In the matter of Johns Lyng Group Limited

[2025] NSWSC 1020

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Johns Lyng Group Limited [2025] NSWSC 1020

Hearing dates:

2 September 2025

Date of orders:

2 September 2025

Decision date:

05 September 2025

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Order convening scheme meeting and associated orders made.

Catchwords:

CORPORATIONS — arrangements and reconstructions — schemes of arrangement or compromise — application under s 411 of the Corporations Act 2001 (Cth) for orders convening meeting of members to consider and, if thought fit, to agree to proposed scheme of arrangement — whether requirements to order scheme meeting are satisfied

Legislation Cited:

- Corporations Act 2001 (Cth), ss 411 and 1319

- Supreme Court (Corporations) Rules 1999 (NSW), r 3.4

Cases Cited:

- Re APM Human Services International Ltd [2024] NSWSC 1095

- Re Ansarada Group Ltd [2024] NSWSC 411

- Re Bigtincan Holdings Ltd [2025] NSWSC 140

- Re Coca-Cola Amatil Ltd [2021] NSWSC 270

- Re Ellerston Global Investments Ltd [2020] NSWSC 879

- Re ELMO Software Pty Ltd [2023] NSWSC 12

- Re GetSwift Ltd [2020] FCA 1382

- Re Intega Group Ltd [2021] NSWSC 1434

- Re Invocare Ltd [2023] NSWSC 1180

- Re Pacific Smiles Group Ltd [2024] NSWSC 812

- Re PSC Insurance Limited [2024] FCA 946

- Re SG Fleet Group Ltd [2025] NSWSC 214

- Re Sienna Cancer Diagnostics Ltd [2020] FCA 899

- Re Vocus Group Ltd [2021] NSWSC 630

Category:

Principal judgment

Parties:

Johns Lyng Group Limited (Plaintiff)
Sherwood BidCo Pty Ltd (Bidder)

Representation:

Counsel:
MA Izzo / JJ Rudd (Plaintiff)
TL Wong (Bidder)

Solicitors:
MinterEllison (Plaintiff)
Gilbert + Tobin (Bidder)

File Number(s):

2025/311629

JUDGMENT

Nature of the application

1. By Originating Process filed on 14 August 2025, the Plaintiff, Johns Lyng Group Ltd (“JLG”) seeks 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 contemplate that there will be 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, as I will set out below.

2. By way of background, 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 (“PEP”) and its affiliates.

3. Under the proposed scheme, the Bidder will 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.

4. I made the orders sought by JLG at the conclusion of the hearing on 2 September 2025. These are my reasons for doing so. I have drawn on the helpful submissions of Mr Izzo, with whom Mr Rudd appeared for JLG, in this judgment.

Affidavit and other evidence

5. JLG reads the affidavit dated 14 August 2025 of its solicitor, Mr Sommer, which outlines the nature of JLG’s business and the proposed scheme.

6. JLG also reads the affidavit dated 1 September 2025 of Mr Nash, who is the chairman and a non-executive director of JLG. Mr Nash also refers to the nature of JLG’s business and to the establishment of an independent board committee following the receipt of an initial non-binding and conditional indicative proposal from PEP, which was responsible for assessing, negotiating and implementing matters connected with the scheme. The independent board committee comprises several non-executive directors of JLG. Two directors of JLG, Mr Didier, who is the managing director and group chief executive officer of JLG, and Mr Carnell, whom is an executive director and chief executive officer of JLG, and who are Relevant Shareholders for the purposes of the scheme, did not participate in that committee. Mr Nash notes that the independent directors, in respect of the cash consideration and subject to the independent expert continuing to conclude that the scheme is in the best interests of JLG shareholders (other than Relevant Shareholders), unanimously recommend that JLG shareholders vote in favour of the scheme in the absence of a superior proposal and they make no recommendation to Relevant Shareholders in relation to the scrip consideration. Mr Nash also addresses the position as to Messrs Didier’s and Carnell’s interests and their recommendation in respect of the scheme. He deals with exclusivity arrangements and a break fee payable under the SID and the process of verification of information concerning JLG in the scheme booklet, which was in conventional form. He also addresses the manner in which scheme documents will be dispatched to shareholders and proposed communications with shareholders in respect of the scheme. He confirms his consent to act as chair of the scheme meetings and the consent of a proposed alternative chair of those meetings.

