Federal Court of Australia

Miller as executor of the estate of Detlef John Kirsten v Kirsten (No 2) [2023] FCA 1034

ORDERS

THE COURT ORDERS THAT:

1.    The first defendant is to pay 40% of the plaintiff’s costs of and incidental to the proceedings on a party-party basis with such sum to be assessed as a lump sum by a Registrar of the Court in the absence of agreement.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

O’SULLIVAN J:

1    On 2 November 2018, Detlef John Kirsten (deceased) passed away. The Executor of the deceased’s estate is his former wife, Cara Ellen Miller. Probate was granted to the plaintiff on 14 June 2019.

2    The first defendant, Karl James Kirsten (Mr Kirsten), is the deceased’s brother and since 2 November 2018 has been the sole director of the 5th defendant, Ombrel Pty Ltd, which was incorporated on 29 July 2009. Prior to his death, the deceased was the sole director of Ombrel.

3    Issues arose between the plaintiff and Mr Kirsten over a range of matters in relation to the deceased’s estate, including who held 99 of the 100 issued Ombrel shares and the transmission of those shares.

4    In her originating process, the plaintiff had sought, amongst other things:

1.    A declaration that the Ombrel Register of Members rather than the Kirsten Ombrel Register of Members … is the true register of members for [Ombrel].

2.    A declaration that the Deceased rather than [Ombrel] is registered in the register of members of [Ombrel] as the holder of the 99 Ombrel Shares …

…

4.    Orders pursuant to s1071F(2) of the Corporations Act 2001 (Cth) that:

4.1    …

4.2    The transfer or in the alternative the transmission of [the] 1 Ombrel Share … be registered.

4.3    The transfer or in the alternative the transmission of [the] 99 Ombrel Shares … be registered.

…

5    The registration issue in paragraph 4 of the originating process resolved some time ago on the basis that each party bear their own costs. That left the application for declarations in paragraphs 1 and 2 outstanding.

6    There is no dispute that the deceased was the legal and beneficial owner of 1 Ombrel share at the date of his death on 2 November 2018. The declarations issue concerned whether the deceased held 99 Ombrel shares or whether those shares had been transferred from the deceased to Ombrel itself on 30 July 2009. The plaintiff contended the 99 Ombrel shares were held by the deceased and vested in the plaintiff, as Executor, upon the death of the deceased. The plaintiff contended that what is referred to as the “Ombrel Register of Members” which recorded the deceased as holding 99 shares in Ombrel non-beneficially, is the true Register of Members.

7    Mr Kirsten had contended that a different Register, referred to as the Kirsten-Ombrel Register of Members, which records that on 30 July 2009, 99 Ombrel shares held non-beneficially by the deceased were transferred to Ombrel Pty Ltd as trustee for Ombrel Trust, is the true Register of Members.

8    The plaintiff contends these proceedings were necessary because Mr Kirsten refused to register the transmission of 99 Ombrel shares to the plaintiff as Executor of the deceased’s estate. Ultimately, Mr Kirsten registered the transmission of the shares but the question of declarations as to which of the two registers was the correct register, remained live.

9    Just prior to the matter being called on for hearing, the Court was informed the dispute had resolved and that Mr Kirsten had provided the plaintiff with what is described as the corrected Ombrel Register which records the plaintiff as the non-beneficial holder of the 99 shares in Ombrel.

10    The plaintiff’s case, which Mr Kirsten has now accepted, is that the Ombrel Register was the correct register.

11    The defendant had defended the proceedings, both as to the application for the registration of the transmission of the 99 Ombrel shares and the declarations, on the basis that his refusal to register the transmission of the shares in question was with just cause within the meaning of s 1071F(2) of the Corporations Act 2001 (Cth).

12    The dispute between the parties having been resolved, the only remaining issue concerned an application by the plaintiff for the costs of the proceedings in pursuing the declarations sought in paragraphs 1 and 2 of the originating process.

13    The parties tendered a number of affidavits and other documents which were received into evidence for the purposes of providing background and context to the matter.

14    The plaintiff submits:

(a)    That the plaintiff was almost certain to succeed in obtaining the declarations; and

(b)    The provision of the Ombrel Register was a capitulation by the first defendant.

