Testel Aust P/L v Rickard (No 2) - [2017] SADC 69

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
TESTEL AUST P/L v RICKARD & ORS (No 2)
[2017] SADC 69
Decision of His Honour Judge Chivell
4 July 2017
INTEREST - RECOVERABILITY OF INTEREST
TRADE AND COMMERCE - TRADE PRACTICES AND RELATED MATTERS - ENFORCEMENT AND REMEDIES - INJUNCTIONS
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - ORDER FOR COSTS ON INDEMNITY BASIS
Plaintiff’s claim for damages and other remedies for breaches of a restraint covenant in a franchise deed. Judgment for the plaintiff and defendants’ cross-action dismissed. Plaintiff awarded $144,812.63 damages.
Interest - claim for interest on judgment at 5%. Defendant submits interest rate claimed excessive – interest at 5% awarded, discounted because plaintiff’s loss incurred gradually until end of restraint period. Full interest awarded after expiry of restraint period.
Injunction - injunction against first defendant for breach of contract not opposed. Terms of injunction discussed. Injunction granted.
Costs - defendants’ case was false to their knowledge. Trial needlessly protracted. Indemnity costs awarded on action and cross-action. Defendants’ claim for partial costs of action and cross-action dismissed.
District Court Supplementary Rules 2014 (SA) r 208; Grincelis v House (2000) 201 CLR 321; Wheeler v Page (1982) 31 SASR 1; Colgate Palmolive Co & Anor v Cussons Pty Ltd (1993) 118 ALR 248; Andrews v Barnes (1888) 39 Ch D 133; Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd [1991] FCA 187; Ragata Developments Pty Ltd v Westpac Banking Corporation [1993] FCA 72; Artcraft Pty Ltd & Anor v Dickson & Anor (No 2) [2014] SASC 144; Viscariello v Legal Practitioners Disciplinary Tribunal & Ors (No 2) [2016] SASC 15; Calderbank v Calderbank [1975] 3 All ER 333; Bashour v Australian and New Zealand Banking Group [2017] FCA 163; Australian Securities and Investments Commission v West & Anor (2008) 100 SASR 496; Lahoud v Lahoud [2006] NSWSC 126, referred to.

TESTEL AUST P/L v RICKARD & ORS (No 2)
[2017] SADC 69

I delivered reasons for judgment in favour of the plaintiff in this matter on 7 April 2017.[1] I said that I would hear the parties as to the form of the orders to be made in light of those reasons, and as to any ancillary orders.[2]
[1] [2017] SADC 31.
[2] [635].
I now make the following orders, and give reasons for doing so, having heard further submissions from counsel on 9 May 2017 and 13 June 2017.
Interest Rate
Mr Dal Cin, counsel for the plaintiff, submitted that an interest rate of 5% is ‘conservative’. The District Court Supplementary Rules 2014 (SA) (‘DCSR’) provide:
208—Pre-judgment interest
The appropriate rate for the calculation of interest on pre-judgment economic loss under section 39 of the District Court Act 1991 is a matter for determination by the Judge or Master in each case. As a guide only, and subject to any contrary legislative provision, the Court may calculate interest in such cases as follows—
(a)in respect of the period from 1 January to 30 June or part of that period in a year, the cash rate of interest last set by the Reserve Bank of Australia before that 1 January, plus 4%; and
(b)in respect of the period from 1 July to 31 December or part of that period in a year, the cash rate of interest last set by the Reserve Bank of Australia before that 1 July, plus 4%.
These Rules commenced on 1 October 2014.[3]
[3] DCSR 2.
Mr Dal Cin handed up a printout of the cash rate from April 2011 to May 2017, which showed a fairly steady decline over the period from 4.75% to 1.5%. The cash rate did not go below 1.5% during that period. Applying the DCSR 208 formulation, this would justify a rate of 8.75% down to 5.5% over the relevant period.
Counsel for the defendants, Mr Munt, submitted that DCSR 208 is expressly a ‘guide only’. He submitted that there was an ‘unusual economic climate’ during the subject period. He referred to the interest rate for retail deposit accounts of between 1% and 3%. He submitted that the commercial interest rate should be discounted for inflation, citing Grincelis v House[4] and Wheeler v Page.[5] These are well-known authorities. I have no doubt that DCSR 208 was drafted with them in mind. DCSR 208 was drafted during the current ‘unusual economic climate’. The Reserve Bank cash rate takes account of inflation and other economic conditions.
[4] (2000) 201 CLR 321 at [17]-[18].
