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Court File No.: CV 1.2-9896-OOCL
ONTARIOSUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
BONNIE CUMMINGS IN HER CAPACITY AS ESTATE EXECUTRIXOF THE ESTATE OF THE LATE JOHN CUMMINGS
Applicant
-and-
PEOPLEDGE HR SERVICES INC., WINSTON PARK FINANCIAL SERVICES LTD., CMCFRASER LTD., 1624452 ONTARIO LIMITED
Respondents
MOTION RECORD(returnable February 16, 2016)
(Volume 1 of 2)
February 10, 2016 CASSELS BROCK & BLACKWELL LLP2100 Scotia Plaza40 King Street WestToronto, ON MSH 3C2
Joseph J. Bellissimo LSUC #465558Tel: 416.860.6572Fax: [email protected]
Lawyers for BDO Canada Limited,in its capacity as Receiver of the RespondentCompanies
TO: THE ATTACHED SERVICE LIST
Legal*22075170.1
SERVICE LIST (Updated as at Febi•ua~y 9, 201.6)
CASSELS BROCK & BLACKWELL LLP Joseph Bellissimo Tel: 416.860.65722100 Scotia Plaza Fax: 416.642.715040 King Street West jbelissimo cr casselsbrock.comToronto, ON MSH 2C1
Lawyers for the Receiver BDO CanadaLimited
STEPHEN WALTERS PROFESSIONAL Stephen Walters Tel: 905.826.0651CORPORATION Fax: 905.826.30016509B Mississauga Road [email protected]
Mississauga, ON LSN 1 A6
SPEIGEL NICHOLS FOX LLP Jeffrey Tighe Tel: 905.366.970030 Eglinton Avenue West, Suite 400 Fax: 905.366.9707Mississauga, Ontario LSR 3E7 [email protected]
Lawyers for Bonnie Cummings
BONNIE CUNNINGS [email protected]
1VIARK KING Mark King Delta. l @eastlink.ca
MURRELL HEALTH SERVICES INC. Dr. Frederick [email protected]
1VIurrcll
CANADA REVENUE AGENCY Brian Clements Tel: 905.572.4426Hamilton Tax Services Office Fax: 905.570.8248P. O. BoX 2220 [email protected] Bay Street NorthHamilton, ON L8N 3E1
DEPARTMENT OF JUSTICE CANADA Kevin Dias Tel: 416.973.6373130 King Street West Fax: 416.973.0810Toronto, ON MSX 1K6 [email protected]
HER MAJESTY THE QUEEN IN RIGHT [email protected]
OF THE PROVINCE OF ONTARIO ASREPRESENTED BY THE MINISTER OFFINANCERevenue Collections Branch, Insolvency UnitPO Box 620 33 King Street West, 6 FloorOshawa, ON L1H 8H5
OFFICE OF THE SUPERINTENDENT Stefan Miskovsky Tel: 1 (877) 376.9902OF BANKRUPTCY CANADA (toll free)Federal Building [email protected] Bay Street North, 9th Floor
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Hamilton, ON L8R 3P7
DELL FINANCIAL SERVICES CANADA Sharissa Ellyn Tel: 416.758.2289LIMITED Senior Legal Counsel [email protected]
155 Gordon Baker Road, Suite 501North York, ON M2H 3N5
CHAITONS LLP George Tel: 416.218.11415000 Yonge Street, 10th Floor, Toronto, Benchetrit Fax: 416.218.1841Canada, M2N 7E9 [email protected]
Lawyers for Bank of Montreal
BANK OF MONTREAL John Quigley [email protected]
MCCARTHY TETRAULT Alain N. Tardif Tel: 514.397.4274Bureau 2500 Fax: 514.875.62461000 rue De La Gauchetiere QUEST [email protected]
Montreal, QC H3B OA2
Lawyers for FifryOne
THORNTON GROUT FINNIGAN D. ,J. Miller Tel: 416.304.0559100 Wellington Street West, Suite 3200 Fax: 416.304.1313P.O. Box 329 [email protected]
Toronto, ON MSK 1
Lawyers for Activpayroll
BLAKE, CASSELS & GRAYDON LLP Steven Wcisz Tel: 416.863.2616199 Bay Street Fax: 416.863.2653Suite 4000, Commerce Court West [email protected] ON MSL lA9
Matthew Kanter Tel: 416.863.5825Lawyers for Labatt Breweries of Canada LLP
matthew. ka [email protected]
LABATT BREWERIES OF CANADA Clare Smith clare.smith c~labatt.comLLP
DALE & LESSMANN LLP Garth Dingwall Tel: 416.369.7881181 University Avenue, Suite 2100, Toronto, Fax: 416.863.1009011taT1o, Canada MSH 3M7 [email protected]
Lawyers for Fronius Canada Ltd
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MCCARTHY TETRAULT LLP Geoff R. Hall Tel: 416.601.7856Toronto Dominion Bank Tower, Suite 5300 Fax: 416.868.0673Toronto ON MSK lE6 [email protected]
Lawyers for PMC-Sie~^ra Ltd. andPMC-Sierra US Inc.
HOUSING SERVICES CORPORATION Howie Wong Tel: 416.594.9325 ext. 252390 Bay Street, Suite 710 General CounselToronto, ON MSH 2Y2 hwon a,hscorp.ca
BLAKE, CASSELS & GRAYDON LLP Pamela Huff Tel: 416.863.2958199 Bay Street Fax: 416.863.2653Suite 4000, Commerce Court West [email protected]_
Toronto ON MSL lA9
LawyeNs foN Celergo LLC
GREEN GERMANN SAKRAN Karmel Sakran Tel: 905.639.1222411 Guelph Line, [email protected]
Burlington ON L7R 3Y3
Lawyers fog At~idge TranspoNtation
MCLEAN & KERR LLP G.F. Camelino Tel: 416-369-6621Barristers and Solicitors Fax: 416-366-8571130 Adelaide Street West, Suite 2800 [email protected]
Toronto, ON MSH 3P5
Lawyers for Burloak No. 1 Investment LimitedPaNtnership
Burloak No. 1 Investment Limited [email protected]
CARLYLE &PETERSON LAWYERS Laird French Tel: 519.432.0632LLP Fax: 519.432.0634216-700 Richmond Street lfrench~plaw.com
London, ON N6A SC7
Lawyers for Dasco Data Products Limited
MCLENNAN ROSS LLP David Risling Tel: 780.482.9200600 West Chambers Fax: 780.482.910012220 Stony Plain Road [email protected]
Edmonton, AB TSN 3Y4
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Lawyers for The Hamlet of Cambridge Bay
MIDDLEBROOK HOLDINGS INC. Doug Tel: 416.407.45575 Classic Drive Middlebrook Fax: 1.888.310.4923Brampton, ON L6Y SG9 [email protected]
ROBARTS GRAPHIC INC. Tim Roberts Tel: 905.678.01107765 Tranmere Drive, Suite 2 Fax: 906.678.9236Mississauga, ON LSS 1V5 [email protected]
DATALOGIC SOLUTIONS LTD. Sophie Tel: 44.203.327.046016-20 Morden Road, 2"d Floor Duckworth [email protected]
South WimbletonLondon S W 19 3BN EnglandUnited Kingdom
HIGH LINE CORPORATION Jackie Johnstone Tel: 905.940.8777145 Renfrew Drive, Suite 210 Fax: 905.940.8770Markham, ON L3R 9R6 ,[email protected]
BLUEPOINT VALUATIONS INC. Brad Borkwood Tel: 905.315.68444145 North Service Road, Suite 200 Fax: 1.866.387.0286Burlington, ON L7Z 6A3 [email protected]
GRAND &TOY LTD. Nazeen Daya Tel: 416.401.6355200 Aviva Park Drive Fax: 905.264.7475Vaughan, ON L4L 9C7 nazneendaya n grandandtoy.com
BLUE-PENCIL INFORMATION Dragica Medeiros Tel: 905.847.2583 x 225SECURITY Fax: 905.847.7431761 Redwood Square [email protected]
Oakville, ON L6L 6R6
J3C WERX Julie Chagger Tel: 905.997.7345/416.648.43606371 Chapman Court [email protected]
Mississauga, ON LSV 1J2
TEMPEST GLOBAL TELECOM Val Turner Tel: 905.332.38633228 South Service Road, Su1te 106 [email protected]
Burlington, ON L7N 3H8
PUROLATOR INC. Ortie Nesci Tel: 1866.313.5347 ext. 647425995 Avebury Road, 3rd F100T' [email protected]
Mississauga, ON LSR 3T8
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NORTEK SOLUTIONS [NC. Linda Woolley Tel: 905.852.38439 Oakview Place Fax: 1.800.671.3843Uxbridge, ON L9P 1R4 [email protected]
MICHAEL BARRY Michael Barry Tel: 905.690.025624 Brookhurst Crescent [email protected]
Waterdown, ON LOR 2H3
JAGGU SAH [email protected]
BORDEN LADNER GERVAIS LLP Cheryl Woodin Tel: 416.367.6270Scotia Plaza Fax: 416.361.733640 King Street West cwoodin cr blg.com
Toronto, ON MSH 3Y4
Lawyers for Berkley Canada Inc.
Together with former Customers of Peopledge HR Services Inc. having filed Eligible Cl~iins
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Court File No.: CV 12-9896-00CL
ONTARIOSUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
BONNIE CUMMINGS IN HER CAPACITY AS ESTATE EXECUTRIXOF THE ESTATE OF THE LATE JOHN CUMMINGS
Applicant
- and -
PEOPLEDGE HR SERVICES INC., WINSTON PARK FINANCIAL SERVICES LTD., CMCFRASER LTD., 1624452 ONTARIO LIMITED
Respondents
MOTION RECORD(returnable February 16, 2016)
(Volume 1 of 2)
INDEXTab Document Page No.
1. Notice of Motion 1-4
A. Draft Form of Order 5-12
2. Receiver’s Sixth Report dated February 10, 2016 13-47
A. Order of the Honourable Mr. Justice Newbould dated October29, 2012
48-63
B. Second Report to the Court dated December 3, 2012 (withoutthe Appendices thereto)
64-103
C. Order of the Honourable Mr. Justice Campbell datedDecember 10, 2012
104-107
D. Third Report to the Court dated February 15, 2013 (withoutthe Appendices thereto)
108-116
E. Fourth Report to the Court dated April 5, 2013 together withits Supplement to Fourth Report dated May 1, 2013 (withoutthe Appendices thereto)
117-163
F. Order of the Honourable Mr. Justice Newbould dated May 15,2013
164-179
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G. Endorsement of Mr. Justice Newbould dated May 15, 2013 180-194
H. Fifth Report of the Receiver dated November 3, 2014 andSupplement to the Fifth Report of the Receiver datedDecember 8, 2014 (without the Appendices thereto)
195-215
I. Customer Deposit Claims Registry 216-217
J. General Claims Registry 218
K. Notice of Revision and Disallowance dated February 19, 2015issued to Dell Financial Services Canada Limited
219-225
L. Letter to Canada Revenue Agency dated November 26, 2013 226
M. Summary of employee claims 228
N. Report on Phase 1 Forensic Investigation 229-299
O. Reasons for Judgment of the Honourable Mr. Justice Pattillodated July 3, 2015
300-311
P. Receiver’s R&D Statement for the period ending February 5,2016
312
Q. Receiver’s Final Estimate of Distributions to Customers andCreditors
313
3. Affidavit of Eugene Migus sworn February 5, 2016, withExhibits thereto
314-383
4. Affidavit of Marc Mercier sworn February 9, 2016, withExhibits thereto
384-436
5. Blackline of draft form of order against Commercial Listmodel Receiver Discharge Order
437-445
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Legal"22111727.1
Court File No. CV 12-98 )6-OOCI:,
ONTARIOSUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
BONNIE CUMMINGS IN HER CAPACITY AS ESTATE EXECUTRIXOF THE ESTATE OF THE LATE JOHN CUMMINGS
Applicant
- and -
PEOPLEDGE HR SERVICES INC., WINSTON PARK FINANCIAL SERVICES LTD.,CMC FRASER LTD., 1624452 ONTARIO LIMITED
Respondents
NOTICE OF MOTION(returnable February 16, 2015)
BDO Canada Limited ("BDO"), in its capacity as the Court-appointed receiver (the
"Receiver"), without security, of all of the assets, undertakings and properties of Peopledge HR
Services Inc. ("Peopledge") and each of Winston Park Financial Services Ltd. ("WPFS"), CMC
Fraser Ltd. ("CMC"), and 1624452 Ontario Limited ("162") (collectively, WPFS, CMC and 162
together with Peopledge, the "Debtors") acquired for, or used in relation to a business carried on
by the Debtors, makes a motion to a Judge presiding over the Commercial List at 10:00 a.m. on
February 16, 2016, or as soon after that time as the motion can be heard, at the court house, 330
University Avenue, 8th Floor, Toronto, Ontario, MSG 1R7.
PROPOSCD METHOD OF HEARING: The motion is to be heard orally.
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THE MOTION IS FOR an order, substantially in the form attached as Schedule "A" hereto:
(a) abridging the time for service of this notice of motion and motion record, including
the Sixth Report of the Receiver dated February 10, 2016 (the "Sixth Report"), the
Affidavit of Eugene Migus sworn February 5, 2016 (the "Migus Affidavit") and
the Affidavit of Marc Mercier sworn February 9, 2016 (the "Mercier Affidavit"),
and dispensing with further service thereof;
(b) approving the final distribution of the remaining proceeds available in the estates of
the Debtors as set out in paragraphs 98 and 99 of the Sixth Report (the "Final
Distribution");
(c) substantively consolidating the funds in the estates of the Related Companies with
the Peopledge General Estate Funds (as defined in the Sixth Report) for the purpose
of facilitating the Final Distributions;
(d) approving the Record Destruction Process (defined and described in paragraph 107
of the Sixth Report);
(e) upon the discharge of the Receiver, lifting the suspension of the administration of
the Debtors' bankruptcy estates and authorizing and directing the Trustee in
Bankruptcy to proceed directly to wind up the bankruptcy administrations of the
Debtors;
(~ approving the Receiver's consolidated statement of receipts and disbursements for
the period ending February 5, 2016;
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(g) approving the Fifth Report of the Receiver dated November 3, 2014 and the
Supplement to the Fifth Report of the Receiver dated December 8, 2014, together
with the conduct and activities of the Receiver as respectively set out therein;
(h) approving the Sixth Report, together with the conduct and activities of the Receiver
as set out therein;
(i) approving the fees and disbursements of the Receiver and its counsel for the period
from March 31, 2013 to January 31, 2016 set out in the Migus Affidavit and the
Mercier Affidavit, together with a holdback in the amount of $40,000.00 for fees
and disbursements incurred by the Receiver and its counsel for the period from
February 1, 2016 to the completion of the receivership administration, including
completing the Remaining Activities (as defined in the Sixth Report);
(j) discharging BDO as Receiver of the undertaking, property and assets of the
Debtors and releasing BDO from any and all liability that BDO may have in any
way arising out of the acts or omissions of BDO while acting as Receiver, or from
matters that were raised, or which could have been raised, in the within receivership
proceedings, as set out in the Receiver's draft order; and
(k) such further and other relief as this Court may deem just.
THE GROUNDS FOR THE MOTION ARE:
(a) The facts and grounds as set out in the Sixth Report, the Migus Affidavit and the
Mercier Affidavit;
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C~
(b) Rules 1.04, 2.03, 3.02 and 37 of the Rules of Civil Procedure , R.R.O. 1990, Reg.
194, as amended; and
(c) such further grounds as are just.
THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing of the motion:
(a) the Sixth Report, together with the Appendices thereto;
(b) the Migus Affidavit, together with the Exhibits thereto;
(c) the Mercier Affidavit, together with the Exhibits thereto; and
(d) such further materials as is just.
February 10, ?015 CASSELS BROCK & BLACKWELL LLP2100 Scotia Plaza40 King Street WestToronto, ON MSH 3C2
Joseph J. Bellissimo LSUC #4655.5RTel: 416.860.6572Fax: [email protected]
Lawyers for BDO Canada Limited,in its capacity as Receiver as the RespondentCompanies
Legal"22071150.3
4
Legal`22111727.1
Court File CV 12-9896-OOCL
ONTARIOSUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
THE HONOURABLE ) TUESDAY, THE 16Tx
JUSTICE ~ DAY OF FEBRUARY, 2016
BETWEEN:
BONNIE CUMMINGS IN HER CAPACITY AS ESTATE EXECUTRIXOF THE ESTATE OF THE LATE JOHN CUMMINGS
Applicant
- and -
PEOPLEDGE HR SERVICES INC., WINSTON PARK FINANCIALSERVICES LTD., CMC FRASER LTD. AND 1624452 ONTARIO
LIMITED
Respondents
FINAL DISTRIBUTION AND DISCHARGE ORDER
THIS MOTION, made by BDO Canada Limited ("BDO") in its capacity as the Court-
appointed receiver (the "Receiver") of the undertaking, property and assets owned and/or
administered by (a) Peopledge HR Services Inc. ("Peopledge") and by (b) Winston Park
Financial Services Ltd. ("WPFS"), CMC Fraser Ltd. ("CMC") and 1624452 Ontario Limited
("162") (collectively, WPFS, CMC and 162 are the "Related Companies", and together with
Peopledge, the "Debtors"), for an order:
(a) abridging the time for service of the notice of motion and motion record,
including the Sixth Report of the Receiver dated February 10, 2016 (the "Sixth
Report"), the Affidavit of Eugene Migus sworn February 5, 2016 (the "Migus
Affidavit") and the Affidavit of Marc Mercier sworn February 9, 2016 (the
"Mercier Affidavit"), and dispensing with further service thereof;
I,egal'~ 13727448.7
5
(b) approving final distribution of the remaining proceeds available in the estates of
the Debtors as set out in paragraphs 98 and 99 of the Sixth Report (the "Final
Distribution");
(c) substantively consolidating the funds in the estates of the Related Companies with
the Peopledge General Estate Funds (as defined in the Sixth Report) for the
purpose of facilitating the Final Distributions;
(d) approving the Record Destruction Process (defined and described in paragraph
107 of the Sixth Report);
(e) upon the discharge of the Receiver, lifting the suspension of the administration of
the Debtors' bankruptcy estates and authorizing and directing the Trustee in
Bankruptcy to proceed directly to wind up the bankruptcy administrations of the
Debtors;
(~ approving the Receiver's consolidated statement of receipts and disbursements for
the period ending February 5, 2016;
(g) approving the Fifth Report of the Receiver dated November 3, 2014 and the
Supplement to the Fifth Report of the Receiver dated December 8, 2014, together
with the conduct and activities of the Receiver as respectively set out therein;
(h) approving the Sixth Report, together with the conduct and activities of the
Receiver as set out therein;
(i) approving the fees and disbursements of the Receiver and its counsel for the
period from March 31, 2013 to January 31, 2016, together with a holdback in the
amount of $40,000.00 for fees and disbursements incurred by the Receiver and its
counsel for the period from February 1, 2016 to the completion of the receivership
administration, including completing the Remaining Activities (as defined in the
Sixth Report); and
(j) discharging BDO as Receiver of the undertaking, property and assets of the
Debtors and releasing BDO from any and all liability that BDO may have in any
6
way arising out of the acts or omissions of BDO while acting as Receiver, or from
matters that were raised, or which could have been raised, in the within
receivership proceedings, as set out in the Receiver's draft order,
was heard this day at 330 University Avenue, Toronto, Ontario.
ON READING the Sixth Report, the Migus Affidavit, the Mercier Affidavit, and on
hearing the submissions of counsel for the Receiver and
no one else appearing although served as evidenced by the Affidavit of Deborah Ferguson sworn
February 10, 2016, filed;
1. THIS COURT ORDERS that the time for service of the notice of motion and the
motion record (including service of the Sixth Report, the Migus Affidavit and the Mercier
Affidavit) be and is hereby abridged and that the motion is properly returnable today and the
requirement for service upon interested parties, other than those served, is hereby dispensed with
and that the service as effected by the Receiver is hereby validated in all respects.
2. THIS COURT ORDERS that all capitalized and undefined terms used but not defined
herein shall have the meanings ascribed to them in the Sixth Report.
APPROVAL OF FINAL DISTRIBUTION
3. THIS COURT ORDERS the Receiver's determination of Claims against the Debtors as
set out in paragraphs 30 to 58 of the Sixth Report be and are hereby approved and confirmed,
and shall be binding on the applicable Claimants.