15    In general terms, the first defendant submits he acted reasonably and there was no capitulation.

16    It is for the reasons which follow that there will be an order that the first defendant pay 40% of the plaintiff’s costs on a party-party basis.

BackgrounD

17    From its incorporation on 29 July 2009 until 11 May 2010, Ombrel’s registered office was at E D Kirsten Accountants Pty Ltd. Ernst Kirsten was the deceased’s father and it seems that initially Kirsten Accountants Pty Ltd were Ombrel’s accountants.

18    Between 12 May 2010 and 12 April 2016, Ombrel’s registered office was at the office of its accountants, Clarke & Brownrigg.

19    Between 13 April 2016 and 19 March 2019, Lucent Financial were Ombrel’s accountants and Ombrel’s registered office was at Lucent’s office. It seems that at some stage Lucent Financial changed its name to Lucent Advisory. Nothing turns on that.

20    Between 20 March 2019 and 18 August 2019, Ombrel’s registered office was at 298 Payneham Road, Payneham South Australia. On 19 August 2019, Ombrel changed its registered office to 294 Payneham Road, Payneham, which are the offices of LBH Accountants.

21    Notwithstanding the change in registered offices, Lucent remained responsible for maintaining documents relating to Ombrel and the Ombrel Trust, including Ombrel’s Register of Members between 13 April 2016 and 15 April 2020.

22    When Lucent took over as accountant for Ombrel from Clarke & Brownrigg, Clark & Brownrigg provided hard copies of documents relating to Ombrel including the Register of Members. The hard copy documents were scanned electronically by Lucent on or about 15 April 2016.

23    Ms Natalie Biller is a Senior Accountant employed by Lucent. On 15 April 2020, she personally delivered hard copies of the documents relating to Ombrel and the Ombrel Trust to LBH.

24    The Ombrel Register provided to Lucent by Clark & Brownrigg did not include any entry recording the transfer of 99 Ombrel shares by the deceased to Ombrel.

25    During the time Lucent was responsible for maintaining the documents relating to Ombrel and the Ombrel Trust, including the Ombrel Register, there were no amendments to the Ombrel Register.

26    On 3 July 2020, the plaintiff’s solicitors, Piper Alderman, wrote to Mr Kirsten in his capacity as the sole director of Ombrel. The letter enclosed a copy of the grant of Probate for the deceased’s estate naming the plaintiff as Executor; the deceased’s Will; a Notice as to Disclosure of Assets; Certificates of Disclosure; and two share transfer forms for non-market transactions, one for the 99 Ombrel shares and one for the single Ombrel share. Both share transfer forms were for the transmission of the deceased’s shares to the plaintiff as Executor of the deceased’s estate. The letter requested Mr Kirsten to register the two share transmission forms.

27    Mr Kirsten responded directly to the plaintiff by email sent 6 July 2020 in what might be described as a general fashion in which he asked a number of questions. Mr Kirsten offered to make available Ombrel’s financial statements, which had been requested by the plaintiff, together with anything else the plaintiff may require.

28    On 16 July 2020, Piper Alderman wrote again to Mr Kirsten requesting, amongst other things, that as a director of Ombrel he register the transmission of the Ombrel shares by 17 July 2020, failing which the plaintiff would make application to the court seeking orders that he comply with his statutory obligations under the Act.

29    On 17 July 2020, Mr Kirsten sent an email to Piper Alderman in which he informed Piper Alderman that the plaintiff could view the Ombrel Register on 21 July 2020 at his office, enclosed a copy of Ombrel’s Constitution and referred to s 1072G of the Act, a replaceable rule, which provides that the directors of a proprietary company may refuse to register a transfer of shares in the company for any reason.

30    Mr Kirsten did not register the share transmission.

31    On 23 July 2020, Piper Alderman wrote to Mr Kirsten pointing out that s 1072G of the Act had been replaced by cl 4 of Ombrel’s Constitution which reads:

The directors of the company may refuse to register a transfer of shares in the company for any reason and without assigning any reason for that refusal.

32    Piper Alderman pointed out that cl 4 did not apply to the transmission of shares from a deceased member to [his] personal representatives such that the clause did not empower Mr Kirsten to refuse to register the plaintiff as the holder of the shares registered in the name of the deceased.