[5] (1982) 31 SASR 1.
In any event, Mr Dal Cin’s calculations are not based on DCSR 208. If they were, the interest rate claimed would be more than 5%. The rule has been used more as a check against error. It is a practice of the court to apply an interest rate of between 5% and 6% on pre-judgment loss.
I rule that an interest rate of 5% is conservative and, therefore, reasonable.
Interest
The plaintiff has divided his claim for interest on the award of damages of $144,812.63 into two periods:
·from April 2011 (when the loss commenced) to September 2014 (when the restraint covenant period expired). Assuming that the loss accumulated at a steady rate over the period of 3.5 years, and allowing for that by halving the gross interest over the period, and applying an interest rate of 5%, the plaintiff calculates interest for this period as $12,600 (rounded);[6] and
·from September 2014 to April 2017, by which time the whole of the loss had been incurred, a period of 2.5 years, applying a rate of 5%, the plaintiff calculates interest as $18,100 (rounded).[7]
[6] $144,812.63 x 5% x 3.5 ÷ 2.
[7] $144,812 x 5% x 2.5.
Mr Dal Cin acknowledged that these calculations involved a ‘broad brush’ approach.
Mr Munt argued that Mr Dal Cin’s approach in relation to the first period was unfair to the defendants, because the payments received by the defendants were not regular throughout the year. He pointed to the period between October 2013 and September 2014. Active issued an invoice for about $37,000 in August 2014 out of a total of about $41,000 for the entire period. It is doubtful if the invoice was even paid during the period, so the interest would be less if it were calculated on that basis.
Mr Munt submitted that, using another broad brush, this time in favour of the defendants, the interest figure for the first period should be more like $7,200. Mr Dal Cin argued that this approach was even more arbitrary. Doing the best I can, I award $10,000 for the first period.
As to the second period, Mr Munt submitted that the figure of $18,100 was too high and disproportionate to the quantum of damages.
I do not accept that it would be a proper exercise of my discretion to reduce the interest for that reason alone. The figure is high because the defendants have unsuccessfully defended this action for a long time. They have no claim to sympathy in relation to interest.
I allow $18,100 in relation to the second period.
That leads to a total figure of $28,100 for interest.
Mr Munt also argued that the plaintiff should not receive a ‘windfall gain’ by receiving interest on revenue lost. The defendants have been unable to demonstrate that a windfall gain would result. The damages assessed were a loss suffered by the plaintiff. If it had not suffered that loss, then it would have been that much better off. Either its profits would have been higher, or its losses lower. There was no evidence that the plaintiff’s overheads would have been any different.[8] There is no reason to discount interest on this basis.
[8] See Reasons for Judgment, [613].
Injunctions
The first defendant concedes that an injunction against him in relation to breach of contract is appropriate.[9] After hearing submissions on the alternative terms of the injunction suggested by counsel, I grant an injunction in the following terms:
[9]    See Reasons for Judgment, [557].
1.    The first defendant is permanently restrained from using, disclosing or otherwise dealing with the information contained in the following electronic files:
1.1In the sub folder named “Marketing” within a folder named “Active” saved on a laptop computer referred to in paragraph 287 of the reasons for decision delivered on 7 April 2017 and published in this action as [2017] SADC 31 (“the subject computer”), the following files:
(i)TESTEL CLIENT LIST NATIONAL& HOSPITALS 2003 03 31.doc
(ii)TESTEL CLIENT LIST NATIONAL 2004 10 11.doc
(iii)sa_clients.xls
(iv)sa client 02.xls
(v)sa_clients02.xls
1.2In the folder named “Recycle Bin” in the subject computer, the following files:
(i)SA 2010 09 20 Areas.xls
(ii)naccodes.xls
(iii)2005 07 13 Decision Makers with CAM.xls
(iv)2005 07 21 KAM.xls
(v)All States – Areas.xls
(vi)All States – NAC Codes.xls
(vii)dec_maker1.xls
1.3The electronic files identified in Exhibit P132, rows 1647 to 1652, comprising files known as backup files and any associated primary file, with the names:
(i)areasrates.bak
(ii)_sset.bak
(iii)_ompany.bak
(iv)_esthist.bak
(v)naccodes.bak
(vi)_ESTERS.bak
2.    Within 14 days, the first defendant deliver up to Jean-Pierre du Plessis in his capacity as the independent computer expert and for the purposes of paragraph 3 below the subject computer and all printed copies of documents in the first defendant’s possession, custody or control that have been printed from the files described in paragraph 1 above or from a copy of those files.