7. JLG also reads the affidavit dated 1 September 2025 of Mr Neeland, who is a director of the Bidder and TopCo. Mr Neeland addresses the verification process in respect of information concerning the Bidder contained in the scheme booklet and also deals with funding arrangements in respect of the scheme, which is to be funded by equity funding provided by PEP and borrowings from a syndicate of lenders under a binding debt commitment letter. Mr Neeland also addresses entry into a deed poll by the Bidder and TopCo in respect of their obligations under the scheme.

8. Mr Izzo took me through the proposed scheme booklet in detail in the course of submissions. JLG also tendered a letter dated 1 September 2025 from the Australian Securities and Investments Commission (“ASIC”) in customary form, which reserved its position as to s 411(17)(b) of the Act; indicated that it considered that it had had a reasonable opportunity to examine the terms of the scheme and draft explanatory statement and to make submissions to the Court; and indicated that it did not propose to appear to make submissions or to oppose the scheme at the first Court hearing.

Role of the Court at the first Court hearing

9. The Court’s role at a first Court hearing in respect of a scheme is primarily to determine, in the exercise of its discretion, whether to convene a scheme meeting and approve the explanatory statement if it is satisfied of several matters, namely that the plaintiff is a “Part 5.1 body”; the proposed scheme is an “arrangement” within the meaning of s 411 of the Act; there has been proper disclosure to members (or creditors if a creditors’ scheme); the scheme is bona fide and properly proposed; ASIC has had reasonable opportunity to examine the proposed scheme and explanatory statement, to make submissions and has had 14 days’ notice of the proposed hearing date of the first Court hearing; the procedural requirements of the Supreme Court (Corporations) Rules 1999 (NSW) (“Rules”) have been met; and there is no apparent reason why the scheme should not, in due course, receive the Court’s approval if the necessary majority of votes is achieved: Re Ellerston Global Investments Ltd [2020] NSWSC 879 at [25]–[26]; Re Vocus Group Ltd [2021] NSWSC 630 at [12]; Re Invocare Ltd [2023] NSWSC 1180 at [14]; Re Pacific Smiles Group Ltd [2024] NSWSC 812 at [9]; Re APM Human Services International Ltd [2024] NSWSC 1095 at [11] (“APM”).

10. Each of the preconditions to the exercise of s 411(1) of the Act is met here. JLG is registered under the Act and is a Part 5.1 body and the proposed scheme is an “arrangement” between JLG and its shareholders. There is evidence that the draft scheme booklet has been the subject of a verification process. The procedural requirements under the Rules have been met, on the basis that I will dispense with r 3.4 where JLG proposes to give notice of the second Court hearing by way of ASX announcement in accordance with common practice.

11. Where the preconditions to the exercise of power under s 411(1) of the Act are satisfied, then it is necessary for the Court to consider whether the Court should, in its discretion, exercise its power under s 411(1) of the Act. The Court will then consider whether the proposed scheme is fit for consideration at the proposed scheme meeting, in the sense that it is of such a nature and cast in such terms that, if it achieves the statutory majority at the meeting, the Court would be likely to approve it on the hearing of a petition which is unopposed and that members (or creditors) are to be properly informed as to the nature of the scheme before the scheme meeting. Mr Izzo here submits that the Court can be satisfied that the scheme is fit for consideration by the proposed scheme meetings in the sense that it is of such a nature and cast in such terms that, if it achieves the statutory majorities at each scheme meeting, the Court would be likely to approve it on the hearing of a petition which is unopposed; that JLG shareholders are to be properly informed as to the nature of the scheme before the scheme meetings; and that there is nothing in the terms of the scheme that would warrant the Court declining to permit its consideration by JLG shareholders.