33    In the letter dated 23 July 2020, Piper Alderman also enclosed a written notice signed by the plaintiff in accordance with s 1072A(2)(a)(i) of the Act giving notice of the plaintiff’s election to be registered as the holder of the deceased’s shares. Section 1072A(2)(a)(i) provides:

1072A Transmission of shares on death (replaceable rule—see section 135)

If shares not held jointly

…

(2)    If the personal representative gives the directors the information they reasonably require to establish the representative’s entitlement to be registered as holder of the shares:

(a)    the personal representative may:

(i)    by giving a written and signed notice to the company, elect to be registered as the holder of the shares; or

…

34    Notwithstanding subsequent requests by the plaintiff through Piper Alderman to register the transmission of shares in the name of the plaintiff, Mr Kirsten failed to do so despite saying in an email dated 24 July 2022 to Piper Alderman that he “will ensure any legally required share transfers are processed within the timeframe required by law”.

35    On 27 July 2020, Mr Kirsten signed, and on 29 July 2020 lodged, a “Request for correction” with the Australian Securities and Investments Commission (ASIC) seeking that ASIC’s record of Ombrel’s shareholding be corrected to reflect that the deceased had transferred 99 Ombrel shares to Ombrel itself on 30 July 2009 with those shares being held by Ombrel non-beneficially.

36    On 31 July 2020, the plaintiff and a solicitor from Piper Alderman attended at Mr Kirsten’s office to inspect the Registers of, amongst other companies, Ombrel.

37    The plaintiff took photographs of Ombrel’s Register of Members as presented by Mr Kirsten and inspected Ombrel’s documents. Ombrel’s Register of Members produced by Mr Kirsten on 31 July 2020 was the Kirsten-Ombrel Register which records the deceased transferring 99 Ombrel shares to Ombrel itself on 30 July 2009. The Ombrel documents did not include a transfer form for the transfer of the 99 Ombrel shares.

38    This was the first time the plaintiff became aware of the Kirsten-Ombrel Register. As I have noted earlier, Lucent had no record of the transfer by the deceased of the 99 Ombrel shares.

39    The plaintiff conducted a complete search of the deceased’s computers and hard drives to ensure that she had not missed anything, and in July 2020 engaged Mr Jean-Pierre Du Plessis, a Forensic Accountant with particular expertise in digital forensics services, including searching computer databases for documents, to search the deceased’s electronic devices. Mr Du Plessis was unable to find any document evidencing a transfer of 99 Ombrel shares from the deceased to Ombrel itself.

40    On 5 August 2020, the plaintiff received an electronic copy of the Ombrel Register from Lucent. The Ombrel Register received from Lucent did not record the deceased transferring 99 shares to Ombrel.

41    Having seen Mr Kirsten’s request to ASIC to correct its records, Piper Alderman wrote to Mr Kirsten on 10 August 2020 stating that Mr Kirsten had not provided any just cause for not registering the transmission and concluded Mr Kirsten refused to do so.

42    On 24 August 2020, Mr Kirsten responded by email to Piper Alderman stating he was not refusing to register the transfer [sic transmission] of the shares but was attempting to ensure that he did it correctly. He questioned why the shares were not listed on the statement of assets and liabilities dated 16 April 2019 used for the grant of Probate. There was no response by Piper Alderman to that email.

43    By letter dated 31 August 2020, ASIC declined to correct its records for a number of reasons, including that a company must not hold shares in itself except as provided for in ss 259A and 259B of the Act. Neither of those sections apply in this matter.

44    By letter dated 24 November 2020, Piper Alderman provided what it described as a final opportunity to Mr Kirsten to register the transmission of shares to the plaintiff by midday on 30 November 2020. Mr Kirsten responded to this letter by email dated 29 November 2020 referring Piper Alderman to his legal advisor. Mr Kirsten did not register the transmission of the shares.

45    On 15 December 2020, the plaintiff issued these proceedings.

46    Since Mr Kirsten had referred in correspondence dated 24 August 2020 to the non-disclosure of the Ombrel shares in the statement of assets filed for the purposes of Probate, between January 2021 and November 2021, the plaintiff corresponded with the Registrar of Probates in the Supreme Court of South Australia for the purposes of obtaining a certificate in relation to, amongst other things, the Ombrel shares. It seems that one of the difficulties was that the shares had a nil value such that the Probate Registry queried why the shares were an asset needing disclosure if that was the case.

