There's never been any legislation covering flag disposal in Canada. The rules of Flag Etiquette are laid out in a publication by the Department of Canadian Heritage and the rule for disposal is pretty vague. It just says that old flags "should be destroyed in a dignified way." But of course that's just the rule as it stands today. The Flags of the World website suggests that this regulation didn't exist until the 1970s or 1980s, well after the 1965 switchover. In the Navy, for example, old ensigns were often turned into polishing rags. Not quite the respectful disposal one might expect.

On top of there being no general rule for flag disposal at the time, there were no specific instructions for the flags that got lowered in 15 Feb 1965 (at least none that were made public that I'm aware of). Given all that, I don't think we can really say what happened to all the old Red Ensigns. I do know that the last Red Ensign flown over Parliament is currently in the collection of the Canadain Musuem of History though. You can see a picture of it if you scroll down this page here.