IE CA 3 Holdings and IE CA 4 Holdings - Case Update

The Federal Court has refused to stay an order recognising the bankruptcies of two Canadian companies, but has found that there are genuine and reasonable points to be argued on the appeal.

Last month, the Court heard arguments about whether it should recognise the bankruptcies of IE CA 3 Holdings and IE CA 4 Holdings, two Canadian subsidiaries of NASDAQ-listed Iris Energy, the Australian parent company of the Iris Energy Group. Iris opposed the application, arguing that recognition was sought for an improper purpose, would constitute an abuse of process and was manifestly contrary to Australian public policy. Specifically, Iris took issue with the fact that the stated purpose of the Australian recognition was to enable the trustee to carry out examinations in Australia even though certain examinations have already taken place in Canada.

The Court agreed to recognise the bankruptcies, finding that Iris’ submissions ignored the obligations imposed on the trustee in completing its statutory duty. Iris sought leave to appeal and brought an application seeking a stay of the recognition pending appeal.

The Court ultimately found that the stay sought by Iris was both premature and too broad and refused to stay the recognition. It was premature because an examinee (or possibly even Iris) will be able to seek an appropriate remedy if an examination summons is issued that “is likely to bite before the proposed appeal is decided”. It was too broad because it would prevent all examinations, even those which may not create any prejudice to Iris.

However, the Court did acknowledge that there are genuine and reasonable points to be argued on all of Iris’s proposed grounds of appeal. The Court stated that the issue of whether a proceeding amounts to an abuse of process is not a discretionary decision and that the applicable standard of review is correctness. The Court also pointed out that there have been examinations in Canada and that the trustee has the liberty to apply for further examinations there. As a result, the Court was satisfied that there was a genuine and reasonable point to be argued on appeal and stated that it was “unnecessary, and possibly unwise, to express any further view” in relation to the likelihood of success of the appeal.

The decision can be found here.

Professionals involved:

• Counsel for PwC in its capacity as foreign representative: Stewart Maiden KC of List G Chambers and Vicki Bell of List A Barristers

• Solicitor for PwC in its capacity as foreign representative: White & Case

• Counsel for Iris Energy: Jeremy Giles SC of 7 Wentworth Selborne and Alexander Di Stefano of List A Barristers

• Solicitor for Iris Energy: Norton Rose Fulbright Australia