47    The plaintiff explained to the Probate Registrar that Mr Kirsten would not register the plaintiff, as the deceased’s Executor, as holder of the 99 shares without a Registrar’s Certificate. On 24 November 2021, after a hearing before the Probate Registrar, the Registrar indicated she was not prepared to issue the Certificate unless directed to do so by a judge. Ultimately, on 3 June 2023, Stein J directed the Registrar of Probates to issue a Registrar’s Certificate in relation to, amongst other things, the 99 Ombrel shares.

The parties’ submissions

48    During the course of argument, the plaintiff referred to correspondence between the parties and to a binding financial agreement between the deceased and the plaintiff dated 1 August 2014. The plaintiff also referred to the deceased’s Will dated 27 June 2016. Both of these documents record that the deceased was the owner of 100% of the Ombrel shares, which total 100.

49    The plaintiff submits that when the Ombrel Register was given by Lucent to LBH in April 2020, it was in the same state as it was created on 29 July 2009. On that and the matters to which I have referred above, the plaintiff submits Mr Kirsten has acted unreasonably and has capitulated in relation to the Ombrel Register.

50    Mr Kirsten submits his behaviour both during this litigation and in the period leading up to it has been reasonable. As with the plaintiff’s case, counsel for the first defendant referred to correspondence between the parties which, amongst other things, included:

(a)    Mr Kirsten’s email sent on 24 August 2022 to the plaintiff’s solicitors which was after the Kirsten-Ombrel Register had been produced to the plaintiff and the application to ASIC to rectify its records, in which he states that he was not refusing to register the transfer [sic transmission] of the shares but attempting to ensure he acted correctly;

(b)    Requests for a copy of an additional statement of assets and liabilities filed in the Supreme Court of South Australia in June 2021 by the plaintiff, after proceedings had been commenced in this Court. He submits that given the 99 Ombrel shares had not been disclosed in the original statement of assets and liabilities which accompanied the application for Probate, such a request was reasonable in the circumstances; and

(c)    A letter from his solicitors dated 2 November 2021, in which his solicitors inform the plaintiff’s solicitors that upon production of a Certificate from the Probate Registrar in relation to the 99 Ombrel shares, Mr Kirsten will register the relevant transmissions.

51    Mr Kirsten points to the fact that the Ombrel shares apparently have no value and yet these proceedings were instituted in this Court. Having said that, Mr Kirsten accepts that the question is not so much the value of the shares but who held the shares as trustee for the Ombrel Trust. Mr Kirsten also observes that the value of the Ombrel Trust is unknown.

52    In the course of submissions, Mr Kirsten referred to, amongst other things, an email sent on 6 August 2009 by the deceased to his father and a person named “Donovan” which reads:

Hi Dad & Donovan,

One outstanding question regarding corporate structure. For Donovan’s benefit I will quickly outline what that is.

We have a trust set up – Ombrel Trust, for which the trustee is Ombrel Pty Ltd.

Ombrel Trust is then 99% shareholder in Ombrel Pty Ltd, with myself having 1%.

Further companies are set up in the same manner – Ombrel Trust 99%, Detlef 1%.

So the structure is thus:

Ombrel Pty Ltd – Ombrel Trust – Other Companies.

Ombrel Pty Ltd will not conduct any trading of its own, only the other companies will.

Financial transactions will occur in the name of the Ombrel Trust.

The question I have is does this constitute a company group?

Does this mean the companies lodge a joint tax return?

From a legal perspective – if one of the trading companies were sued for whatever reason, having such a structure would that allow legal pursuit of either Ombrel Trust, Ombrel Pty Ltd, or other associated companies?

Regards,

Detlef

53    Mr Kirsten points to this email as demonstrating the difficulty in reaching any conclusions in the absence of a trial. So much so may be accepted however the email, whilst ambiguous, nonetheless must be seen in light of the deceased’s Will in which he lists, at paragraph 8, that his assets include “100% shareholding … in Ombrel Pty Ltd which acts as Trustee for the Ombrel Trust, …” and the binding financial agreement.