12. As I noted above, JLG’s independent directors here recommend that JLG’s shareholders vote in favour of the scheme at the scheme meeting, subject to the matters noted above. The independent expert, Kroll Australia Pty Ltd, has also expressed the view that the proposed scheme is fair and reasonable and in the best interests of JLG shareholders (other than Relevant Shareholders) in the absence of a superior proposal. Although the independent expert has not expressed a view as to consideration payable to Relevant Shareholders, it has noted that a relevant shareholder who receives only cash consideration would be in the same position as other JLG shareholders. No apparent difficulty arises with the disclosure in the scheme booklet and the verification process adopted in respect of the scheme booklet. Subject to the particular matters addressed below, I am satisfied that there is nothing in the terms of the scheme or in its effect on scheme shareholders that would otherwise warrant the Court declining to approve the scheme at the second Court hearing, if it receives the statutory majorities required by s 411(4)(a)(ii) of the Act at the scheme meeting.

Particular matters

13. Mr Izzo draws attention to several other matters in respect of the scheme. First, as I also noted above, the scheme contemplates that Relevant Shareholders may elect to receive their scheme consideration partly or wholly in the form of scrip consideration, and that other JLG shareholders will receive only cash consideration. JLG rightly accepts that, having regard to the different treatment and interests of Relevant Shareholders and other JLG shareholders, the Relevant Shareholders should form a different class for the purposes of considering and agreeing to the scheme and the Court should order that two separate scheme meetings be convened, one comprising Relevant Shareholders and one comprising other JLG Shareholders: Re SG Fleet Group Ltd [2025] NSWSC 214 at [15]; Re ELMO Software Pty Ltd [2023] NSWSC 12 at [22] (“ELMO”); Re PSC Insurance Limited [2024] FCA 946 at [39].

14. Second, Mr Izzo points out that four Relevant Shareholders who are executives of JLG, namely Messrs Didier, Carnell, Lunn and Gleeson and their respective shareholding entities (“Borrowers”) will enter into Margin Loan Agreements with Topco as lender. This matter is disclosed in the Chairman’s letter and in section 6.10 of the proposed scheme booklet. Under the Margin Loan Agreements, the Borrowers agree to elect to receive certain portions of their scheme consideration as scrip consideration, and also receive an advance equivalent to the cash consideration that would otherwise be payable on those JLG shares, and pledge the Topco shares received as a result of that election to the lender as security for the advance. Recourse under the Margin Loan Agreements is limited to the Topco shares against which the advance is secured, a matter that is also disclosed in section 6.10(e) of the scheme booklet.

15. This arrangement is plainly advantageous to Messrs Didier, Carnell, Lunn and Gleeson, since they receive the equivalent of the cash consideration and also stand to benefit from any appreciation in the value of the Topco shares but are not required to repay their loans beyond the value of those shares. That matter is disclosed in the Chairman’s letter and sections 3.2 and 3.6 of the independent expert’s report, which indicate the independent expert’s view that, under the Margin Loan Agreements, the Borrowers will receive a net benefit in connection with the scheme relative to other JLG shareholders because they will initially receive a cash amount (being the proceeds of a loan advance from Topco) in respect of their Topco shares equivalent to the cash consideration received by JLG shareholders other than Relevant Shareholders; they stand to benefit from any increase in the value of the Topco shares they receive as scheme consideration over a period up to the next decade; and they have no “downside” due to the limited recourse nature of the loans. Mr Izzo points out that the independent expert has valued the Topco shares to be received by Relevant Shareholders (including the Borrowers) at less than the cash consideration under the scheme primarily due to a minority discount, and also notes that the Margin Loan Agreements are a form of management incentive.