4. THIS COURT ORDERS that the Receiver be and is hereby authorized and directed to
distribute, after payment of fees and expenses incurred by the Receiver and its counsel allocated
in accordance with the May Directions Order, the following:
(a) the balance of the Canadian Customer Account Funds to Claimants with Proven
Canadian Customer Deposit Claims on a pari passu ex post facto pro rata basis;
(b) from the Peopledge General Account Funds:
7
(i) the sum of $33,771.96 payable by the Receiver in satisfaction of its
obligations to the former employees of Peopledge pursuant to Section 81.4
of the BIA;
(ii) the sum of $18,570.21 to former employees of Peopledge in satisfaction of
the priority afforded to the former employees for outstanding wages
pursuant to Section 14 of the Employment Standards Act;
(iii) the sum of $8,969.71 to Canada Revenue Agency ("CRA") in satisfaction
of the Peopledge Source Deduction Claim;
(iv) the sum of $18,570.21 to CRA in satisfaction of the Peopledge HST
Claim;
(v) the sum of $20,292.28 to Bank of Montreal in satisfaction of its Claims
against Peopledge;
(c) from the 162 General Account Funds, the sum of $5,644.63 to CRA in
satisfaction of its Claims against 162;
(d) subject to the payments set out in clauses (c) and (d), the balance of the General
Estate Funds to:
(i) Proven General Claims;
(ii j Residual Proven Canadian Customer Deposit Claims; and
(iii) Residual Proven US Customer Deposit Claims,
on a pari passu ex post facto pro rata basis and in full and final satisfaction of all
such Claims.
8
RECORD DESTRUCTION
5. THIS COURT ORDERS that the Receiver's Record Destruction Process (as defined
and described in paragraph 107 of the Sixth Report) be and is hereby approved and that the
Receiver be and is authorized and directed to take all necessary steps to implement the Record
Destruction Process.
DEBTORS' BANKRUPTCIES
6. THIS COURT ORDERS that, upon filing of the Discharge Certificate (defined below),
the temporary suspension of the bankruptcy estates of each of the Debtors pursuant to paragraph
6 of the Directions Order of the Honourable Mr. Justice C. Campbell dated December 10, 2012
be and is hereby lifted and BDO, in its capacity as trustee in bankruptcy of the Debtors, be and is
hereby authorized and directed to proceed directly to wind up the bankruptcy administration of
the Debtors.
DISCHARGE AND RELEASE OF BDO AS R~C~IVER
7. THIS COURT ORDERS that upon the Receiver filing a certificate certifying that it has
completed the Remaining Activities as defined in the Sixth Report (the "Discharge
Certificate"), the Receiver shall be discharged as Receiver of the undertaking, property and
assets of the Debtors, provided however that notwithstanding its discharge herein (a) the
Receiver shall remain Receiver for the performance of such incidental duties as may be required
to complete the administration of the receivership herein, and (b) the Receiver shall continue to
have the benefit of the provisions of all Orders made in this proceeding, including all approvals,
protections and stays of proceedings in favour of BDO in its capacity as Receiver.
8. THIS COURT ORDERS AND DECLARES that BDO is hereby released and
discharged from any and all liability that BDO may hereafter have by reason of, or in any way
arising out of, the acts or omissions of BDO while acting in its capacity as Receiver herein, save
and except for any gross negligence or wilful misconduct on the Receiver's part. Without
limiting the generality of the foregoing, BDO is hereby forever released and discharged from any
and all liability relating to matters that were raised, or which could have been raised, in the
9
within receivership proceedings, save and except for any gross negligence or wilful misconduct
on the Receiver's part.
APPROVAL OF CONSOLIDATED R&D STATEMENT
9. THIS COURT ORDERS that the Receiver's Consolidated Statement of Receipts and
Disbursements for the period from October 29, 2012 to February 5, 2016 attached at Appendix
"P" of the Sixth Report be and is hereby approved.
APPROVAL OF REPORTS
10. THIS COt7RT ORDERS that the Fifth Report, and the conduct and activities of the
Receiver as set out therein, be and are hereby approved.
11. THIS COURT ORDERS that the Supplement to the Fifth Report, and the conduct and
activities of the Receiver as set out therein, be and are hereby approved.
12. THIS COURT ORDERS that the Sixth Report, and the conduct and activities of the
Receiver as set out therein, be and are hereby approved.
APPROVAL OF RECEIVER AND LEGAL FEES
13. THIS COURT ORDERS that the fees and disbursements of the Receiver for services
rendered for the period from March 31, 2013 to January 31, 2016, in the aggregate amount of
$218,912.54 plus HST as detailed in the Migus Affidavit, be and are hereby approved.
14. THIS COURT ORDERS that the fees and disbursements of the Receiver's legal
counsel, Cassels Brock &Blackwell LLP, for the period from March 31, 2013 to January 31,
2016, in the aggregate amount of $209,661.29 plus HST as detailed in the Mercier Affidavit, be
and are hereby approved.
15. THIS COURT ORDERS that the Holdback (as defined and described in the Sixth
Report) in the amount of $40,000.00 be and is hereby approved and the Receiver be and is
hereby authorized to disburse the Holdback in order to satisfy the reasonable fees and
disbursements of the Receiver and its counsel incurred for the period from February 1, 2016 to
10
the completion of the receivership administration, including completing the Remaining Activities
(as defined in the Sixth Report).
11
BONNIE CUMMINGS IN HER CAPACITY AS ESTATE
EXECUTRIX OF THE ESTATE OF THE LATE JOHN
CUMMINGS
Appl
ican
t
-and-
PEOPLEDGE HR SERVICES INC., WINSTON PARK
FINANCIAL SERVICES LTD., CMC FR.ASER LTD., 1624452
ONTARIO LIMITED
Respondents
Cour
t Fi
le No. CV 12-9896-OOCL
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
PROCEEDING COMMENCED AT
TORONTO
FINAL DISTRIBUTION AND DISCHARGE
ORDER
Cass
els Brock &Blackwell LLP
2100 Scotia Pl
aza
40 Kin
g Street West
Toro
nto,
ON MSH 3C2
Joseph J. Bellissimo LSUC #46555R
Tel:
416.860.6572
Fes:
416.
642.
7150
Lawyers fo
r BDO Can
ada Limited,
in its cap
acit
y as
Rec
eive
r of th
e Re
spon
dent
Companies
Legal* 13
7274
48.7
12
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Legal'22111727.1
Court File CV 12-9896-OOCL
ONTARIOSUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
BETWEEN:
BONNIE CUMMINGS IN HER CAPACITY AS ESTATE EXECUTRIXOF THE ESTATE OF THE LATE JOHN CUMMINGS
Applicant
-and-
PEOPLEDGE HR SERVICES 1NC., WINSTON PARK FINANCIALSERVICES LTD., CMC FRASER LTD. AND 1624452 ONTARIO
LIMITED
Respondents
SIXTH REPORT OF BDO CANADA LIMITEDRECEIVER OF PEOPLEDGE HR SERVICES INC.,
WINSTON PARK FINANCIAL SERVICES LTD., CMC FRASER LTD.AND 1624452 ONTARIO LIMITED
February 10, 2016
Legal`22111942.1
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TABU OF CONTENTS
OVERVIEW OF THE RECEIVERSHIP ........................................................................................1
PURPOSE OF SIXTH REPORT .....................................................................................................4
TERMS OF REFERENCE ..............................................................................................................5
RECEIVER'S ACTIVITIES TO DATE .........................................................................................6
OVERVIEW OF ESTATE ASSETS ...............................................................................................8
OVERVIEW OF THE CLAIMS PROCESS ...................................................................................8
OVERVIEW OF PROVEN CLAIMS AND PRIORITY CLAIMS ..............................................10
RESULTS OF PHASE 1 OF FORENSIC INVESTIGATION .....................................................15
INSURANCE CLAIM MATTERS ...............................................................................................18
BANKRUPTCY OF THE DEBTORS ..........................................................................................21
SUBSTANTIVE CONSOLIDATION OF THE DEBTORS' ESTATES .....................................22
CONSOLID~4TED STATEMENT OF RECEIPTS AND DISBURSEMENTS ...........................23
PROPOSED FINAL DISTRIBUTIONS .......................................................................................23
ALLOCATION OF RECEIVERSHIP COSTS .............................................................................26
PEOPLEDGE RECORD DESTRUCTION PROCESS ................................................................27
PROPOSED DISCHARGE OF THE RECEIVER ........................................................................29
PROFESSIONAL FEES AND EXPENSES .................................................................................30
SUMMARY OF RELIEF SOUGHT .............................................................................................32
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List of Appenclices
Appendix A Order of the Honourable Mr. Justice Newbould dated October 29, 2012
Appendix B Second Report to the Court dated December 3, 2012
Appendix C Comeback Directions Order granted by the Honourable Mr. Justice Campbelldated December 10, 2012
Appendix D Third Report to the Court dated February 15, 2013
Appendix E Fourth Report to the Court dated April 5, 2013 together with its Supplementto Fourth Report dated May 1, 2013
Appendix F May Directions Order dated May 15, 2013
Appendix G Endorsement of Mr. Justice Newbould dated May 15, 2013
Appendix H Fifth Report of the Receiver dated November 3, 2014 and Supplement to theFifth Report of the Receiver dated December 8, 2014
Appendix 1 Customer Deposit Claims Registry
Appendix .r General Claims Registry
Appendix 1< Notice of Revision and Disallowance dated February 19, 2015 issued by theReceiver to Dell
Appendix L CRA Rejection Letter
Appendix M Summary of Peopledge's employee claims
Appendix N Receiver's report on the Phase 1 Forensic Investigation
Appendix O The Honourable Mr. Justice Pattillo Reasons for Judgment issued July 3,2015
Appendix P Receiver's R&D Statement for the period ending February 5, 2016
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OVERVIEW OF THE RECEIVERSHIP
1. BDO Canada Limited ("BDO") was appointed as receiver (the "Receiver") pursuant to
section 101 of the Courts of Justice Act R.S.O. 1990 C. c.43, as amended, over all of the
assets, undertakings, and properties owned and/or administered by (a) Peopledge HR
Services Inc. ("Peopledge") and by (b) Winston Park Financial Services Ltd. ("WPFS"),
CMC Fraser Ltd. ("CMC") and 1624452 Ontario Limited ("162") (collectively, the
"Related Companies", and together with Peopledge, the "Debtors") pursuant to the
Order of the Honourable Mr. Justice Newbould (the "Receivership Order") dated
October 29, 2012. A copy of the Receivership Order is attached as Appendix "A".
2. Peopledge conducted business as a provider of payroll processing, human resources, and
benefits services. Peopledge serviced 152 Canadian customers ("Canadian Customers")
and eight US customers ("US Customers" and together with the Canadian Customers,
the "Customers"). Peopledge's primary shareholder and directing mind was John
Cummings ("John Cummings"), who died from cancer in 2012. His widow, Bonnie
Cummings ("Bonnie Cummings"), as estate executrix of Cummings' estate (the
"Cummings Estate"), began the process of investigating John Cummings' assets and
affairs, including the business of Peopledge, which revealed a troubled company in
financial distress, with limited to no proper accounting and what appeared to be a
significant sum of money missing from the Peopledge's payroll accounts.
3. The Receiver was appointed to, among other things:
(a) oversee the orderly wind-down of the business of Peopledge;
(b) develop and implement an orderly claims process for the Debtors' creditors; and
(c) investigate the competing rights of Peopledge's customers as potential claimants
to the funds maintained in Peopledge's bank accounts.
4. The Receivership Order ordered the Receiver and all interested parties to ̀ come back' to
the Court to seek direction regarding, among other things, a claims process for the
Debtors (the "Comeback Motion"). The Receiver filed its Second Report to the Court
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dated December 3, 2012 (the "Second Report") in connection with the Comeback
Motion, a copy of which (without the Appendices thereto) is attached as Appendix "B".
As part of the relief granted at the Comeback Motion, the Honourable Mr. Justice
Campbell granted an order (the "Claims Process Order") directing and empowering the
Receiver to administer the Claims Process (as defined therein). The Claims Process Order
required that, among other things, on or before February 15, 2013, the Receiver deliver a
report setting out a summary of the claims received in accordance with the Claims
Process Order to every person that filed a Proof of General Claim or Proof of Customer
Deposit Claim (collectively, the "Claims") by January 18, 2013 (the "Claims Bar
Date") (collectively, all such persons, the "Claimants").
5. Also as part of the relief granted at the Comeback Motion, the Honourable Mr. Justice
Campbell granted an order (the "Comeback Directions Order") authorizing and
directing, among other things, that the Receiver file assignments in bankruptcy for the
Debtors, provided that the general administration of the bankruptcy estates be suspended
until further order of the Court (discussed below). A copy of the Comeback Directions
Order is attached as Appendix ~~C".
6. The Receiver filed its Third Report to the Court dated February 15, 2013 (the "Third
Report") summarizing the Claims as directed by the Claims Process Order, a copy which
(without the Appendices thereto) is attached as Appendix "D".
7. The Receiver attended before the Honourable Mr. Justice Newbould on May 9, 2013 to
seek advice and directions from the Court with respect to completing the Claims Process
and entitlement of creditors to the funds in the estates of the Debtors (the "May
Directions Motion"). In connection with the May Directions Motion, the Receiver filed
its Fourth Report to the Court dated April 5, 2013 together with its Supplement to Fourth
Report dated May 1, 2013 (collectively, the "Fourth Report"), a copy of which (without
the Appendices thereto) are attached as Appendix "E".
8. As part of the relief granted by the Court on the May Directions Motion, the Honourable
Mr. Justice Newbould granted an order dated May 15, 2013 (the "May Directions
Order"):
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(a) authorizing and directing the Receiver to complete the Claims Process;
(b) declaring that only those Claimants with Proven Canadian Customer Deposit
Claims (as defined below) may receive a distribution from the Canadian
Customer Account Funds (as defined below) and only those Claimants with
Proven US Customer Deposit Claims (as defined below) may receive a
distribution from the US Customer Account Funds (as defined below);
(c) authorizing and directing the Receiver to complete an interim distribution to such
Claimants; and
(d) authorizing and directing the Receiver to undertake the Phase 1 Forensic
Investigation (as defined below) in respect of funds which appeared to have been
diverted from Peopledge's bank accounts.
9. A copy of the May Directions Order is attached hereto as Appendix "F". A copy of the
Endorsement of Mr. Justice Newbould dated May 15, 2013 is attached hereto as
Appendix "G".
10. The Receiver has completed the Claims Process and accepted, disallowed and/or settled
all Claims filed.
11. The Receiver has completed its Phase 1 Forensic Investigation and has concluded that the
investment of further estate resources to investigate the movement of funds between and
from the Debtors' accounts is not warranted, as discussed below.
12. The Receiver is now prepared to make a final distribution to Claimants, including to
those Claimants with Proven General Claims (as defined below). In preparation for a
distribution, the Receiver has developed recommendations with respect to the entitlement
of such Claimants which require the approval of this Honourable Court.
13. There are no realizable assets remaining in the estate. Subject to completion of the
distributions and the record destruction process discussed below, the Receiver is of the
view that the administration of the Debtors' estates is complete and consequently seeks
its discharge and release as Receiver.
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14. This is the Receiver's Sixth Report to the Court (the "Sixth Report") which is filed in
connection with these remaining matters in the receivership estate.
PURPOSE OF SIXTH REPORT
15. The purpose of this Sixth Report is to report to the Court with respect to: (i) the activities
of the Receiver for the period from May 1, 2013 to the date of this Sixth Report; (ii) the
Claims Process and the status of Claims proved; (iii) the results of the Phase 1 Forensic
Investigation and the Receiver's conclusions with respect thereto; (iv) the Receiver's
recommendations with respect to a final distribution of estate funds; (v) the remaining
duties of the Receiver; and (iv) the discharge and release of the Receiver.
16. In particular, this Sixth Report is filed in support of the Receiver's motion for an order:
(a) approving the proposed final distribution (the "Final Distributions") of the
remaining proceeds available in the estates of the Debtors as set out in paragraphs
98 and 99 herein;
(b) substantively consolidating the funds in the estates of the Related Companies with
the Peopledge General Estate Funds (defined below) for the purpose of
facilitating the Final Distributions;
(c) approving the Record Destruction Process (defined and described in paragraph
107 herein) designed by the Receiver to protect sensitive Customer information
held by Peopledge;
(d) upon the discharge of the Receiver, lifting the temporary suspension of the
administration of the Debtors' bankruptcy estates and authorizing and directing
the Trustee to proceed directly to wind up the bankruptcy administrations of the
Debtors;
(e) approving the Receiver's consolidated statement of receipts and disbursements for
the period ending February 5, 2016 (the "R&D Statement");
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(~ approving the Fifth Report of the Receiver dated November 3, 2014 together with
the Supplement to the Fifth Report of the Receiver dated December 8, 2014
(collectively, the "Fifth Report") copies of which (without the Appendices
thereto are attached as Appendix "H", and approving the conduct and activities
of the Receiver as respectively set out therein;
(g) approving this Sixth Report, together with the conduct and activities of the
Receiver as set out therein;
(h) approving the fees and disbursements of the Receiver and its counsel for the
period from March 31, 2013 to January 31, 2016, together with a holdback for
fees and disbursements to be incurred by the Receiver and its counsel in
connection with completing the Receiver's remaining duties in these receivership
proceedings; and
(i) discharging BDO as Receiver of the undertaking, property and assets of the
Debtors and releasing BDO from any and all liability that BDO may have in any
way arising out of the acts or omissions of BDO while acting as Receiver, or from
matters that were raised, or which could have been raised, in the within
receivership proceedings, as set out in the Receiver's draft order.
TERMS OF REFERENCE
17. All references to currency or dollars in this Sixth Report shall mean Canadian dollars
unless otherwise stated.
18. All reports and orders filed or issued in these receivership proceedings are available on
the Receiver's website at: http://extranets.bdo.ca/peopledge/
19. The Receiver has relied upon unaudited financial information of Peopledge, including its
books and records, certain financial information prepared by Peopledge, and discussions
with and representations made by Peopledge's management, Bonnie Cummings and the
Cummings Estate. The Receiver has not been provided with any substantive books and
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records of the Related Companies. The information has not been audited in any manner
by the Receiver.
RECEIVER'S ACTIVITIES TO DATE
20. The activities of the Receiver since its appointment are more fully described in the First
Report, the Second Report, the Third Report, the Fourth Report and the Fifth Report.
21. Since the Fourth Report, the Receiver took the following steps in conjunction with its
mandate:
(a) completed its administration of the Claims Process, including:
(i) conducting an extensive review of the Claims of the Claimants;
(ii) assisting Claimants in compiling supporting documentation in respect of
their respective Customer Deposit Claims;
(iii) issuing letters to certain Claimants requesting additional information to
allow the Receiver to complete its review of their respective General
Claims (as defined below);
(iv) on a Claim-by-Claim basis, issuing Notices of Allowance or Notices of
Revision or Disallowance to Claimants; and
(v) negotiating and settling disputes of certain Claims;
(b) completed an interim distribution to Customers with Proven Canadian Customer
Deposit Claims and Proven US Customer Deposit Claims (each as defined below)
in accordance with the May Directions Order;
(c) Successfully sought repayment to the Peopledge estate of the amount of
$256,536.38 from The Durham College of Applied Arts &Technology Inc.
("Durham College") as discussed below;
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(d) analyzed various distribution and creditor recovery scenarios and methodologies
with respect to the General Estate Funds (defined below), including as described
below;
(e) consulted with certain major stakeholders in respect of the Receiver's review of
potential distribution scenarios and methodologies for the General Estate Funds;
(~ completed its Phase 1 Forensic Investigation, including analyzing results and
compiling recommendations;
(g) consulted with certain major stakeholders in respect of the Receiver's results from
the Phase 1 Forensic Investigation, including the Receiver's recommendations
against further investigation or action;
(h) completed its reporting obligations pursuant to the Wage Earner PNotection
Program Act ("WEPPA") and its administration of WEPPA claims of
Peopledge's former employees;
(i) continued to safeguard confidential customer information and developed a
recommended Record Destruction Process, which process is detailed below
subject to the approval of this Court;
(j) completed its investigation into possible recovery under Peopledge's insurance
policy and reported and submitted a claim for recovery under the E&O Policy (as
defined and discussed below), which claim did not result in any additional funds
to the estate;
(k) continued to respond to requests for information from Peopledge's former
Customers relating to their former payroll services; and
(1) continued to respond to creditor inquiries and other ancillary matters relating to
the administration of the Debtors' estates.
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OVERVIEW OF ESTATE ASSETS
22. As set out in the Fourth Report, as part of its payroll processing business, funds delivered
to Peopledge by its former customers designated for payroll and related governmental
and other remittances (collectively, "Payroll Funds") were deposited into one of two
"Consolidated Payroll Accounts", being (i) the "Canadian Consolidated Account"
held with Bank of Montreal ("BMO") which was used to administer payrolls for
customers with Canadian employees ("Canadian Customers"), and (ii) the "US
Consolidated Account" held with BMO Harris Bank in the United States which was
used to administer payrolls for customers with US employees ("US Customers" and
together with the Canadian Customers, "Peopledge's Customers"). In addition to the
Consolidated Payroll Accounts, Peopledge also held a number of additional accounts
with BMO seemingly designated for general business operations (the "Peopledge
General Accounts").
23. As such, the assets of Peopledge are categorized into three separate pools: (i) Payroll
Funds deposited into the Canadian Consolidated Account (the "Canadian Customer
Account Funds"); (ii) Payroll Funds deposited into the US Consolidated Account (the
"US Customer Account Funds"); and (iii) funds in the Peopledge General Accounts
(the "Peopledge General Accounts Funds"). Collectively, the Canadian Customer
Account Funds and the US Customer Account Funds shall be called the "Customer
Trust Funds".
