skip to main content
Feb 10, 2021

Dylex Limited: Previously Unknown Asset Brings Additional Recovery to Creditors

Peter Farkas and Robert Harlang


During the 1970s and 1980s Dylex Limited (“Dylex”) was one of Canada’s largest retailers.  Dylex, a publicly listed company, operated in Canada under different iconic banners including Tip Top Tailors, Thrifty’s, Big Steel Man, Fairweathers, BiWay and Braemar.  It also had an equity interest in retailers such as Harry Rosen and Suzy Shier, as well as businesses in the US.

Over time, Dylex’s retail footprint shrunk and by 2001, Dylex only operated the BiWay and Fairweathers chains; it was struggling financially.  In September 2001, a bankruptcy order was made against Dylex; our firm was named as the trustee.

As a result of  the realization of the known Dylex assets, which consisted of inventory, leasehold interests  and the going-concern sale of Fairweathers, together with the proceeds from trustee initiated litigation, the preferred creditors received full recovery of their claims and the ordinary, unsecured creditors received in excess of 70%.

The bankruptcy administration proceeded in the normal course and after the final dividend was paid in 2007, the Dylex estate was wound up and we were discharged as trustee.


Identification of a Previously Unknown Asset

Twelve years later, In April 2019, we were contacted by an IT consultant  who advised that Dylex had an interest in excess of 65,000 internet protocol numbers (“IP Numbers”) registered at the American Registry for Internet Numbers (“ARIN”). These IP Numbers were still registered to Dylex.

IP Numbers are identified with each email address and there are limited number of IP Numbers available in the world. Every device connected to the internet needs a unique internet protocol number in order to send or receive information from other internet users.  In the early 1990’s, ARIN was established to be a central registry for internet numbers.  ARIN is a not-for-profit organization created by the US government and is headquartered in Virginia.

Dylex’s IP Numbers were codified as type IPv4.  Due to mathematical limitations, IPv4 IP numbers are capped at approximately 4.2 billion distinct numbers.  While this may seem like almost an infinite number of IP Numbers, capacity was reached in the mid 1990s.

As a result of reaching capacity, another protocol was developed –IPv6.  The IPv6 protocol has substantially more internet numbers than IPv4.  The IPv6 protocol, however, does not have all the features and characteristics of the IPv4 protocol.  As a result, the IPv4 numbers continue to have market value.

We encouraged the IT Consultant to work on generating an offer for Dylex’s interest in the IP Numbers, and if it did, we advised that we would be prepared to have the bankruptcy resurrected. At the same time, we searched a way to value the IP Numbers in order to be able to assess any offers. For instance, we noted that in Nortel, 666,624 IPv4 Numbers were sold for $7.5 million.

We also investigated the ARIN procedure to assign IP Numbers.  We discovered that in order to affect the transfer of a debtor’s interest in the IP Numbers, the guidelines of ARIN include:

  1. ARIN should receive notice of the contemplated sale;
  2. Reference in court and sale documents should be to “the debtor’s interest in the registration right to the IP Numbers” and not to the “ownership of the IP Numbers”.
  3. There should be an acknowledgement that the seller has the exclusive right to the use of the IP Numbers subject to ARIN’s policies and the right to transfer its exclusive right to use the IP Numbers to a purchaser and is subject to the terms and conditions of ARIN’s transfer policy.The transfer policies include (i) the purchaser demonstrates a justified need for IP Numbers (ii) the purchaser demonstrates that it will actually use the IP Numbers rather than just hold the IP Numbers (iii) the purchaser is based in ARIN’s service area and (iv) the purchaser signs an appropriate contract with ARIN confirming it will comply with ARIN’s policies.
  4. If the sale or court documents indicate that it is free and clear of interests of others, ARIN’s transfer policies should be carved out.

Ultimately, we received a conditional offer for Dylex’s interest in the IP Numbers for an amount of approximately US$1 million. The proposed purchaser was a US headquartered company.  The conditions included:

  • The re-appointment of the trustee of the Dylex estate under Section 41. (11) of the Bankruptcy and Insolvency Act (the “Re-appointed Trustee”);
  • Court approval of the sale of Dylex’s interest in the IP Numbers; and
  • The transfer of Dylex’s interest in the IP Numbers to the purchaser by ARIN.

We engaged our former legal counsel to assist in negotiating the conditional sale and to communicate with ARIN regarding the potential sale of the IP Numbers.

All the conditions were satisfied by the spring of 2020.  At the end of the summer of 2020, we made the “final” final dividend to the Unsecured Creditors, almost two decades after the commencement of the Dylex bankruptcy.


What Businesses Might Have IP Numbers With Substantial Value?

So, are there hidden assets in other estates?

Generally, small and medium size companies are unlikely to have IP Numbers.  Such companies likely use IP Numbers under leasing arrangements with internet providers (such as Bell, Rogers and Telus).  As entities become larger, they develop the need to have their internet technology on their own servers, which requires them to need to have static IP numbers rather than dynamic (leased) IP numbers provided by  an internet provider.   Nortel and Dylex are of course examples of these larger entities.

Also, companies that existed in the 1980s may be more likely to have static IP Numbers.

In conclusion, there maybe more hidden IP assets in some bankrupt estates or insolvent companies that are worth a second look. 



Acknowledgement: Robert and Peter thank Benjamin Bloom of Minden Gross for his assistance in developing this article.


Back to all publications