By Originating Process filed on 1 November 2024, the Plaintiff, Sunland Group Ltd ("Sunland"), applied for orders under s 411 of the Corporations Act 2001 (Cth) ("Act") in respect of a proposed scheme of arrangement.
By way of background, Sunland was in the business of residential property development and construction. In October 2020, it announced a strategy by which all development activities would be completed and non-development inventory would be sold, so as to return net asset value to Sunland shareholders and to deliver a premium to the historic trading price of Sunland shares. Since 18 March 2021, Sunland has returned substantial funds to Sunland shareholders by dividends and capital distributions. The acquirer under the proposed scheme, Sun Holdings GC Pty Ltd ("Sun Holdings"), is a special purpose vehicle incorporated to acquire the Sunland shares as part of the scheme, and a wholly-owned subsidiary of Homecorp Property Group (Aust) Pty Ltd ("Homecorp") which also undertakes home construction and development. The scheme consideration payable by Sun Holdings is cash only of $0.0675 per Sunland share, less any Permitted Dividend (as defined) of up to $0.065 per Sunland share. I made the orders sought by Sunland to convene the scheme meeting at the conclusion of the hearing on 3 December 2024 for the reasons set out in my judgment in Re Sunland Group Ltd [2024] NSWSC 1591.
The scheme meeting was held on 20 January 2025 and the scheme was then approved by the requisite majorities of shareholders for the purposes of s 411(4)(a)(ii) of the Act. At this second Court hearing, Sunland seeks orders approving the scheme. No Sunland shareholder or other person indicated an intention to appear at this hearing or appeared to oppose the approval of the scheme and I made the orders sought by Sunland at the conclusion of this hearing. These are my reasons for making those orders, and I have drawn on the helpful submissions of Ms Whittaker, with whom Mr Jameson appears for Sunland, in this judgment.
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Affidavit evidence
Sunland reads the affidavit dated 2 February 2025 of Mr Grant Harrison who is a director and secretary of Sunland and its Chief Financial Officer. He addresses the registration of the scheme booklet with the Australian Securities and Investments Commission ("ASIC"), the dispatch of the scheme booklet to Sunland shareholders and Sunland directors' decision made on 6 January 2025 to pay a fully franked Permitted Dividend (as defined) of $0.065 for each Sunland share, conditional upon the scheme becoming effective, and the announcement of that decision made by Sunland to Australian Securities Exchange. Mr Harrison also addresses the results of proxy votes in respect of the scheme meeting, the conduct of the scheme meeting on 20 January 2025, the results of that meeting and voter turnout at that meeting, by comparison with previous annual general meetings of Sunland held in 2022-2024. He also addresses the giving of notice of this second Court hearing.
By an affidavit dated 3 February 2025, Mr Christopher Healey, who is a Senior Client Relationship Manager with MUFG Corporate Markets, which had been engaged by Sunland to dispatch communications in relation to the scheme to its shareholders, addressed the process which had been adopted to dispatch those communications, the conduct of a shareholder information line, a letter sent to shareholders announcing the declaration of the Permitted Dividend by Sunland, the position in respect of proxy votes, the conduct of the scheme meeting and the announcement of the results of the scheme meeting.
For completeness, Sunland also tendered a modification to the scheme terms, which was not material in character, and addressed a delay in satisfaction of the condition precedent relating to ASIC's issue of a no objection letter in relation to the scheme. Sunland also tendered a letter dated 3 February 2025 from ASIC confirming that it had no objection to the scheme for the purposes of s 411(17) of the Act and a certificate proving the satisfaction or waiver of the conditions precedent to the scheme.
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Applicable principles and submissions
It is, of course, well-established that 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 Permanent Trustee Co Ltd (2002) 43 ACSR 601; [2002] NSWSC 1177 at [8]-[10]; Re Central Pacific Minerals NL [2002] FCA 239 ("Central Pacific Minerals") at [8]-[14]; Re Seven Network (No 3) Ltd (2010) 267 ALR 583; [2010] FCA 400 ("Seven Network") at [35]-[39]; Re Solution 6 Holdings Ltd (2004) 50 ACSR 113; [2004] FCA 1049 at [18]-[24]; Re Redcape Property Fund Ltd and the Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) [2012] NSWSC 486 at [7]; Re Amcor Ltd (No 2) [2019] FCA 842 at [7]-[11]; Re Ellerston Global Investments Ltd [2020] NSWSC 1108 ("Ellerston") at [10]-[12]; Re Coca-Cola Amatil Ltd [2021] NSWSC 489 at [9]; Re Pendal Group Ltd (No 3) [2023] NSWSC 14 at [9]. The Court will also have regard to shareholders' assessment of their interests as manifested in the voting results on the scheme resolution in recognising that shareholders are "the best judges of whether an arrangement is to their commercial advantage": Central Pacific Minerals at [13]; Ellerston at [10]. I have drawn on my judgments in Re Invocare Ltd (No 2) [2023] NSWSC 1350 at [8]-[9] and Re Southern Cross Gold Limited (No 2) [2025] NSWSC 2 for this summary.
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Submissions and determination
I am satisfied that Sunland complied with the Court's orders in respect of the distribution of scheme documents to its shareholders and the conduct of the scheme meeting. As I noted above, Sunland shareholders voted in favour of the scheme by the requisite statutory majorities. The level of shareholder participation at that meeting, although not high, was better than that achieved at Sunland's recent annual general meetings. This matter does not suggest any defect in the notice of the scheme given to Sunland shareholders and does not give rise to any reason not to approve the scheme.
The scheme was recommended by Sunland's directors and the independent expert whose report was included in the scheme booklet expressed the view that the scheme was fair and reasonable and in the best interests of Sunland shareholders in the absence of a superior proposal. As I noted above, no Sunland shareholder or other person indicated an intention to appear at the second Court hearing to oppose the scheme and there was no such appearance. I am satisfied that there is no reason to doubt that the scheme is fair and reasonable so that an intelligent and honest Sunland shareholder, properly informed and acting alone, might approve it. There is otherwise no reason to doubt that Sunland has brought to the Court's attention all matters that could be considered relevant to the exercise of the Court's discretion or that there was full and fair disclosure to shareholders of all information material to the decision whether to vote for or against the scheme. I am therefore satisfied that the scheme is appropriate for the Court's approval.
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Exemption under s 411(12) of the Act
Sunland also seeks an exemption pursuant to s 411(12) of the Act from compliance with s 411(11) so that a copy of the Court order approving the scheme does not need to be annexed to any copy of Sunland's constitution that may be issued in the future. An order of this kind is properly made where the rights of Sunland's shareholders are not modified by the scheme: Re Equinox Resources Ltd (2004) 49 ACSR 692; [2004] WASC 143 at [22]-[23]; Re Murchison Metals Ltd [2014] NSWSC 951 at [10]-[11]; Re The Trust Company Ltd [2013] NSWSC 1947 at [19].
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Determination and orders
For these reasons, I made the orders sought by Sunland at the conclusion of the second Court hearing on 3 February 2025.
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Decision last updated: 19 February 2025