24. In addition to Peopledge's assets, the Receiver holds funds in respect of the Related
Companies (the "Related Companies' General Account Funds"), including funds held
by 162 in its general operating account (the "162 General Account Funds").
OVERVIEW OF THE CLAIMS PROCESS
25. Given that a significant source of the funds in the estates is Payroll Funds, as part of the
Claims Process Claimants were required to submit their claims by the Claims Bar Date in
two class categories: (i) "Customer Deposit Claims" (in Canadian dollars for Canadian
Customers and in US dollars for US Customers), being amounts paid to Peopledge for the
purpose of funding payroll services for which Peopledge did not complete in whole or in
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part, and (ii) "General Claims", being all other claims against any of the Debtors,
including any damage claims of Customers, secured claims or government claims.
26. Paragraphs 2 and 3 of the May Directions Order authorized and directed the Receiver to
complete the Claims Process (including authorizing the Receiver to accept, revise or
disallow Claims). This process included:
(a) determining the validity of Customer Deposit Claims filed in Canadian dollars
(where proven, the "Proven Canadian Customer Deposit Claims") and the
Customer Deposit Claims filed in US dollars (where proven, the "Proven US
Customer Deposit Claims");
(b) determining the validity of General Claims (where proven, the "Proven General
Claims"); and
(c) providing a dispute process for Claimants seeking to dispute any determination by
the Receiver upon receipt from the Receiver of a Notice of Revision or
Disallowance.
27. As more particularly described in the Second Report and the Fourth Report, Peopledge
did not maintain proper customer or financial records, which increased the time required
to assess and verify Customer Deposit Claims submitted (and to a lesser extent, the
General Claims). As such, the Receiver worked with Claimants to, among other things,
assist them in compiling the documents needed to prove or settle their respective Claims.
28. In accordance with the May Directions Order, the Receiver issued a Notice of
Acceptance or a Notice of Revision or Disallowance with respect to all Claims received,
including those claims received or amended after the Claims Bar Date, as discussed
below.
29. A number of Claimants delivered a Notice of Dispute to the Receiver following receipt of
a Notice of Revision or Disallowance with respect to their Claims. All disputes have
been consensually or otherwise resolved as between the Receiver and the respective
Claimant in accordance with paragraph 3(~ of the May Directions Order.
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OVERVIEW OF PROVEN CLAIMS AND PRIORITY CLAIMS
~A) Customer Deposit Claims
30. Attached as Appendix "I" is a copy of the Customer Deposit Claims Registry setting out
all Proven Canadian Customer Deposit Claims and all Proven US Customer Deposit
Claims. After appropriate revisions (including, in some circumstances, increases to
reflect actual payroll remittances due) the aggregate provable amount of Customer
Deposit Claims is $6,023,812.49 CDN and $146,974.96 USD.
31. As set out in the Fourth Report, following the Claims Bar Date, the Receiver received a
late filed claim on April 4, 2013 from Celergo LLC ("Celergo") on behalf of one of its
clients, Pinebridge Investment Canada Inc., in the amount of $286,883.46 and relating to
a remittance to Canada Revenue Agency ("CRA") that was not made by Peopledge (the
"Pinebridge Claim"). The Pinebridge Claim was subsequently disallowed by the
Receiver, which disallowance was disputed by Celergo. The dispute was resolved on
consent by Order of the Honourable Mr. Justice Penny dated November 25, 2014 and the
Pinebridge Claim is deemed to be a Proven Canadian Customer Deposit Claim. The
Pinebridge Claim will be entitled to a ̀ catch-up' dividend from the Canadian Customer
Account Funds in priority to any final distribution to Claimants with Proven Canadian
Customer Deposit Claims (as reflected on the Distribution schedule).
SB) General Claims
32. Attached as Appendix "J" is a copy of the General Claims Registry setting out all
Proven General Claims. After appropriate revisions and/or settlements of claims, the
current aggregate provable amount of General Claims is $668,047.84 (reduced from
$1,391,686.09 as at the Claims Bar Date). The General Claims comprise damage claims
from Customers, supplier claims, and, as discussed below, the secured claim of BMO, the
claim of Dell Financial Services Canada Limited ("Dell"), and certain priority claims of
former Peopledge employees and CRA.
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SecuNed Claim of BMO
33. BMO provided a $250,000 loan to Peopledge pursuant to a Loan Application and
Agreement dated August 28, 2007 under the Canada Small Business Financing Act (the
"BMO Loan"). The BMO Loan is secured by way of a Security Agreement dated
August 10, 2007 (the "Security Agreement") and was further supported by a personal
guarantee by John Cummings (the "Cummings Guarantee").
34. As set out in the Fourth Report, the Receiver understands that the Cummings Guarantee
of the BMO Loan was insured. The indebtedness owing to BMO at the time of John
Cummings' death in May 2012 was approximately $34,400. Peopledge continued to
make principal and interest payments after Cummings' death until the date of the
Receivership Order. As of the date of the Receivership Order, according to Peopledge's
books and records, approximately $13,372 was owed on the BMO Loan (including
principal and interest).
35. The Cummings Estate submitted an insurance claim in or around November 2012 for the
principal balance of the BMO Loan at the time of Cummings' death and BMO has
confirmed to the Receiver it received payment pursuant to the insurance policy in the
amount of $34,402.30. BMO has further confirmed to the Receiver it applied $13,394.07
of the insurance payment on account of the remaining principal and interest on the BMO
Loan as at the date of the Receivership Order. At the request of the Receiver, the
$21,008.23 balance of the guarantee funds was delivered by BMO to the Receiver and
deposited with the Peopledge General Account Funds.
36. As part of the Claims Process, among other things, BMO filed a secured General Claim
for legal fees incurred in connection with these receivership proceedings and certain
account and other fees incurred by BMO as a secured creditor.
37. In assessing BMO's secured claim the Receiver received a legal opinion from its
independent counsel, Cassels Brock &Blackwell LLP, that the security granted by
Peopledge to BMO creates a valid and perfected security interest in the personal property
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of Peopledge, subject to certain usual qualifications and assumptions in opinions of this
nature.
38. As at January 26, 2016, BMO is owed $20,292.28 in respect of legal fees. The Receiver
is satisfied that these amounts are duly payable by Peopledge and secured by the Security
Agreement.
Dell General Claim
39. Dell leased computer hard drives and servers to Peopledge (the "Dell Servers"), as more
particularly described in the lease agreement dated April 27, 2012 made between
Peopledge and Dell (the "Lease Agreement").
40. As at March 25, 2013, the Receiver obtained an appraisal of the Dell Servers which
estimated their realizable value at $4,575.
41. Dell filed a proof of claim (the "Dell General Claim") for an unsecured claim of $415.73
and a secured claim of $69,312.01.
42. In or around March 2013, the Receiver advised Dell that, based on the materials filed
with the Dell General Claim, (i) no supporting documentation had been provided with
respect to Dell's claim for $415.73; (ii) the Receiver disagreed with how Dell calculated
the amounts owing under the Lease Agreement; and (iii) the Lease Agreement did not
create a security interest against Peopledge in favour of Dell and, subject to Dell
providing evidence of a grant of security interest from Peopledge to Dell, any provable
amounts owing would be deemed unsecured. No response to this request for particulars
was received.
43. The Receiver attempted to make contact with the designated contacts at the email
addresses and telephone number provided on the Dell General Claim without success.
Consequently, the Receiver sent several letters in 2014 and 2015 to the address set out in
the Dell General Claim requesting that an alternative contact from the legal department
respond to the Receiver's requests regarding the Claim. No response was ever received.
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44. On February 19, 2015, the Receiver issued to Dell a Notice of Revision and
Disallowance, attached hereto as Appendix "K", in which the Receiver determined that
(i) Dell's claim of $415.73 is disallowed in full; (ii) Dell's secured claim of $69,312.01 is
disallowed in full; provided however (iii) Dell is allowed a Proven General Claim as an
unsecured creditor in the Peopledge estate in the revised amount of $56,853.86.
45. Dell did not dispute this notice and the Receiver's determination is deemed to be final
and binding.
CRA Claims Against Peopledge and 162
46. The CRA filed three claims in accordance with the Claims Process, as follows:
(a) against 162, $5,644.63 for arrears of HST (the "162 HST Claim"j;
(b) against Peopledge, $8,969.71 for arrears of source deductions (the "Peopledge
Source Deduction Claim"); and
(c) against Peopledge, $16,591.64 in respect of arrears of HST (inclusive of interest
and penalties) against Peopledge (the "Peopledge HST Claim").
47. On April 18, 2013, the CRA delivered to the Receiver an amended Schedule "A" to the
Peopledge HST Claim increasing the amount of CRA's claim for arrears of HST to
$44,745.03 (inclusive of interest and penalties) (the "Amended Peopledge HST
Claim"). The Amended Peopledge HST Claim was received by the Receiver after the
Claims Bar Date and as such was not delivered in accordance with the Claims Process.
48. The 162 HST Claim is the only claim filed in the Claims Process specifically against 162.
The Receiver has reviewed this claim and finds it is an amount duly payable by 162.
49. The Receiver has reviewed the Peopledge Source Deduction Claim and found that it is an
amount duly payable by Peopledge. The Peopledge Source Deduction Claim has a super-
priority charge over the Peopledge General Account Funds.
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50. The Receiver has reviewed the Peopledge HST Claim and the Amended Peopledge HST
Claim and finds that the Peopledge HST Claim is an amount duly payable by Peopledge.
However, the Amended Peopledge HST Claim was not accepted by the Receiver as a
Proven General Claim for CRA's failure to deliver such claim prior to the Claims Bar
Date.
51. CRA advised the Receiver that the increase in the HST claim was a result of an internal
audit of Peopledge's records and account with CRA which took place after the Claims
Bar Date (the "Audit").
52. On November 26, 2013, the Receiver wrote to CRA (the "CRA Rejection Letter") to
advise CRA that the Amended Peopledge HST Claim would not be accepted, but that the
Peopledge HST Claim (in the original amount of $16,591.64, filed) was accepted.
53. In making this determination, the Receiver advised CRA that, among other things, the
rejection of the Amended Peopledge HST Claim was a result of the following factors:
(a) there is no evidence before the Receiver which suggests the Audit could not have
been conducted prior to the Claims Bar Date; and
(b) admittance of the Amended Peopledge HST Claim without such evidence may
unfairly prejudice the rights of other Claimants.
54. The CRA Rejection Letter is attached as Appendix "L". The CRA Rejection Letter
required the CRA to deliver written notice of the CRA's intent to dispute the Receiver's
position with respect to the Amended Peopledge HST Claim on or before December 17,
2013. No response has been received from CRA.
(C~plovee Claims
55. As set out in the Fourth Report, 18 former Peopledge employees are owed a total of
$106,669.10 based on the employees' WEPPA claims. Only one employee filed a
specific General Claim in the Claims Process in addition to his WEPPA claim.
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56. After payment through WEPPA, 18 employees have residual claims in the estate.
Attached as Appendix "M" is a summary of Peopledge's employee claims (broken down
into claims for unpaid wages, vacation pay and termination pay), the amount paid
through WEPPA, and the residual amount owing to each employee. To preserve the
privacy of the employees, the claims are not identified by employee name.
57. Of this amount, $52,342.17 has a priority charge over the Peopledge General Account
Funds as discussed below.
5 8. The Receiver intends to pay this priority amount from the Peopledge General Account
Funds as a part of the proposed Final Distribution.
RESULTS OF PHASE 1 OF FORENSIC INVESTIGATION
59. In the Receiver's Second Report (at paragraphs 129 to 137 thereto), the Receiver set out
its recommendations with respect to a potential forensic investigation that could be
conducted by the Receiver with respect to the $3.4 million in funds transferred from the
Consolidated Payroll Accounts to Peopledge's business accounts and subsequently
moved to unknown third party accounts.
60. The Receiver's proposed investigation was divided into two stages in order to contain
costs and to first identify whether there would be a reasonable prospect of recovery for
the estate before incurring the more substantial costs involved in the second phase of such
investigation. The purpose of the first stage of the forensic review was to trace certain
withdrawals by wire and cheque from Peopledge's accounts into either the WPFS or
CMC accounts and to determine how and to what party the funds were dispersed from the
WPFS and CMC accounts (the "Phase 1 Forensic Investigation").
61. The Phase 1 Forensic Investigation was approved by stakeholders and the May Direction
Order authorized and directed the Receiver to undertake it.
62. In completing the Phase 1 Forensic Investigation, the Receiver implemented the
following steps:
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(a) obtained and evaluated the Debtors' known bank account statements (not already
in the possession of the Receiver);
(b) traced cheques and funds transfers drawn on the Consolidated Payroll Accounts
(excluding any disbursements made in the ordinary course of Peopledge's
business) and on Peopledge's business accounts, and determined how and to
whom such funds were dispersed;
(c) where such funds were deposited into accounts of the Related Companies, traced
cheques and funds transfers drawn on the WPFS and CMC accounts and
determined how and to whom such funds were dispersed;
(d) prepared a detailed source and use analysis matching each known Consolidated
Payroll Account cheque deposit to the associated disbursements) of funds from
the WPFS or CMC accounts;
(e) reconciled payments received on John Cummings' personal American Express
credit card statement with cheques drawn on the WPFS and CMC accounts and
identified as being paid towards the American Express credit card;
(~ subsequent to identifying funds paid towards the personal credit cards of John
Cummings, reviewed five years of credit card statements in an attempt to identify
material assets or other significant information which may have assisted with the
recovery of funds transferred from the Consolidated Payroll Accounts;
(g) identified and enquired with two law firms having received a retainer from the
Related Companies to confirm the status of the retainers, if the law firms continue
to hold retainers for the Related Companies and advise that any unused retainers
should be paid to the Receiver. The Receiver further requested confirmation if
any of the Related Parties were the recipient of any judgments or awards; and
(h) prepared a detailed report summarizing the results of the Phase 1 Forensic
Investigation.
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63. The Receiver's report on the Phase 1 Forensic Investigation is attached as Appendix
"N". The Receiver's key findings with respect to its investigation of the funds diverted
from Peopledge's accounts are as follows:
(a) $2,975,900 was withdrawn from Peopledge's business accounts and deposited
into the accounts of the Related Companies between the period May 2007 to
February 2012;
(b) an additional sum of $542,491 was deposited into the Related Parties' accounts,
during the period May 2007 to Apri12012, the origin of which is not known;
(c) $723,929 was withdrawn from the Related Parties' accounts and was re-deposited
into Peopledge's business accounts between the period May 2007 to Apri12012;
(d) disbursements in the aggregate of $1,558,892, between May 2007 and Apri12012,
were made from the Related Parties' accounts to or on behalf of John Cummings
and Bonnie Cummings and/or their children, Fraser, Cassandra, and Megan
Cummings (collectively, the "Cummings Family"). Significantly, approximately
$651,000 was used to pay Amex credit card debts, $550,000 was used to make
payments on a BMO line of credit in the name of John Cummings and Bonnie
Cummings, and $300,000 was disbursed by personal cheque payable to a member
of the Cummings Family; and
(e) the balance withdrawn from the Related Parties' accounts was not traceable based
on available information and records.
64. As outlined in the Fourth Report, prior to engaging in Phase 2 of the forensic
investigation or taking further steps with respect to the diverted funds, the Receiver
would file a report with the Court advising of the outcome of the Phase 1 Forensic
Investigation and seek direction from the Court as to whether to proceed further.
65. Given the preliminary results, the most likely source of recovery of at least a portion of
the diverted funds from Peopledge's business accounts would be through action against
the Cummings Family.
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66. The preliminary results indicate that funds received by the Cummings Family were
primarily used to pay bills (in particular, credit card debt) over an extended period of
time. The Receiver's review of the credit card statements do not indicate assets of
substantial realizable value were purchased. Further, the Receiver was not able to
identify any assets held by any member of the Cummings Family into which the
disbursed funds may be traced, other than certain mortgage payments made with respect
to Bonnie Cummings primary residence paid through John Cummings and Bonnie
Cummings primary line of credit held with BMO.
67. At present (and before deduction of costs incurred to date), the Receiver holds an
aggregate of approximately $580,446 in the Debtors' estates. The Receiver estimates
that, at minimum, all such funds would be required to fund further forensic review and
analysis and litigation against the Cummings Family for the recovery of diverted funds
and it is likely that the Receiver would require additional funding to complete such
forensic review and analyses and see the litigation through to completion.
68. The Receiver is of the view that the costs of pursuing the Cummings Family, the risks of
litigation, and the low expectation of recovery by way of realizable assets collectively
outweigh any expected benefit to the Debtors' estate. Consequently, the Receiver does
not recommend further action be taken.
69. As part of its ongoing discussions with certain of Peopledge's major stakeholders, the
Receiver discussed the results of the Phase 1 Forensic Investigation. The major
stakeholders consulted unanimously agree with the Receiver's recommendation that no
further action be taken.
INSURANCE CLAIM MATTERS
70. As described in the Second Report and the Fourth Report, the Receiver notified
Peopledge's insurance brokers, including Berkley Canada Inc. ("Berkley"), of the
Receivership Order, requested that the Receiver be added as an additional insured to all
existing insurance policies, and put each insurance broker on notice of potential claims to
be made under the respective policies.
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71. In consultation with Peopledge's key stakeholders, and taking into consideration such
things as policy coverage limits and exclusions, the Receiver determined the Berkley
Professional Liability Insurance Policy (the "E&O Policy") potentially represented the
best opportunity for recovery to stakeholders of some or a portion of funds which had
been diverted from Peopledge's business accounts.
72. As such, with the approval of Peopledge's key stakeholders, the Receiver arranged for
and paid the insurance premiums on the E&O Policy, including the premium required for
the purchase of a run-off or extended reporting period for claims until March 1, 2014 (the
"Extended Reporting Period")
73. The Extended Reporting Period was purchased to allow the Receiver additional time to
investigate whether a claim may be made by the Receiver (on behalf of Peopledge)
pursuant to the terms of the E&O Policy, including time required to complete the Claims
Process and its Phase 1 Forensic Investigation.
74. The Receiver delivered to Berkley its claim (on behalf of Peopledge) together with
supporting documentation by letter dated February 26, 2014.
75. Berkley denied the Receiver's claim in full by letter dated July 2, 2014 on the basis that,
among other things, the Insurance Claim was not covered because it arose out of a
fraudulent act or omission committed by Peopledge.
76. Based on, among other things, the anticipated costs of litigation with Berkley, the terms
and exclusions of the E&O Policy, and the results of the Phase 1 Forensic Investigation,
the Receiver did not reasonably believe it to be cost effective or in the best interest of the
Claimants to expend further estate resources to pursue a claim under the E&O Policy.
77. As part of its ongoing discussions with certain of Peopledge's major stakeholders, the
Receiver discussed the response from Berkley and the potential to pursue a claim under
the E&O Policy. The major stakeholders consulted unanimously agree with the
Receiver's recommendation that no further action be taken.
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DURHAM COLLEGE MOTION
78. As detailed in the Fifth Report, Durham College, a former Peopledge customer, pre-
arranged with Peopledge to fund its payroll through pre-authorized debits.
79. On October 29, 2012, Durham College received notice of the Receivership Order.
Despite the stay provisions set out in the Receivership Order, Durham College took steps
to recall certain payroll funds which had been deposited into Peopledge's account prior to
the receivership. Particulars of the recall and surrounding events are set out in the Fifth
Report.
80. As set out in the Fifth Report, certain of the recall issues surrounding the Second Payroll
were corrected by Durham College or resolved by the Comeback Directions Order.
However, a balance of $256,536.38 remained unresolved. Despite repeated demand by
the Receiver, Durham College refused to return this amount.
81. Accordingly, the Receiver brought a motion returnable January 14, 2015 for an order,
among other things: (i) ordering Durham College to pay to the Receiver the sum of
$256,536.38 plus interest; (ii) ordering that the sum of $256,536.38 (plus interest)
received from Durham College shall be credited by the Receiver to the Canadian
Customer Account Funds; (iii) declaring that, upon payment to the Receiver of the sum
of $256,536.38 (plus interest), Durham College shall be deemed to have a Proven
Canadian Customer Deposit Claim in the amount of $256,536.38; and (iv) authorizing
and directing the Receiver to distribute to Durham College from the Canadian Customer
Account Funds a dividend in accordance with paragraph 10 of the Claim Determination
and Interim Distribution Order. The Fifth Report was filed in support of this motion.
82. On July 3, 2015, the Honourable Mr. Justice Pattillo issued Reasons for Judgment (the
"Durham College Decision") granting all of the relief sought by the Receiver and
ordering $40,000.00 in costs in favour of the Receiver. A copy of the Reasons for
Judgment are attached as Appendix "O".
83. Following release of the Durham College Decision, Durham College paid the amount
ordered in full.