16. Mr Izzo submits that:

“… the Margin Loan Agreements are not class-creating vis-à-vis Relevant Shareholders and the Borrowers. Their rights and entitlements under the [s]cheme are the same, with each having the ability to elect for such amount of [c]ash [c]onsideration or [s]crip [c]onsideration as they see fit, and with each receiving the same [s]cheme [c]onsideration in all scenarios. Such arrangements between the Borrowers and Topco, which are disclosed in the [s]cheme [b]ooklet and are directed to retaining key employees and thus preserving the value of the business, are extraneous to the [s]cheme and do not require the Borrowers to constitute a separate class from all other Relevant Shareholders, although they may be relevant to the Court's discretion to approve the Scheme at the second hearing: Re Pendal Group Ltd (No 2) [2022] NSWSC 1648 at [24]; see also Re Probiotec Limited [2024] FCA 298 at [66]; Re David Jones Limited (No 2) [2014] FCA 720 at [30]-[31] and [33]; Re David Jones Limited (No 3) [2014] FCA 753 at [13]. Further, the fact that under the Margin Loan Agreements, the Borrowers will agree in advance to elect for [s]crip [c]onsideration in certain defined proportions consistently with their right to do so under the Scheme, again as disclosed in the [s]cheme [b]ooklet, does not create any issue in this regard: Re Healthia Limited [2023] NSWSC 1296 at [23].”

17. It seems to me that this matter does not require a third class meeting comprising only Messrs Didier, Carnell, Lunn and Gleeson and their associated entities, where their votes at the Relevant Shareholder meeting can and should be tagged and the views of other Relevant Shareholders will then be clear.

18. Third, Mr Izzo notes that cl 52.8 of JLG's constitution suspends a proxy's authority to attend and speak at a meeting on behalf of a shareholder where that shareholder is present in person or by representative at that meeting. He points out that, where the scheme meetings are proposed to take place as hybrid meetings, there is a risk that a shareholder might unknowingly preclude his or her proxy from voting by observing the conduct of the meeting online. JLG submits, and I accept, that an order should be made displacing the operation of cl 52.8 in respect of the scheme meetings so that the appointment of a proxy or attorney by a shareholder is not revoked or suspended merely by the appointing member attending and taking part in the relevant scheme meeting, unless the appointing member votes on the resolution, in which case the proxy will not be entitled to vote and any vote of the proxy should not be counted: Re Sienna Cancer Diagnostics Ltd [2020] FCA 899 at [112]–[115]; Re GetSwift Ltd [2020] FCA 1382 at [10]–[15].

19. Fourth, Mr Izzo addresses the question of performance risk. He points out that the scheme adopts the conventional step of making the transfer of the scheme shares to the Bidder subject to the provision of scheme consideration, and no transfer of the scheme shares will occur unless and until the total scheme consideration to which shareholders are entitled has been provided, in the case of those shareholders receiving cash consideration, by payment into a trust account for the benefit of those shareholders and, in the case of Relevant Shareholders who elected to receive scrip consideration, by the Bidder confirming in writing to JLG that the scrip consideration has been provided in accordance with cl 5.6(a) of the scheme booklet. The Bidder and Topco have also executed a deed poll in favour of the scheme shareholders. I accept that these are established means of managing performance risk, although it is also necessary to consider the funding arrangements in respect of the scheme: ELMO at [27]–[28]. This matter also gives rise to no reason not to convene the scheme meetings and make the other orders sought.

20. Fifth, Mr Izzo rightly recognises that issues may arise where a party to the deed poll is a special purpose vehicle which does not have capacity to perform its obligations under that deed poll without financial support from a holding company, and where funding from a third party is presently conditional: Re Ansarada Group Ltd [2024] NSWSC 411 at [22] (“Ansarada”). Here, the Bidder is a special purpose vehicle and relies on a binding Equity Commitment Letter, subject to the scheme becoming effective and a binding debt commitment letter which is subject to common conditions precedent, and details of these funding arrangements are set out in section 6.7 of the scheme booklet. I am satisfied that the evidence sufficiently addresses the Bidder’s capacity to fund the scheme. This matter also gives rise to no reason not to convene the scheme meetings and make the other orders sought.

