Ontario Superior Court of Justice Between: the Toronto-Dominion Bank Drytech International Inc. and 6892639 Canada Inc. Fifth R
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Court File No. 16-68152 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: THE TORONTO-DOMINION BANK Applicant and DRYTECH INTERNATIONAL INC. AND 6892639 CANADA INC. Respondents FIFTH REPORT OF THE RECEIVER DATED JUNE 12, 2017 TABLE OF CONTENTS INTRODUCTION .......................................................................................................................... 4 PURPOSE OF REPORT................................................................................................................. 6 TERMS OF REFERENCE ............................................................................................................. 7 ENTERPRISE VEHICLES ............................................................................................................ 7 REMAINING MINOR ASSETS AT DRYTECH’S PREMISES ................................................ 10 REALIZING ON THE REMAINING ASSETS LOCATED IN THE UNITED STATES ......... 11 OWNERSHIP OF THE GULFPORT ASSETS ........................................................................... 13 VACUUM CHAMBER IN THE UNITED STATES .................................................................. 18 CONFIRMATION OF AMOUNT CLAIMED BY BROWN’S CLEANERS ............................ 20 REALIZING ON ACCOUNTS RECEIVABLE .......................................................................... 20 HST AUDIT AND POTENTIAL REFUND ................................................................................ 21 MISSING ARTWORK OWNED BY DRYTECH....................................................................... 22 DEALING WITH THIRD PARTY GOODS ............................................................................... 24 REALIZING ON REAL PROPERTY OWNED BY 6892639 .................................................... 25 CLAIM FOR SOLICITOR’S LIEN ............................................................................................. 26 RECORDS .................................................................................................................................... 28 STATEMENT OF RECEIPTS AND DISBURSEMENTS .......................................................... 29 PROFESSIONAL FEES ............................................................................................................... 29 DISTRIBUTIONS ........................................................................................................................ 30 RECEIVER’S REQUESTS .......................................................................................................... 31 EXHIBITS A Order of Justice Hackland of the Ontario Superior Court of Justice dated November 30, 2016 B Receiver’s proposed allocation of Enterprise Vehicles’ sale proceeds to the Receiver, TD Bank and Enterprise C Detailed count list for Gulfport Assets as at December 12, 2016 Page 2 D Summary and index of Binder provided by Mr. Kevin Dooley E E-mail from Mr. Kevin Dooley, dated March 31, 2017 F Invoice for Dehumidification Unit (4800 Electric) G Invoice for Dehumidification Unit (4800 Gas) H Invoice for Bulldog negative air machines I Equipment listed in Gulfport Count that was matched to Schedule “B” of Aug. 8 Order J Schedule “C” to the Aug. 8 Order K Agreement of Purchase and Sale for 1670 Vimont L Proposed Approval and Vesting Order for 1670 Vimont M Letter from Norton Rose to Deloitte dated April 18, 2017 N Inventory of records/documents found at Drytech’s premises O Interim Statement of Receipts and Disbursements for the receivership of Drytech for the period from April 12, 2016 to May 31, 2017 P Interim Statement of Receipts and Disbursements for the receivership of 6892639 for the period from April 12, 2016 to May 31, 2017 Q Deloitte’s Invoices for Professional Fees totalling $241,458.85 (excluding HST) R Gowlings’ invoices for Professional Fees totalling $54,523.04 (excluding HST) S TD Bank Statement of Arrears re First Mortgage on 1670 Vimont Page 3 INTRODUCTION 1. By Order of the Ontario Superior Court of Justice (the “Court”) dated April 11, 2016 (the “Appointment Order”), Deloitte Restructuring Inc. (“Deloitte”) was appointed as the receiver (the “Receiver”) of all of the assets, undertakings and properties of Drytech International Inc. (“Drytech”) and 6892639 Canada Inc. (“6892639”) (collectively the “Debtors”) acquired for, or used in relation to the business carried on by the Debtors, including all proceeds thereof (the “Property”). In addition, the Receiver is authorized to sell, convey, transfer, lease or assign the Property or any part thereof out of the ordinary course of business: a) without the approval of the Court in respect of any transaction not exceeding $500,000, provided that the aggregate consideration for all such transactions does not exceed $750,000; and b) with the approval of the Court in respect of any transaction exceeding $500,000 or exceeding $750,000 in the aggregate. 