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BANKRUPTCY OF THE DEBTORS
84. In accordance with the Comeback Directions Order the Debtors filed an assignment in
bankruptcy on January 11, 2013. BDO was appointed as trustee in bankruptcy of the
Debtors (the "Trustee").
85. The bankruptcy was sought to preserve the ̀ look-back' provisions under section 95 and
96 of the BIA in consideration of the diverted funds from the Consolidated Payroll
Accounts and Peopledge's business accounts. However, the Receiver and the key
stakeholders proposed to temporarily suspend the administration of the bankruptcy so
that Claimants were not obligated to participate in dual administrations and claims
processes in both the receivership and the bankruptcy.
86. Accordingly, paragraph 6 of the Comeback Directions Order provides that: (i) the
administration of the bankruptcy estate of each of the Debtors by the Trustee is
suspended; and (ii) the assignments in bankruptcy shall have no effect on the claims of
any persons against the Debtors or their property and assets, and no person is required to
file proofs of claim or proofs of claim property with the Trustee to preserve any such
claims, each until further order of the court.
87. The administrative suspension now requires lifting. Given that the Receiver is seeking a
final distribution and its discharge and release, the Receiver seeks an order lifting the
administrative stay effective upon the discharge of the Receiver so that the Trustee's
administration of the Debtors' bankruptcy estates can be completed.
88. However, the receivership administration has fully and completely dealt with the various
Claimants and their respective Claims, and will result in the distribution of all available
estate assets to the Claimants. It is the Trustee's opinion the bankruptcy administration
should therefore proceed immediately to wind up, without completing certain statutory
requirements, such as holding a first meeting of creditors.
89. Fully administering the bankruptcy estates would not provide any benefit to the creditors
and would only result in increased professional fees. The Trustee therefore seeks an
Legal'22111942.1
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order authorizing and directing it to proceed directly to wind up the various bankruptcy
administrations.
90. The Receiver previously transferred a total amount of $21,400.00 amongst the four
bankruptcy administrations to cover the professional fees and disbursements for those
administrations, including their wind-up.
SUBSTANTIVE CONSOLIDATION OF THE DEBTORS' ESTATES
91. To facilitate the proposed Final Distributions, the Receiver proposes to substantively
consolidate the balance of the Related Companies' General Account Funds (after
payment in full of the 162 HST Claim) with the Peopledge General Account Funds
(together, the Related Companies' General Account Funds and the Peopledge General
Account Funds shall be called the "General Estate Funds").
92. The Receiver has considered the following factors in forming its recommendation for
substantive consolidation of the General Estate Funds:
(a) Other than the 162 HST Claim, there are no Proven Claims against the Related
Companies. Specifically:
(i) No shareholder claims were filed against the Related Companies; and
(ii) Activpayroll Ltd. ("Activpayroll") submitted a Proof of General Claim
dated January 18, 2013 claiming $457,863.72 against Peopledge,
comprising claims for damages incurred by Activpayroll arising from or
relating to Peopledge's receivership and the termination of Activpayroll's
payroll services contract with Peopledge. As well, Activpayroll asserted
its claims `jointly and severally' against the Related Companies. No
evidence of Activpayroll's right to assert such amounts against the Related
Companies was provided and the Receiver disallowed Activpayroll's
claim against the Related Companies in full;
~ This amo~mt was revised to $228,726.29 by the Receiver by Notice of Revision dated November• 27, 2013.
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(b) No Claimant is prejudiced. The Receiver proposes to satisfy the 162 HST Claim
in full as the only creditor of 162. All other Claimants will benefit from the
increased recovery of their respective Proven Claims against Peopledge;
(c) The General Estate Funds have been previously co-mingled and transfers of funds
were completed between the Debtors without observance of corporate formalities:
(i) Peopledge transferred funds from the Consolidated Payroll Accounts to
the accounts of the Related Companies to the detriment of the Customers;
and
(ii) It is just and equitable to consolidate the Generate Estate Funds to benefit
Customers' recovery of their Proven Customer Deposit Claims and Proven
General Claims. Customer Deposit Claims represent approximately 81
of all Claims filed and, together with the General Claims of Customers as
filed, the Customer represent approximately 89% of all Claims filed; and
(d) The Debtors shared common management and a common controlling shareholder,
being John Cummings.
93. The overall effect of consolidation is fair and reasonable in the circumstances. The
Receiver respectfully recommends and requests approval of the substantive consolidation
of the General Estate Funds for the purpose of facilitating the proposed Distributions.
CONSOLIDATED STATEMENT OF RECEIPTS AND DISBURSEMENTS
94. Attached as Appendix "P" is the Receiver's R&D Statement for the period ending
February 5, 2016. The R&D Statement details individual receipt and disbursement line
items and the Receiver is seeking its approval by this Court.
PROPOSED FINAL DISTRIBUTIONS
95. As provided in the May Directions Order, only those Claimants with Proven Canadian
Customer Deposit Claims may receive a distribution from the Canadian Customer
Account Funds and only those Claimants with Proven US Customer Deposit Claims may
Legal"22111942.1
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receive a distribution from the US Customer Account Funds on a pari passu ex post facto
pro rata basis.
96. In accordance with the May Directions Order, the Receiver completed the interim
distribution from the Customer Trust Funds. The distributions were completed on a
rolling basis beginning on June 7, 2013 and were processed as Customer Deposit Claims
were proven in the Peopledge estate. The Customer Deposit Claims Registry (attached
previously at Appendix "I") sets out the respective distributions received by each
Claimant with either a Proven Canadian Customer Deposit Claim or a Proven US
Customer Deposit Claim.
97. After disbursement of all available Customer Trust Funds, the deficiencies owing with
respect to the Proven Canadian Customer Deposit Claims (the "Residual Proven
Canadian Customer Deposit Claims") and the Proven US Customer Deposit Claims
(the "Residual Proven US Customer Deposit Claims") shall be eligible to receive a
pari passu ex post facto pro rata distribution from the General Estate Funds together with
the Proven General Claims (subject to the priority payments set out below).
98. The Receiver seeks the authorization and approval of the Court to distribute the funds in
its hands as follows (after payment of the costs of the receivership allocated in
accordance with the May Directions Order, as discussed below):
(a) the balance of the Canadian Customer Account Funds to Claimants with Proven
Canadian Customer Deposit Claims on a pari passu ex post facto pNo rata basis2;
(b) from the Peopledge General Account Funds:
(i) the sum of $33,771.96 payable by the Receiver in satisfaction of its
obligations to the former employees of Peopledge pursuant to Section 81.4
of the BIA;
Z There are no further US Customer Account Funds available for distribution to Claimants with Proven USCustomer Deposit Claims.
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(ii) the sum of $18,570.21 payable in satisfaction of the priority afforded to
the former employees for outstanding wages pursuant to Section 14 of the
Employment Standards Act;
(iii) the sum of $8,969.71 to CRA in satisfaction of the Peopledge Source
Deduction Claim;
(iv) the sum of $16,591.64 to CRA in satisfaction of the Peopledge HSTClaim; and
(v) the sum of $20,292.28 to BMO in satisfaction of its Proven General Claim
against Peopledge.
(c) from the 162 General Account Funds, the sum of $5,644.63 to CRA in
satisfaction of the 162 HST Claim;
(d) subject to the payments set out in clauses (c) and (d) above, the balance of the
General Estate Funds to:
(i) Proven General Claims;
(ii) Residual Proven Canadian Customer Deposit Claims; and
(iii) Residual Proven US Customer Deposit Claims,
on a pari passu ex post facto pro rata basis and in full and final satisfaction of all
such Claims.
99. Attached hereto as Appendix "Q" is the Receiver's Final Estimate of Distributions to
Customers and Creditors which provides an estimate of the Final Distributions to be
made in accordance with the foregoing. The Receiver estimates that Claimants with
Proven Canadian Customer Deposit Claims, Proven US Customer Deposit Claims and
General Claims will receive the following distributions:
Legal`22111942.1
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Creditor Class Interim Distribution(previously issued)
Estimated ProposedFinal Distribution
Estimated Total
Distribution
Canadian Customers 35.0% 3.7% 38.7%3
US Customers 74.0% 0.9% 74.9%4
General Creditors 3.5% 3.5%
ALLOCATION OF RECEIVERSHIP COSTS
100. The Claims Process Order required that the Receiver and its counsel track all time in
reviewing, validating and resolving any discrepancies with each claimant on a claimant-
by-claimant basis. This provision was included in the Claims Process Order, at the
request of certain stakeholders, to address a potential concern that the Receiver and its
counsel would have to incur disproportionally large time reviewing and validating the
claims of some customers (particularly smaller customers with relatively lower amounts
owed) given the lack of proper accounting records of Peopledge, and thus preserving the
opportunity for an adjusted allocation of costs of the receivership to account for any such
disproportionate expenditure of time.
101. Having now completed the Claims Process, the Receiver is of the view that there was no
notable or significant disproportionality in the time required to review and validate
Claims other than would be typical and expected based on the quantum of Claims.
102. The Receiver is therefore of the view that the time and cost necessary to undertake a
detailed cost re-allocation analysis is not warranted or justified, and therefore
recommends that the costs of the receivership be allocated in accordance with the May
Directions Order and as applied to the interim distributions made by the Receiver.
3 Represents the combined distribution to applicable Claimants on account of both Proven Canadian CustomerDeposit Claims and Residual Proven Canadian Customer Deposit Claims.4 Represents the combined distribution to applicable Claimants on account of both Proven US Customer DepositClaims and Residual Proven US Customer Deposit Claims
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PEOPLEDGE RECORD DESTRUCTION PROCESS
103. To process their payrolls, Peopledge's Customers delivered potentially sensitive
information regarding their employees (including salary, banking, and personal
information such as social insurance numbers) and other payroll information (including
historical remittance records, tax and other receipts, and banking records) (collectively,
"Customer Records").
104. In addition to the Customer Records, the Receiver, on its appointment, took possession of
Peopledge's general business records (the "General Business Records").
105. All of Peopledge's physical records have been boxed and inventoried. There are
approximately 70 boxes stored at Crown Records Management ("Crown") and
approximately 60 boxes stored by the Receiver at its Mississauga offices. The Receiver
has implemented the proper safeguards to ensure that no physical records have been
copied, scanned or otherwise duplicated by any party other than the Receiver and that no
unauthorized parties have access to Customer Records.
106. As discussed in the Fourth Report, the Receiver imaged and made copies of Peopledge's
electronic Customer Records for the purpose of conducting its Phase 1 Forensic
Investigation. The payroll processing computer servers (including the Dell Servers) are
stored at Pier 1 Network Enterprises Inc. ("Pier 1"). Peopledge's computer hard drives
are stored at Iron Mountain Incorporated ("Iron Mountain"). Electronic back-ups of
servers and computer's previously located at Peopledge's leased premises are stored by
the Receiver at its Mississauga offices. The Receiver has implemented the proper
safeguards to ensure that none of the original or imaged electronic records have been
copied, scanned or otherwise duplicated by any party other than the Receiver, and that no
unauthorized parties have access to the original or imaged electronic Customer Records.
107. In consideration of the potential sensitivity of the Customer Records and the fact that the
receivership is being wound down and further retention of such sensitive information is
no longer required, the Receiver has developed a proposed process (the "Record
Destruction Process") to destroy the Customer Records in order to protect the integrity
of the sensitive information as follows:
Leg a 1'22111942.1
42
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(a) Upon approval of the Record Destruction Process by this Court, all physical
Customer Records will be shredded. The Receiver will monitor the shredding
process which will take place at Crown's office (using Crown's shredding
facilities) and at the Receiver's office (using third party mobile shredding
services). The Receiver will be provided with a certificate certifying the
completion of the shredding process. The Receiver estimates a cost of
approximately $2,000 to complete the shredding of the physical Customer
Records;
(b) Also beginning such date, all electronic Customer Records will be destroyed. All
original and imaged hard drives (including the hard drives contained in the Dell
Servers) will be crushed by a third party provider and the residual computer
equipment shall be sold as scrap, if deemed economical to do so. The Receiver
will monitor the crushing process which will take place at the Receiver's office
(using third party mobile crushing services) and/or the Peer 1 co-location. The
Receiver estimates a cost of approximately $2,000 - $3,000 to complete the
crushing process based on an estimate for the aggregate number of existing hard
drives. The Receiver is advised by the third party providers it has canvassed that
crushing is a more secure and final method for destruction than simply ̀ wiping'
or deleting the data contained on the hard drives and the cost of either process is
the same; and
(c) Finally, the Receiver will continue to maintain Peopledge's General Business
Records, together with the books and records in its possession relating to the
business of the Related Companies, each in the ordinary course of this
administration. To the extent that the Receiver determines Customer Records
form part of any of the General Business Records, such information will be
destroyed as provided herein.
108. The receivership administration began in October 2012. The Receiver has not had any
request for information or copies of Customer Records from the Customers since on or
about the Claims Bar Date.
Legal*22111942.1
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109. The Receiver believes the Record Destruction Process proposed herein is reasonable and
cost efficient in the circumstances and respectfully recommends and requests approval of
such process.
MISCELLANEOUS ESTATE MATTERS
110. CMC invested in and held common shares in BE Resources Inc. ("BE"). BE is a
publically traded company listed on the TSX Venture Exchange with a ticker symbol of
BER.
111. The last certificate in the Receiver's possession indicates 25,000 shares were held by
CMC (which may have changed do to splits, consolidation, etc.). The last reported value
is $0.35 per share for a potential total value of $8,750.
112. The Receiver has been advised there has been a trading halt on the shares since July
2014. Further, according to BMO Nesbitt Burns ("Nesbitt Burns"), in order to sell the
shares certain restrictions are required to be lifted.
113. Nesbitt Burns further advises that this will require the assistance of a law firm authorized
to practice securities law in the United States to effect any sale. Given the apparent
nominal value of the BE share certificates, the Receiver is of the opinion it is not
economical to pursue the sale of the BE shares;
PROPOSED DISCHARGE OF THE RECEIVER
114. The Receiver has substantially completed its duties as receiver of property, assets and
undertaking of the Debtors, subject to completion of:
(a) the proposed Final Distributions;
(b) payment of the remaining fees and disbursements of the Receiver and of its
counsel, Cassels, including estimated fees and disbursements to the completion of
the receivership proceedings as identified in the Receiver's R&D;
(c) the Record Destruction Process; and
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(d) other administrative matters incidental to BDO's appointment as Receiver
(collectively, the "Remaining Activities").
115. To complete the Remaining Activities, the Receiver requests the Holdback defined and
discussed below.
116. Other than the Remaining Activities, it is the Receiver's opinion that there axe no
remaining matters requiring the Receiver's attention, nor are there any remaining assets
capable of realization in the Debtors' estates.
117. The Receiver accordingly requests approval of its final accounts and its discharge so that
this administration may be concluded. As provided in the Receiver's draft order, the
proposed discharge and release of BDO as receiver of the Debtors will take effect on the
Receiver filing a certificate with the Court certifying that it has completed the Remaining
Activities.
PROFESSIONAL FEES AND EXPENSES
118. Pursuant to paragraph 16 of the Receivership Order, the Receiver and its counsel may
pass their accounts from time to time.
119. The Receiver seeks to have its fees and disbursements, together with the fees and
disbursements of its legal counsel, approved. The Receiver and its counsel have
maintained detailed records of their professional time and costs.
120. The aggregate fees and disbursements of the Receiver for services provided during the
period from March 31, 2013 to January 31, 2016 in the aggregate amount of $218,912.54
plus HST. The activities of the Receiver are described in its accounts exhibited to the
Affidavit of Eugene Migus sworn on February 5, 2016, attached as Tab 3 of the
Receiver's motion record ("Migus Affidavit").
121. Cassels has acted as the Receiver's independent legal counsel on all matters related to the
receivership proceedings. Cassels rendered its accounts to the Receiver for the period
from March 31, 2013 to January 31, 2016 in the aggregate amount of $209,661.29 plus
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HST. The activities of Cassels are described in its accounts exhibited to the Affidavit of
Marc Mercier sworn on February 9, 2016, attached as Tab 4 of the Receiver's motion
record ("Mercier Affidavit")
122. It is the Receiver's view that its and Cassels' fees and disbursements are fair and
reasonable and are justified in the circumstances and accurately reflect the work done by
the Receiver and on behalf of the Receiver by Cassels in connection with the
receivership.
123. It is also the Receiver's view that the rates charged by the Receiver and Cassels are
reasonable and are consistent with the rates charged by other firms in the Toronto market
for the provisions of similar services and the rates charged for services rendered in
similar proceedings.
124. Accordingly, the Receiver respectfully recommends and requests approval of these fees
and disbursements.
125. In addition, the Receiver proposes a holdback of funds from the Final Distribution in the
amount of $40,000.00 (the "Holdback") as an estimate of the fees and expenses to be
incurred by the Receiver and Cassels for the period from February 1, 2016 to the
completion of the receivership administration, including completing the Remaining
Activities. Such estimate has been reflected on the Receiver's R&D Statement and in the
Receiver's estimates of the Final Distribution detailed above.
126. The Receiver will rely upon the Holdback to pay any fees and disbursements required to
complete the administration, including the Remaining Activities. It is the Receiver's view
that the Holdback is reasonable and appropriate in the circumstances and the Receiver
respectfully recommends and requests approval of the Holdback.
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SUMMARY OF RELIEF SOUGHT
127. For the foregoing reasons, the Receiver respectfully recommends that this Honourable
Court grant the relief set out in paragraph 16 herein.
All of which is respectfully submitted this 10`~ day of February, 2016.
BDO CANADA LIMITEDIn its capacity as the Receiver ofPeopledge HR Services Inc.,Winston Park Financial Services Ltd.,CMC Fzaser Ltd. and 1624452 Ontario Limitedand not in its personal capacityPer:
~~'~~ ,, ~ Cam✓
Eu e P. Mi us, CP~t, CA, CIRPg gSenior Vice-President
Legal'22111942.1
47
~~ ~~
Legal"22111727.1
Court File No.
ONTARIOSUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
THE H4N(~URABLE MR. } MONDAY, THE 2gTH
JUSTICE NEWBOULD ~ DAY OF OCTOBER, 2012
BONNIE CUMMINGS iN HER CAPACITY AS ESTATE EXECUTRIXOF THE ESTATE OF THE. LATE JOHN CUMMINGS
Applicant
- and -
PEOPLEDGE HR SERVICES INC., W{NSTON PARE{ FINANCIAL SERVICES LTD.,CMC ERASER LTD., 1624452 ONTARIO LIMITED
Respondents
•~~
THIS APPLICATION made, ex part, by Bonnie Cummings in her capacity ~s
Estate Executrix of the Estate of the late John Cummings. (the "Applicant°) for an Order
pursuant to section 1.01 of the Gourts of Justice Act, R.S.O. 1..990, c. C.43, as amended
(the "CJA"), infer alias appointing BDO Canada Limited as receiver (in such capacities,:
the "Receiver") without security, of all of the assets, undertakings and properties of
Peopledge HR Services Inc., Winston Part Financial Services Ltd., CMC Fraser Ltd.,
and 1624452 Ontario Limited {collectively, the "Debtors") acquired #or, or used in
relation to a business carried on by each of the Debtors, was heard this day at 330
University Avenue, Taranto, Ontario.
ON READING the affidavit of Bonnie Cummings, in her capacity as Estate
Executrix of the Estate of the Late John Cummings (the °Estate Executrix") sworn
Lcgnl*A9 12031.3
48
_~_
October 24, 2012 and the Exhibits thereto and on hearing the submissions of counsel.
for the Estate Executrix, counsel for- the Receiver and can reading the consent of BDO
Canada Limited to act as the Receiver.
APPOINTMENT
1. THIS COURT QRDERS that pursuant to section 10~ of the CJA, BDO Canada
Limited is hereby appointed Receiver, without security, of alb of the assets, undertakings
and properties of the Debtors acquired for, or used in relation to a business carried on
by any of the debtors, including all proceeds thereof,. whether such assets or funds are
subject to third party interests or are considered trust assets held by any of the Debtors
for the benefit of third parties (collectively, the "Property").
RECEIVER'S POWERS
2. THIS COURT ORDERS that the Receiver is hereby empowered and authorized,
but naf obligated, to acf at once in respect of the Property and, without in any way
limiting the generality af' the foregoing, the Receiver is hereby expressly empowered
and authorized, but not obligated, tc~ do any of the following where the Receiver
considers it necessary or desirable:
(a) to take- possession of and exercise control over the Property and
any and all proceeds,.:. receipts and disbursements arising out of or
from the Property;
(b) to receive, preserve, and protect the P'raperty, car any part or parts
thereof, including, but not. limited to, the changing of Iocks and
security codes., the relocating of Property to safeguard if, the
engaging of independent security personnel, the taking of physical
inventories and the placement.. of such insurance coverage as may
be necessary or desirable;
(c} to manage, operate; and carry on the business of the Debtors,
including the powers to enter into any a~reernents, incur any
~..~~~i~s~ ~zt~sE.