54    Mr Kirsten submits that the correspondence is indicative of a position taken by him that he was seeking disclosure of the 99 Ombrel shares in the statement of assets and liabilities and/or a Registrar’s Certificate at which time he would do what needed to be done. In support of that submission, Mr Kirsten observes that following the orders of Stein J on 3 June 2023, once the Registrar’s Certificate had been issued, Mr Kirsten proceeded to register the transmission of the Ombrel shares.

55    Mr Kirsten submits a review of the correspondence and a chronology of what occurred between the parties reveals a willingness on his part to co-operate and points to what it describes as the aggressive nature of the plaintiff’s solicitors correspondence. Mr Kirsten also submits that there has not been a refusal to transmit in circumstances where there was an alternative Register of Members and that his attitude shows he acted reasonably. He submits he did not capitulate.

56    Mr Kirsten also refers to what is common ground between the parties which is that in December 2022, the parties reached a compromise, however it was not approved by the Supreme Court of South Australia with the result that the proceedings re-commenced. That is drawn to the Court’s attention to explain some of the delay in these proceedings.

57    Mr Kirsten submits that credit would have been an issue if the matter had proceeded to trial and that there was no certainty, had this matter proceeded, what the result would have been. It submits that the Court cannot simply look to the declarations sought in isolation but needs to look at the specific relief sought in conjunction with the overall relief sought in the proceedings. In that context, the declarations formed only part of the relief sought and the orders seeking the registration of the transmission of the shares (orders 4.2 and 4.3 of the originating process) had resolved on the basis that the parties would bear their own costs.

58    Mr Kirsten submits that his position, as revealed by the correspondence, was that he could not act in good faith notwithstanding a grant of Probate in circumstances where the Ombrel shares had not been disclosed in the statement of assets and liabilities.

Principles

59    Mr Kirsten referred to Hamilton v JJR Investment Holdings Pty Ltd and Ors [2023] SASC 40 in which Stein J considered an application for costs in a complex matter involving corporate Trustees and orders for the removal of Trustees and appointment of new Trustees. Shortly before the trial was due to commence, the parties agreed orders. The plaintiffs sought costs on the basis that there had been, in effect, a capitulation.

60    Although her Honour considered that a binding settlement had been reached which precluded the application for costs (which is not the case here insofar as the declarations to which I have referred were sought), nonetheless her Honour determined that absent a trial it was not possible to determine whether the applicants would almost certainly have succeeded nor to address the respective reasonableness of the parties. Her Honour considered there was no relevant capitulation or surrender.

61    In considering the matter, her Honour referred: at [136] to Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194, where after considering a line of authorities, Hill J set out a number of propositions that apply when considering an application for costs in circumstances where there has been no trial of the merits: at p 201.

These cases seem to me to support the following propositions being made:

(1)    Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a cost order: Stratford and the SEQEB case.

(2)    It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial: Stratford. This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue.

(3)    In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them: SEQEB.

(4)    In a particular case it might be appropriate for the Court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation: cf Sunday Times Newspaper Co Ltd v McIntosh (1933) 33 SR (NSW) 371.

(5)    Where the proceedings terminate after interlocutory relief has been granted, the Court may take into account the fact that interlocutory relief has been granted: cf Re Asiatic Electric Co Ply Ltd [1973] NSWLR 603 at 606, a case which, however, depended upon the specific wording of the statute under consideration.

62    In Re-Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622, 624- 65 McHugh J said:

In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extracurial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation …

Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare.

If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.

(Footnotes removed)

63    Having referred to both Aust-Home and Lai Qin, Stein J proceeded to consider a number of authorities dealing with the concept of capitulation: at [139]-[162].

64    In ONE.TEL Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548, Burchett J considered that although there had been no settlement, because the respondent had encountered evidentiary difficulties and had accepted that notices issued by the respondent should be set aside, under those circumstances the applicants had succeeded and awarded costs in their favour.

65    In Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84; (2018) 97 NSWLR 681, [3]-[9] Basten JA observed that although it may be possible to identify success which is manifested on the face of the record and that it may appear that a party has readily capitulated, nonetheless if one party commences litigation by manufacturing a dispute, it cannot expect to recover the costs of obtaining orders which would not, in any event, have been opposed.

66    Unsurprisingly, a common theme in the authorities to which Stein J referred in Hamilton is that each case will depend on its own particular circumstances as to whether or not the discretion to award costs in favour of a particular party is exercised in circumstances where no trial on the merits occurs.