21. Sixth, Mr Izzo addresses a break fee in respect of the scheme. Under cl 14.3 of the SID, JLG must pay the Bidder a "Target Break Fee" of $11 million (inclusive of GST) in specified circumstances, which are consistent with common practice. A Target Break Fee is not payable merely because the resolution submitted to the scheme meetings in respect of the scheme is not approved by the requisite majorities, and the Target Break Fee represents less than 1% of the implied equity value of JLG based on the maximum consideration of $4.00 per share which is payable under the SID. I accept that break fees of this kind are now common features in schemes of arrangement and will generally be permitted unless the amount of the break fee is such that it could influence voting at the meeting or if there are some unusual features: Ansarada at [24]; Re Bigtincan Holdings Ltd [2025] NSWSC 140 at [54]. This matter gives rise to no reason not to convene the scheme meetings and make the other orders sought.

17. Seventh, Mr Izzo addresses exclusivity arrangements in respect of the scheme. Clause 15 of the SID includes "no shop", "no talk", "no due diligence", "notification" and "matching right" obligations, and the "no talk" and "no due diligence" restrictions in cll 15.3 and 15.4 are subject to the fiduciary and statutory carve outs in cl 15.5. The "Exclusivity Period" as defined in the SID continues for a maximum of eight months after the date of the SID or as otherwise agreed in writing between JLG and the Bidder. The exclusivity provisions are disclosed in section 2.5(d) of the scheme booklet. Although the exclusivity period is here relatively long, I accept that exclusivity provisions of this kind have previously been accepted: ELMO at [29]; Re Coca-Cola Amatil Ltd [2021] NSWSC 270 at [22]. This matter also gives rise to no reason not to convene the scheme meetings and make the other orders sought.

18. Eight, Mr Izzo notes that section 5.7 of the scheme booklet refers to the proposed treatment of JLG Performance Rights, which will automatically vest shortly before the scheme record date so that new JLG shares are issued to the holders of those Performance Rights and acquired under the scheme. I accept that those arrangements do not have the effect that shareholders who hold such rights are in a separate class of members on that account alone: ELMO at [25].

19. Ninth, Mr Izzo refers to the independent directors’ recommendation as to the scheme and notes that the independent directors consider that it is appropriate for the executive directors also to make a recommendation as to the scheme. In the absence of a superior proposal and subject to the independent expert continuing to conclude that the scheme is in the best interests of JLG shareholders other than Relevant Shareholders, the executive directors also recommend that JLG shareholders vote in favour of the scheme and, subject to those same qualifications, they intend to vote all JLG shares held or controlled by each of them in favour of the scheme. The scheme booklet discloses the interests and dealings in JLG shares of the JLG directors, including the executive directors, in the Chairman’s letter and elsewhere where the directors' voting intention and recommendations are stated. I accept that the disclosed interests of the executive directors do not require that they refrain from making a recommendation: Re Intega Group Ltd [2021] NSWSC 1434 at [22]; APM at [27].

20. Tenth, Mr Izzo notes that cl 8.4 of the scheme provides for a deemed warranty that a scheme shareholder’s shares are fully paid and free of encumbrances. These matters are disclosed in sections 1.7 and 9.2(g) of the scheme booklet and also referred to in Part A of the Frequently Asked Questions at section 3 of the scheme booklet. I accept that the clauses of this kind do not prevent the approval of the scheme, where the clause is properly disclosed in the scheme booklet: ELMO at [32].

21. Eleventh, Mr Izzo addresses the proposed manner of despatch of documents and email reminders which are in conventional form and proposed inbound and outbound shareholder calls. The scripts for those calls have been disclosed to the Court in the evidence and no order was sought approving them in accordance with current scheme practice. There is no issue I need to raise in respect of them. These matters, separately and together, provide no reason not to make the orders sought by JLG.

Orders

27. For these reasons, I made the orders sought by JLG at the conclusion of the first Court hearing on 2 September 2025.

**********

Decision last updated: 09 September 2025