49
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obligations in the ordinary course of business, cease to carry on all
or any part of the business, or cease to perform .any contracts of
the. Debtors;
(d} to engage consultants, appraisers, agents, experts, auditors,
accountants, managers, counsel and such other persons-from time
to time and on whatever basis, including on a temporary basis, to
assist with the exercise of the Receiver's powers .and duties,
including without limitation those conferred by this Order;
(e) to purchase or lease such machinery, equipment, inventories,:
supplies, premises or other assets to continue the business of the
Debtors or any part or parts thereof;
(f~ to receive. and collect all monies and accounts now owed' or
hereafter owing to the Debtors and to exercise all remedies ofi the:
Debtors in collecting such monies, including, without limitation, to
enforce any security held by the Debtors;
(g) to take such steps as the Receiver deems. are necessary or
desirable to control access to and use of ali accounts at 'banks. or
other financial: institutions in the name of the Debtors (collectively,
the "Accounts"), and to cause the transfer and collection of funds
in the Accounts for deposit into. the Post-Receivership Accounts
(defined in paragraph 10 herein);
(h) to settle; extend or compromise any indebtedness awing. to the-
:Debtors;
(i) to execute,. assign, issue and indorse documents of whatever
nature in respect of any of the Property, whether in the: Receiver's
name or in the name and on behalf of any of the Debtors, for any
purpose pursuant to this Order;
l.,cdul*R~ 12081.3
50
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(j) to undertake environmental or workers' health and safety
assessments of the Property and' operations of the Debtors;
(k) to initiate, prosecute and continue the prosecution of any and all
proceedings and to defend all proceedings now pending or
hereafter instituted with respect to the Debtors, the Property or the
Receiver, and to settle or compromise any such proceedings. The
authority hereby conveyed sha1J extend' to such appeals or
applications for judicial review in respect of any order or judgment
pronounced in any such. proceeding;
{l) to market any or all.' of the Property, including advertising and
soliciting offers in respect of the Property or any part or parts
thereof anti negotiating such terms and conditions of sale as the
Receiver in its discretion may deem appropriate;
(m) to sell, convey, trans#er, lease or assign the Property or any part or
parts thereof out of the ordinary course of business,.
(i) without the approval of this Court. in respect- of any
transaction not. exceeding $50,000, provided that the
aggregate consideration for all such transactions does not
exceed $200,.000; and
(ii) with the approval of this Court. in respect of any transaction
in which the purchase price or the aggregate purchase price
exceeds the applicable amount set out in the preceding
clause;
and in each such case notice under subsection 63(4) of the Ontario
Personal Property Security Act, shall not be required, and in each
case the Ontario Bul/c Sales Act shall not apply.
~.~~<~i~si izoxi.~
51
-5-
(n) to apply for any vesting order or other orders necessary to convey
the Property or any part or parts thereof to a purchaser or
purchasers thereof, free and clear of any liens or encumbrances
affecting such. Property;
(o} to report to, meet with and discuss with such affected- Persons (as
defined blow) as the Receiver deems appropriate on all matters
relating to the Property and. the receivership, and to share
information, subject to such terms as to confidentiality as the
Receiver deems advisable;
(p) to register a copy of this Order and any other Orders in respect of
the Property against title to any of the Property;
(q) to apply for any permits y. IICGCICES, approvals or permissions as may
be required by any governmental authority and any renewals
thereof for and on behalf of and, if thought desirable by the
Receiver, in the name of the Debtors;
(r) to enter into agreements.. with any trustee in bankruptcy appointed
in respect. of the Debtors, including, without limiting the generality of
the foregoing, the ability to enter into occupation. agreements #or
any property owned or leased by the D~btQrs;.
(s) to exercise any shareholder, partnership, joint venture or other
rights: which the Debtors may have.; and'
(t) to take any steps reasonably incidental: to the exercise of these
powers or the performance of any statutory obligations.
and in each case where the Receiver takes any such actions or steps, it shall be
exclusively authorized and empowered to do so, to the exclusion of all other Persons
(as defined below), including the .Debtors, and without interference from any other
Person.
Legal*81121)813
52
-6 -
DUTY YO PROVIDE ACCESS AND CO-OPERATI(aN TO THE RECEIVER
3. THIS COURT ORDERS that (i) the Debtors, (ii) all of their respective current and
former directors, officers, employees, agents, accountants, legal counsel and
shareholders, end all other persons acting on its instructions ar behalf, and (iii) ail other
individuals,. firms, corporations, governmental' bodies or agencies, or other entities
having not ce of this Order {all. of the foregoing, collectively, being "Persons" and each.
being a "Person") shall forkhwith advise the Receiver of the existence of any Property in
such Person's possession or control, shall grant immediate and continued access to the
Property to the Receiver,. and shall deliver all such-Property to the Receiver upon the
Receiver's request.
4. THIS COURT ORDERS that all Persons shall forthwith advise the Receiver of
the existence of any books,. documents, securities, contracts, orders, corporate and
accounting records, and any other papers, records and information of any kind related
to the business or affairs of the Debtors, and any computer programs, computer tapes,
computer disks, ar other data storage media containing any such information (the
foregoing, collectively, the "Records") in that Person's possession or control, and shelf
prouide to the Receiver or permit the Receiver to make, retain and take away copies
thereof and grant to the Receiver unfettered access to and use. of accounting,.. cocr~puter,
software and physical facilities rela# rtg thereto, provided however that nothing in this
paragraph 5 ar in paragraph 6 of this Order shall require the .delivery- of Records, ar the.
granting of access to Records, which may not be dsclflsed or provided fo the Receiver
due to the privilege attaching tt~ solicitor-client communication or due to statutory
provisions prohibiting such disclosure:
THIS COURT ORDERS that if any Records are stored or o#herwise contained on a
computer or other electronic system of information storage, whether by independent
service provider or otherwise, all Persons in possession or control of such Records shall
forthwith give unfettered access to the Receiver far the purpose of allowing the R~c~iver
to recover and fully copy all of the information contained therein whether by way of
printing the information onto paper ar making copies of computer disks or such other
manner of retrieving and copying the information as the Receiver in its discretion deems
Legnl'81 12081.3
53
-7 -
expedient,. and shall not alter, erase or destroy any Records without the prior written
consent of the Receiver. Further, for the purposes of this paragraph, all Persons shall
provide the Receiver with ail such assistance in gaining immediate access to the
information in the Records as the Receiver .may in its discretion. require including
pE~oviding the Receiver with instructions on the use of any computer or other system and
providing the Receiver with any and all access codes, account names antf: account
numbers that may be required to gain access to the information..
NO PROCEEDINGS AGAINST THE RECEIVER
5. THIS COURT ORDERS that no proceeding or en#orcement process in any court
or tribunal (each, a "Proceeding"}, shall be corr~menceci or continued against the
Receiver exceE~t with the written consent of the Receiver or with leave of this Court.
NO PRQCE~DINGS AGAINST THE DEBTORS OR THE PROPERTY
6. THIS COURT ORDERS That no Proceeding against or in respect of the Debtors
or the Property shill he commenced or contin~~ed except with the written consent.. of the
Receiver or with leave of this. Court and any and all Proceedings currently under way
against or in respect of the Debtors or the Property are hereby sfiayed and suspended
pending further Order of this Court.
NO EXERCISE OF RIGHTS OR REMEDIES
7. THIS COURT ORDERS that all rights and remedies against: a~~y of the Debtors,
the Receiver:, or affecting the Property, are hereby stayed and` suspended except with
the written consent of the Receiver or leave of this Court, provided however that this
stay anci suspension does not apply in respect of any "eligible financial contract" as
defiined in the CIA, and further provided that nothing in this paragraph shall (s) empower
the Receiver or the Debtors to carry on any business which the DeE~tors are not lawfully
entitled to carry on, (ii) exempt the Receiver or the Debtors from compliance with
statutory or regulatory provisions relating.. to health, safety or the environment,. (iii)
prevent the filing of any registration to preserve or perfect a security interest, or (iv)
prevent the registration of a claim for lien.
Legal"81 120813
54
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NO INTERFERENCE WITH THE RECEIVER
8. THIS COURT ORDERS that no Person shall discontinue, fail to honour, alter,
interfere with, repudiate, terminate or cease to perform any right, renewal right, contract,
agreement, licence or permit in favour of car held by the Debtors, wthout,written consent
of the Receiver or leave of this Court.
CONTINUATION OF SERVICES
9. THIS COURT ORDERS that all Persons having oral or written agreements with
the Debfors or statutory or regulatory mandates for the supply of goods and/or services,
including. without (imitation, all computer software, communication and other data
services,. centralized banking services, payroll services, insurance, transportation
services, utility or r~fher services to the Debtors are hereby restrained until further Order
of this Court from discontinuing,. altering, interfering with or terminating the supply of
such goods or services as may be required by the Receiver, and that the Receiver shall
be entitled to the continued use of the Debtors' current telephone numbers, facsimile
numbers, Internet addresses and domain names, provided in each case that the normal
prices or charges far all such goods or services received after the date of this Order are
paid by the Receiver in accordance with. normal payment practices of the Debtors or
such other practices as may be agreed upon by the supplier or service provider and the
Receiver:, or as may be ordered by this Court.
RECEIVER TO HOLD FUNDS
10. THIS COURT ORDERS that all funds, monies, cheques, instruments, and other
forr~~s of payments received or collected by the Receiver from and after the making of
this Order from any source whatsoever, including without limitation the sale of all or any
of the Property and the collection of any accounts receivable in whole or in part,
whether in existence on the date of this Order or hereafter coming into existence, shaft
be deposited into one or more new accounts to be opened by the Receiver (the "Post
Receivership Accounts") and the monies standing to the credit of such Post
Receivership Accounts from time to time, net of any disbursements provided for herein,
E.egal * R 112081.3
55
~2
shall be held by the Receiver to be paid in accordance with the terms of this Order or
any further Order of this Court.
11. THIS COURT ORDERS that the Receiver will maintain separate Post
Receivership Accounts for each of the Debtors, and will maintain separate accounting
ledgers for each of the Debtors.
EMPLOYEES
12. THIS'. COURT ORDERS that afl employees of the Debtors shall remain the
employees of the applicable. Debtor until such time as the Receiver; on the Debtor's
behalf, may terminate the employment of such employees. The Receiver shall not: be
liable for any employee-related liabilities,. including any successor employer liabilities as
provided for in section 14.06(1.2) of the BIA, other than such amounts as the Receiver
may specifically agree in writing to pay, or in respect of its obligations under sections
81.4(5) or 81.6(3) of the BIP► ar under the Wage Earner Protection Program Act.
PIPEDA
13. THIS COURT ORDERS that, pursuant to clause 7(3)(c) of the Canada Personal
Information Protection and Electronic Documents Act, the Receiver shall disclose
personal information of identifiable individuals to prospective purchasers or bidders for
the Properky and to their advisors,. bu# only to the extent desirable or required to
negotiate and attempt to complete one or :more sales of the Property (each, a "Sale").
Each prospective purchaser or bidder to whom such personal information is disclosed
shall maintain and protect the privacy of such informa#ion and limit the use of such
information to its evaluation of the Sale, and if it does not complete a Sale, shall return
all such ['nformation to the Receiver, or in the alternative destroy all such information.
The purchaser of any Property shall be entitled to continue to use the personal
information provided to it, and related to the Property purchased, in a manner which is
in all material respects identical to the prior use of such information by the Debtors, and
shall return a([ other personal information to the Receiver, or ensure that all other
personal information is destroyed.
f.cgal * K 1120813
56
LIMITATION ON ENVIRONMENTAL LIABILITIES
14. THIS COURT ORDERS that nothing herein. contained shall require the Receiver
to occupy or to take control, care,. charge, possession or management (separately
andlor collectively,. "Possession") of any of the Property that might be environmentally
contaminated, might be a pollutant. or a contaminant, or .might cause or contribute to a
spill,. discharge, release or deposit of a substance contrary to any federal,... provincial or
other law respecting the protection, conservation, enhancement, remedation or
rehabilitation ofi the environment or relating to the disposal of waste or other
- contamination including; without limits#ion, the Canadian Environmental Protection Acf,
the Ontario Environmental Protection Act, the Ontario Water Resources Act,:: or the
Ontario Occupational Health and Safety Act and regulations thereunder (the
"Environmental Legislation"), provided however that nothing herein shall exempt the
Receiver from any duty to report or make disclosure imposed by applicable
Environmental Legislation, The Receiver shall not, as a result of this Order or anything
done in pursuance of the Receiver's duties and powers under this Order,: be deemed to
be in Possession of any of the Property within the meaning of any Environmental
Legislation, unless it is actually in possession.
LIMITATION ON THE RECEIVER'S LIABILITY
15. THIS COURT ORDERS that the Receiver shall incur no liability or obligation as a
result.: ofi ifs appointment or the carrying out, the provisions of this Order, save and
except for any gross negligence ar wilful misconduct on its part, or in respect of its
obligations under sections 81.4(5) or 81.6(3) of the BIA or under the Wage Earner
Protection Program Act. Nothing in this Order shall derogate from the protections
afforded the Receiver by section 14.06 of the BIA or by any otherapplcable legislation.
RECEIVER'S ACCOUNTS ✓,{~~,,, T z~' ~ ~ ~'Y"
16. THIS COURT ERS that. the Receiver and counsel' to the Receiver shall be
paid their reaso le fees and disbursements, in each case at their standard rates and
charges, a that the Receiver and counsel to the Receiver shall be entitled to and are
hereby granted. a charge (thy "Receiver's Charge") on the Property;. as security for
Lcga!*8i 1208(3
57
such fees and disbursements, bath before and after the making of this Order in respect
of these proceedings, and that the Receiver's Charge shalt form a first charge on the
Property in priority to all security interests, trusts, liens, charges and encumbrances,
statutory or otherwise, in favour of any Person, but subject to sections 14.06(7), 81.4(4),
and 81.6(2) of the BIA.
17. THIS COURT ORDERS that the .Receiver and its legal counsel shall pass its
accounts from time to time, and far this purpose the accounts of the Receiver and its
legal counsel are hereby referred to a judge of the Commercial List of the Ontario
Superior Court of Justice.
~8. TM'lS COURT ORDERS' that prior to the passing of its accounts, the Receiver
shall be at liberty from time to time to apply reasonable amounts,. cut of the monies in its
hands, against its fees and disbursements, including legal fees and disbursements,
incurred .at the normal rates and charges of the Receiver or its counsel, and such
amounts shall constitute advances. against its remuneration and disbursements when
and as approved by this Court..
GENERAL
19. THIS COURT ORDERS that the Receiver may from time to tune apply to this
Court for advice and directions in the discharge of its powers and. duties hereunder.
20. THIS CURT ORDERS that nothing in this Urder shall prevent the Receiver
from acting as a trusfiee in bankruptcy ofi any of the Debtors.
21. THIS COURT HEREBY REQUESTS the aid and recognition of any court,
tribunal, regulatory or administrative body having jurisdiction in Canada or in the United
States to give effect. to this Order and to assist the Receiver and its agents. in carrying
out the terms of this Order. All courts, tribunals, regulatory and. administrative bodies
are hereby respectfully requested' to make such orders and to provide such assistance
to the Receiver, as an officer of this Court, as may be necessary or desirable to give
effect to this Order or to assist the Receiver and its agents in carrying out the terms of
this Order.
Legal' K 11208 ] .3
58
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22. THIS COURT ORDERS that the Receiver be at liberty and is hereby authorized
and empowered to apply to any court, tribunal, regulatory or administrative body,
wherever located, for the recognition of this Order and for assistance in carrying out the
terms of this Order, and that the Receiver is authorized and empowered to act as a
representative in respect of the within proceedings for the purpose of having these
proceedings recognized in a jurisdiction outside Canada.
23. THIS COURT ORDERS that. the Applicant shall have its costs of this application,
up to and including entry and service of this Order on a substantial indemnity basis to
be paid by the Receiver from the Debtors' estate with such priority and at such time as
this Court may determine,
24. THIS COURT 'ORDERS that the Receiver shall deliver to the Customers of the
Debtors and other interested parties known to the Receiver notice of this Order in
substantially the form attached as Appendix "A" to this Order.
25. THIS COURT ORDERS that the Receiver is authorized and directed to enter into
the referral agreement dated October 24, 2012 with Ceridian Canada Ltd.
26. THIS COURT ORDERS that the Receiver shall set down a date on notice to all
parties within 30 days of the issuance of this Order (the "Comeback Date") to report to
the Court and to seek additional relief as appropriate from the Court, including without
limitation, the. approval of a proposed claims process.
27. THIS COURT QRDERS that any interested pasty ir~ay apply to this Court to vary
or amend this Order on the Comeback Date or an not less than seven (7) days' notice
to the Receiver, the Applicant and to any other party likely to be affected by the order
sought or upon such other notice, if any, as this Court may order.
ENTEi~cG Eli' r iNSCFiiT F~ TQRC?~iTQQt~t 1 BJt~tC P10:LE / UlaiVS ~E EGiS'f~iE Nt7.:
OCT 2 9 2012~~—~~ ~ V
i~~o:~i;s i izua i .3
59
VIA EMAIL
October <"~ 2012
70 THE CUSTOMERS OFPEOPLEDGE HR SERVICES INC.
Re: Peopted~e HR Services Inc., in receivership
On October <~>, 2012, the Ontario Superior Court. of Justice issued an order (the "Order"}appointing BDO CanacJa Limited as Receiver (the "Receiver"} of Peopledge HR Services Inc.("Peoptedge"}. A copy of the Qrder can be accessed for your reference at our website atwww.bdo.ca/peopled~e.
You are receiving this notice because you had contracted with Peopled~e for the provisionof certain payroll services. Regrettably, we must inform you that Peopted~e has ceased alloperations, and as such your contracts and other arrangements with Peopled~e have beenterminated effected immediately. No further payroll services will be provided to you.
To assist you to transition your payroll services to a new provider, and, to the extentpossible, to minimize disruption to your' payroll services, the Receiver has entered into anarrangement with Ceridian Canada Ltd. ("Ceridian"), a corporation which provides similarservices to those provided by Peapled~e.
Geridian has agreed to offer Peapledge customers payroll processing services.. In addition,Ceridtan has agreed to waive its standard implementation fee that it would otherwisecharge to new .customers provided the new service contract. is signed on or beforeDecember 15, 2Q12, for customers with less than 200 emptayees.
Customers wha wish to transition their payroll services immediately to Ceridian shouldcontact the Receiver, through Mt~. Peter Naumis, Vice-President, at 905-b15-6207 orpnaumis~bdo.ca ar Ms. Nicole Sagotili at 905-615-8787 ext. 2008 or nsa~olitiC~bdo.ca. Mr.Naumis and Ms. Sa~otili wilt assist you with any questions you may have and put you incontact with the appropriate contact at Ceridian to begin the transitioning process.
The Receiver will help transition your existing payroll data to Ceridian including historicalearnings for 2012 and relevant employee data to assist in continuity of your services and atimely transition to Ceridian. Because this information is subject to certain privacy andother protections, the Receiver will not transfer any data relating to your account withCeridian, or other provider of your choosing, unless and until the Receiver receivesyour written consent and authorization to do so. Accordingly, please find enclosed anAuthorization and Release Form which must he completed in full and returned to theReceiver by: (i) electronic scan by email at pnaumisC~bdo.ca; {ii) by fax to 1-905-615-1333to the attention of Mr. Naurnis.
regal"$186635.2
60
To the extent possible, and subject to available resources, the Receiver will help transitionyour existing payroCl data to such other provider' as you may choose.
Updates as xo further developments within the receivership administration will be postedon www.bdo.ea/peopled$e, and: you are encouraged to regularly check this website.Where appropriate or as required by law,. the Receiver will deliver notices by electronicmail.
Yours very truly,
BDO CANADA LIMITEDfn its capacity as thecourt-appointed Receiverof the property and assetsof Peopledge HR Services Inc.and not in its persona{ orcorporate capacity.Per:
Eugene P. Migus, CA•CIRPSenior Vice-President
lend.
Legal*8186635.2
61
CONSENT TO TRANSFER PAYROLL INFORMATION
TO; BDO Canada Limited, in its capacity as court-appointedreceiver (the "Receiver") of the property, assets andundertakings of Peopledge HR Services Inc. ("Peopledge")
RE: Transition of the accounts of Peopledge's pre-receivershipcustomers to Ceridian Canada Ltd. ("Geri'dian"')
We, the undersigned former customer of Peopledge, hereby consent, authorizeand direct the Receiver to transfer to Ceridian all of our current and historicalemployee and payrolP information arising from or relating to our payroll servicescontract with Peopledge, which contract has been terminated'. We arerequesting the Receiver to complete this transfer for the purpose of facilitatingour retention of Ceridian as our new payroll service provider.
We acknowledge and agree that the Receiver is released from alll liability to us inany way relating. to Peopledge.
This consent may be executed and delivered by electronic. transmission, and`when so delivered, shall be deemed an original.
DATED at ,(City) (Province)
on , 2012.(Month) (Day}
(INSERT CUSTOMER NAME BELOW)
X:
Per:Name:Title:have the au#horny to bind the Customer..