3.    Jean-Pierre du Plessis shall within 14 days of receipt permanently delete from the subject computer all of the electronic files referred to in paragraphs 1.1(i) to (v), 1.2(i) to (vii) and 1.3(i) to (vi) above and destroy all of the printed copies of documents delivered up to him pursuant to paragraph 2 above.
4.    Jean-Pierre du Plessis shall immediately thereafter make the subject device available for collection by the first defendant.
These orders are as proposed by the plaintiff in draft Minutes of Order, with amendments discussed at the hearing and with certain amendments proposed by the defendant.
At [557] of the judgment, I said:
Mr Munt conceded that Testel would be entitled to an injunction for breach of contract, which would only be against Mr Rickard. Mr Munt indicated that Mr Rickard did not object to an injunction being granted in relation to information that came to him as a Testel franchisee.
Paragraphs 3 and 4 of the orders proposed by the plaintiff bind not only Mr Rickard, but also Mr Wilson and Active. Mr Munt pointed out that the claims against Mr Wilson and Active based on breach of confidence were found to have had no basis on the evidence.[10] The only claim in this regard which was made out was against Mr Rickard based on breach of contract. I accept that submission. I therefore agree that there is no basis upon which an injunction can be granted in relation to Mr Wilson or Active. I have therefore granted an injunction in terms of the defendants’ proposed minutes of order.
[10] See [556].
It follows that the extent to which the injunction applies to computers or documents in the possession of Mr Wilson or Active will depend upon the extent to which they are also in the custody or control of Mr Rickard, whether jointly or in any other way.
There is no need for the independent expert, Mr du Plessis, to destroy the computers delivered up to him. It is sufficient that the electronic files be deleted, and the documents be destroyed. I therefore order in terms suggested by the defendants. However, I allow Mr du Plessis 14 days, rather than seven, to make his assessment.
As to the costs of Mr du Plessis’ work, I reject the defendants’ submission that the plaintiff should be solely responsible for that. The need for Mr du Plessis’ services was activated by Mr Rickard’s defence of the action, and his failure to disclose relevant documents until they were discovered by Mr du Plessis on Mrs Rickard’s computer. This failure persisted until 18 September 2015, and even then the defendants were arguing that the contents of the Active file were not ‘directly relevant in and of themselves’.[11] This was plainly wrong, as the contents of the file were relevant and were significant factors in the outcome of the litigation. There is no basis upon which to argue that costs incurred in Mr du Plessis’ investigation should be borne by the plaintiff. The costs were legitimately and reasonably incurred by the plaintiff in the conduct of the action. They should be paid by the defendants.
Costs
[11] Exhibit D197, Exhibit ‘TR-13’.
Plaintiff’s Application
The plaintiff seeks its costs on an indemnity basis. It concedes that the cross‑action was ‘arguable’.[12] However, it argues that it should have its costs of both the action and cross-action, having regard to the misconduct of the defendants in defending the action on the basis of a false representation of Mr Rickard’s role in the business of Active.
[12] Written Submissions of the Plaintiff in Reply, [13.1].
The following principles are extracted from the judgment of Sheppard J in Colgate Palmolive Co & Anor v Cussons Pty Ltd:[13]
[13] (1993) 118 ALR 248 at 256-7.
·     the ordinary rule is that, where the court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on a party-party basis. In many cases the result will be that the amount recovered by the successful party under the order will fall short of (in many cases well short of) a complete indemnity;
·     the court ought not usually make an order for the payment of costs on some basis other than a party-party basis. The circumstances of the case must be such as to warrant the court departing from the usual course. The tests have been variously put. The Court of Appeal in Andrews v Barnes[14] said the court had a general and discretionary power to award costs as between solicitor and client ‘as and when the justice of the case might so require’;
[14] (1888) 39 Ch D 133 at 141.
·     the categories in which the discretion may be exercised are not closed;[15]
[15] Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd [1991] FCA 187. Davies J expressed (at 6) similar views in Ragata Developments Pty Ltd v Westpac Banking Corporation [1993] FCA 72.
·     it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion:
·the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;
·evidence of particular misconduct that causes loss of time to the court and to other parties;
·the fact that the proceedings were commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law;
·the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions;
·an imprudent refusal of an offer to compromise.
The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party-party basis;
·     the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on an indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
For practical applications of these issues, see Artcraft Pty Ltd & Anor v Dickson & Anor (No 2)[16] and Viscariello v Legal Practitioners Disciplinary Tribunal & Ors (No 2).[17]
[16] [2014] SASC 144 at [17]-[19].
