In the Matter of the Bankruptcy Of
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Estate No. 31-394548 ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST) IN THE MATTER OF THE BANKRUPTCY OF DYLEX LIMITED, A COMPANY INCORPORATED PURSUANT TO THE LAWS OF CANADA AND HAVING ITS HEAD OFFICE IN THE CITY OF TORONTO, IN THE PROVINCE OF ONTARIO MOTION RECORD (Motion for Re-Appointment of Employee Representative Counsel, returnable July 3, 2020) June 30, 2020 KOSKIE MINSKY LLP 20 Queen Street West Suite 900, Box 52 Toronto, ON M5H 3R3 Andrew J. Hatnay – LSUC No. 31885W Tel: 416-595-2083 / Fax: 416-204-2872 Email: [email protected] James Harnum – LSUC No. 60459F Tel: 416-542-6285 / Fax: 416-204-2819 Email: [email protected] Proposed Representative Counsel for the Employees of Dylex Limited (in bankruptcy) - 2 - TO: MINDEN, GROSS LLP 2200-145 King St. West Toronto, ON M5H 4G2 Raymond M. Slattery – LSO #20479L Tel: (416) 369-4149 / Fax: (416) 864-9223 [email protected] Lawyers for KSV Kofman Inc., in its capacity as proposed Trustee of the Estate of Dylex Limited, and not in its personal capacity AND TO: OSLER, HOSKIN & HARCOURT LLP 100 King St. West, First Canadian Place Suite 6200, PO Box 50 Toronto, ON M5X 1B8 Shawn Irving – LSO #50035U [email protected] Tel: (416) 862-4733 / Fax: (416) 862-6666 Lawyers for Equinix - 3 - TABLE OF CONTENTS TAB DESCRIPTION PAGE NOS. 1. Notice of Motion dated June 30, 2020 1-8 2. Affidavit of James Harnum, sworn June 30, 2020 9-13 A Exhibit "A": Excerpt from Government of Canada 14-18 website regarding Unclaimed Dividend Fund 3. Report of KSV Kofman Inc. dated December 4, 2019 19-173 4. Representation Order dated August 20, 2001 174-179 5. Affidavit of Sam Martin sworn August 16, 2001 180-184 TAB 1 1 Estate No. 31-394548 ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST) IN THE MATTER OF THE BANKRUPTCY OF DYLEX LIMITED, A COMPANY INCORPORATED PURSUANT TO THE LAWS OF CANADA AND HAVING ITS HEAD OFFICE IN THE CITY OF TORONTO, IN THE PROVINCE OF ONTARIO NOTICE OF MOTION (Motion for Re-Appointment of Employee Representative Counsel, returnable July 3, 2020) KOSKIE MINSKY LLP ("KM") will make a motion to a judge presiding over the Commercial List to be heard on July 3, 2020 at 9:30 a.m. via video conference in Toronto, Ontario. THE MOTION IS FOR: 1. AN ORDER, if necessary, abridging the time for service of this Notice of Motion and the Motion Record, declaring that the motion is properly returnable today, and validating service of this Notice of Motion and Motion Record; 2. AND ORDER re-appointing KM as the Representative Counsel to all terminated employees of Dylex Limited ("Dylex") with respect to an additional distribution to be made by the Trustee in Bankruptcy of Dylex (KSV Kofman Inc.; the "Trustee"), as 2 2 reported in the Report of KSV dated December 4, 2019, which was filed with the Court on December 12, 2019, and for the payment of the reasonable costs of the Employees for Representative Counsel in the total amount of $35,000 (inclusive of taxes and disbursements); and 3. Such further and other relief as counsel may advise and this Honourable court may seem just. THE GROUNDS FOR THE MOTION ARE: 1. In August 2001, Dylex became insolvent and ceased all operations. All of Dylex's employees, approximately 4,631 individuals, were terminated (collectively, the "Employees") without being paid severance pay and other amounts owing to them. The Employees claimed to be owed a total of approximately $19,069,232 and were a major creditor group of Dylex. Approximately 4,200 employees still have outstanding claims as unsecured creditors of Dylex. 2. Dylex proceeded through a series of insolvency proceedings before finally becoming a bankrupt: (a) on August 3, 2001, it obtained protection from its creditors under the CCAA; (b) on August 17, 2001, the CCAA was terminated and an interim receiver was appointed over Dylex; and 3 3 (c) on September 28, 2001, a receiving order was issued and Dylex became a bankrupt. 3. On August 20, 2001, Mr. Justice Spence of the Ontario Superior Court of Justice (Commercial List) appointed KM as Representative Counsel to the Employees of Dylex in the bankruptcy proceedings. 4. At the first meeting of creditors meeting held on October 24, 2001, Andrew Hatnay of KM was also appointed as an Inspector of the estate of Dylex. 5. Representative Counsel prepared and filed an omnibus proof of claim in the bankruptcy proceedings for the amounts owing to the Employees in accordance with section 126(2) of the Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3 ("BIA"). The Employees' claims were settled with the Trustee and (other than correcting any minor clerical errors) are not in dispute for the purpose of the IP Asset Distribution (discussed below). 6. Over the next few years, the Trustee realized on the known assets of Dylex and ultimately paid out a total distribution to creditors of approximately 75 cents on the dollar of creditors' claims. 7. On October 17, 2012, the Trustee was discharged, the Dylex bankruptcy proceeding were terminated, and the estate was closed. The appointment of Representative Counsel also terminated with the termination of the bankruptcy proceedings. 8. In the fall of 2019, the former trustee of Dylex, KSV, (formerly Duff & Phelps, formerly, Richter & Partners Inc,) advised KM that it had identified an unrealized asset of Dylex 4 4 known as "Internet protocol numbers" ("IP Numbers"), and that it had entered into an agreement to sell the IP Numbers to a third party purchaser, thereby generating funds for an additional, one-time distribution to the creditors of Dylex (the "IP Asset Distribution"), including to eligible Employees. The past accepted claims of the Employees set out in the omnibus proof of claim will be used for the Employees' distribution component of the IP Asset Distribution. 9. The amount available in the IP Asset Distribution for all eligible creditors is approximately $750,000. In order to release the distribution cheques to all the creditors on a cost-effective basis, KSV proposes to limit the mailing of cheques to creditors who have a claim against Dylex in the amount of $1,500 or higher. For creditors who have a claim less than $1,500, KSV will send their distribution payment to the Unclaimed Dividend Fund administered by the Office of the Superintendent of Bankruptcy of Canada, from which those creditors can obtain their distribution payment. 10. With the $1,500 claim threshold: i) approximately 1,900 Employees (representing approximately 45% of all the Employee creditors, whose claims represent approximately 92% in dollar value of all the Employees' claims), and ii) approximately 700 trade creditors (representing approximately 82% of all trade creditors, whose claims represent approximately 99% in dollar value of all trade creditors claims) would be receiving dividend cheques from the Trustee. 11. In order to facilitate and assist with the portion of the IP Asset Distribution to be made to the Employees, KSV consulted with KM to be re-appointed by the Court as Representative Counsel. 5 5 12. The role of Representative Counsel with respect to the IP Asset Distribution would include: a) preparing and sending a mass mailing letter to all the Employees informing them of the IP Asset Distribution, the claim threshold, the upcoming distributions from the Trustee, and the process to claim an Unclaimed Dividend Fund from the Office of the Superintendent of Bankruptcy of Canada; b) reviewing the Employee Omnibus Proof of Claim that was filed in the 2001 Dylex bankruptcy proceedings as is necessary, and reconciling any issues or discrepancies; c) coordinating with the Trustee for communications to the Employees about the distribution; d) acting as a single point of contact for all Employee inquiries; e) attending in court as may be necessary to ensure that the Employees have appropriate representation on any issues that may arise; and f) responding to inquiries from Employees, their beneficiaries and estates including address changes and returned mail. To process such inquiries efficiently, KM would set up a dedicated toll-free telephone number and email path monitored by a clerks to address these inquiries (any complicated inquiries would be escalated to a lawyer); 13. The re-appointment of Representative Counsel for the Employees would ensure appropriate representation for a large creditor group of Dylex who are still owed amounts 6 6 on their claims, generate efficiencies and costs savings for the estate and other creditors, and is just and fair in the circumstances. 14. Sections 126(2) (authority for employee representative counsel) and 183(1) (general power of the bankruptcy court) of the Bankruptcy and Insolvency Act, R.S.C., 1985, c. B- 3; and 15. Such further and other grounds as counsel may advise and this Honourable Court permit. THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing of this motion: 16. The Affidavit of James Harnum, sworn June 30, 2020; 17. The Report of KSV dated December 4, 2019; 18. The Representation Order of the Court dated August 20, 2001; 19. The Affidavit of Sam Martin sworn on August 16, 2001; and 20. Such further and other material as counsel may advise and this Court may permit. June 30, 2020 KOSKIE MINSKY LLP Barristers & Solicitors 20 Queen St. W., Suite 900, Box 52 Toronto, ON M5H 3R3 Andrew J. Hatnay – LSUC No. 31885W Tel: 416-595-2083 / Fax: 416-204-2872 Email: [email protected] 7 James Harnum – LSUC No. 60459F Tel: 416-542-6285 / Fax: 416-204-2819 Email: [email protected] Proposed Representative Counsel for the Employees of Dylex Limited (in bankruptcy) TO: MINDEN, GROSS LLP 2200-145 King St.