Legal`8188853.1
62
BONNIE CUMMINGS IN H
ER CAPACITY AS ESTATE
EXECUTRIX O~ THE ESTATE OF THE LATE JOHN
CUM9MINGS
Applicant
-and-
PEOPLEDGE NR SERVICES lNC., W
{NSTON PARK FiNANCiAL
SERVICES LTD., CMC ERASER LTD., 1624452 ONl'ARIO
LIMITED
Respondents
Court ~~le N
a.
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL L{ST
PROCEEDING COMMENCED AT
TORONTO
~~~~~~.
Stephen Walters Professional Corporation
65~9B Mississauga R
oad
Mississauga; ON L5N 1A6
Stephen Walters
Tel: 9Q5.826.0659
Fax: 905.826.3001
Lawyers for the Applicant
63
~~ ~~
Legal"22111727.1
Court File CV12-9896-OOCL
ONTARIOSUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
BE1lNEEN:
BONNIE CUNNINGS IN HER CAPACITY AS ESTATE EXECUTRIXOF THE ESTATE OF THE LATE JOHN CUAAMINGS
Applicant
- and -
PEOPLEDGE HR SERVICES INC., WlNSTON PARK FINANCIALSERVICES LTD., CMC ERASER LTb. AND 1624452 ONTARIO
LIMITED
Respondents
SECOND REPORT OF BDO CANADA LIMITEDRECEIVER OF PEOPLEDGE HR SERVICES INC.,
WINSTON PARK FINANCIAL SERVICES LTD., CMC ERASER LTD.AND 1624452 ONTARIO
LIMITED
December 3, 2012
Legal"8366693.2
64
TABLE OF CONTENTS
Page No.
INTRODUCTION .............................................................................................. 1
PURPOSE OF REPORT ....................................................................................... 1
TERMS OF REFERENCE ...................................................................................... 3
OVERVIEW OF PEOPLEDGE'S BUSINESS AND BACKGROUND OF APPOINTMENT ..................... 3
RECEIVER'S ACTIVITIES TO DATE ........................................................................ 11
OVERVIEW OF ACCOUNTS HELD BY PEOPLEDGE AND THE RELATED COMPANIES .................. 14
FUNDS HELD IN THE CANADIAN CONSOLIDATED PAYROLL ACCOUNT ............................... 17Post-Receivership Deposits ........................................................................ 18Automatic Payroll Processed ...................................................................... 19Recall of Pre-Receivership Funds and Durham College Deposits/Payments ................ 22
FUNDS HELD IN THE US CONSOLIDATED PAYROLL ACCOUNT ........................................ 23
NOTICE TO CUNNINGS ESTATE AND INSURANCE COMPANIES OF POTENTIAL CLAIMS ............ 25
CLAIAAS PROCESS ........................................................................................... 26
CUSTOMER TRANSITION PROCESS ....................................................................... 28General Overview of Customers Transition Status ............................................. 30Activpayrott Inc ...................................................................................... 31Labatt Canada Inc .....................................:............................................. 33
POENTIAL FORENSIC INVESTIGATION ................................................................... 34
PROPOSED ASSIGNMENTS IN BANKRUPTCY ............................................................. 37
SUMMARY OF RELIEF SOUGHT ............................................................................ 38
Legal'8366693.2
65
INTRODUCTION
1. BDO Canada Limited (in its corporate capacity, "BDO", or, in its capacity as receiver,
the "Receiver") was appointed as receiver pursuant to section 101 of the Courts of
Justice Act R.S.O. 1990 C. c.43, as amended (the "CJA") over all the assets,
undertakings, and properties owned and/or administered by (a) Peopledge HR Services
Inc. ("Peopledge") and by (b) Winston Park Financial Services Ltd. ("WPFS"), CMC
Fraser Ltd. ("CMC") and 1624452 Ontario Limited ("162") (collectively, the "Related
Companies") pursuant to the Order of the Honourable Mr. Justice Newbould dated
October 29, 2012 (the "Receivership Order"). A copy of the Receivership Order
together with the Endorsement of Mr. Justice Newbould is attached as Appendix "A".
2. The Receivership Order was issued on the application (the "Application") of Bonnie
Cummings, in her capacity as the Estate Executrix (the "Estate Executrix") of the
Estate of the Late John Cummins (the "Cummings Estate").
3. As intended by the Application, the Receiver was appointed to, among other things,
oversee the orderly wind-down of the business of Peopledge and accordingly the
business of Peopledge was terminated by the Receiver immediately following its
appointment.
4. The Receivership Order provides that the Receiver shall set down a date on notice to
all parties within 30 days of the issuance of the Receivership Order to report to the
Court and to seek additional relief as appropriate, including a claims process (the
"Comeback Motion"1.
5. This Second Report of the Receiver (the "Report") is filed in connection with the
Comeback Motion.
PURPOSE OF REPORT
6. The purpose of this Report is to report to the Court with respect to:
(A) the activities of the Receiver and the status of the receivership;
(B) the Receiver's recommendations with respect to a claims process to identify
claims against Peopledge and the Related Companies;
Legal'8366693.2
66
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(C) an outline of the likely steps and costs of any forensic investigation into pre-
receivership transactions involving Peoptedge and the Related Companies as
requested by the Court;
(D) the Receiver's motion for:
(a) an Order authorizing and directing Bank of Montreal ("BMO") to transfer
to and release to the Receiver ail funds still held in any account held
with BMO in the name of Peopledge or the Related Companies;
(b) an Order authorizing and directing the Receiver to return to the
applicable customers) any deposits into the Canadian Consolidated
Account (as defined below) that were scheduled to be deposited on or
after October 29, 2012, (i) provided such deposit was actually received
on or after October 29, 2012, (ii) provided such deposit has not already
been returned, and (iii) only to the extent such deposit has not been
processed, in whole or in part, by way of scheduled payroll payments or
third party remittances;
(c) an Order approving the Agreement dated November 2, 2012 between
the Receiver and Labatt Breweries of Canada L.P., by its general
partner Labatt Brewing Company Inc.;
(d) an Order authorizing the Receiver to file assignments in bankruptcy for
Peopledge and each of the Related Companies;
(e) an Order approving a claims process for claims against Peoptedge and
the Related Companies as set out below and in the form of Claims
Process Order attached to the Receiver's notice of motion;
(f) advice and direction with respect to any financial investigations into
pre-receivership transactions involving Peopledge and the Related
Companies;
(g) approving the Preliminary Report dated October 26, 2012 prepared by
BDO in connection with the Application (the "Preliminary Report"),
along with the conduct and activities of BDO set out therein;
Legal"8366693.2
67
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(h) approving the First Report of the Receiver, filed as Tab 3 of the
Receiver's motion record, along with the conduct and activities of the
Receiver set out therein; and
(i) approving this Report, along with the conduct and activities of the
Receiver set out herein.
TERMS OF REFERENCE
7. All references to currency ($) or dollars in this Report shalt mean Canadian dollars
unless otherwise stated.
8. The Receiver has retied upon unaudited financial information of Peopledge, including
its books and records, certain financial information prepared by Peopledge, and
discussions with Peopledge's management. The Receiver has not been provided with
any books and records of the Related Companies, and continues to have a very limited
information concerning the business, share structure, and liabilities of the Related
Companies.
9. The information contained in this Report has been obtained from the accounting
records of Peoptedge and/or the Related Companies (where available) and is based on
discussions with and representations made by Peoptedge's management and the Estate
Executrix. The information has not been audited in any manner by BDO or the
Receiver.
OVERVIEW OF PEOPLEDGE'S BUSINESS AND BACKGROUND OF APPOINTMENT
10. BDO was retained by Peopledge on September 10, 2012 to conduct an assessment of
the operations and bank accounts of Peopledge used in processing customers' payrolls
and deduction remittances and provide a recommendation for any potential
restructuring, wind-down, or other proposed course of action for Peoptedge.
11. BDO prepared the Preliminary Report for the Court which was included by the
Cummings Estate as part of its application record. The Preliminary Report is attached,
without appendices, as Appendix "B". Much of the Preliminary Report is based on
information provided to BDO by the Cummings Estate, and should be read in
conjunction with the affidavit of the Estate Executrix sworn October 24, 2012 (the
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"Executrix Affidavit"). The Executrix Affidavit is attached, without exhibits, as
Appendix "C". Additional information was also provided by Jennifer Hughes
("Hughes") who was then the former Manager of Finance and Administration of
Peopledge.
12. Prior to its appointment as Receiver, BDO had restricted access to Peopledge, its
books and records, and management. In respect of the Related Companies, there was
limited, if any, information available to BDO for review. The restrictions on BDO were
a result of the lack of senior management at Peopledge and were required by the
Cummings Estate in order to seek to .avoid disruption to the continued operation of
Peopledge until such time as the Cummings Estate could determine the appropriate
course of action to take in respect of Peopledge.
The Business of Peop(edge
13. Peopledge conducted business as a provider of payroll processing, human resources,
and benefits services. Peopledge serviced 152 Canadian customers and eight US
customers. The estimated number of employees paid through Peopledge's services was
9,926, in Canada and 482 in the U.S.
14. To administer payroll services for its customers, Peopledge licensed a third party
payroll processing software package called ePersonatity, which was used by employers
to administer personnel records, position control, salary administration, benefit
administration, and other needs of human resource departments. Peopledge is one of
the only payroll companies in Canada that used this software.
15. The general business model of Peopledge is as follows:
(A) customers inputted their payroll data into ePersonatity for processing by
Peopled~e. Peopledge reviewed the data, calculated the required payroll
taxes and other deductions, and forwarded a draft fund summary report to
customers for their approval. The fund summary report itemizes the
calculation of each individual employee's net pay, payroll tax and other
deductions, and payroll processing fees payable to Peopledge;
(B) once the fund summary report was approved by the customer:
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(a) Peopledge generated a data file through ePersonality containing each
individual employee's net payroll amount and bank account
information. The data was then converted to a format which is
readable by banking systems and provided the necessary information for
the distribution of payroll funds directly to employees' bank accounts;
and
(b) customers arranged to deliver to Peopledge funding for payrolls,
comprised of customer's employee payrolls, payroll taxes and other
remittances, and _the payroll processing fees earned by Peopledge
(collectively, the "Payroll Funds") via: (a} electronic fund transfer,
including wire transfer and Internet or telephone banking; (b) pre-
authorized debit transactions; or (c) by providing Peopled~e a float
balance by certified funds and replenishing the balance after each
payroll is processed;
(C) Payroll Funds were deposited into one of two "Consolidated PayrollAccounts", being (i) the "Canadian Consolidated Account" held with BMO
which was used to administer payrolls for customers with Canadian employees,
and (ii} the "US Consolidated Account" held with BMO Harris Bank ("BMO
Harris") in the United States which was used to administer payrolls for
customers with US employees;
(D) there were no separate or designated trust or other like accounts for depositson acustomer-by-customer basis. The effect of this was that whenever acustomer deposited Payroll Funds, regardless of the nature of the funds, the
deposited funds were co-mingled with all other funds held in the Consolidated
Payroll Accounts, including funds which had been deposited by other customersand with all funds from processing fees earned by Peopledge;
(E) customer payrolls, payroll tax and other remittances, along with the payroll
processing fees earned by Peopledge, were paid directly from the Consolidated
Payroll Accounts as follows:
(a) Peopledge typically disbursed customers' payrolls to their respective
employees within three days of receiving Payroll Funds;
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(b) however, the portion of Payroll Funds representing payroll tax and other
deductions could remain in the Consolidated Payroll Accounts for
longer. Generally, such funds would remain in the account for up to 45
days before they would be distributed by Peopledge. For those
customers who chose to remit tax and other deductions quarterly, funds
deposited for payment of such tax and other deductions could remain in
the Consolidated Payroll Accounts for more than three months;
(c) payroll processing fees earned by Peopledge were transferred from the
Consolidated Payroll Accounts to the other corporate bank accounts
held by Peopledge with BMO twice a month; and
(d) interest earned on funds held in the Consolidated Payroll Accounts was
also regularly transferred to these corporate bank accounts; and
(F) as a result of the above practices, there was usually a significant balance on
hand in the Consolidated Payroll Accounts at any given time (the "Float"),
which balance was comprised of any combination of various customers'
payrolls, payroll tax and other remittances associated with various customers'
payrolls (and not always those same customers with payrolls on deposit), and
the payroll processing fees and interest earned by Peopledge.
Accounting Practices
16. While the Receiver has not undertaken a review of all customer contracts to-date, the
practice of depositing all customer Payroll Funds into either of the Consolidated
Payroll Accounts appears to have been contrary to the terms of a number of significant
customers of Peopledge and contrary to the terms of the standard form outsourcing
agreement used by Peopledge for its customers, which agreements provide that
Peopled~e would hold Payroll Funds received from a customer in separate accounts(s)
and in the case of some refers to Peopledge holding such funds in trust for the
customer.
17. The above co-mingling of funds comprising the Float was further compounded by
certain accounting practices (or lack thereof) used by Peopledge.
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18. Peopledge maintained two general ledgers:
(A) The "Peopledge GL", which was used to report Peopledge's revenues (i.e.
payroll processing fees and interest earned) and related business expenses, and
which tracks all debit and credit transactions related to the corporate bank
accounts held with BMO; and
(B) the "Customer GL", which was used to record transactions related to the
processing of customer payrolls, payroll tax, and other remittances.
19. Copies of sample pales of each of the Peopledge GL and the Customer GL are
appended to the Preliminary Report as Appendix "C" and "D", respectively.
20. The Customer GL maintains all accounting and transactions relating to the
Consolidated Payroll Accounts. However, the Customer GL does not track the
collection and distribution of Payroll Funds on acustomer-by-customer basis, but
rather tracks these activities based on the nature of the intended disbursements (i.e.
net payroll funds to be distributed to employees, withholding taxes to be remitted to
Canada Revenue Agency, union dues collected, etc.).
21. The practical result of this is that Peoptedge's records do not readily demonstrate
current liabilities to specific customers and the Receiver would therefore have to
reconstruct the funds that were received and subsequently disbursed on behalf of each
of Peopledge's former customers.
22. The Receiver, with the assistance of Hughes, is in the process of reconstructing the
accounting records on acustomer-by-customer basis using transaction records, which
the Receiver is using to attempt to assist customers in understanding remittances that
may be outstanding on their employee payroll and which will be needed to assist the
Receiver in reviewing claims against the Peopledge estate.
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The Receiver's Initial Investigations into Movement of Funds
23. As detailed in the Executrix Affidavit, when conducting or directing the initial
investigations into the business and affairs of Peopledge, the Estate Executrix
discovered that money had been withdrawn from the Float held in the Canadian
Consolidated Account and deposited into what the Customer GL described as a "High
Yield Account", which was purportedly held with CMC Fraser and/or Winston Park
Financial Services or WPFS.
24. The Customer GL indicates that the balance held in the "High Yield Account" as at
September 30, 2012 is $3.400 million.
25. As investigated and initially confirmed by the Receiver, with the exception of one
cheque for $200,000 drawn directly on the Canadian Consolidated Account on or about
February 17, 2012, it appears that funds described in the Customer GL as transferred
to the "Nigh Yield Account' were moved during the period from May 2007 to February
2012 as follows:
(A) the funds were moved via online banking transfers from the Canadian
Consolidated Account to Peopledge's corporate bank account;
(B) cheques were then drawn on Peopledge's corporate bank account, which
cheques were made payable to "CMC Fraser" and/or "Winston Park Financial
Services", the business trade names of 162 and WPFS;
(C} the funds drawn were deposited into at least two accounts: (i) one held by 162
with BMO, which received $1,365,900; and (ii) a second held by WPFS with TD
Canada Trust ("TD"), which received $1,300,000; and
(D) the recipient of the remaining approximately $800,000 is not evident on the
face of the records before the Receiver.
26. As at the date of the receivership, the balance of 162's account was $1,745.07, and
the balance of WPFS' account was $116,709.44. As discussed later in the Report,
these funds have been released to the Receiver.
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27. The Receiver's review of the account statements of the accounts of 162 and WPFS
which received funds as described above show significant withdrawals of such funds
over a lengthy period of time. As directed by the Court, the Receiver has not yet
investigated in depth how those funds were further disbursed.
28. To date, despite the Receiver's enquires of former Peopledge staff and BMO, and its
preliminary review of the financial records of Peopledge (but without forensic audit),
the Receiver has not located any evidence such as bank statements, account numbers,
or other evidence to corroborate that the accounts held with 162 and WPFS are the
"High Yield Account" to which the Customer GL was referring.
29. As directed by the Caurt in granting the Application, the Receiver has not undertaken
a forensic investigation but has simply assessed the potential work to be done, on
which it intends to seek further direction from the Court.
30. In addition to the money withdrawn from the Float as described above, Peoptedge was
regularly drawing down on available funds in the Float to fund its own business
operations, including the payroll of its own employees. Peopledge's books and records
su~~est management utilized available Float funds to fund their own operations
beginning in September 2007. Peoptedge would return a portion of the funds to the
Float when sufficient receipts were available from payroll processing fees or interest
revenue.
31. As also discussed in the Preliminary Report, the Receiver's initial investigation into the
transfers of funds from the Float to Peopledge's corporate bank accounts indicates
that Peoptedge utilized $464,000 of the Float for its own expenses as at October 15,
2012, but the balance was reduced to $313,570 by October 29, 2012. Given the co-
mingling of funds, it may be difficult to ascertain which deposits of Payroll Funds on a
customer by customer basis were affected by these withdrawals or how much of the
withdrawals would have been attributed to fees and interest earned by Peopledge.
32. Finally, the Receiver has become aware of various transfers of funds between the
Consolidated Payroll Accounts and Peopledge's US denominated corporate account
which do not appear to represent transfers of interest earned or payroll processing
fees. The Receiver is in the process of determining the extent of such transactions.
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Basis of Ex Parte Appointment under the CJA
33. In the context of alt of the above, the Cummings Estate sought the appointment of a
receiver on an ex parte basis over Peopledge on the following primary grounds:
(A) the Cummings Estate is the majority and controlling shareholder of Peopledge;
(B) there were no registered acting directors of Peopledge and there was no senior
management in place to oversee the business operations;
(C) as funds were deposited into the Consolidated Payroll Accounts, they became
co-mingled with funds from other customers and Peopledge's funds and there
had been no proper or ordinary course safeguards (such as the use of a
separate account on a customer by customer basis) put into place by Peopled~e
to distinguish streams of funds entering and leaving the Consolidated Payroll
Accounts;
(D) Peopledge was operating at a deficit and was using the Float to fund its
operations;
(E) approximately $3.400 million appeared to have been diverted from the Float to
an account only known as the "High Yield Account";
(F) the Estate Executrix's investigations into the records of the cheques drawn
from the Consolidated Payroll Account, as well as the transfer of funds to the
Peopledge corporate account were largely incomplete and needed to be
continued and completed;
(G) the "High Yield Account" could not be located and only less than $120,000 had
been successfully traced in and to accounts held by or with the Related
Companies;
(H) the Cummings Estate was not wilting or able to fund and/or oversee the
continued operation of Peopledge;
(I) although the immediate termination of Peopledge's business was difficult for
customers (as often occurs on a shutdown of an insolvent business), an ordinary
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course notice to customers of the situation would likely have resulted in a
"race to the swiftest" among customers that would create chaos to the
detriment of all stakeholders, as customers would likely have taken action to
seize funds or other assets from Peopled~e and the Float; and
(J) given the missing funds of at least $3.400 million and the co-mingled nature of
the Consolidated Payroll Accounts, remedies exercised by certain customers
would be to the potential detriment of other customers who had also
contributed to the Consolidated Payroll Accounts and the Float.
34. The Receiver understands that the Cummings Estate chose to proceed by way of
appointment of the Receiver instead of by way of an assignment in bankruptcy in an
effort to minimize disruption (to the extent possible in the circumstances) to
customers and to have a receiver in place to more effectively assist, as is practical and
subject to available resources of the receivership, with the transitioning of data to
new service providers.
