Iris Energy Ltd v PricewaterhouseCoopers Inc in its capacity as foreign representative of IE CA 3 Holdings Ltd

Principles governing the grant of a stay pending appeal 7 In Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 2) [2010] FCA 1212; 88 IPR 633 at [15], Jagot J identified from the authorities the principles applicable to a stay application such as the present. Omitting the references to authority, those were stated by her Honour as follows: (1) "A successful party is presumed to be entitled to the benefits of the judgment obtained" […]. (2) An "applicant for a stay has the burden of persuading the court that it should be granted" […] but it is not necessary to show special or exceptional circumstances […]. (3) "The court, in the exercise of its discretion, will not hesitate to stay proceedings when it is necessary to preserve the subject matter or integrity of the litigation. Nor will the court hesitate to grant a stay where the refusal of a stay could create practical difficulties in terms of the relief which [the] court could grant" […]. (4) It is relevant to consider whether "there is a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed" […]. (5) Another relevant consideration is whether the proposed appeal is genuine and based on reasonable grounds […]. (6) Relevant also is the willingness or not of a party to give an undertaking as to damages. […] 8 I do not understand those principles to be controversial before me. I adopt them.

The proposed appeal 9 Grounds 1 and 2 of the draft notice of appeal are directed at Markovic J's conclusion that the foreign proceeding should be recognised in Australia under Art 17 of the Model Law. In particular, it is directed at the conclusion that the recognition proceeding is not an abuse of the process of the Court with the result that recognition should not be refused on the basis that it "would be manifestly contrary to the public policy of this State" within the meaning of Art 6. 10 Ground 3 of the draft notice of appeal is directed at Markovic J's conclusion that it is "necessary" within the meaning of Art 21 of the Model Law to confer on the local representatives the powers of a liquidator including to conduct examinations. In particular, it is said that the power to conduct examinations in Australia is unnecessary in circumstances where examinations have been conducted pursuant to the law of British Columbia and under the supervision of the Supreme Court of British Columbia and that the trustee has the right to apply in Canada to conduct additional examinations. 11 I accept, as submitted by Mr Giles SC who appears for Iris, that whether or not a proceeding amounts to an abuse of process is not a discretionary decision requiring the establishment of error of the nature of that identified in House v The King [1936] HCA 40; 55 CLR 499 at 504-505; rather, the applicable standard of appellate review is the "correctness standard" as explained in Warren v Coombes [1979] HCA 9; 142 CLR 531 at 551-552: GLJ v Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32; 414 ALR 635 at [15]-[17]. It may be that once abuse of process is established it is a matter of discretion whether to refuse recognition in reliance on Art 6 (see Indian Farmers Fertiliser Cooperative Ltd v Legend International Holdings Inc [2016] VSC 308; 52 VR 1 at [32] per Randall AsJ and Kellow, in the matter of Advanced Building & Construction Ltd (in liq) v Advanced Building & Construction Ltd (in liq) (No 2) [2022] FCA 781 at [24] per Derrington J), but grounds 1 and 2 are directed at the anterior question of whether or not there is an abuse of process. The result is that I am satisfied that there is a genuine and reasonable point to be argued on the appeal in relation to grounds 1 and 2. It is unnecessary, and possibly unwise, to express any further view in relation to the prospect of such an argument succeeding. 12 In view of the fact that there have been examinations in Canada and that the trustee has the liberty to apply for further examinations there, I also accept that there is a genuine and reasonable point to be argued in relation to ground 3. Again, I express no view on the prospect of that argument succeeding.

