Court File and Parties

Citation: Zayo Inc. v. Primus Telecommunications Canada Inc., 2016 ONSC 5251 Court File No.: CV-16-11257-00CL Date: 2016-10-28

Superior Court of Justice – Ontario (Commercial List)

Re: In the Matter of the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended And In the Matter of a Plan of Compromise or Arrangement of Primus Telecommunications Canada Inc., Primus Telecommunications, Inc. and Lingo, Inc.

Before: Justice Penny

Counsel: Maria Konyukhova and Vlad Calina for the Primus Entities Steve Weisz and Aryo Shalviri for FTI Consulting Canada Inc. in its capacity as Monitor of the Primus Entities Matthew Gottlieb and Larissa Moscu for the Moving Party, Zayo Inc. Jason Wadden for the Purchaser, Birch Communications Inc. Matthew Milne-Smith and Natasha MacParland for the Lending Syndicate (BMO as Agent)

Heard: August 9, 2016

Costs Endorsement

[1] In reasons of August 18, 2016, I dismissed a motion, brought by Zayo Inc., for an order that FTI Consulting Canada, in its capacity as court-appointed Monitor for the Primus applicants, pay Zayo the amount of $1,228,799.81 from proceeds of sale of the applicants’ assets. This amount represented the applicants’ (pre-CCAA filing) arrears owed to Zayo in relation to agreements assigned by the applicants, with Zayo’s consent, to Birch Communications Inc. in an asset purchase transaction which closed on April 1, 2016. The transaction was approved by orders of this Court made on February 25, 2016 and March 2, 2016 and certified completed by the Monitor on April 1, 2016.

[2] The interests of Primus, the debtor, FTI, the monitor, Birch, the purchaser, and the syndicate of secured lenders, represented by BMO, were all engaged by the relief sought.

[3] An approval and vesting order and assignment order had already been made by the court. The sale of Primus’s assets to Birch had already closed and the Monitor had delivered its certificate. Substantial funds had already been distributed in accordance with a distribution order of the court.

[4] There was a significant shortfall in payment of the amount owed to the syndicate of lenders in first position. The mechanism for dealing with “cure costs” in the asset purchase agreement would have required Primus and Birch to share responsibility for the $1.2 million payment equally. This was, accordingly, a zero sum game. A dollar paid to Zayo would probably have to come $.50 from the secured lenders and $.50 from Birch.

[5] Zayo argues that no cost should be awarded. This is on the basis that ‘costs are not the norm in a CCAA proceeding.’ In Indalux, the Court of Appeal said that there are sound policy reasons that underlie this approach, which include the reality that as a result of the situation of the insolvent company, the amount of funds available for distribution is limited and parties ought not to expect to recover their litigation costs.

[6] This case seems to me one of the exceptional cases where this principle ought not to be applied. The only issue was whether Zayo’s consent to the assignment of its contract should be set aside. The real opponents, the secured lenders and Birch, were not insolvent and would have been the losers had Zayo prevailed.

[7] In my view, the normal rule of costs applies in the circumstances of this case and the loser should, therefore, pay.

[8] I do agree with Zayo that the costs requested seem inordinately high, particularly because the responding parties claimed to have divided the work.

[9] In all of the circumstances, I award each of Primus and BMO $30,000 and each of Birch and the Monitor $20,000 on account of the costs of this motion.

Penny J.

Date: October 28, 2016