RECEIVER'S ACTIVITIES TO DATE
35. Since its appointment, the Receiver has, among other things, engaged in the following
activities in conjunction with its mandate:
(A) the Receiver took steps to immediately terminate the business operations and
employment of alt employees of Peopted~e, but for those key employees
required by the Receiver to assist in transitioning customer payroll information
where cost-effective ar practicable to do so (collectively, those former
employees of Peopledge engaged by the Retainer are referred to herein as the
"Independent Contractors");
(B) the Receiver delivered notice to all customers of Peoptedge in the form
substantially attached to the Receivership Order;
(C) the Receiver effected service of the Receivership Order on the two secured
creditors of Peopledge, BMO and Dell Financial Services Canada Limited
("Dell"), an Canadian taxation and other government entities which may be
impacted by the receivership, and on the minority shareholders of Peopledge;
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(b) the Receiver immediately sought to take possession of and secure the
remaining funds in the Consolidated Payroll Accounts and the other accounts
held in the name of Peopledge, as discussed below;
(E) the Receiver immediately sought to take possession of and secure the
remaining funds in the accounts held in the name of the Related Companies, as
discussed below;
(F) the Receiver took possession of Peopledge's primary operating premises
located at 5515 North Service Road, Suite 303, Burlington, Ontario (the
"Premises") and made appropriate arrangements with Peopledge's former
landlord for interim occupancy of the Premises on a per-diem basis;
{G) the Receiver arranged to change the locks on the Premises, cancelled existing
passcodes to the alarm system, and issued new passcodes for a select number
of individuals;
(H) the Receiver has received and responded to numerous inquiries from creditors,
former customers and other stakeholders of Peopledge;
(1) the Receiver instructed the Independent Contractors to terminate external
access to Peopledge's computer servers, programs, and databases;
(J) the Receiver has maintained a publicly assessable website
(www.bdo.ca/peopledge) to provide information to interested parties;
(K) the Receiver has engaged in discussions with many of the former customers of
Peopledge, and, where cost-effective or practicable to do so, the Receiver has
assisted customers in retrieving electronic data to provide to alternate payroll
source providers;
(L) the Receiver has entered into a limited access arrangement with Labatt
Breweries of Canada LP ("Labatt"), Peopledge's largest former customer, to
accommodate the transfer of data required by Labatt to service the payrolls of
its approximately 3, 500 employees;
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(M) the Receiver has entered into an interim facilitation agreement (the "IFA"}
with Activpayroll Ltd. ("Activpayroll") in order to accommodate certain unique
circumstances for Activpayroll and the 1,104 employees of Activpayroll's
customers, in respect of which the Receiver sought and obtained the approval
of this Court prior to entering into the IFA as discussed below;
(N) the Receiver and Ceridian have transitioned 59 former customers of Peopledge
to Ceridian, representing approximately 1,800 employees;
(0) the Receiver has assisted an additional 56 former customers in obtaining and
transitioning their respective payroll information to other service providers,
representing approximately 2,900 employees;
(P) the Receiver has commenced a preliminary investigation into the transfer of
funds from Peopledge to and through the Related Companies to determine
whether a formal forensic examination is warranted and advisable, and has
devised recommendations to the Court in this regard as detailed below;
(~ the Receiver has taken steps to safeguard and handle alt of Peopledge's
personal information in accordance with the PersonQl Information Protection
and Electronic Documents Act;
(R) the Receiver has taken steps to take control of and safeguard Peopledge's
records, including confidential customer information;
(5) the Receiver has begun to canvass customers to determine the ultimate steps
required to destroy and/or safeguard confidential customer information, and
has begun to develop a protocol in this regard;
(T) the Receiver has notified by letter the Estate Executrix of the potential for
claims of the estate andlor customers and/or third parties as against the
Cummings Estate;
(U) the Receiver notified Peopledge's insurance brokers) of the Receivership
order, and requested that the Receiver be added as an additional insured to all
existing insurance policies; the Receiver arranged payment of insurance
premiums) in order to keep the insurance policies in food standing;
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(V) the Receiver has provided notice by letters to Peopledge's insurers of the
adjustment for claims to be made under the insurance;
(W} the Receiver has identified and taken steps to preserve access to critical
services required by the Receiver to effectively administer the receivership,
including Internet usage, offsite computer hosting, and offsite record
retention;
(X) the Receiver has recently received a cheque payable to one of Peopledge's
former customers in the amount of $31,717.47 from WSIB which appears to be
an "Experience Rating Refund" in favour of the customer, which the Receiver
will be forwarding on to the customer; and
(Y) the Receiver has taken steps to commence applications for terminated
employees of Peopled~e as is required under the Wage Earner Protection
Program Act, S.C. 2005, c. 47, s. 1.
36. The Receiver has not operated and is not operating the business of Peopledge.
OVERVIEW OF ACCOUNTS HELD BY PEOPLEDGE AND THE RELATED COMPANIES
37. On October 29, 2012, the Receiver delivered notification letters by facsimile and/or
electronic mail to the various financial institutions at which Peopledge and the
Related Companies held various bank accounts which letters provided information with
respect to the receivership appointment, including a copy of the Receivership Order
(the "Notices to Financial Institutions"}. Each financial institution was requested to
freeze all bank accounts held by Peoptedge and/or the Related Companies and to
remit bank balances directly to the Receiver. Copies of the Notices to Financial
Institutions are attached (without attachments) as Appendix "D".
38. As directed in the Receivership Order, the Receiver has opened a separate Post-
Receivership Account (as such term is defined in the Receivership Order) for
Peoptedge and each of the Related Companies.
39. An overview of the accounts held by Peopledge is as follows (with details of the
current status column to be discussed further below):
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Banking Account Description Opening Balance Current Status ofInstitution as at October 29 Funds
BMO Consolidated interest bearing $3,729,582.91 $2,057,078.50 heldbank account used to with the Receiver;administer payrolls for A balance ofcustomer with Canadian $984,566.22 remainsemployees (one of the two in the BMO account;Consolidated Payroll Accounts)
$788,406.31 was(the "Canadian ConsolidatedautomaticallyAccount")disbursed as payrollon or after October29, 2012.
BMO Harris (in the Consolidated interest bearing USD$237,140.68 USD$147,204.90United States) bank account used to held with the
administer payrolls for Receiver.customer with Unites States A balance ofemployees (one of the two USD$2,428.96Consolidated Payroll Accounts) remains with BMO(the "US Consolidated Harris Bank.Account")
$88,091.07 wasautomaticallydisbursed as payrollon or after October29, 2012
BMO US Dollar banking account, UDS$2,081.15 USD$2,081.15 heldused for general operating with the Receiverpurposes("USD Account")
BMO Used for Outsourcing Canadian $19.22 $19.22 held with thePayroll Receiver
BMO Used for general operating $55,636.46 $87, 351.15 remainspurposes with BMO.'
BMO InvestorLine BMO InvestorLine account $619.32 Cash Being wound down.2$8,700 Securities
ING Direct Canada Used for general operating $0.09 $0.09 is held withpurposes the Receiver
'The increase in the balance of the general operating account is a result of fundstransfers between Peoptedge's' BMO accounts the morning of October 29, 2012 priorto the Receiver's appointment.
ZPeopledge maintained a BMO InvestorLine Account and the Receiver has requested acollapse of the securities held therein following which all cash will be forwarded tothe Receiver.
40. As at October 28, 2012, the Related Companies held the following accounts:
(A) 162 maintains three accounts as follows:
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BankingInstitution
Account Description Balance Amount remitted toReceiver
BMO InvestorLine Canadian deposit account $1,745.07 $1,745.07
BMO InvestorLine BMO InvestorLine account $72,500 Being wound down.'
BMO InvestorLine BMO InvestorLine account $Nil Being wound down.'
'162 maintained BMO InvestorLine Accounts and the Receiver has requested a collapseof the securities held therein following which all cash will be forwarded to theReceiver.
(B) WPFS maintains one account as follows:
BankingInstitution
Account Description Balance Amount remitted toReceiver
TD Canada Trust Canadian deposit account $~ ~ 6,709.44 $116,709.44
(C) CMC maintains two accounts as follows:
BankingInstitution
Account Description Balance Amount remitted toReceiver
BMO Canadian deposit account $330.99 $330.99
BMO US savings account $486.31 $4$6.31
41. To date, the Receiver is not aware of, nor has it been advised of, any other accounts
held by Peopledge or the Related Companies.
42. The status of Peopled~e's accounts with BMO and BMO Harris accounts are discussed in
further detail below.
RELEASE OF BMO FUNDS
43. On November 12, 2012, BMO released the funds held in the following accounts:
(A) for Peopledge, the (i) US Dollar Account in the amount of $149,286.05 USD; and
(ii) Canadian corporate bank account in the amount of $19.22;
(B) for CMC, the (i) Canadian corporate bank account in the amount of $330.99;
and (ii) US corporate bank account in the amount of $486.31 USD; and
(C) for 162, the Canadian corporate bank account in the amount of $1,745.07.
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44. The funds were delivered to the Receiver by BMO on the condition that they not be co-
mingled with any other funds held by the Receiver (a practice consistent with the
Receiver's requirement to open Post-Receivership Accounts for each of Peoptedge and
the Related Parties) or paid out to any party until an order from this Court has been
obtained. The letter accompanying the funds is attached as Appendix "E".
45. BMO still holds an aggregate of approximately $984,566.22 in the Canadian
Consolidated Account.
46. BMO has advised the Receiver that it intends to comply with the Receivership Order
and the Receiver's request to have the funds paid to its Post-Receivership Account for
Peoptedge. However, BMO requires a further court order prior to releasing the funds
held in the Canadian Consolidated Account and Peoptedge's general corporate account
in consideration of its concerns regarding possible (competing) trust claims in and to
the funds held by BMO, and in particular, deemed trust claims of the CRA. BMO has
therefore requested that the Receiver obtain a court order authorizing and directing
BMO to release these funds and releasing BMO from any liability in doing so.
FUNDS HELD IN THE CANADIAN CONSOLIDATED PAYROLL ACCOUNT
47. As described above, certain funds of Peopledge were held in the Canadian
Consolidated Account, the balance of which was $3,729,582.91 as at 11:59 p.m. on
October 28, 2012.
48. The following activity occurred within the Canadian Consolidated Account on October
29, 2012:
(A) $3,377,146.91 was deposited by customers after the Receivership Order
notwithstanding the receivership. Of the deposits received, an aggregate sum
of $2,989,377.01 was successfully recalled by the respective depositing
customer and $387,769.90 remains on hand with BMO. For the reasons
discussed below, the Receiver is recommending that the court grant an order
authorizing and directing the release of the remaining funds to the applicable
depositing customers;
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(B) $788,406.31 had been pre-processed through from the Canadian Consolidated
Account for automatic distribution of payroll or other third party remittances.
This automated distribution process is discussed in detail below; and
(C) $845,164.34 which had been deposited into the Canadian Consolidated Account
prior to October 29, 2012 was successfully recalled by Durham College of
Applied Arts &Technology ("Durham College"). Of these funds, Durham
College has returned $588,627.96 to the Receiver, as discussed below.
49. The Receiver has investigated the above activities, and understands and reports as
follows:
Post-Receivership Deposits
50. 18 customers' Payroll Funds were deposited into the Canadian Consolidated Account
on or after October 29, 2012, notwithstanding the receivership. The Receiver
understands that 12 of these deposits were automated pre-arranged debits of
customer accounts and 6 were wire transfers for scheduled deposits on October 29,
2012.
51. The total of such deposits is $3,377,146.91. Of those post-receivership deposits,
approximately $2,989,377.01 were recalled by the customer on their instructions to
their respective financial institutions to reverse the deposits. Durham College also
falls into this category, subject to a unique difference as discussed below.
52. In the Receiver's view, because the business of Peopledge was immediately ceased
following the Receiver's appointment and customer contracts were immediately
terminated, the Peoptedge estate is not entitled to the receipt of such funds, which
were only received as a result of a mistake or as a result of automated or scheduled
processing that should not have occurred. This situation is not, in the Receiver's
opinion, akin to the payment of an account receivable owing to the company post-
receivershipwhich the estate is still entitled to notwithstanding the receivership.
53. It is also the Receiver's view that it would be unfair and unjust to distinguish between
deposits made by automated debit on or after October 29, 2012 (which were clearly
not completed prior to the receivership) and wire transfers (which may have been
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initiated prior to the receivership for a deposit schedule to be made on October 29,
2012 or after). It is the Receiver's view that making any such distinction would be
arbitrary and would treat customers differently simply based on the choice of deposit
mechanism that they used. In the Receiver's opinion, any deposits that were
"scheduled" to be made on or after October 29, 2012 would be returned to the
applicable customer.
54. The Receiver is therefore recommending and requesting an Order that authorizes and
directs the Receiver to return to the applicable customers) any deposits into the
Canadian Consolidated Account that were scheduled to be deposited on or after
October 29, 2012, {i) provided such deposit was actually received on or after October
29, 2012, (ii) provided such deposit has not already been returned, and (iii) only to the
extent such deposit has not been processed, in whole or in part, by way of scheduled
payroll payments or third party remittances
55. If this recommendation is accepted by the Court, the amount of $387,769.90 would be
distributed to the applicable customers by the Receiver, following receipt of the funds
currently held by BMO.
Automatic Payroll Processed
56. Payment of payroll funds to individual employees was an automated process which was
administered by Peopled~e electronically through a banking module called "File
Transfer Facility" ("FTF").
57. Generally, the process of paying payroll from the Canadian Consolidated Account
involves the following steps:
(A) customers input their payroll data into ePersonality for processing by
Peopledge;
(B) Peopledge uses the data to create a draft fund summary report, which
itemizes, among other things, the calculation of each individual employee's net
pay, payroll tax and other deductions, and which is sent to customers for
approval;
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(C) once approved, Peopledge generates a data file through ePersonality
containing each individual employee's net payroll amount and bank account
information (the "Payroll File");
(D) customers arrange to deliver to Peopledge Payroll Funds in advance of the
scheduled payroll date;
(E) the Payroll File is converted into a format readable by banking systems and
uploaded into FTF;
(F) the upload is generally done withintwo days of the scheduled payroll date, but
can be done farther in advance or as late as the same day as the scheduled
payroll date;
(G) once uploaded, the FTF Payroll File is accessible by BMO;
(H) the uploaded FTF Payroll Fite provides the necessary instructions to BMO to
enable it to automatically direct deposit payroll funds into employee accounts;
(I) BMO then "warehouses" the FTF Payroll File and begins the steps to process
the payroll:
(a) BMO confirms there are sufficient funds in the Canadian Consolidated
Account to cover the proposed distributions to employees and holds the
necessary funds until such time as the file is processed;
(b) on the value date, the funds held for the purpose of processing the file
are automatically debited to the Canadian Consolidated Account and
credited to the employees' accounts at their respective financial
institutions; and
{c) the transactions are queued and processing commences immediately at
12:01 on the scheduled payroll date.
58. BMO has explained to the Receiver that when an FTF Payroll File is "warehoused" and
the funds required to process the payroll are held by BMO, although the required funds
are not debited from the Canadian Consolidated Account and the balance of the
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Canadian Consolidated Account continues to reflect such funds, Peopledge (and other
third parties) are no longer able to access or use such funds, which are considered to
be spent.
59. The Receiver understands a similar process was used as between Peopledge and BMO
Harris Bank in respect of the US Consolidated Account, which is discussed below.
60. In summary, on October 29, 2012, (before the Receivership Order had been issued):
(A) beginning at 12:01 a.m., $33,005.98 was automatically processed as payroll or
remittances from the Canadian Consolidated Account; and
(B) at approximately 10:00 a.m., BMO received five FTF Payroll Files from
Peopledge and began to process such files. The aggregate payroll to be
processed from the five FTF Payroll Files was $755,400.33 and these files had
been "warehoused" prior to receipt of the Receiver's Notice to Financial
Institutions and before the Canadian Consolidated Account was frozen. The
payroll was automatically disbursed beginning at 12:01 a.m. on November 1,
2012.
61. BMO advises the Receiver that, because the funds were deposited into individual
employee bank accounts, once the "warehoused" files were processed BMO was
unable to reverse or recall such funds without the consent of both the individual
employee and its financial institution.
62. The Receiver continues to review whether the Peopledge estate may have rights to
seek recovery of Payroll Funds that were deposited pre-receivership and were
processed post-receivership notwithstanding the receivership. There are however
complicated factual and legal issues raised in those circumstances, which the Receiver
and its counsel continue to review. The Receiver expects to report to the Court
further on those issues and seek further direction from the Court.
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Reca!( of Pre-Receivership Funds and Durham Co(tege Deposits/Payments
63. Durham College pre-arranged for deposits of Payroll Funds by electronic fund transfers
on October 26, 2012 of $845,164.34 (the "First Payroll") and on October 29, 2012 of
$1,998,615.03 (the "Second Payroll"), totalling $2,843,779.37.
64. On October 29, 2012, Durham College received the Receiver's Notice of the
receivership, and contacted its financial institution (also BMO) to recall both
electronic fund transfers. As a result, $2,843,779.37 was returned to Durham College.
65. It was discovered shortly after the recall had been- processed that net payroll amounts
had also been distributed to Durham College employees from the Canadian
Consolidated Accounts as follows:
(A) in respect of the First Payroll, $588,627.96; and
(B) in respect of the Second Payroll, $1,467,769.33.
66. Given that funds were automatically disbursed as payroll but the funds to pay such
payroll were also returned to Durham College, BMO commenced a process of trying to
retrieve the payroll distributions, while the Receiver and BMO attempted to resolve
the issue directly with Durham College (BMO advises the Receiver that because of the
electronic transfer nature of the original deposit, BMO was unable to prevent or stop
the recall of the deposit instructed by Durham College).
67. Ultimately, Qurham College voluntarily returned funds equal to the net amount paid
out to its employees to correct the "double dip" created by the concurrent
withdrawals;
68. As a result, Durham College deposited $2,057,078.50 (being the total of the
$588,627.96 and $1,467,769.33 payrolls processed) on November 2, 2012 directly into
an account maintained by the Receiver.
69. Given that the balance returned to Durham College for the Second Payroll was in
relafiion to a deposit made on October 29, 2012, if the Court grants the order
recommended by the Receiver above with respect to post-receivership deposits, then
Durham College would similarly be entitled to the return of the balance of the Secord
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Payroll. Thus, no action would be required in respect of the balance of the Second
Payroll.
70. However, in respect of the First Payroll, Durham College has only returned the
amounts equal to the payroll processed, but not the entire amount that it was able to
reverse post-receivership. Thus, it has not returned $256,536.38, being the balance of
the First Payroll representing the profit earned by Peopledge for processing the First
Payroll and the tax and other deduction portion of the First Payroll.
71. The Receiver and its counsel are reviewing the legal claims of the estate and will
report further to the court with respect to any action that the Receiver may
recommend.
FUNDS HELD IN THE US CONSOLIDATED PAYROLL ACCOUNT
72. As noted above, prior to the appointment of the Receiver, certain funds of Peopledge
were held in the US Consolidated Account. The balance of the US Consolidated
Account as at 11:59 p. m. on October 28, 2012 was $237,140.68.
73. In consideration of the limited resources which would be available to the Receiver
post-appointment, it appeared there would not be sufficient funds available to
recognize and enforce the Receivership Order in the United States. Accordingly, it
was proposed and provided for at paragraph 2(g) of the Receivership Order to have the
funds in the US Consolidated Account moved to USD Account maintained by BMO in
Canada. It was understood that, without a recognition order, the Receiver may
encounter difficulties in taking possession and control of the funds in the US
Consolidated Account.
74. Following its appointment, the Receiver instructed the Independent Contractors to
transfer the funds held with BMO Harris in the US Consolidated Account to the USD
Account held with BMO in Canada. The sum of $147,218.90 USD was received by BMO
on October 31, 2012 and delivered to the Receiver on November 12, 2012, as discussed
above.
75. Although the balance of the US Consolidated Account appears to have been
$237,140.068 as at October 28, 2012, only $147,218.90 was available to the Receiver
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to be transferred out of the account on October 29, 2012. Similar to the situation
discussed above for the Canadian Consolidate Account, the difference had been
"warehoused" and pre-processed for payroll, and such funds were automatically
distributed beginning at 12:01 a.m. on October 29, 2012.
76. Because the Receivership Order has not been recognized in the United States, BMO
Harris has advised that it is not in a position to recognize the Receiver's authority and
is therefore unable to provide information requested by the Receiver regarding the
details of the US Consolidated Account.
77. However, from its limited discussions with BMO Harris and from its review of the
online banking account to which the Receiver has access in Canada, the Receiver
understands the following:
(a) as at 12:01 a.m. on October 29, 2012 the US Consolidated Account held
$237,140.68 USD;
(b) $147,218.90 USD was successfully transferred into the USD Account thereafter
as discussed above;
(c) it appears that $88,091.07 USD was processed to the credit of certain US tax
authorities due on October 31, 2012;
(d) $59,386.57 USD was deposited by a customer on October 29, 2012 and the
corresponding payroll, (in the amount of $58,788.32 USQ), was released on
October 29, 2012; and
(e) there may be a remaining balance of approximately $2,428.96 in the BMO
Harris account.
78. BMO Harris has advised that it is unable to reverse such transactions, unable to
comment as to any balance, and unable to remit any balance to the Receiver.
Effectively, without a recognition order, BMO Harris is unable or unwilling to recognize
the Receiver's authority.
79. At this time, it is not cost effective to take any further steps with respect to the
balance of $2,428.96 USD held with BMO Harris. The Receiver continues to review
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issues concerning the $88,091.07 USD which was automatically distributed to certain
US tax authorities on October 29, 2012. The Receiver will report to the Court further
on this point as may be required.
NOTICE TO CUNNINGS ESTATE AND INSURANCE COMPANIES OF POTENTIAL CLAIMS
80. The Receiver has advised the Estate Executrix that Peopledge, though the Receiver, or
customers of Peopledge may have claims in, to or against the Cummings Estate, and
put the Estate Executrix on notice that na distributions or dispositions of any of the
Cummings Estate's property should be made by the Estate Executrix without order of
the Court on notice to the Receiver. A copy of the letter to the Cummings Estate is
attached as Appendix "F".
