Corbett v Corbett Court Pty Limited, in the matter of Corbett Court Pty Limited

Introduction 4 Keith and Valerie owned a hardware business in Picton, New South Wales. They amassed substantial assets including land holdings and shares in companies which owned land. The companies included K & V Corbett Pty Limited ("K&V Corbett") and Menangle Pty Limited ("Menangle"). The parents each owned half of the shares in K&V Corbett and they owned two thirds of the shares in Menangle while the siblings owned the other third. 5 Corbett Court was incorporated on 30 December 1993 as the vehicle for the development of 96 Argyle Street Picton (owned by Menangle) and the adjoining property at 100 Argyle Street (owned by John). John subscribed for 42 shares and a further 42 shares in aggregate were registered in the name of each of the other siblings (as to 6 shares each). Some siblings said they paid six dollars for their shares, others indicate that their parents paid on their behalf; Honora and Anne said that they did not pay for shares in Corbett Court and dispute that they consented to be shareholders. Valerie, Keith and John were appointed the directors of Corbett Court. 6 Both Valerie and Keith died intestate. Valerie died in November 2008; she had ceased to be a director of Corbett Court in 2005 due to the onset of dementia. Keith died in April 2010. 7 At the time of Keith's death: Corbett Court owned two properties - the IGA Supermarket and Picton Mall; The anchor tenant of Picton Mall was Coles Supermarkets Australia ("Coles"). Under clause 66 of the lease, if 40% or more of the shops in the internal mall area of Picton Mall as shown in the lease plan were vacant, the rent payable by Coles would be reduced; On 14 November 2008, Colliers International ("Colliers") valued Picton Mall at $12 million and on about 27 April 2009, Colliers valued the IGA Supermarket at $6 million; Keith (and therefore his estate), John, K&V Corbett and Menangle were all guarantors of debt approximating $14.4 million owed by Corbett Court to the National Australia Bank ("NAB"). The NAB facility was due to expire on 31 July 2012. Corbett Court was required to ensure that the ratio of the loan to value of the property ("LVR") did not drop below 70%; John was the sole remaining director of Corbett Court and the "estate companies" comprising K&V Corbett, Menangle and Picton Tavern Pty Limited (a lender to K&V Corbett). Until his death, Keith had been actively involved in the affairs of the estate companies and Corbett Court; Corbett Court also owed approximately $2 million to the estate companies, including K&V Corbett and Menangle; and Corbett Court had not held a general meeting (without complaint) or paid a dividend. 8 On 17 August 2010, Mr Peter Mokas, Coles' manager of retail leasing, wrote to John querying whether the vacancies in Picton Mall exceeded 40% and accordingly whether Coles' rent should be reduced in accordance with clause 66 of its lease. Coles had relied on this clause to reduce its rent in 2005. John said that Picton Mall was having difficulty in attracting specialty shops because of competition from new centres in nearby regions and economic conditions. John said he was concerned that Corbett Court would not be able to continue to meet repayments to NAB if Coles' rent was reduced. 9 John pursued negotiations with Target Australia ("Target") in relation to the installation of a "Target Country" discount department store in Picton Mall. Email correspondence reveals that on 9 September 2010, Mr Mokas threatened to instigate the reduction unless an agreement was reached with Target by 30 September 2010 with a view to Target opening a store at Picton Mall by September or October 2011. John received a letter of offer from Target on 30 September 2010. John received a quote from Kinsley and Associates estimating that the cost of conducting the work required to prepare Picton Mall for the Target tenancy would be in the order of $2.4 million. John believed that if the work was done under his direct supervision using direct labour and subcontractors, Corbett Constructions Pty Limited (a company owned by John and Renelle) could achieve the work for $1.1 million on an at cost basis. 10 On 17 November 2010, letters of administration in Keith's estate were granted to Perpetual Trustee Company Limited ("Perpetual") and Perpetual became the administrator of Valerie's estate as well. 11 At Perpetual's instigation, Mr Gary Holbrook of PKF (later known as BDO) chartered accountants replaced John as a director of the estate companies on 25 January 2011. Mr Holbrook was replaced on 27 June 2013 by Mr David Ratcliffe. 12 Without making any finding as to its accuracy, as at 7 June 2011, Mr Holbrook in his capacity as director of the estate companies estimated the fair market value of the estate companies at $10,851,468 as at the date of Valerie's death in November 2008 and $10,664,535 as at 7 June 2011. John's estimate was higher: between $12 million and $15 million. 13 Whatever the nature of the relationships between the siblings before the death of their parents, the relationships were put under great strain by the need for administration of their parents' estates and a significant aggravating factor was determining the terms on which the estate companies could be extricated from guarantees to NAB in connection with Corbett Court's indebtedness. It is in this context that the question of the need for, and funding of, work required to install Target as a tenant at Picton Mall arose.