Prejudice 13 The prejudice identified by Iris if no stay is granted and it ultimately succeeds in the appeal, whether as to recognition or only as to the power to apply to conduct examinations, is as follows. 14 First, Iris submits that unless orders 6 and 7 are stayed, an appeal from those orders will be rendered nugatory, or at least derogated from if examinations are pursued before any appeal is determined. I do not accept that the order simply for recognition causes any prejudice to Iris if ultimately set aside on appeal. Any prejudice that may flow from recognition is with respect to the conduct of examinations and the production of documents, which is identified and discussed separately below. In the circumstances, the first identified prejudice need not be considered any further. 15 Secondly, Iris submits that the taking of steps by the local representatives towards an examination will interfere with Iris's rights. Iris says that it does not wish its officers to be subject to further examination with the attendant costs, disruption and reputational risk that that would entail. Also, it does not want to undertake further work to produce documents that will forever interfere with Iris's rights to keep its documents and information private and confidential. 16 Thirdly, and relatedly, Iris submits that any public examinations of its directors or officers carries a risk of further reputational and financial damage. In that regard, Iris's shares are publicly listed on the NASDAQ, and Iris's affairs are scrutinised by investors and journalists. It submits that any reputational harm may affect its share price. 17 Fourthly, Iris submits that there is no countervailing prejudice to the local representatives in the event that their power to proceed with examinations is stayed pending an appeal.

Further relevant background 18 In the Canadian bankruptcies, NYDIG ABL LLC (a third-party creditor of the companies with a cumulative claim of more than US$115m) passed resolutions at creditors' meetings of the companies authorising the trustee to examine Ms Belinda Nucifora, the chief financial officer of Iris, and Messrs Daniel Roberts, William Roberts, Alfred, Guzowski and Bartholomew on a variety of matters, including transactions that took place between the companies and their affiliates including Iris (J[36]). Messrs William Roberts, Alfred and Guzowski are former directors of the companies as well as being directors of Iris, and Messrs Daniel Roberts and Bartholomew are directors of Iris (J[21]-[22]). 19 Iris offered only William Roberts for examination, so the trustee filed an application in the Supreme Court of British Columbia seeking to examine the proposed examinees about their knowledge of the affairs of the companies. The Court allowed the application in part and made orders that: (1) Iris make each of Messrs William Roberts, Alfred and Guzowski and Ms Nucifora available for examination by the trustee; (2) permitted the trustee to choose the sequence in which such examinations would occur; and (3) limited the trustee such that it was permitted to select two of the examinees to examine for up to one full day with the balance to be examined for no longer than half a day each. (J[42].) 20 The trustee was also granted liberty to apply again to the Supreme Court of British Columbia to seek further orders for examination of the same examinees, or other examinees, although to the extent that it wishes to seek a further order for the examination of Messrs Daniel Roberts and Bartholomew it would need to be able to establish "fresh circumstances" to do so (J[129]). 21 Between January and March 2024, the trustee conducted the examinations. The examinations did not produce the level of information that the trustee required to finalise its investigations into the affairs, property and dealings of the companies. That was said to be because the trustee was not able to examine Messrs Daniel Roberts and Bartholomew, the time allowed was too limited and a number of questions were not answered (J[48]). 22 The trustee considers that there is limited utility in seeking to undertake further examinations in Canada, particularly in circumstances where the companies do not have any assets in that jurisdiction. However, the trustee is of the view that certain current and former officers of the companies may need to be examined, or re-examined, in order to progress and complete its investigations into the affairs, property and dealings of the companies. Certain of those potential examinees are in Australia, or otherwise outside of Canada (J[49]).

