COURT FILE NO.: CV-22-89887 DATE: 2023/01/23

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Cash Cloud Inc. Applicant ) Thomas Conway, Kevin Caron, and Jason Rucci for the Applicant )

-and-

BitAccess Inc. Respondent ) Peter Mantas, Nabila Abdul Malik, Gabrielle Cyr, and Julien A. Frigon for the Respondent )

ENDORSEMENT ON COSTS

HOOPER J.

[1] On October 4, 2022, I dismissed the application for injunctive relief and invited cost submissions from each side. The following is my decision on costs.

[2] There were three hearings before the court:

a. August 18, 2022 – Hearing of the urgent injunction application b. September 1, 2022 – Hearing of the respondent’s breach of undertaking c. September 26, 2022 – Hearing requested by the respondent to vary this court’s interim order dated September 1, 2022

Brief background

[3] The origin of this urgent application for injunctive relief arose from a letter dated August 4, 2022, wherein the respondent, BitAccess Inc. (“BitAccess”), gave notice of its intention to terminate the agreement it had with Cash Cloud Inc. (“Cash Cloud”). The termination date in that notice letter was August 18, 2022.

[4] The termination of this agreement would have resulted in BitAccess immediately deactivating software Cash Cloud used to operate its cryptocurrency kiosks, rendering them unusable. Cash Cloud sought an injunctive order to restrain BitAccess from deactivating the software until an arbitration could be held.

[5] The matter was of significant importance to both sides – Cash Cloud arguing its company would be irreparably harmed if its cryptocurrency kiosks could not operate; BitAccess arguing that continuing in a business relationship with Cash Cloud presented significant ongoing risks to its business and reputation.

The August 18th hearing

[6] The urgent application was heard for 2.5 hours on August 18, 2022. Coincidentally, August 18th was also the date the deactivation of software was to take effect under the termination letter of August 4, 2022.

[7] During the hearing, counsel for the applicant raised a concern that the software had already been deactivated. Counsel for the respondent confirmed with his client, in real time, that the software was still active. This prompted a discussion on preserving the status quo while the court’s decision was under reserve. To satisfy the court’s concerns, counsel for the respondent sought instructions and provided an undertaking to the court that no steps would be taken to deactivate the software before the release of my decision.

The September 1st hearing

[8] On August 31, 2022, the court received correspondence from the applicant that the undertaking had been breached, and the software had been deactivated. The court thereafter received further correspondence from the respondent’s counsel that included the following passage:

It was brought to my attention late yesterday that the parent company of BitAccess Inc. (“BitAccess”), Lux Vending LLC d.b.a. Bitcoin Depot, a company incorporated in Georgia (“Lux Vending”), took control yesterday of BitAccess’ ability to deactivate the cloud-based software that operates the kiosks of Cash Cloud, Inc. (“Cash Cloud”). This was sudden and unexpected.

Lux Vending also informed BitAccess of its intention to deactivate the cloud-based software operating on Cash Cloud’s kiosks…

Upon learning of Lux Vending’s intention yesterday, Moe Adham, the CEO of BitAccess, vehemently opposed the move. He also brought to their attention the undertaking by BitAccess, given to the court to maintain status quo.

The purpose of this letter is to inform Your Honour of these developments, and that under the circumstances, BitAccess is no longer able to fulfil the undertaking for reasons beyond its control.

[9] As a result, an urgent hearing was scheduled for September 1, 2022, and an interim order was made requiring the software to be reactivated and to remain active until further order of this court.

The September 26, 2022 hearing

[10] On September 22, 2022, the court received a further “urgent” request for an attendance before me, this time from the respondent, on the basis that my September 1st interim order was inconsistent with the laws and regulations of the United States, where a large number of these cryptocurrency kiosks operated.

[11] A hearing was arranged with counsel for September 26, 2022 and material was filed. That material confirmed the respondent had concerns relating to proposed changes in securities regulations that, if passed, might cause my September 1st order to violate U.S. law. Those changes had not yet passed. There was no evidence that my interim order actually violated U.S. law. The entire attendance was premature and unnecessary. The request to vary my order was dismissed.