81. Similarly, the Receiver has notified Peopled~e's insurance of the potential for claims
to be made under Peoptedge's insurance policy. A copy of such letters (without
attachments) are attached as Appendix "G".
PRELIMINARY OVERVIEW OF CLAIMS/FUNDS POOL
82. Based on the Receiver's preliminary review and analysis (including the information
summarized above), it appears that:
(A) there may be approximately $10.4 million in claims by customers in relation to
Payroll Funds deposited with Peopledge prior to the receivership which were
not processed;
(B) of that amount, (i) approximately $1.4 million relates to unprocessed employee
payroll; (ii) approximately, $4.47 million relates to unremitted deductions
owing to CRA, (iii) approximately $2.23 million relates to unremitted benefits
plan payments, and (iv) approximately $1.7 million relates to other third party
remittances not made;
(C) in addition, customers appear to have provided advanced deposits with
Peopledge for future unspecified payroll in the amount of approximately
$617,000; and
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(D) Peopledge may have approximately $99,000 of its own employee related
liabilities, which may include unremitted source deductions to CRA.
83. The current funds available in the Peopledge estate are approximately
CDN$3,128,995.87 and US$149,286.05 (without accounting for receivership fees and
costs but also not accounting for additional claims that may be available to the estate
to recover additional funds, including the $256,536.38 pre-receivership deposit
recalled by Durham College). Of those funds, approximately $387,769.90 relate to
customer deposits made post-receivership, which are discussed above and which the
Receiver recommends be returned to the depositing customer.-
84. As a result, the Receiver is of the view that an orderly, but efficient, process be
conducted to determine the universe and nature of claims against Peopledge in order
to develop a streamlined and coordinated manner of resolving claims and ultimately
distributing funds to the entitled parties.
CLAIMS PROCESS
85. The Receiver is therefore proposing to conduct a claims process pursuant to which the
Receiver will call for, review and report on claims against Peopledge and the Related
Companies.
86. The Receiver expecfis that some parties may hold, or assert, trust or propriety claims
against Peopledge's funds in relation to such claims and at least two former customers
have already expressly asserted such rights.
87. It is the Receiver's view that it is necessary for the Receiver (and ultimately the Court)
to have a complete understanding of not only the quantum of potential trust claims
against Peopledge but the factual circumstances surrounding each claim in order to
make informed and proper decisions as to which, if any, persons may have priority or
trust claims to funds which are generally commingled in Peopledge's accounts. The
Receiver believes that it is in the interests of Peopledge's stakeholders as a whole for
the assertion and determination of such claims to be undertaken in an orderly manner
to prevent a flood of individual competing motions seeking trust determinations.
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88. Further, given that many of those claims wilt likely raise difficult common legal issues
between multiple claimants and potentially raise claims that may be legally or
factually dependent on the claims of other parties (i.e. multiple claimants asserting a
trust claim to the same dollar), the Receiver does not believe it is efficient and
appropriate to engage in a traditional claims process that includes the Receiver's
making firm determinations on the claims filed, issuing acceptances/disallowances and
creditors having the ability to accept or dispute the Receiver's determinations with
finality on all parties.
89. Instead, the Receiver is proposing and recommending that it conduct a claims process
by which it calls for and receives alt claims divided into two categories of class:
customer deposit claims and a!l other claims. The Receiver will then review the claims
and attempt to settle the questions of the claims and report on to the stakeholders
and the Court. The Receiver also proposes that a further Court attendance then be
held (on notice to all claimants) in order for the Receiver to seek advice and direction
as to the most appropriate and efficient process to determine or adjudicate the filed
claims.
90. The claims process being proposed by the Receiver is particularly set out in the draft
form of Claims Process Order appended to the Receiver's Notice of Motion and
includes the following key deadlines:
December 10, 2012
December 14, 2012
December 14, 2012
January 18, 2013
February 15, 2013
February 22, 2013
Claims Process Order granted
Claims Bar Notice, forms of Proof of Claim and Instruction
Letter to be delivered to all known creditors, customers,
employees and governmental authorities
Claims Bar Notice, Proof Claim and Instruction Letter to
be published in the Globe and Mail (National Edition) and
the Watl Street Journal
Claims Bar Date (5:00 pm EST)
Receiver to report on claims filed
Court appearance for advice and directions
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91. The Receiver notes that in relation to the Related Companies, the Receiver has not
received any documents which would show that there are any known creditors,
employees or other stakeholders of the Related Companies (other than the Applicant's
potential equity interest) and thus the "notice" to parties with potential claims
against the Related Parties will, in effect, solely consist of the newspaper publication.
92. The Receiver also notes that it has sought to tailor the proofs of claim form and claim
instructions in order to streamline and expedite the filing of claims to the greatesfi
extent possible.
93. The Receiver recommends and requests that the Court approve the proposed claims
process substantially in the form of the draft Claims Process Order and the most
appropriate and efficient manner to conduct an orderly identification and assessment
of claims against Peopledge and the Related Companies.
CUSTOMER TRANSITION PROCESS
94. Immediately following its appointment, the Receiver attended at the Premises and
met with Hughes. The Receiver informed Hughes of the receivership appointment and
sought her assistance. After a lengthy discussion, Hughes recommended that the
Receiver retain the Independent Contractors, comprised initially of Hughes and three
other former employees to facilitate, among other things, the transfer of payroll data
to Ceridian Canada Ltd. ("Ceridian") and/or other service providers selected by
Peopledge's former customers, and to arrange the preparation and distribution of
Records of Employment and T4 slips to Peopledge's employees. As there were further
requests of the Receiver to facilitate in the transitioning process (as discussed below),
the Receiver engaged further Independent Contractors to meet these needs. The
Receiver initially engaged the services of six Independent Contractors.
95. As described in the Preliminary Report, in an effort to establish potential transition
options for Peopledge's customers, discussions were initiated with certain payroll
service providers with a view to exploring possibilities, where possible, to ease the
transition of customers to new service providers following cessation of Peopledge's
business and to allow for a potential benefit to the receivership estate.
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96. Prior to the Receiver's appointment, all discussions with Ceridian were on a
confidential basis and Ceridian had no knowledge of the identity of Peopledge's
customers. A Referral Agreement with Ceridian (described in the Preliminary Report
and appended as Appendix "K" of the Preliminary Report) was negotiated and
finalized, and approved by the Court in the Receivership Order. As described in the
Preliminary Report and as set out in the terms of the Referral Agreement, Ceridian has
no positive obligation to enter into service contracts with any of Peopledge's former
customers, but must pay a referral fee to the Receiver if it does enter into an
agreement with a former Peopledge customer before December 15, 2012.
97. Upon granting the Receivership Order, the Honourable Mr. Justice Newbould
encouraged the Receiver to facilitate transition where reasonable, which the Receiver
has sought to do, having regard to the limited financial resources in the receivership
and the limited number of personnel with the skill set required to operate Peopledge's
software system (discussed below).
98. As discussed above, Peopledge is the only Canadian providers that used the payroll
processing software, ePersonality. Prior to the appointment, Ceridian believed and
informed the Receiver that information technology personnel should be able to export
existing customer payroll data to Microsoft Excel spreadsheets which Ceridian could
then use to upload data onto their own payroll processing system. Ceridian provided a
Microsoft Excel template for the proposed customer payroll data.
99. Significant effort was made to have Peopledge's information technology personnel
(the "IT Personnel") formulate a customized computer program ("Script") to export
customer payroll data to the Microsoft Excel spreadsheet templates provided by
Ceridian. However, due to the fact that Ceridian IT personnel could not engage
directly with Peopledge counterparts prior to the receivership, advance testing of the
proposed transfer of customer payroll data to a suitable format for Ceridian could not
be perfected in advance.
100. Upon the appointment of the Receiver, the communication channels between Ceridian
and the IT Personnel were opened immediately such that information could flow freely
between the two teams. IT Personnel modified the Script and new results from the
Script were provided to Ceridian. Although improvements were achieved, there
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remained some incompatibilities which required the temporary engagement of
additional I7 personnel in order to assist in the transition of customers. The Receiver
also worked with Ceridian to determine how Ceridian could utilize the currently
available customer payroll data with the direct assistance of customers.
101. Using this cooperative approach, the Receiver and Ceridian were ultimately able to
create the appropriate Script required to transition data required to process payrolls,
subject to ongoing troubleshooting required on a customer by customer basis.
General Overview of Customers Transition Status
102. Effective October 29, 2012, all of Peopledge's customer contracts were terminated.
103. The Receiver issued notification letters by electronic mail to Peopledge's customers in
the afternoon of October 29, 2012, immediately after informing Peopledge employees
of the receivership. Attached as Appendix "M" is a copy of the Notice to Customers,
which advised customers of: i) the receivership; ii) the termination of all customer
contracts and cessation of services; and iii) the transition options available for
customers to Ceridian.
104. Ceridian offered to contact Peopledge customers directly as well to advise them of the
opportunity to transition payroll services. Accordingly, the Receiver provided Ceridian
with a customer contact list on October 31, 2012.
105. On November 8, 2012, the Receiver delivered a second notice to customers, to ensure
all parties were aware of the receivership, and would have the opportunity to make
alternate arrangements for payroll. The second notice is attached as Appendix "I".
106. Some customers that contacted the Receiver directly inquired whether the Receiver
would be offering ongoing services required to process their upcoming payrolls. The
Receiver advised those customers that because the Receiver was not operating the
business of Peopledge, the Receiver itself was not in a position to continue to process
upcoming payrolls. Instead, the Receiver sought to assist customers in their
arrangements to transition their services to alternative providers, on a commercially
reasonable basis given its limited resources.
107. In addition to the unique situations involving Activpayroll and Labatt discussed below:
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(A) the Receiver and Ceridian have transitioned 59 customer payrolls to Ceridian,
resulting in a net referral fee to the Receiver of $434,265.89;
(B) the Receiver has assisted an additional 56 former customers in obtaining and
transitioning their respective payroll information to other service providers;
(C) the Receiver understands that 25 customers have made alternative
arrangements and did not require direct assistance from the Receiver; and
(D) other than delivering the notices to customers discussed above, the Receiver
has not been able to-make direct contact with 7 remaining customers.
Activpayro(1 Inc.
108. Activpayrotl was a customer of Peopledge, with its head office in Aberdeen, Scotland
serving clients in various international jurisdictions. Activpayroll is one of two
customers of Peopledge that is itself a payroll processor for whom Peopledge
administered payrolls.
109. On behalf of Activpayroll, Peopledge serviced payrolls for 12 customers with an
aggregate of 1104 employees. Activpayrotl's largest customer represents the majority
of employees serviced through it, with an aggregate of 965 employees in the United
States and Canada.
110. The Receiver understands that, following the Appointment Order and the cessation of
Peopledge's business, ActivpayroRl had greater difficulty in securing transition of
payroll service compared to certain other customers of Peopledge, for various reasons.
In addition, contrary to the Receiver's understanding prior to its appointment, the
Receiver was advised after its appointment that Ceridian would not be able to process
U.S. payrolls.
111. By November 2, 2012, Activpayroll concluded that it had no options to avoid disruption
in payroll processing services to its most significant customer, which had payrolls in
both Canada and the U.S. that had to be immediately processed, without having
access to Peopledge's own systems and former employees to process payroll.
Activpayroll requested that the Receiver retain certain former Peopledge personnel
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involved in processing the specific payrolls and arrange the continuation of payroll
processing services.
112. As indicated elsewhere in this Report, due to the limited funding beyond the
Receiver's charge and limited operational resources, the Receiver had sought to limit
its involvement to facilitating an orderly transition of customers to new providers.
113. However, due to the relatively large number of employees affected in relafiion to
Activpayroll and the fact that there did not appear to be any alternate immediate
solution for Activpayroll's payroll processing requirements, fihe Receiver agreed to
provide assistance to Activpayroll on a temporary basis.
114. In response to these urgent requests by Activpayroll, the Receiver contacted former
Peopledge personnel designated by Activpayroll ("Staff"), whom Activpayroll had also
already contacted, to confirm that the Staff would agree to process data on behalf of
Activpayroll.
115. After extensive discussions and negotiations with Activpayroll, and as no alternate
means of processing the payroll data was then available to Activpayroll, the Receiver
agreed, on an interim and exceptional basis, to engage certain Staff to provide data
processing services for Activpayroll. Activpayroll agreed to be fully responsible for all
direction to and work of the Staff, and for all activities relating to flow of funds in
relation to any payrolls. The Staff's remuneration was to be paid and prefunded by
Activpayroll.
116. At Activpayrolt's request, the Receiver also inquired with BMO to determine whether
the payroll system of Peopledge could be used to allow Activpayrol! to run payrolls.
Following discussions with representatives from BMO it was determined that the
current Peopledge system could not be used as there would be undue risks to all
parties and because the system could not be implemented within the time required by
Activpayroll.
117. On Monday, November 5, 2012, Activpayrol! advised that it had succeeded in making
at least temporary arrangements for the flow of funds required for the Canadian
payrolls and that it had made separate arrangements to fund U.S. payrolls for its
customers. However, Activpayroll required the continuing processing services of the
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Staff for a short term period in order to process the data for certain customer
payrolls.
118. On November 5, 2012, the terms of the IFA between the Receiver and Activpayroll
were negotiated and finalized. Due to the urgent and unique nature of Activpayroll's
concerns, court approval of the IFA was sought that afternoon on an ex porte basis.
119. The Receiver prepared its First Report in connection with that ex Porte application, a
copy of which is attached as Tab 3 to the Receiver's motion record. The appendices
to that report, namely the Report of the Proposed Receiver, the Affidavit of Bonnie
Cummings and the Receivership Order are not attached to avoid duplication.
120. Late on November 5, 2012, the Honourable Mr. Justice Morawetz issued an order and
endorsement approving the Interim Facilitation Agreement in form and content agreed
to by the Receiver and Activpayroll. A copy of that order, with the IFA attached as a
schedule thereto, is attached as Appendix "J".
121. The IFA expired on November 30, 2012 in accordance with its terms.
Labatt Canada Inc.
122. Labatt was Peopledge's lamest customer with approximately 3,500 employees. Labatt
was referred to in the Preliminary Report as "Customer 1 ".
123. Labatt is a notable customer not only due to its size but by the fact it owns and uses a
copy of ePersonality to administer its payroll and certain other human resources
functions. Part of the contract between Labatt and Peopledge is for hosting and
technical support for ePersonality.
124. Under its contract with Labatt, Peopledge was required to maintain all Labatt payroll
information on two computer servers (the "Labatt Servers") separate and apart from
data and information for all other customers of Peopledge.
125. As a result, the Receiver was of the view that Labatt would not likely turn to Ceridian
for alternate payroll processing arrangements but would seek its own solution.
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126. Indeed, Labatt has done so. However, Labatt sought the assistance of the Receiver in
providing direct access to the Labatt Servers to transition its payroll services to a new
computer server. In addition, Labatt requested temporary access to such payroll
information in order to process its own payrolls in the event the transition was not
completed in time before any payrolls became due, which request ultimately proved
unnecessary as the transition was completed prior to the due dates of Labatt's
payrolls.
127. Labatt and the Receiver negotiated an Access and Indemnity Agreement which was
finalized and executed on November 3, 2012. A copy of the Access and Indemnity
Agreement is attached as Appendix "K". The Receiver is seeking the approval of the
Access and Indemnity Agreement from the Court.
128. The Receiver understands that Labatt also extended temporary employment contracts
with seven former Peoptedge employees to facilitate their payroll processing.
POEN7IAL FORENSIC INVESTIGATION
129. As discussed above, the Receiver has identified various questionable transfers of funds
from the Peopledge accounts, as follows:
(A) Online banking transfers from the Canadian Consolidated Account to the
Peopledge corporate account, which transfers have been identified as the
"High Yield Account" on the Customer GL. Cheques were then drawn on the
corporate account payable to the Related Companies either directly or to a
trade name used by the Related Companies;
(B) withdrawals from the Float to Peopledge's general corporate accounts; and
(C) transfers of funds between the Consolidated Payrolls Accounts.
130. As requested by the Court, the Receiver has prepared an overview as to a possible
forensic investigation in respect of such transfers and related activities funds.
131. The Receiver believes that any forensic investigation should be undertaken in stages in
order to control costs. The first two stages would be as follows:
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(A) Stage #1:
(a) The purpose of Stage #1 of the forensic review is to trace the known
cheques into either the WPFS or CMC account and then to determine
how and to whom the funds were dispersed from those accounts. This
would involve tracing each known cheque drawn on the Consolidated
Payroll Account to its deposit in the WPFS or CMC account. The
deposited funds would then be matched to disbursements from the
WPFS or CMC accounts to determine to whom the funds were disbursed.
A detailed source and use analysis will be prepared .matching each
known Consolidated Payroll cheque deposit to the associated
disbursements) of funds from the WPFS or CMC account.
(b) This review and analysis would be based upon the banking records
(including cancelled cheques) some of which is in the Receiver's
possession or readily available to the Receiver. However, liven that it
appears from the records available to the Receiver that the
questionable transfers date back to May 2007, the Receiver would need
to obtain all banking records for the period May 2007 to date that are
not currently in its possession.
(c) The Receiver has estimated the professional fees required to complete
Stage #1 are in the range of $20,000.
(B) Stage #2:
(a) It is likely that the Stage #1 analysis of disbursements from WPFS or CMC
accounts will identify other potentially related parties and bank
accounts for which it will be necessary to obtain information. If it is
found that funds have been transferred from WPFS or CMC accounts to
another bank account(s), it will be necessary to determine the owner of
the subsequent account and whether that account could be said to be
owned by WPFS, CMC or another related party. Once the additional
related party bank accounts are identified it will be incumbent on the
Receiver to obtain the necessary authorizations to obtain the further
banking information to complete the source and use of funds analysis.
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(b) To the extent that intervening related party bank accounts have been
used to flow funds prior to their final disbursement, the Stage #1
analysis will need to be repeated to analyze the further intercompany
transactions, and subsequent tracing exercises will be required to trace
funds into third and related party accounts.
(c) In order to carry out this review, there are certain supporting
documents which will be required, including copies of the bank
statements and cancelled cheques for any bank accounts identified as
_ belonging to additional related parties. To the extent. that funds have
been disbursed to what appear to be third parties, the forensic review
will identify, where possible, the business carried on by the third party
to understand the nature of the disbursement.
132. Prior to engaging in a Stage #2 analysis, the Receiver would propose to file a report
with the Court advising of the outcome of the Stage #1 analysis. This will guide any
recommendation to proceed further in the forensic investigation,
133. Costs associated with Stage #2 would depend upon the number of intermediary
accounts and transactions identified during Stage #1, and a fee estimate would be
provided in conjunction with the proposed report to be filed following completion of
Stage #1.
134. As noted above, the Receiver recommends that any forensic investigation should be
conducted in stages. In that way, costs can be contained until it is better known where
any ultimate recovery for the estate may be possible or likely.
135. The Receiver is also sensitive to the fact that some creditors may wish to incur cost to
be borne by the estate to pursue these matters, while others may not.
136. Accordingly, the stage approach provides the option of incurring a relatively small
amount of cost by way of initial investigation, which will ideally provide the creditors
with the information necessary to determine if they wish to incur further costs.
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137. Additionally, the Receiver notes that a forensic imaging of the data on Peopledge'sservers may be necessary for evidence preservation purposes, which will likely cost anestimated $7,000 to $10,000.
PROPOSED ASSIGNMENTS IN BANKRUPTCY
138. In discussions since the Receiver's appointment, counsel for certain of the significantcustomers and stakeholders of Peopledge have also advised the Receiver of theirpreference to ensure that any applicable review periods for potential challenges toany preferences or transfers at under value be preserved and have accordinglyrequested that the Receiver seek authority to make assignments in bankruptcy onbehalf of Peopledge and the Related Parties.
139. The Receiver agrees that it is prudent to do so, but is of the view that theadministrative costs associated with the requisite notices to creditors and the callingand holding of meetings of creditors is an unnecessary cost to the estate given thenotifications and claims process being proposed by the Receiver herein, and istherefore of the opinion that the administrative steps triggered by the assignmentsshould be suspended until at least the results of the claims process are known.
140. Accordingly, the Receiver is recommending and requesting an order of the Courtauthorizing it to file assignments in bankruptcy for Peopledge and each of the RelatedParties, but suspending the administration of the bankruptcy estates by the Trusteeuntil further order of this Court. The Receiver will be serving its motion record(including this Report and the draft form of order being sought) on the OSB.
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SUMMARY OF RELIEF SOUGHT
141. Based on the above, the Receiver respectfully requests the relief as set out inparagraph 6(d) of this Report and in the Receiver's notice of motion and draft ordersbe granted.
All of which is respectfully submitted this 3rd day of December, 2012.
BDO CANADA LIMITEDIn its capacity as the Receiver ofPeoptedge HR Services Inc.,Winston Park Financial Services Ltd.,CMC Fraser Ltd. and 1624452 Ontario Limitedand not in its personal capacityPer:
Eugen . Migus, CPA, CA. RP, Senior Vice-President
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