67    On the basis of Aust-Home and Lai Qin, it is clear that in the absence of a trial on the merits, the usual position is that absent some compelling reason, such as for example the unreasonable conduct of a party in prosecuting or resisting litigation, there should be no order as to costs. Further, although capitulation or surrender is a factor to be taken into account, it is not a stand-alone basis for an award of costs given there may be a number of reasons why capitulation or surrender occurs, including, as Basten JA observed in Nichols, the manufacturing of a dispute.

68    The plaintiff submitted that the normal rule is costs follow the event and that the declarations sought as to the correct Register of Members was a relevant “event” in the sense it was a particular issue on which it would have succeeded at trial: Nicholls v Michael Wilson & Partners (No 2) [2013] NSWCA 141, [13] (Sackville AJA); Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304, [38] (Beazley, Ipp and Basten JJA).

Consideration

69    At the outset, I note that on 17 July 2020, Mr Kirsten specifically raised s 1072G of the Act which, although it had been replaced by cl 4 of Ombrel’s Constitution, provides that “The directors of a proprietary company may refuse to register a transfer of shares in the company for any reason.” It remains unclear why Mr Kirsten would refer to s 1072G if he was willing to co-operate, however in the absence of a trial on the merits I attribute no weight to this factor.

70    I make no finding as to how the Kirsten-Ombrel Register came into existence, however a number of matters persuade me that Mr Kirsten’s conduct in defending proceedings was unreasonable and that this is one of those cases where I am confident the plaintiff would almost certainly have succeeded in her claim for declarations.

71    First, there was no mention by Mr Kirsten of the Kirsten-Ombrel Register until 31 July 2020.

72    Second, the transfer recorded in the Kirsten-Ombrel Register was a legal impossibility: ss 259A and 259B of the Act. That fact should have been made clear to Mr Kirsten at the earliest opportunity by those advising him which should have put him on notice that the plaintiff was almost certain to succeed in her application for declarations.

73    Third, on 15 December 2021, the plaintiff filed a genuine steps statement setting out the steps the plaintiff had undertaken concerning requests for the registration of the transmission of the shares the subject of the proceedings. Those requests also involved the issue of which Register of Members was the correct register. The plaintiff’s solicitors wrote letters on these issues to Mr Kirsten and/or Ombrel dated 3 July 2020, 16 July 2020, 23 July 2020, 10 August 2020 and 24 November 2020.

74    Fourth, on 19 November 2021, Besanko J ordered the defendants to prepare and provide to the plaintiff a statement of their defences for the purpose of inclusion in a statement of issues and that the plaintiff prepare and serve on the defendants a statement of issues by 4.00pm on 1 December 2021. The statement of defences included within the statement of issues that was filed contains the following:

8.    The Defendants deny that the Plaintiff is entitled to the relief sought in paragraphs 1 to 3 of the Originating Application, on the basis that:

8.1    The Kirsten Ombrel Register of Members, described in the Miller affidavit, is the true register of members of the Fifth Defendant;

8.2    The Fifth Defendant is registered in the Kirsten Ombrel Register of Members as the holder of the 99 Ombrel Shares described in the Miller affidavit.

9.     The Defendants deny that the Plaintiff is entitled to the relief sought in paragraph 4 of the Originating Application, on the basis that the First Defendant’s refusal or failure to register the transfer or transmission of the Shares, described in paragraph 4 of the Originating Application, was not without just cause as:

9.1    the Shares are required to be disclosed under s 121A of the [Administration and Probate Act 1919 (SA)] but have not been disclosed or alternatively, the Plaintiff’s attempted disclosure has been incomplete or incorrect;

9.2     pursuant to s 44(1) of the [Administration and Probate Act], the First Defendant has not been able to satisfy himself by examination of a Registrar’s certificate, or on the basis of some other reliable evidence, that the Shares have in fact been disclosed under s 121A of the [Administration and Probate Act], such that if he had transferred or transmitted the Shares, he would have committed an offence under s 44(2) of the [Administration and Probate Act];

9.3     further, or in the alternative, as for the 99 Ombrel Shares referred to in paragraph 4.3 of the Originating Application, the Fifth Defendant [Ombrel] is registered in the register of members as the holder of those shares.

(Square brackets provided)

75    It can be seen that in [8] of the statement of issues, Mr Kirsten, as the sole director of Ombrel, took the position that the Kirsten-Ombrel Register was the true Register of Members of Ombrel and that Ombrel was registered as the holder of 99 Ombrel shares. It was not until the trial of this matter was imminent that Mr Kirsten abandoned this position.

76    As to the matters in [9.1] of the statement of issues concerning the requirement to disclose under s 121A of the Administration and Probate Act. Section 121A(1) provides:

A person who applies—

(a)    for probate or administration; or

(b)    for the sealing of any probate or administration granted by a foreign court,

in respect of the estate of a deceased person shall, in accordance with the rules, disclose to the Court the assets and liabilities of the deceased person known to him at the time of making the application.

77    I accept there was an issue as to whether it was necessary to declare the Ombrel shares in the statement of assets and liabilities to be provided with the application for Probate or subsequently. That is connected directly to the issue of ownership of the 99 shares.

78    As I have already noted, since Mr Kirsten was insisting on a Registrar’s Certificate before he would register the transmission of the shares, the plaintiff applied to the Supreme Court of South Australia for a direction that the Registrar of Probates issue a Certificate.

79    In any event, it was in an attempt to resolve the impasse over the ownership of the 99 Ombrel shares that the application to the Supreme Court of South Australia was made and which led to the consequent direction by Stein J in, In The Estate of Kirsten (deceased) [2018] SASCA (PROB-19-003379), unpublished.

80    The matters in [9.2] of the statement of issues refer specifically to ss 44(1) and (2) of the Administration and Probate Act. It seems Mr Kirsten was concerned about committing an offence under s 44 of the Administration and Probate Act which provides:

44—Obligation of person dealing with asset to ensure that it has been properly disclosed

(1)    A person who deals with an asset of the estate of a deceased person that is required to be disclosed under section 121A must satisfy himself by examination of the Registrar's certificate, or on the basis of some other reliable evidence, that the asset has in fact been so disclosed.

(2)    A person who fails to comply with subsection (1) shall be guilty of a summary offence and liable to a penalty not exceeding two thousand dollars.

(3)    This section does not apply to an asset of the estate of a deceased person who died before the day on which section 121A came into operation.

81    The issue seemed to be that:

(1)    A person who deals with an asset of the estate of a deceased person that is required to be disclosed under s 121A must satisfy himself by examination of the Registrar's Certificate, or on the basis of some other reliable evidence, that the asset has in fact been so disclosed; and

(2)    A person who fails to comply with subs (1) is guilty of a summary offence and liable to a penalty not exceeding two thousand dollars.

82    Mr Kirsten contended that if he had transferred or transmitted the shares, he would have committed an offence under s 44(2). There is an issue as to whether by registering the transmission of the 99 Ombrel shares to the plaintiff, Mr Kirsten would have been dealing with an asset of the estate of the deceased contrary to s 44(1). Accepting for the moment that by transmitting the 99 Ombrel shares Mr Kirsten was dealing with an asset of the deceased’s estate and that the 99 Ombrel shares were required to be disclosed under s 121A, the requirement in s 44(1) is that Mr Kirsten was required to satisfy himself either on the basis of the Registrar’s Certificate or on the basis of some other reliable evidence that the asset had, in fact, been so disclosed.

83    Two things may be said about that defence. First, Mr Kirsten was dealing with the Executor of the deceased estate. He was also aware of an application to the Registrar of Probates for the issue of a Registrar’s Certificate in relation to the 99 Ombrel shares and was represented by counsel before Stein J but, it would seem, took no active part in the proceedings.

84    There was no basis upon which Mr Kirsten could have been satisfied that the 99 Ombrel shares had not been disclosed in the absence of a Registrar’s Certificate, if for no other reason the plaintiff had taken the matter before the Registrar of Probates and had issued the application which was heard by Stein J. Accordingly, Mr Kirsten’s reliance on s 44 as a basis to refuse to register the transmission of the 99 Ombrel shares to the plaintiff because it was not disclosed as an asset of the estate (and therefore the issue of ownership of the shares resolved) was misconceived. The only basis upon which the absence of the Ombrel shares from the statement of assets and liabilities could have formed an issue for Mr Kirsten was if there was a competing interest in those shares.

85    The position is put beyond doubt by the matters in [9.3] of the statement of issues where Mr Kirsten states positively that Ombrel is registered in the Kirsten-Ombrel Register as the holder of 99 Ombrel shares. That competing interest was not only doomed from a legal perspective, it was a position which was abandoned immediately prior to trial.

86    Counsel for Mr Kirsten accepted in his submissions that there was no doubt Mr Kirsten was fully cognisant of the affairs of the deceased and Ombrel, amongst other companies, because he had been appointed a director of Ombrel in November 2018. Under those circumstances the only conceivable basis for Mr Kirsten’s position was a contest over the true ownership of the 99 Ombrel shares.

87    Second, by registering the transmission of the 99 Ombrel shares, Mr Kirsten is likely to have been protected by ss 43(2) and (3) of the Administration and Probate Act. Once again, putting aside the question whether by transmitting the 99 Ombrel shares Mr Kirsten was dealing with the assets of the deceased’s estate, ss 43(2) and (3) provide:

(2)    Subject to this Act, where a person, acting in good faith and in reliance on probate or administration granted under this Act, deals with an asset of the estate of a deceased person, he incurs no personal liability by so doing notwithstanding that the probate or administration may subsequently prove to be invalid or be revoked or rescinded.

(3)    This section does not affect the rights that may lie against any person to whom property has been invalidly transferred, or to whom a payment has been invalidly made, by an executor or administrator.

88    None of the parties had turned their minds to s 43. Counsel for Mr Kirsten submitted that s 43(2) creates an immunity to an Executor who acts in good faith and in reliance on Probate to deal with an asset. I do not accept that submission. In my view, s 43 applies not only to a person who has been granted Probate or Letters of Administration but also a person who upon being shown Probate or Letters of Administration acts in good faith and in reliance upon those grants. So much so is apparent from s 43(1) which provides:

(1)    The revocation or rescission of probate or administration granted under this Act does not render the executor or administrator liable for any prior act done by him in good faith and in reliance on the probate or administration.

89    If s 43(2) is limited to an executor or administrator, there would be no need for s 43(1). Further, s 43(2) does not refer to an executor or administrator but a “person”. Had the intention of the legislature been to limit s 43(2) to an executor or administrator, it would have been simple to say so. In any event, whether my interpretation of s 43(2) is correct or not, once again, the only conceivable basis for Mr Kirsten’s position was a contest over the true ownership of the 99 Ombrel shares, a position he ultimately conceded.

90    Mr Kirsten insisted upon formal steps being taken which, in all the circumstances, had no practical value. Notwithstanding his contentions concerning s 44 of the Administration and Probate Act, I do not consider that to have been a valid concern, if for no other reason than that it was always open to him to obtain an acknowledgement from the plaintiff that she was proceeding on the basis of the grant of probate naming her as Executor of the deceased’s estate.

91    Further, there was no other party other than Ombrel itself through Mr Kirsten challenging the ownership of the 99 Ombrel shares, which as I have noted was doomed to fail given s 259A of the Act.

92    In these circumstances, I consider Mr Kirsten capitulated at the last moment.

93    In short, these proceedings were a triumph of form over substance and were only necessary because of what I consider to be the unreasonable actions taken by Mr Kirsten in relation to the ownership of the 99 Ombrel shares. In my view, the plaintiff was almost certain to be successful in her application and it is because of Mr Kirsten’s unreasonable actions, which were taken without just cause, that the estate and Mr Kirsten have been put to unnecessary expense, including the retaining of senior counsel on both sides.

94    As I have noted, the issue over the transmission of shares the subject of paragraph 4 in the originating process was resolved with each party bearing their own costs and the transmission of the Ombrel shares to the plaintiff was registered. Nonetheless, utility remained in obtaining the declarations to ensure that there was no issue raised subsequently about the ownership of the 99 Ombrel shares.

95    Since the proceedings dealt with a number of matters involving companies other than Ombrel. I consider Mr Kirsten should pay part of the plaintiff’s costs on a party-party basis which I fix at 40%.

Conclusion

96    There will be an order that Mr Kirsten pay 40% of the plaintiff’s costs of and incidental to the proceedings on a party-party basis with such sum to be assessed as a lump sum by a Registrar of the Court in the absence of agreement.

Associate:

Dated:    29 August 2023

SCHEDULE OF PARTIES