Motorola Solutions Inc. v Hytera Communications Corporations Limited

INTRODUCTION

1. The first applicants in this matter, Mr David Michael Orr and Mr Richard John Hughes, are the joint and several administrators of Redflow Limited ACN 130 227 271, Redflow International Proprietary Limited ACN 128 888 997, Redflow R&D Proprietary Limited ACN 116 992 253, and ZCell Australia Proprietary Limited ACN 613 792 420 (the second, third, fourth and fifth applicants, respectively, and together, the Companies). The administrators were appointed on 23 August 2024.
2. This is an application by the administrators to extend the convening period of the second meeting of creditors for the second to fifth applicants pursuant to ss 439A(6) and 447A(1) of the Corporations Act 2001 (Cth) and s 90-15 of the Insolvency Practice Schedule (Corporations), Sch 2 of the Corporations Act. The administrators also seek orders under s 37AF of the Federal Court of Australia Act 1976 (Cth) for the suppression of paragraphs and exhibits to two of Mr Orr's affidavits, on the ground that the order is necessary to prevent prejudice to the proper administration of justice, as provided in s 37AG(1)(a).
3. The administrators rely on their application filed on 16 September 2024, an affidavit of Mr Orr filed on 16 September 2024 (First Orr Affidavit), a further affidavit of Mr Orr filed on 17 September 2024 (Second Orr Affidavit) and an affidavit of Mr Hugo Vincent Oates filed on 17 September 2024. On 16 September 2024, the administrators, by their solicitor, notified the Australian Securities and Investments Commission (ASIC) of this application, providing a copy of the application and the First Orr Affidavit. An officer of ASIC has confirmed receipt of that notice. Further, on 16 September 2024, the Companies' employees, creditors and the landlord for the head office, from which the Companies have been operating, were notified, and the date and time of the hearing of this application was given to those parties. No response has been received.

RELEVANT BACKGROUND

1. Redflow Limited is an Australian publicly listed company, focusing on developing, manufacturing and selling zinc-bromine flowing electrolyte batteries. As at the date of the First Meeting of Creditors, on 4 September 2024, the Companies had a workforce of 128 employees operating in Australia, Germany, Thailand and the United States. The Companies operate from leased premises at 27 Counihan Road, Seventeen Mile Rocks in the State of Queensland, of which Redflow International is the lessee. The terms of that lease have not been adopted, but an agreement has been made to allow the Companies to continue in occupation in exchange for rent and outgoings. The second meeting of creditors is due to be convened on or before 20 September 2024. The administrators seek an extension of the convening period by two months to 20 November 2024.

SHOULD THE CONVENING PERIOD BE EXTENDED?

1. The principles upon which the Court proceeds in applications for extension of the convening period for the second meeting of creditors of a company in administration are well known and do not need to be repeated here. The written submissions filed in support of this application have set out those principles and, in particular, refer to the decision of Middleton J in Re Strawbridge (in their capacity as joint and several voluntary administrators of each of Virgin Australia Holdings Ltd (admins apptd) (ACN 100 686 226)) and Ors (No 2) [2020] FCA 717; 144 ACSR 347 (see [64]-[68]).
2. The First Orr Affidavit expresses the administrators' view that it is in the best interests of the Companies' creditors for the convening period to be extended for two months for the following four reasons:
3. the sale of the business as a going concern is likely to maximise the return to creditors;
4. in order to preserve employment for as many employees as possible with the likelihood that they will be retained with a business sale because of their technical expertise and know-how;
5. sale as a going concern is likely to produce a better price than an asset sale through liquidation; and
6. to allow the Companies to retain the benefit of tax assets and research and development funds, which a purchaser may be able to access if the Companies are sold as a going concern.
7. Further, the administrators express the view that the sale of the Companies as a going concern under the terms of a Deed of Company Arrangement (DOCA) has reasonable prospects. The administrators have arrived at the two-month period as that required to progress the sale because of the complexity of the business, including the nature of the Companies' products, being that they are saleable only to a small target market, and for the need for a buyer to have sufficient working capital to progress the business through its growth phase. Further, the Redflow entity must be restructured, which is complex because of its ASX-listed status.
8. I am persuaded that it is appropriate to grant the extension sought by the administrators for the reasons advanced in the First Orr Affidavit.

SHOULD SUPPRESSION ORDERS BE GRANTED?

1. The administrators also seek orders, as I have said, under s 37AF of the Federal Court Act, until further order but, otherwise, no later than 20 November 2024, for paragraphs and exhibits of the First and Second Orr Affidavits and the transcript of the hearing to be suppressed and not to be published to any person other than the applicants and their legal advisors, among others. In particular, the administrators seek to suppress Exhibit DMO-50 to the First Orr Affidavit, and paragraph 12 and Exhibit DMO-52 to the Second Orr Affidavit.
2. Exhibit DMO-50 is an information memorandum that has been made available to prospective purchasers of the Companies. It contains sensitive information and has been provided only to persons who have signed non-disclosure agreements. Paragraph 12 and Exhibit DMO-52, refers to and contains a valuation report, respectively.
3. The principles relevant to suppression orders have also been well-rehearsed and, again, I do not need to repeat them in this judgment. I do, however, refer to the decision of Perram J in Motorola Solutions, Inc. v Hytera Communications Corporations Limited (No 2) [2018] FCA 17 at [6]-[9], in which His Honour restated the principles.

DISPOSITION

1. I am satisfied that, at the present time, the information sought to be suppressed is commercially sensitive and that its disclosure may prejudice the administrators' efforts to secure the best possible outcome for the creditors.
2. It is, therefore, appropriate that I make the orders sought by the administrators. Orders will, therefore, be made in the terms of the draft proposed by the administrators, which I note provides for any person to have leave to apply to vary these orders upon three business days' notice to the administrators. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Sarah C Derrington.

Associate: Dated: 24 September 2024 SCHEDULE OF PARTIES QUD 545 of 2024 Applicants Fourth Applicant: REDFLOW R&D PTY LTD (ADMINISTRATORS APPOINTED) ACN 116 992 253 Fifth Applicant: ZCELL AUSTRALIA PTY LTD (ADMINISTRATORS APPOINTED) ACN 613 792 420