2. The Appointment Order authorizes the Receiver to, among other things, take possession of, and exercise control over, the Property and any and all proceeds, receipts and disbursements, arising out of, or from, the Property of the Debtors. 3. The Receiver submitted its first report to the Court, dated May 20, 2016 (the “First Report”) on June 1, 2016. This report provided details of the Receiver’s initial activities and marketing activities undertaken by the Receiver with respect to the sale of the assets owned or used by Drytech in its Certified Restoration Dry-cleaning Network LLC (“CRDN”) franchised restoration dry-cleaning operation (the “CRDN Business”); 4. Based on the First Report and representations made to the Court on June 1, 2016, the Court authorized and directed the Receiver to enter into and carry out the terms of an asset purchase and sale agreement dated May 20, 2016 between the Receiver as vendor and a purchaser for the CRDN Business. This sale closed on June 3, 2016. 5. The Receiver submitted its second report to the Court, dated July 26, 2016 (the “Second Report”) on August 8, 2016. This report provided information and documentation to support Page 4 the Receiver’s opinion that most of the equipment located in the United States of America (“U.S.”), which was used by Drytech and a U.S. related company, Drytech International, Inc. (“Drytech US”), was the property of Drytech. 6. Based on the Second Report and representations made to the Court on August 8, 2016, the Court issued an Order that day (the “Aug. 8 Order”) declaring that certain assets located in Ocala, Florida were the property of Drytech, and that the ownership of the remaining Disputed Property (as listed in Schedule “C” to that Order) be determined by the Court on a motion to be scheduled. 7. The Receiver submitted its third report to the Court, dated September 6, 2016 (the “Third Report”) on September 12, 2016. This report provided information on the Receiver’s activities and the status of the Receiver’s realization efforts with respect to the Property of the Debtors. 8. Based on the Third Report and representations made to the Court on September 12, 2016, the Court approved (1) the Receiver’s acceptance of each Purchase Agreement (as defined in the Third Report) between the Receiver and the identified offerors in the public tender sale process conducted by the Receiver for Drytech’s assets located in Canada, and (2) the proposed interim distribution of funds to specific secured creditors. 9. The Receiver submitted its fourth report to the Court, dated November 22, 2016 (the “Fourth Report”) on November 29, 2016. This report provided information on the Receiver’s activities and the status of the Receiver’s realization efforts with respect to the remaining Property of the Debtors (including equipment located in Florida). The Fourth Report also provided additional documentation to support the Receiver’s position that, with certain minor exceptions, the remaining equipment located in the U.S. was the property of Drytech. 10. Based on the Fourth Report and representations made to the Court on November 29, 2016, the Court issued an Order the next day, attached as Exhibit “A” to this report (the “Nov. 30 Order”), which: a) Ordered that Mr. Kevin Dooley (a former officer and director of Drytech) deliver to the Receiver any of the inventory, equipment and other property listed in Schedule “A” to the Nov. 30 Order that was in his possession, care or control (Note: Schedule “A” Page 5 generally described equipment located in Gulfport, Mississippi, plus three generators located in Pearl River, Louisiana (the “Gulfport Assets”); b) declared that the Receiver was entitled to sell the inventory, equipment and other property listed in Schedule “A” to the Nov. 30 Order, and that any claim disputing the proposed distribution of the proceeds of sale may be the subject of a motion to the Court on notice; c) ordered that Mr. Kevin Dooley offer reasonable assistance to the Receiver in locating the Vacuum Chamber that was previously in his possession, care or control; d) ordered that the aggregate dollar limit for sales without specific Court approval, referred to paragraphs 1(a) and (b) above, be increased from $750,000 to $900,000; e) approved the proposed interim distribution of funds to specific secured creditors; and f) approved the other activities of the Receiver as described in the Fourth Report. 11. All of the Court Orders and Receiver’s reports (excluding sealed supplemental reports) have been posted on the Receiver’s website at http://www.insolvencies.deloitte.ca/en-ca/drytech. PURPOSE OF REPORT 12. The purpose of this fifth report