7.15 Mr Boskovitz also stated that ' our retainer regarding the winding up proceedings have been terminated ' but that ' we will continue to act for the company in other respects until it is wound up '."
5 Final orders were then made on 2 February 2009 as previously stated.
6 Sanum-Kehlbeck's application for an order that Dr Seeger pay its costs of the proceedings is based on certain aspects of the power to award costs against a non-party saved by rule 42.3.2 of the Uniform Civil Procedure Rules 2005 from the operation of the prohibition in rule 42.3.1 upon the making of an order for costs against a person who is not a party. Rule 42.3.2 says that rule 42.3.1 does not limit the power of the court to make orders within particular categories. The categories upon which Sanum-Kehlbeck relies are:
"(c) to make an order for payment, by a person who has committed contempt of court or an abuse of process of the court, of the whole or any part of the costs of a party to proceedings occasioned by the contempt or abuse of process, or"
"(d) to make an order for costs against a person who purports, without authority, to conduct proceedings in the name of another person"
7 It is accepted that there is no general jurisdiction to award costs against a non-party and that such an order can be made solely by reference to the categories in rule 42.3.2: Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2008] NSWCA 283.
8 Sanum-Kehlbeck places particular emphasis on rule 42.3.2(c) and the proposition that Dr Seeger committed an abuse of process. The particular species of abuse said to be involved is that identified by Sheller JA in Carson v Legal Services Commissioner [2000] NSWCA 308, by reference to observations of Mason CJ, Deane J and Dawson J in Walton v Gardiner [1993] HCA 77; (1993) 177 CLR 378, where it was said that proceedings will constitute an abuse of process if they can be clearly seen to be foredoomed to fail; and this is so regardless of the propriety of the purpose of the person responsible for the institution and maintenance of the proceedings. A "plainly unarguable" and "futile" test was adopted by the Court of Appeal in Lemoto v Able Technical Pty Ltd [2005] NSWCA 153; (2005) 63 NSWLR 300 in its discussion of circumstances in which a plaintiff's legal practitioner might be ordered to pay a defendant's costs. The impropriety relevant to abuse of process lies in the knowing pursuit of a claim that simply cannot succeed.
9 There is no reason to doubt that the same thinking holds good when the conduct in issue is that of defending rather than attacking. A person who knowingly maintains a defence against the obviously indefensible thereby commits an abuse.
10 I am not satisfied, however, that an abuse of process of this kind was committed. Genuine issues of standing were raised by the notice of appearance referred to at paragraph 7.9 of Mr Harding's submissions, quoted above. Those issues were determined in favour of Sanum-Kehlbeck on 15 December 2008 when White J found that it was Sanum-Kehlbeck, not Mr Reiner Kehlbbeck, that was the 51% shareholder. Despite what is said at paragraphs 6.11 and 6.12 of Mr Harding's submissions, White J's judgment proceeded on the basis that the question concerning the 51% shareholding was whether it was Sanum-Kehlbeck or Mr Kehlbeck, that held those shares; there was no suggestion that Dr Seeger was, in the proceedings, seeking to establish that he held those shares.
11 Once the question of standing had been determined by White J favourably to Sanum-Kehlbeck, as plaintiff, Sanum Australia, having filed a notice of appearance and grounds of opposition in court before that determination was made, did not seek to defend the winding up application. After the question of standing had been resolved adversely to it and an interlocutory regime had been put in place, Sanum Australia, as defendant, took no step until 15 January 2009 when its solicitor indicated that it would not oppose the making of a winding up order.
12 It is thus clear that the only opposition Sanum Australia actually offered was on the standing question, as to which the judgment of White J makes it clear that there was a genuine question to be determined. Once it had lost that argument, Sanum Australia effectively capitulated.
13 There is thus no basis for concluding that Sanum Australia knowingly maintained a defence against the obviously indefensible. There would accordingly be no basis for the making of a costs order against Mr Seeger under rule 42.3.2(c), even if were shown that it was he who instructed Mr Boskowitz on behalf of Sanum Australia.
14 In view of the conclusion just stated, it is not necessary, in the rule 42.3.2(c) context, to decide whether it was Dr Seeger who purported to instruct Mr Boskowitz on behalf of Sanum Australia. The point is, however, of significance to the rule 42.3.2(d) aspect to which I must now turn. I therefore record my conclusion it was Dr Seeger who purported to instruct Mr Boskowitz on behalf of Sanum Australia. There are two reasons for this. First, it is impossible to identify anyone else who might have done so. Second, Mr Boskowitz, in the course of a telephone conversation with Sanum-Kehlbeck's solicitor in January 2009, was asked who was instructing him in the proceedings and replied:
"Dr Seeger is sitting next to me."
15 The question posed by rule 42.3.2(d) is whether Dr Seeger purported, without authority, to conduct proceedings in the name of Sanum Australia.
16 There were, at all material times, two directors of Sanum Australia, Mr Kehlbeck and Dr Seeger; and this was so despite the filing with ASIC in October 2008 of notification that Dr Seeger had become the sole director. It may be accepted that a resolution of directors was necessary in order to cause a solicitor to be retained by Sanum Australia for the purpose of appearing in response to Sanum-Kehlbeck's originating process and filing a notice of appearance.
17 Regard must be had to the substantial reality of this litigation. Although it was, in form, a claim by Sanum-Kehlbeck for an order for the winding up of Sanum Australia, it was, in reality, a dispute between Mr Kehlbeck on the one hand and Dr Seeger on the other about control of Sanum Australia. Neither individual was a party to the proceedings but, in the particular circumstances, Dr Seeger was the only person who could cause Sanum Australia to defend or, at least, put Sanum-Kohlbeck to proof. In addition, the position that defence of the proceedings sought to protect was that which White J held did not exist, that is, that Sanum-Kehlbeck was not a shareholder in Sanum Australia and therefore had no standing to initiate winding up proceedings.
18 It is, to my mind, clear that Dr Seeger set Sanum Australia in motion to defend Sanum-Kehlbeck's winding up application as a means of seeking to retain and assert his own dominion over Sanum Australia - that he was the "real party" as referred to by Mason CJ and Deane J in Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178 at 190 and that the defence he mounted ostensibly for Sanum Australia was really a defence of his own position and own interests engaged in, as it had to be, through and in the name of Sanum Australia.
19 Ms Merkel submitted on behalf of Dr Seeger that he was, in effect, acting for the company in the same way as if leave under s 237 of the Corporations Act 2001 (Cth) had been granted to him and that the absence of that leave was, in substance, a procedural irregularity. There is some merit in that submission, but acceptance of the analogy would carry with it an assumption that any leave granted would very likely have been on the usual terms that the person granted leave protect the company against costs unless and until, in the light of the outcome, it is seen appropriate that those costs be an impost on the company's own financial resources. The reality of the situation, as it seems to me, is that Dr Seeger appropriated to himself a position that, had it been formally sought and granted, would almost certainly have put him at risk personally as to the company's costs.
20 The nature of these proceedings as, in substance, a dispute between Mr Kehlbeck and Dr Seeger in which Sanum Australia, at the instigation of Dr Seeger, argued the case that Dr Seeger would have argued had he been a party (being, in any event, a case that served his interests to the exclusion of those of his co-shareholder), coupled with the factual finding about how Mr Boskowitz came to be retained and instructed, leads me to conclude that the case is within the rule 42.3.2(d) description.
21 I am satisfied, therefore, that it is open to the court, as a matter of discretion, to order that Sanum-Kohlbeck's costs be paid by Dr Seeger. If Sanum Australia were ordered to pay Sanum-Kahlbeck's costs, the financial burden would fall as to 49% on Dr Seeger and 51% on Sanum-Kohlbeck itself, so that the effective recovery would be as to 49% only. That is enough to cause me to think that the discretion should be exercised and Dr Seeger should be made to bear 100%.
22 There is then the question whether it should be ordered that costs be assessed on the indemnity basis. I am of the opinion that no sufficient basis for such an order has been shown. There was a genuine issue as to the identity of the 51% shareholder. That was determined by White J in favour of Sanum-Kaklbeck. Thereafter, as I have said, Sanum Australia effectively capitulated. I do not discern in this any delinquency of the kind that must be found to warrant assessment on the indemnity basis.
23 In the result, therefore, it is ordered that Dr Hilbert Seeger pay the plaintiff's costs of the proceedings as a whole, such costs to be assessed on the party/party basis.
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