In the matter of Johns Lyng Group Limited (No 2)

Catchwords: CORPORATIONS — arrangements and reconstructions — schemes of arrangement or compromise — application under s 411 of the Corporations Act 2001 (Cth) for orders approving scheme of arrangement and ancillary orders

Legislation Cited: - Corporations Act 2001 (Cth), ss 411, 1319

Cases Cited: - Re Bionomics Ltd (No 2) [2024] NSWSC 1666
- Re Cirrus Networks Holdings Ltd (No 2) [2023] NSWSC 1436
- Re Damstra Holdings Ltd [2024] NSWSC 425
- Re InvoCare Ltd (No 2) [2023] NSWSC 1350
- Re Johns Lyng Group Ltd [2025] NSWSC 1020
- Re Southern Cross Gold Ltd (No 2) [2025] NSWSC 2
- Weinstock v Beck (2013) 251 CLR 396; [2013] HCA 14

Category: Principal judgment

Parties: Johns Lyng Group Ltd (Plaintiff)
Sherwood BidCo Pty Ltd (Bidder)

Representation: Counsel:
M Izzo SC / JJ Rudd (Plaintiff)
TL Wong (Bidder)
Solicitors:
Minter Ellison (Plaintiff)
Gilbert + Tobin (Bidder)

File Number(s): 2025/311629

Judgment

Nature of the application and background

1. By Originating Process filed on 14 August 2025, the Plaintiff, Johns Lyng Group Ltd (“JLG”) sought orders under ss 411 and 1319 of the Corporations Act 2001 (Cth) (“Act”) in respect of a proposed scheme of arrangement between JLG and its shareholders. The orders sought provided for two separate meetings of JLG shareholders, the first comprising all JLG Shareholders who are not “Relevant Shareholders” (as defined) and the second comprising Relevant Shareholders, being management and employee shareholders of JLG who have the opportunity to take up an alternate form of consideration under the scheme.

2. JLG is a public company listed on Australian Securities Exchange (“ASX”) which provides building, restoration, property management, essential compliance and home services and disaster recovery services in Australia, New Zealand, and the United States. On 11 July 2025, JLG announced on the ASX that it had entered into a Scheme Implementation Deed dated 11 July 2025 (“SID”) with Sherwood BidCo Pty Ltd (“Bidder”), an entity owned and controlled by funds managed and advised by Pacific Equity Partners Pty Limited and its affiliates. Under the proposed scheme, the Bidder would acquire all of the issued JLG shares, in consideration for JLG shareholders receiving cash consideration of $4.00 per JLG share held, other than those Relevant Shareholders who may elect to receive some or all of their scheme consideration in the form of scrip consideration. That scrip consideration is four shares in the Bidder's holding company, Sherwood TopCo Pty Ltd (“Topco”), for every one JLG share in respect of which a Relevant Shareholder makes an election. Any Relevant Shareholder who does not make an election will receive all their entitlement to scheme consideration in the form of cash consideration. If the scheme is approved and implemented, the Bidder will acquire all JLG Shares and JLG will then be delisted from the ASX. I made the orders sought by JLG at the conclusion of the hearing on 2 September 2025 for the reasons set out in my judgment in Re Johns Lyng Group Ltd [2025] NSWSC 1020.

3. The scheme meetings were held on 8 October 2025 and the scheme was approved at the general scheme meeting, with the approval of 99.1% of the votes cast and 81.49% of general JLG shareholders present and voting in person or by proxy. The scheme was also approved at meeting of Relevant Shareholders in JLG, with the approval of 100% of the votes cast and 100% of Relevant Shareholders present and voting in person or by proxy. JLG now seeks orders approving the scheme. These are my reasons for making those orders, and I have drawn on the helpful submissions of Mr Izzo, with whom Mr Rudd appeared for JLG, in this judgment.

Affidavit and other evidence

4. JLG reads the affidavit dated 10 October 2025 of Mr Peter Nash, Chairman and Non-executive Director of JLG, which confirms registration of the scheme booklet and lodgement of a copy of the convening orders with the Australian Securities & Investments Commission (“ASIC”); despatch of the documents relating to the scheme meetings substantially in compliance with the orders made at the first Court hearing, subject to the matters that I note below; and the despatch of reminder emails and text messages to shareholders in substantially the form disclosed to the Court at the first hearing. Mr Nash also addresses the publication of an ASX announcement regarding the second Court hearing; the conduct of the scheme meetings and the passing of the resolution to agree to the scheme by the requisite statutory majorities at both scheme meetings; voter turnout at the scheme meetings and the tagging of votes of certain shareholders at those meetings.

5. JLG also tenders conditions precedent certificates evidencing satisfaction of the conditions precedent to the scheme and tenders a letter dated 13 October 2025 from ASIC confirming that it has no objection to the scheme, for the purposes of s 411(17) of the Act.

Applicable principles and determination

6. The Court must be satisfied of several matters in order to approve a scheme of arrangement at the second court hearing, namely that the plaintiff has complied with the orders of the Court convening the meeting of members; the meeting of members so convened has approved the scheme with the requisite majorities; all other statutory requirements have been satisfied; the scheme is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone, might approve it; the plaintiff has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court’s discretion; and there was full and fair disclosure to members of all information material to the decision whether to vote for or against the applicable scheme: Re InvoCare Ltd (No 2) [2023] NSWSC 1350 at [8]–[9]; Re Bionomics Ltd (No 2) [2024] NSWSC 1666 at [6]; Re Southern Cross Gold Ltd (No 2) [2025] NSWSC 2 at [8]. In exercising its power of approval, the Court has a residual discretion whether to approve a scheme and is not bound to approve it merely because it has made orders for the convening of meetings or because the statutory majorities have been achieved. In exercising that residual discretion, the matters the Court will take into account include whether the scheme is fair and reasonable, so that an intelligent and honest member of the relevant class, properly informed and acting alone, might approve it; whether there was full and fair disclosure to members of all information material to the decision whether to vote for or against the scheme; and whether the plaintiff has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court’s discretion.

7. The statutory requirements for the scheme have been satisfied. There is here no reason to doubt that JLG’s shareholders were provided with full and fair disclosure in the scheme booklet dispatched to them, subject to one matter which Mr Izzo draws to my attention. Mr Nash’s evidence is that several employees of JLG were not identified as Relevant Shareholders until after the initial despatch of the scheme documents and Topco Documents (as defined) to the Relevant Shareholders, generally because they did not hold shares in their personal names. Those persons were initially sent the scheme documents relevant to JLG shareholders generally rather than those directed to Relevant Shareholders. Some 34 further Relevant Shareholders were later identified as a result of further inquiries made by JLG and were sent the correct Scheme Documents and the Topco Documents on 22 September 2025. They were also notified that the scheme documents which applied to them as Relevant Shareholders were those sent to them in the second distribution, which included proxy forms for the Relevant Shareholder Scheme Meeting.

8. Mr Izzo submits, and I accept, that this non-compliance with the convening orders is a "procedural irregularity" which does not invalidate the Relevant Shareholder scheme meeting and the resolutions passed at that meeting under s 1322(2) of the Act, and that the irregularity has not caused substantial injustice; compare Re Damstra Holdings Ltd [2024] NSWSC 425 at [10]. I accept that the Court can also be satisfied that no substantial injustice has been suffered by those Relevant Shareholders in this category where, as Mr Izzo points out, they were then sent the scheme documents for the Relevant Shareholder scheme meeting and the Topco Documents prior to that meeting, and were notified of the relevant meeting and proxy form that applied to them. They had also been provided those documents 10 days prior to the date by which an election was required and 13 days prior to the date by which any proxy was required to be submitted and several of them cast votes at the Relevant Shareholder scheme meeting. I am satisfied that this procedural irregularity is automatically validated under s 1322(2) of the Act without the need for a Court order, and there is no reason for the Court to order to the contrary: Weinstock v Beck (2013) 251 CLR 396 at [7]; [2013] HCA 14.

9. Mr Izzo also points out that, as contemplated at the first Court hearing, the votes of four Relevant Shareholders who are executives of JLG, namely Messrs Didier, Carnell, Lunn and Gleeson and their respective shareholding entities, who will enter into Margin Loan Agreements with Topco as lender, were tagged in order to ascertain whether the resolution to agree to the scheme would have been satisfied by the requisite majorities of Relevant Shareholders if their votes were disregarded. The evidence establishes that the Relevant Shareholders would have voted to pass the Scheme Resolution by the requisite majorities if those votes were disregarded, where all of the votes cast and all of the Relevant Shareholders present in person or by proxy, attorney or corporate representative at the Relevant Shareholder scheme meeting (putting aside the votes of these shareholders) were in favour of the scheme resolution. In those circumstances, the votes of these shareholders were not determinative of the outcome of the scheme resolution, and no issue arises in respect of the approval of the scheme in this regard.

10. There is no suggestion that the scheme was proposed other than in good faith and for a proper purpose. The scheme was recommended by JLG’s independent board committee and the independent expert has expressed the view that the scheme was in the best interests of JLG shareholders in the absence of a superior proposal. There is no reason to doubt that the scheme is fair and reasonable so that an intelligent and honest JLG shareholder, properly informed and acting alone, might approve it. As I noted above, the resolution to approve the scheme was here passed at the scheme meeting by the requisite statutory majorities. Mr Izzo also notes that 752 JLG shareholders cast a vote in respect of the scheme resolution out of a total number of 6,871 JLG Shareholders, resulting in a voter participation rate at the scheme meetings of 10.94%, which is above the turnout at the last three annual general meetings of JLG. That evidence affords no reason to doubt the efficacy of the procedure for convening the scheme meeting. There is also no reason to doubt that JLG has brought to the Court’s attention all matters that could be considered relevant to the exercise of the Court’s discretion.

11. Although my attention was drawn to detailed criticisms of the scheme made by a JLG shareholder on an investor website, neither that shareholder or any other shareholder notified JLG that they intend to object to the approval of the scheme or appear at the second court hearing and no shareholder appeared at the second Court hearing to contest the approval of the scheme. For all these reasons, I was satisfied that the scheme was appropriate for the Court’s approval.

Exemption from compliance with s 411(11) of the Act

12. JLG seeks exemption from compliance with s 411(11) (which would require a copy of the orders under s 411(4)(b) to be annexed to the company's constitution) in accordance with s 411(12) of the Act, where the scheme will not amend its constitution and it will become a wholly owned subsidiary of the Bidder upon implementation of the scheme, I will make the order in accordance with common practice: Re Cirrus Networks Holdings Ltd (No 2) [2023] NSWSC 1436 at [13].

Orders

13. For these reasons, I made the orders sought by JLG at the conclusion of the second Court hearing on 13 October 2025.

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