Consideration 23 Any examinations by the local representatives in Australia would be under ss 596A and/or 596B of the Corporations Act. The procedure for that is governed by Div 11 of the Federal Court (Corporations) Rules 2000 (Cth). Under r 11.3, the procedure includes an application for the issue of an examination summons by way of originating or interlocutory process supported by an affidavit stating the facts in support of the process. Although that application may be made without notice to any person, the examinee who is served with the examination summons is entitled to apply to the Court for an order discharging the summons (r 11.5). An examination can also be stayed or delayed pending an application for leave to appeal or an appeal: see, eg, Wainter Pty Ltd, in the matter of New Tel Ltd (in liq) [2005] FCA 1224; 54 ACSR 554. 24 In my view the stay sought before me by Iris is both premature and too broad. It is premature because in the event that an examination summons is issued and served, and any order for production under it or the examination itself is likely to bite before the proposed appeal is decided, the examinee (or possibly even Iris) can at that time seek an appropriate remedy - discharging or staying the summons. It is too broad because it would prevent all examinations, even those which may not create any particular or specific prejudice to Iris, and even of people who are not officers of Iris. 25 Iris seeks to counter each of those propositions. In relation to its application being premature, Mr Giles submits that Iris would not be able to run an abuse of process argument in support of the discharge of an examination summons or the stay of an examination because that question has already been decided by Markovic J. I do not accept that. Her Honour expressly recognised that a proposed examinee would have a right to be heard on, or to seek to discharge, any examination order. Her Honour decided that the application for recognition and for the power to apply to conduct examinations is not an abuse of process, but her Honour did not decide that any particular examination - whether as to the individual examinee, the subject(s) to be canvassed, particular questions to be asked, the timing or the documents to be produced - is not or would not be an abuse of process. Her Honour clearly contemplated that the proper time to raise such issues is when a particular examination summons is issued and served (J[130]). 26 In relation to the application being too broad, Mr Giles correctly submits that no person other than officers of Iris has at this stage been identified as a probable examinee. However, that position could change. In particular it could change if information produced in the examination of one of the officers of the companies or of Iris who does not seek or is not granted relief from being examined, or from a notice to produce documents, points to the utility of examining someone else. The point is that the objections to examination in Australia of officers of Iris are not the same for all officers and may vary in their validity or strength depending on what any particular officer is sought to be examined on; it is a fact specific inquiry which will vary from person to person. Although abuse of process arguments can be raised to resist examination, they will vary from examinee to examinee and from time to time, so there is no foregone conclusion that there will be no examinations before the appeal and, therefore, that there will be no examinees identified who are not officers of Iris. 27 I also do not accept the argument for prejudice based on reputational damage to Iris. Mr Giles points to there already having been an article in a newspaper in Australia arising from the recognition proceeding which might be thought to be adverse to Iris - although in truth I do not find the article to be critical of Iris - as evidence of there being a real risk that there may be further coverage in the event that there are examinations. The difficulty is that the argument cuts both ways - the fact of there already having been coverage of the liquidation process lessens any harm that further coverage from examinations might otherwise cause. But more fundamentally, if there is proper justification for further examinations, then there is no reason why media coverage arising from such examinations would be a proper basis to stop them. There is an overriding public interest in the affairs of companies in liquidation being investigated, subject to the limitations and safeguards that the law imposes on that process, and if such an investigation uncovers unsavoury facts which are then reported in the media, that can hardly be said to be a bad thing, especially in relation to a public company. 28 Mr Giles also submits that if examination summonses are issued and served on officers of Iris, Iris will expend costs in responding to those summonses. But those costs will be able to be sought, as a matter of the Court's discretion, in the examination proceeding in the event that an appeal is ultimately successful. I am also not sure that those are necessarily Iris's costs, as opposed to the individual examinees' - there is no evidence as to that. In any event, such costs are of relatively minor prejudice so I would give them little weight even if satisfied that they were Iris's costs and could not be recovered. 29 I also do not accept the argument that there is no countervailing prejudice to the trustee in the event that a stay is granted pending an appeal. I take judicial notice of it being likely that there are time periods within which recourse actions must be brought, and time is running. In any event, there is substantial public interest in liquidation proceedings being dealt with quickly and efficiently. In short, delay is prejudice. It can take quite some time between the making of an application for an examination summons to be issued to the actual examination being conducted - there are many necessary and additional possible steps to be taken in that period, and an available date for examinations has to be found. To not allow those processes to even commence pending an appeal would be prejudicial to the trustee and hence possibly to creditors of the companies. 30 For those reasons, on balance, I do not consider that Iris will suffer any particular prejudice if a stay is not granted and it is ultimately successful on an appeal, and such prejudice as there may be does not outweigh the prejudice the other way. It also does not outweigh the consideration that the trustee is entitled to the benefit of the judgment it has obtained.

Conclusion 31 For those reasons, the application for a stay of orders 6 and 7 of the orders made in the primary proceeding on 18 October 2024 must be dismissed. Although the application also seeks a stay of order 13, the costs order, Mr Giles rightly did not press that before me. The application should also be dismissed in that respect. 32 Neither party sought, or said anything about, the costs of the application. I am not sure whether that was deliberate or whether it was thought that costs might be dealt with on another occasion. I will therefore reserve the costs, recognising that by r 40.03 of the Rules, if neither party seeks their costs then the reserved costs will become costs in the cause in the application for leave to appeal and the appeal in the event that leave is granted. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart.