Australian Prudential Regulation Authority v Holloway

Judgment 1I delivered judgment on 8 February 2013 in respect of proceedings by which the Plaintiffs, the Liquidators ("Liquidators") of Employ (No 96) Pty Limited (in liq) ("Employ 96") and Employ 96 sought orders under s 588FF of the Corporations Act 2001 (Cth) in respect of certain transactions made by Employ 96. 2In summary, I held that two payments made on 5 April 2007 and 1 May 2007 by Employ 96 to DVT Services (NSW) Pty Limited ("DVT Services") were unfair preferences for the purposes of s 588FA of the Corporations Act. I held that a series of payments between 8 May and 13 August 2007 were not preferences for the purposes of s 588FA of the Corporations Act and that a final payment made on 13 August 2007 was an unfair preference for the purposes of s 588FA of the Act. I also held that payments made after 1 May 2007, under an agreement which provided for DVT Services to charge for work performed at double its usual rates, were uncommercial transactions for the purposes of s 588FB of the Corporations Act, and expressed the preliminary view that DVT Services should be ordered to repay half of the amount it received in respect of services provided in that period, so that it and Employ 96 were placed in the position they would have been had services been provided to Employ 96 on DVT's usual commercial terms. 3The Plaintiffs also brought proceedings against Mr de Vries and Mr Tayeh, who conducted business through a partnership known as de Vries Tayeh ("Partnership"), as well as against DVT Services. I held that Employ 96 and DVT Services were parties to the relevant transactions and the Partnership (and hence Mr de Vries and Mr Tayeh personally) were not party to those transactions. I also held that, were it necessary for them to do so, Messrs de Vries and Tayeh would have established defences under s 588FG(1)(a) of the Corporations Act so as to avoid orders being made against them personally under s 588FF of the Corporations Act. I indicated that I would hear the parties as to the orders to be made to give effect to the judgment and as to costs. 4The parties ultimately reached agreement as to the form of orders that should be made to give effect to the judgment other than in respect of costs and I will make those orders. Each of the parties has provided further written submissions and relied on further evidence in respect of the question of costs and I heard further oral argument as to costs. The Plaintiffs contend that DVT Services should be ordered to pay their costs of the proceedings against it on an ordinary basis until 19 January 2011 and thereafter on an indemnity basis; and that the proceedings brought by the Plaintiffs against Messrs de Vries and Tayeh should be dismissed on the basis that each of the Plaintiffs and Messrs de Vries and Tayeh pay their own costs of the proceedings. On the other hand, the Defendants contend that DVT Services should be ordered to pay 75% of the Plaintiffs' costs as agreed or as assessed and also sought an order that the Plaintiffs pay the costs of Messrs de Vries and Tayeh as agreed or assessed on the basis they were two-thirds of the total costs of the Defendants. Applicable principles 5The Plaintiffs drew attention to well-established principles in respect of an order for costs, and the Defendants did not take issue with the substance of those principles although the result of their application in the circumstances was in dispute. The Defendants submit that the application of the ordinary rule as to costs would lead to the result that the Plaintiffs would obtain an order for payment of their costs by DVT Services, and the Plaintiffs would be ordered to pay Messrs de Vries' and Tayeh's costs of the proceedings. 6Section 98 of the Civil Procedure Act 2005 (NSW) relevantly provides that: "Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court; and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis." Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) in turn provides that, where the Court makes an order as to costs, the Court is to order that costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs. 7The principles underlying an award of costs include that costs are awarded to compensate the successful party for the expense of being put to the necessity of litigation; a wholly successful defendant should ordinarily receive its costs unless good reason is shown to the contrary; and the discretion to order costs must be exercised judicially and not against the successful party except for some reason connected with the proceedings: Milne v Attorney-General (Tasmania) (1956) 95 CLR 460 at 477; Oschlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 97-98 per McHugh J, at 129-123 per Kirby J; Ruddock v Vardalis (No 2) [2001] FCA 1865; (2001) 115 FCR 229 at 234. In Howard's Storage World Pty Ltd v Haviv Holdings Pty Ltd [2010] FCAFC 5; (2010) 182 FCR 84, Gray J observed at [17] that: "The overriding principle that costs are in the discretion of the court can also be expressed in terms of the negative proposition that no rule or principle should be applied mechanically in the determination of the question where costs should lie in any particular case. Attention must always be paid to the particular circumstances of the individual case. The aim is to do substantial justice in relation to costs, based on the outcomes of the various issues in the proceeding, as between the entities that are parties to that proceeding." 8In particular, the Plaintiffs point out the Court may limit the costs awarded to a party, or not award costs to that party, if its conduct has obscured the issues, caused unnecessary evidence to be led and inappropriately prolonged proceedings and increased their cost: Capolinguia v Phylum Pty Ltd (1991) 5 WAR 137; Coombes v Registrar of Aboriginal Corporations (No 2) [2008] FCA 1078 at [34] 9In some circumstances, it will also be appropriate to make an adjustment as to the order for costs where a plaintiff is successful against one defendant and not successful against other defendants. In Currabubula Holdings Pty Ltd v State Bank of New South Wales [2000] NSWSC 232, Einstein J dealt with the position of multiple parties, some successful and others unsuccessful, and referred (at [95]) to the "rule of thumb" that is designed: "... to achieve substantial justice in the awarding of costs as between a partially successful plaintiff and variously successful and unsuccessful defendants. The rule operates upon the premise that defendants are proportionately responsible for and liable for the joint costs involved in mounting the defence. Thus, a successful defendant cannot claim from the plaintiff more than a proportionate share of the joint costs of the action in addition to any costs separately referable to that defendant. Conversely, the partially successful plaintiff is prevented from looking to each of the unsuccessful defendants for more than an equal proportionate share of the costs not solely referable to the plaintiff's case against one or other of the defendants individually, in addition to the costs which are so referable. In this way, the rule of thumb prevents both the unjust enrichment of the partially successful plaintiff or successful defendant and the casting of an unfair burden on the unsuccessful defendants. Where the premise is falsified or the rule does not achieve its intended effect, it finds no application." 10On the other hand, his Honour noted an example where the premise of that rule was falsified or it would not achieve its intended effect in Korner v H Korner & Co Ltd [1951] Ch 10, where seven of eight defendants had succeeded on issues that were not the substantial issue in the action and it would be unjust that they recover seven-eights of the total costs incurred by the defendants in defence of the action. His Honour also observed at [106] that: "[t]he purpose of the rule of thumb, applied to the case of multiple, variously successful and unsuccessful defendants, is to prevent a plaintiff who has only been partially successful, from being unjustly enriched and to prevent unsuccessful defendants from being unfairly burdened by the thrusting onto them of the whole of the plaintiff's costs, not referable to the action against one or other defendants." 11In King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No 2) [2009] NSWCA 204 at [35], Young JA (with whose judgment Hodgson and Campbell JJA agreed) referred to the rule of thumb and observed that Currabubula "does seem inconsistent with mainstream authority", but the Court did not overturn that decision. The principles in Currabubula were subsequently cited with approval by the Full Court of the Federal Court in Howard's Storage World Pty Ltd v Haviv Holdings Pty Ltd, and by the Court of Appeal of the Supreme Court of Victoria in Chen v Chan [2009] VSCA 233 at [10] and by the Court of Appeal in Wardle v Agricultural and Rural Finance Pty Ltd; Agricultural and Rural Finance Pty Ltd v Brakatselos (No 2) [2012] NSWCA 388 at [46]-[47] (per Campbell JA, with whom Barrett JA and Sackville AJA agreed). 12The relevant principles were summarised by the Court of Appeal of the Supreme Court of Victoria in Chen v Chan above at [10] as follows (omitting footnotes): "1. The general rule is that costs should follow the event. Absent disqualifying conduct, the successful party should recover its costs even where it has not succeeded on all heads of claim. ... 3. Where there is a multiplicity of issues and mixed success has been enjoyed by the parties, a court may take a pragmatic approach in framing the order for costs, taking into consideration the success (or lack of success) of the parties on an issues basis. Generally, if such an order is made, it is reflected in the successful party being awarded a proportion of its costs but not the full amount. 4. A court may, when fixing costs in a claim where there has been mixed success, take into account complications which it considers will arise in the taxation of costs, as part of its consideration of the overall interests of justice. 5. Where a court determines to make an order apportioning costs, then it does so primarily as "a matter of impression and evaluation," rather than with arithmetical precision, having considered the importance of the matters upon which the parties have been successful or unsuccessful, the time occupied and the ambit of the submissions made, as well as any other relevant matter. 6. Where a number of parties have had the same representation, there is a "rule of thumb" as to the apportionment of costs, namely that, where some of those parties have been successful and others have not, each successful party is only entitled to his or her proportion of the costs incurred on behalf of all, plus the costs, if any, incurred exclusively on his or her behalf. The primary issue for determination in such a case is that of fairness as between the parties, having regard to the manner in which the trial, or appeal, has been conducted." The claim against DVT Services 13The basis of the Plaintiffs' claim for costs against DVT Services is straightforward, namely that it has succeeded against DVT Services so as to support a costs order on an ordinary basis in accordance with the principle in r 42.1 that costs should follow the event. 14The Defendants submit that an order that DVT Services pay the Plaintiffs' costs of the proceedings would give rise to an injustice against it, where the issue of whether Messrs de Vries and Tayeh were party to the transactions and the defence raised by them under s 588FG(1)(a) of the Corporations Act was not relevant to DVT Services. I accept that DVT Services not should be required to pay the costs of issues as to which it had no interest. The Defendants submit that there should be a percentage reduction in the costs for which DVT Services is made responsible to reflect those issues and propose a reduction of 25% in respect of those issues. 15Had it been necessary to determine the matter, I would not have adopted the percentage reduction of 25% for which the Defendants contend. As I noted in my primary judgment, a significant difficulty arose in the proceedings (to which I will also refer below) by reason of the form in which documents were produced by the Defendants and the manner in which they were described in Mr Tayeh's evidence, which described documents produced as "true copies" where they had been produced from computer records at a later date, and intervening systems changes had altered information as to the issuer appearing on them. I observed (in paragraph 18 of my primary judgment) that the determination of the parties to the transaction was made more difficult and the hearing lengthened by these matters. I would therefore have reduced any discount to the costs recovered by the Plaintiffs in respect of the claim against DVT Services so as to require DVT Services (jointly and severally with Messrs de Vries and Tayeh) to bear the wasted costs that arose from these matters. 16Mr Henry, who appears for the Plaintiffs, resisted the application of such a reduction and submitted that, although fixing a percentage of costs was not to be embarked upon in a pedantic way, there is difficulty in fixing a fair percentage in the circumstances of this case given the interrelationships of the Defendants and the substantial nature of the costs incurred with respect to the other issues raised by the Defendants. He submits that the order for costs that the Plaintiffs seek against DVT Services does not involve any question of costs of the question whether Messrs De Vries and Tayeh were party to the relevant transaction (and, specifically, the costs of the defence raised by Messrs de Vries and Tayeh under s 588FG(1)(a) of the Corporations Act in respect of this issue) because that matter was not in issue as between the Plaintiffs and DVT Services. That submission is logically correct where it was common ground between the parties that DVT Services was party to the relevant transactions, although it would necessarily have the practical consequence that the parties would have to be left to a costs assessment or to reach agreement so as to exclude the costs attributable to the question whether Messrs De Vries and Tayeh were party to the relevant transaction and the defence under s 588FG(1)(a) of the Corporations Act. 17I would have been prepared to fix such a percentage reduction, so as to save the parties the costs of assessment by issue so as to exclude costs not referable to the claim against DVT Services, had that course not been opposed by the Plaintiffs. However, I do not consider that, given the uncertainties to which Mr Henry refers, I should fix such a percentage reduction over the Plaintiffs' opposition. I will, in these circumstances, order that that DVT Services pay the Plaintiffs' costs of the proceedings against it without such a percentage reduction. I should make clear, for the assistance of any costs assessor who is ultimately required to assess those costs, that those costs do not include the costs referable only to the issue of whether Messrs de Vries and Tayeh were party to the transactions and the defence raised by Messrs de Vries and Tayeh under s 588FG(1)(a) of the Corporations Act, which were not part of the case brought by the Plaintiffs against DVT Services. The Plaintiffs' application for indemnity costs after 19 January 2011 18The Plaintiffs rely, in support of an application for indemnity costs after 19 January 2011, on the fact that they served an offer of compromise under UCPR r 20.26 on that date, which provided for the Defendants to pay $195,000 exclusive of costs within 28 days, and that offer was not accepted by the Defendants. Rule 42.14 of the UCPR provides that, if a plaintiff makes an offer of compromise under r 20.26 which is not accepted by the defendant and the plaintiff obtains an order or judgment no less favourable than the terms of the offer, the defendant is to pay the plaintiff's costs on the ordinary basis up to and including the day of the offer and thereafter on an indemnity basis, unless the Court orders otherwise. 19The Plaintiffs contend that they have secured a more favourable outcome in the proceedings against DVT Services than that contained in the offer of compromise and that, by reason of UCPR r 42.14, DVT Services should pay the Plaintiffs' costs of the proceedings against it from 20 January 2011 on an indemnity basis. The amount recoverable by the liquidator against DVT Services, as agreed between the parties, exceeds the amount specified in the offer of compromise. However, the Defendants contend that the Plaintiffs' offer of compromise does not attract the operation of UCPR r 42.14 since it cannot be said that the Plaintiffs have achieved a result that is no less favourable than the terms of the offer, where acceptance of the offer would have required the three Defendants jointly and severally to pay the amount of $195,000 plus costs, and the judgment which the Plaintiffs have achieved is only against DVT Services. 20The offer of compromise was on terms that: "The Defendants pay to the Second Plaintiff the sum of $195,000 exclusive of costs within 28 days after written notice of acceptance of this offer by any one of the Defendants." That offer expressly contemplates that the Defendants would pay an amount to Employ 96 although it provides for acceptance of the offer by any one of the Defendants. The question of who would be liable for those amounts was not insignificant, where there may or may not be a question whether DVT Services has assets available to satisfy a judgment against it. Mr Henry contends that the offer of compromise is to be read as having the effect that, on acceptance by one defendant only, only that defendant was obliged to pay the amount specified but acceptance of the offer of compromise by that defendant would have not would not have prevented the proceedings being pursued against the other defendants. I do not consider that that the terms of the offer of compromise are consistent with that reading of it. 21In my view, a judgment against DVT Services alone, albeit in a higher amount than the offer of compromise, cannot be said to be no less favourable to the Plaintiffs than the offer made in the offer of compromise, so far as that offer would have permitted the Plaintiffs to enter judgment against all three Defendants in the specified amount and avoid any risk that the assets of DVT Services may be insufficient to meet the judgment against it. Accordingly, the basis for an order for costs on an indemnity basis in favour of the Plaintiffs against DVT Services has not been established. 22The Plaintiffs contend that the offer could operate as an offer under the principles in Calderbank v Calderbank [1975] 3 All ER 333 if not valid under UCPR r 20.26. The Defendants did not contend that the offer of compromise did not take effect under r 20.26 so this issue does not strictly arise. Even if the offer had taken effect under those principles, it would not have supported an order for indemnity costs for the reasons I have set out above. The claims against Messrs de Vries and Teyah 23The Plaintiffs seek an order that each party should bear their respective costs of the claim against Messrs de Vries and Tayeh. Alternatively, the Plaintiffs contend, if an order for costs is made in favour of Messrs de Vries and Tayeh, it should be discounted or reduced by reason that the hearing was lengthened in respect of the issues as to the form of documentation to which I have referred, and Messrs de Vries and Tayeh should be ordered to pay the costs of and incidental to the defences they had raised but abandoned shortly before the hearing. The Plaintiffs accept that these orders would require a departure from the usual order that costs follow the event. The Plaintiffs rely on several matters as supporting that departure. 24The Plaintiffs contend that the Defendants, including Messrs de Vries and Tayeh, put the Plaintiffs to proof of Employ 96's insolvency at the time of the relevant transactions, until the business day prior to the commencement of the trial, and this resulted in the Plaintiffs performing substantial unnecessary work, including the issue of subpoenas, inspection of documents and preparation of a lengthy report by the liquidator as to that issue. The Points of Defence filed by the Defendants on 13 October 2010 denied that the transactions in issue in the proceedings were entered into at a time when Employ 96 was insolvent. The Defendants, in their outline of submissions served one business day prior to the final hearing, indicated that they would not dispute the insolvency of Employ 96 at the time the transactions were entered into. Mr Tayeh conceded in cross-examination that he knew of Employ 96's substantial tax debt in March 2007 and suspected insolvency from at least 1 May 2007. Mr Henry submits that the Defendants should not have denied the insolvency of Employ 96 from that date. Mr Golledge, who appeared for the Defendants, rightly accepted in oral submissions that (at the least) a preferable pleading of the Defence would have acknowledged the matters known to the Defendants and their suspicion, through Mr Tayeh, that Employ 96 was or was likely to be insolvent from May 2007, leaving the legal implications of those admitted facts to be determined at the hearing. 25The Defendants contend that proof of Employ 96's insolvency was part of the liquidator's case in chief in a preference or uncommercial transaction suit. While that is undoubtedly the case, the proof that was likely to be required would have been much less had the Defendants not pressed their defence to this issue. The Defendants also point out that the liquidator's original affidavit sworn 20 August 2010 contained his expression of opinion as to insolvency but was not supported by contemporaneous documents and that the Points of Claim filed about the same time did not particularise the claim for insolvency other than by reference to future expert evidence. The Defendants contend that, with the evidence and pleadings in that condition, they were entitled to "wait and see" what the Plaintiffs' case on insolvency actually involved; that the cost of preparing the liquidator's expert report as to solvency was not attributable to any unreasonable conduct by them; and that none of the costs up to the point when solvency evidence was served, including the Plaintiffs' cost of obtaining and reviewing material from third parties through the issue of subpoenas, should be found to have resulted from unreasonable conduct on the part of the defendants. I do not accept that submission so far as it assumes that Mr Tayeh, and the other Defendants who shared his knowledge, could properly plead their Defence in a manner that did not reflect their own knowledge as to Employ 96's position in the relevant period. 26The Defendants relied on an email dated 19 April 2012 which they contended advised that they would be putting no positive case in respect of the question of solvency. That email provided that: "On our instructions the defendants will not be serving evidence on the question on the issue of solvency but reserve their right to challenge the plaintiffs' solvency evidence" (emphasis added). It does not seem to me that that email amounts to any concession by the Defendants in respect of the question of solvency, since it plainly put the Plaintiffs to proof of that question and reserved the right to rely on any failure by the Plaintiffs to prove that matter. So far as the Defendants reserved the right to "challenge the plaintiffs' solvency evidence", they therefore required the Plaintiffs to incur the costs of advancing further evidence that was sufficient to establish insolvency. 27The Plaintiffs also rely on the fact that the Defendants raised a defence under s 588FG(2) of the Corporations Act, which would have required the Defendants to establish that they did not have reason to suspect insolvency. The Defendants, in their outline of submissions served one business day prior to the final hearing, indicated that they would not maintain that defence. As I noted above, Mr Tayeh conceded in cross-examination that he suspected Employ 96's insolvency from at least 1 May 2007. The Plaintiffs contend that the Defendants should not put forward the good faith defence when an essential aspect of that defence was that they did not have reasonable grounds for suspecting that Employ 96 was insolvent. The Defendants contend that the good faith defence should not be treated as distinct from other issues in the case so as to justify an apportionment of costs by reason of the abandonment of that defence close to the trial. The Defendants point out that that defence raised questions about their knowledge of Employ 96's financial position at the time of the impugned payments, that were also relevant to the Plaintiffs' attack on the agreement for Employ 96 to pay double the usual rates charged by DVT Services. I accept that there is some overlap between the relevant issues. 28The Plaintiffs contend, and an affidavit of the solicitor with carriage of the proceedings for the Plaintiffs, Ms Malnersic, dated 12 March 2013 amply demonstrates, that their solicitors undertook a significant amount of work and incurred significant cost in seeking to establish the insolvency of Employ 96, including the issue of subpoenas to third parties and review of material produced and the preparation of an expert accounting report by the liquidator in respect of that issue. Ms Malnersic estimates the work undertaken in relation to the subpoenas incurred costs of nearly $60,000 excluding GST and estimates that approximately 80% of the work undertaken in relation to the subpoenas was directed to establishing the insolvency of Employ 96 and the defence under s 588FG(2) of the Corporations Act. Ms Malnersic estimates that the Plaintiffs incurred costs in relation to the liquidator's expert report as to Employ 96's of approximately $33,900 excluding GST. Ms Malnersic estimates that time costs of approximately $118,000, which amount to approximately one third of the Plaintiffs' costs of the proceedings, relate to these issues. Ms Malnersic also estimates that a substantial portion of disbursements were incurred in respect of these issues, although that estimate plainly involved a degree of subjectivity in the allocation of disbursements to particular issues. 29Ms Malnersic was cross-examined in respect of her affidavit dealing with these matters. It was put to Ms Malnersic that the first time that substantial evidence was provided by the Plaintiffs establishing the basis of the claim for Employ 96's insolvency was when the liquidator swore an affidavit in January 2012; Ms Malnersic responded that the source documents may have previously been provided in discovery and rightly noted that the need for further evidence from the liquidator as to Employ 96's insolvency depended on whether the Defendants put that matter in issue. It was put to Ms Malnersic that only one of the eight categories of discovery sought by the plaintiffs related to the question of solvency. I place little weight on that matter since the volume of documents that need to be reviewed in respect of an issue in litigation, the factual complexity of that issue or its significance in the litigation is plainly not to be assessed by counting that the number of discovery categories relating to that issue. I note, however, that Ms Malnersic accepted in cross-examination that the issue of the proper parties to the transactions was also a large component of the discovery. 30The Plaintiffs also contend that the hearing was lengthened (as I observed in my substantive judgment) by the form in which documents were produced by the Defendants and by the misdescription of documents that had later been printed, on occasion in different form, as "true copies" in Mr Tayeh's affidavit evidence. The Defendants contend, and the Plaintiffs accept, that the power to order costs is not to be exercised to the purpose of "punishing" Messrs De Vries and Tayeh for the circumstances surrounding the production of documents in the proceedings. While I accept that proposition, those matters nonetheless need to be taken into account to the extent that they imposed significant costs upon the Plaintiffs that would not otherwise have been incurred. 31The Defendants accept that the issue involved "some additional questioning" of Mr Tayeh and additional evidence from one of DVT Service's employees, Ms McCallum, but submit that it cannot be shown that but for that matter the case would have been completed within any appreciably shorter period. I do not accept that submission. In my view, the form in which documents were produced by the Defendants created significant difficulties at the hearing, by requiring a detailed, complex and lengthy cross-examination of Mr Tayeh, on a document by document basis, to determine which documents could properly be relied upon as evidencing the parties to the transaction and which could not. In my view, this matter significantly lengthened the hearing, which would have proceeded in a more straightforward and significantly shorter manner had there not been difficulties with the nature of the documents on which the Defendants relied and how they were described in Mr Tayeh's evidence. 32The Plaintiffs also relied on an alleged non-compliance with a notice to produce until documents were produced shortly before the hearing. The Defendants submit that the circumstances relating to the notice to produce do not provide a basis for depriving them of any of their costs. The Defendants contend that the defence under s 588FG(1)(a) had been raised when the Points of Defence were first filed and that documents could have been sought by discovery, and the request for their production by notice to produce occurred at a late stage, and the material sought was ultimately produced and made available for tender at trial. The Defendants contend, and I accept, that the issues arising in respect of the notice to produce would not in themselves warrant any special costs order. 33The Defendants also contend that an order for costs in favour of Messrs de Vries and Tayeh is supported by the fact that, within a month of commencement of the proceedings, they had alerted the Plaintiffs to the proposition that the case against them could not succeed because they were not party to the relevant transaction, in an email from their solicitors to the Plaintiffs' solicitors dated 15 September 2010. However, this submission has the difficulties that, first, the deficiencies in the form in which documents were produced by the Defendants and described in Mr Tayeh's affidavit evidence would have left the Plaintiffs in the position that they could not properly assess this contention until they had first cross-examined Mr Tayeh to determine the true position as to the form of invoices issued by DVT Services. Second, as noted above, Messrs de Vries and Tayeh did not maintain only the defence on which they had contended they would succeed, but also put the Plaintiffs to proof of insolvency and maintained a defence under s 588FG(2) of the Corporations Act, until the questions of insolvency and good faith were abandoned immediately prior to the hearing. 34As I noted above, the Defendants seek an order that the Plaintiffs pay the costs of Messrs de Vries and Tayeh as agreed or assessed on the basis they are two-thirds of the total costs of the Defendants. This proposition reflects a possible application of the rule of thumb in Currabubula Holdings Pty Ltd v State Bank of New South Wales above. The Defendants also contend that it will not ordinarily be appropriate, in the exercise of the Court's discretion, to attempt to apportion costs as between issues on which the successful party succeeded and those which it contested but in respect of which it failed. The Defendants rely on observations of Mansfield J in Australian Prudential Regulation Authority v Holloway [2000] FCA 1245 at [51]. There are other cases that take a similar approach. In Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [6]-[7], Beazley, McColl and Basten JJA observed that: "Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which the appellant was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported). As the appellants submit, the commencing position is that costs follow the event so that a successful party is entitled to costs. In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 (at [24]). A similar approach is adopted in the Court of Appeal. If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick (No 2) [2006] NSWCA 374 (at [27])." 35In the present case, the maintenance of substantive defences of the solvency of Employ 96 and under s 588FG(2) of the Corporations Act could not properly be characterised as minor, incidental, procedural or evidentiary issues of the kind referred to by Mansfield J in Australian Prudential Regulation Authority v Holloway above, given the extent of work which needed to be done by the Plaintiffs to address those issues. They were severable in nature - as is demonstrated by the fact that they could be and were readily abandoned immediately prior to the hearing - and plainly took up a significant part of the Plaintiffs' preparation for the hearing. 36The Defendants also submit that: "The mere fact that a party has, even late in the day, abandoned an issue previously raised in the proceedings should not necessarily trigger any adverse cost consequences. Such an approach would have the result of discouraging parties from undertaking, as a case develops, a sensible reassessment of the strength or weakness of particular arguments and would tend to encourage the maintenance of arguments that a party would otherwise abandon but which are maintained for fear of attracting a costs consequence. Such an outcome is not likely to be consistent with a responsible approach to the conduct of litigation nor with the just, quick and cheap disposition of the proceedings." I accept this submission to the extent that any order for costs is discretionary and such conduct therefore does not "necessarily" have such a consequence. However, it does not follow from that proposition that the maintenance and late abandonment of such defences will not result in such adverse cost consequences. No doubt, a party who raises a defence that may properly be maintainable and abandons it sooner rather than later is less likely to be exposed to adverse costs consequences. However, in the present case, Messrs de Vries and Tayeh maintained a defence denying the insolvency of Employ 96 at relevant times, notwithstanding that Mr Tayeh accepted in cross-examination that he suspected that Employ 96 was insolvent from an early date; maintained a defence of good faith, which was a matter within their knowledge and not a matter requiring substantial further investigation; and abandoned both of those defences immediately prior to the hearing. It does not seem to me that an adverse cost consequence in that situation will encourage parties to maintain untenable defences at the hearing, but rather not to raise or to abandon them at the earliest possible date. 37The Defendants also raised the possibility of apportionment, such that the Plaintiff should be required to pay half of the costs incurred by Messrs de Vries and Tayeh so as to avoid the need for attempting, in the assessment process, to distinguish between costs referable only to the case against DVT Services, costs referable only to the case against Messrs de Vries and Tayeh and costs common to the case against all three persons, referring to R v Hore; Ex parte Brisbane City Council [1969] Qd R 75 at 91. I do not accept that an order of costs in favour of Messrs de Vries and Tayeh referable to the whole of the costs of the proceedings, discounted only by half, would properly reflect the result of the trial. 38I do not consider that the matters on which the Plaintiffs rely are such as to wholly deprive Messrs de Vries and Tayeh of an order for costs where they have been successful in defending the claim against them. It would have been open to the Court, and consistent with the analysis that I have set out above, to order that the Plaintiffs pay the costs referable to Messrs Tayeh's and de Vries' defence of the proceedings (as distinct from that of DVT Services), but excluding costs of the defences of the solvency of Employ 96 and under s 588FG(2); that Messrs de Vries and Tayeh, jointly and severally with DVT Services, pay the Plaintiffs' wasted costs of the defences of the solvency of Employ 96 and under s 588FG(1)(a); and that there be a set-off between those amounts, one they were determined on an assessment. An order in that form would, however, have further complicated the assessment process and likely resulted in the parties incurring delay and costs in the assessment that would be disproportionate to the amount in issue in the proceedings or the amount of costs likely to be recoverable by either party. 39In my view, I should instead adopt a broad brush approach, starting with the application of the rule of thumb to a costs order in favour of Messrs de Vries and Tayeh but making several adjustments to secure justice between the parties. First, the application of that principle should be approached on the basis that the claim against Messrs de Vries and Tayeh was in their capacity as partners in the Partnership, and they should be treated as a single party for the purpose of the application of the rule of thumb so that the maximum percentage of costs which would be awarded would be half and not two-thirds of the Defendants' costs. Second, the costs payable by the Plaintiffs should be reduced to compensate them for the costs thrown away on the defences abandoned by Messrs de Vries and Tayeh immediately prior to the hearing. That reduction should also reflect that Messrs de Vries and Tayeh should not be entitled to recover, and the Plaintiffs should be compensated for, the additional costs of the determination of the parties to the proceedings that resulted from the deficiencies in documentation and the form of Mr Tayeh's evidence, to which I referred above. I have also had regard, in determining these matters, to the fact that the Plaintiffs will have an order for costs against DVT Services so far as those issues arose in the successful case against it as distinct from the claims against Messrs de Vries and Tayeh. 40An adjustment to the percentage of costs recoverable by Messrs de Vries and Tayeh reflect these matters is necessarily, to some extent, impressionistic. In my view, these were all significant matters and warrant a substantial reduction of that percentage of the Defendants' costs that would otherwise be payable by the Defendants, applying the principles in Currabubula Holdings Pty Ltd v State Bank of New South Wales above. Having regard to these matters, I will order the Plaintiffs to pay 25% of the Defendants' costs of the proceedings, as assessed or as agreed. Orders 41Accordingly, I make the following orders: