits of an automatic stay and continue to benefit from the use of the monies admittedly belonging to American Axle, Ms. DeMarco argues?
[6] There is another wrinkle. Filed with me today is a Certificate of the Superintendent in Bankruptcy indicating that Durable Release has filed a Notice of Intention to Make a Proposal under the Bankruptcy and Insolvency Act. This complicates matters because it raises the issue whether seeking an order lifting the stay and ordering security for costs pending Durable’s appeal amounts to the seeking of a “remedy” by the creditor, American Axle, which at the moment it is barred from, under s. 69(1)(a) of the Bankruptcy and Insolvency Act.
[7] I think that little turns on this latter question for today’s purposes, however, because whatever happens with respect to Durable Release today is somewhat moot. Even if the stay is lifted, American Axle cannot seek any remedy to recover against either the company or its property (s. 69(1)(a)). Durable’s appeal will either lapse or be taken up by the Trustee, or dealt with somehow in the Proposal proceeding. In these circumstances, I make no order lifting the stay or granting security for costs against Durable Release.
[8] The real issue is whether an order should issue with respect to Ms. Lund personally. I am satisfied that it should. In coming to this conclusion I have considered both the criteria for a lift of stay reviewed in such cases as Babbitt v. Paladin Inc. (1993), 20 C.P.C. (3d) 399, and Hall-Chem Inc. v. Vulcan Packaging Inc. (1994), 1994 CanLII 580 (ON CA), 72 O.A.C. 303 (Ont. C.A.), and Kagal v. Tessler, 2003 CarswellOnt 6830 at paras. 3 - 4, as well as the principles respecting security for costs set out in R. 61.06(1)(c). The trial judge made significant negative findings with respect to Ms. Lund, including remarks about her dishonesty and it is clear she is the operating mind of Durable Release and had complete knowledge of what was going on. I am satisfied that all of this gives rise to sufficient “other good reason” to order security for costs and sufficient basis for the partial lifting stay I propose.
[9] The automatic stay is therefore lifted with respect to Ms. Lund to the extent of the sum of $620,000.00 representing the principal amount of the claim over which there is really no dispute. In addition, Ms. Lund is to post security for costs in the amount of $150,000.00 total for the trial and appeal. The existing bond of $90,000.00 posted by Durable is to remain in place. This is sufficient to secure a significant portion of the trial and appeal costs on her part. If this amount is not paid into court, either by way of cash or an acceptable bond, with 45 days of this order, American Axle shall be entitled to move for dismissal of the appeal.
[10] American Axle is entitled to its costs of this motion fixed at $5,000.00 all inclusive.```