[12] No costs will be awarded for the time leading up to and including the September 1, 2022 and September 26, 2022 hearings. I do not accept the respondent’s position that the costs associated with rectifying its parent company’s decision to deactivate the software ought to be borne by the applicant given the injunction application ultimately failed. The respondent’s undertaking to preserve the status quo should have been honoured and the September 1st hearing should not have been necessary. There is also no basis to award costs to the respondent for its failed attempt to alter the court’s September 1st interim order.

Legal fees incurred after the release of my decision on October 4, 2022

[13] In my October 4, 2022 decision, I declined to grant the injunction due to the failure of the applicant to provide the requisite undertaking as to damages required by Rule 40 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (“Rules”).

[14] The day following the release of my decision, I received correspondence from the applicant’s counsel, enclosing an affidavit of his client that purported to now give this undertaking. The applicant took the position that, by finding the failure to provide the undertaking was fatal to the injunction application, if the applicant now provided that undertaking, the court should reverse its decision. That is, of course, not how litigation works. My decision was final. The only way to alter it is through an appeal.

[15] While the Rule 40 undertaking was provided too late, this attempt to change the court’s decision required a response from BitAccess and costs should be awarded for this response.

[16] There are, therefore, two different time frames for which the respondent will receive costs: the time leading up to and including the August 18, 2022 urgent injunction hearing, and the time after the release of my decision on October 4, 2022.

Legal Principles in relation to costs

[17] Rule 57.01(1) of the Rules sets out the factors that a court may consider when deciding costs. In balancing those considerations, the overriding principles of fairness and reasonableness must be applied: Boucher v. Public Accountants Council (Ontario). Included within the principles of fairness is the expectation that the hourly rates being charged, and the time spent on the matter, would be considered reasonable where the case was tried: Middleton v. Municipality of Highlands East, 2013 ONSC 2027 at para. 5.

[18] The Affidavit of Mohammed Adham, filed by BitAccess in response to this application, confirmed that BitAccess retained counsel only after it received correspondence from Cash Cloud’s Ontario counsel on August 8, 2022. The first correspondence from Mr. Mantas, on behalf of the respondent, was on August 10, 2022, confirming his firm’s retainer, and advising that a substantive response would be provided as soon as the file was reviewed. According to the hours put forth, a total of 229.6 hours were spent by respondent’s counsel from this initial retainer up to and including the hearing on August 18, 2022. The total fees charged to the client for that time period were $120,740 plus HST with $72,443 plus HST claimed on a partial indemnity basis.

[19] The injunction motion was serious, but it was not overly complicated. While one would expect considerable legal time was required to prepare material and attend an urgent hearing, there were no cross-examinations conducted and only one affidavit was filed. The 229.6 hours of legal time being claimed from August 10, 2022 to August 18, 2022 is not reasonable.

[20] In Brahma v. HR Services, 2022 ONSC 2645, Smith J. considered billable rates that were far higher than expected within the Ottawa area. In that case, the rates charged by counsel for the defendant ranged between $954 per hour for senior counsel and $346.50 per hour for an articling student. Before me, BitAccess’ senior counsel claims an hourly rate of $850 with a first-year associate’s hourly rate claimed at $360. These rates are not reasonably expected in this jurisdiction.

[21] In exercising my discretion, and after taking into consideration the factors under Rule 57.01(1), I believe a fair and proportionate award of costs to the respondent for the time spent up to and including August 18, 2022 is $45,000 plus HST.

[22] As for the fees incurred after the release of my decision on October 4, 2022, the respondent has not set out the time spent in dealing with the applicant’s post-decision offer of the Rule 40 undertaking. Rather, the respondent’s submissions lump all legal fees incurred after the September 26th hearing as one amount, totalling 14.7 hours and $7,934.50 in fees. The court is aware, from the correspondence received, that an arbitration had already been commenced by September 26th, and legal time in the arbitration process would overlap this same time period. As a result, the court is left to guess how much time it took to write the two-page responding letter. I therefore award costs of $1,000 plus HST for the time spent after October 4, 2022.

Decision

[23] Costs are therefore awarded to BitAccess in the amount of $46,000 plus HST. No disbursements were sought.

Justice J. Hooper Date Released: January 23, 2023