[17] [2016] SASC 15 at [6].
Mr Dal Cin submitted that:
·Mr Rickard and Mr Wilson concocted the story about Mr Rickard’s role in Active;
·Mr Rickard deleted the Active folder because he knew of its forensic significance and thereafter failed to disclose it, including when affirming his disclosure on oath;
·the actions of Mr Rickard and Mr Wilson caused the plaintiff to undertake a long and complex investigation;
·the failure to make full disclosure continued even after the search order was executed, when it became inevitable that the Active folder would be disclosed;
·Mr Rickard and Mr Wilson gave evidence at great length, much of which was proven to be untrue.
He submitted that the circumstances came within Sheppard J’s second criterion, namely, ‘particular misconduct that causes loss of time to the court and to other parties’. These submissions are consistent with my findings of fact.[18]
[18] See Reasons for Judgment [2017] SADC 31 at [378]-[384], [403], [517]-[519].
The Defendants’ Response – First Argument
The defendants not only opposed the orders sought by the plaintiff, but submitted that the plaintiff should pay their costs on a party-party basis from dates in July and September 2015 when offers were made in ‘Calderbank’ letters.[19] It was submitted that these orders should be made because the offers were imprudently rejected by the plaintiff. This is a somewhat startling proposition when it is considered that the offers referred to were to pay a sum which was less than the damages ultimately awarded to Testel.
[19] See Calderbank v Calderbank [1975] 3 All ER 333.
To consider the submission, it is necessary to set out a short chronology of some negotiations which took place in mid-2015:
·on 17 June 2015, after the execution of the search order, Mr Wilson made an offer inclusive of costs.[20] It was substantially lower than the amount awarded for damages. It was open for two days;
·on 1 July 2015, Mr Wilson made a lower offer;[21]
·on 6 July 2015, Mr Rickard made an offer which added a relatively small amount to Mr Wilson’s offer and was also inclusive of costs.[22] The combination of Mr Wilson’s and Mr Rickard’s offers was less than the damages awarded. It is impossible to say how much was specified for ‘principal relief’, but there can be no doubt that the all-inclusive sum, even if paid in one sum rather than instalments, would be substantially less than the amount ultimately awarded plus costs;
·on 14 August 2015, the defendants filed a joint offer pursuant to DCR 187. The sum specified as being in relation to ‘principal relief’ was substantially below the figure ultimately awarded;
·on 20 August 2015, by which time all three defendants were represented by the same firm, another offer was made to pay a larger sum ‘up front’, and the balance by 18 January 2016. No amounts were expressed for principal relief or costs. Similar terms were referred to;
·by letter dated 31 August 2015, the plaintiff responded.[23] It was willing to accept the total sum offered, expressed as an amount for ‘principal relief’ (a figure substantially less than the damages ultimately awarded) and an amount for costs. Payment was to be made on the same basis offered by the defendants. The terms sought included an injunction restraining the defendants from using the plaintiff’s ‘confidential information’, and settlement was to be by exchange of letters. That was rejected;[24]
·by letter dated 2 September 2015,[25] the defendants sought clarification of ‘confidential information’, a ‘clearer release’ and the preparation of a settlement agreement. A counter-offer was made, this time specifying an amount for principal relief which was also less than the eventual award of damages. The offer was only open until 3 September 2015.
[20] Thirteenth Affidavit of Christopher Andrew Bruce, Exhibit ‘CAB-52’.
[21] Exhibit ‘CAB-53’.
[22] Exhibit ‘CAB-54’.
[23] Seventeenth Affidavit of Richard Dunstone Townsend, Exhibit ‘RDT-86’, p 35.
[24] Thirteenth Affidavit of Christopher Andrew Bruce, Exhibit ‘CAB-56’, p 21.
[25] Exhibit ‘CAB-56’, p 22.

That was the end of the negotiations. The parties had effectively agreed upon a monetary settlement sum, and were quibbling about the mechanics of settlement. The negotiations seem to have ‘fizzled out’, with neither party attempting to take them any further.
The defendants assert that they ‘did everything in their power to attempt to resolve the matter’, and that the plaintiff was not genuine in its desire to resolve the matter, and that it was ‘intent on financially destroying the defendants’.[26]
[26] Written submissions - Defendants’ Summary of Argument on Costs, [12]-[13].
The plaintiff submits that the fact that it was willing, at a particular point in time, to countenance an offer in terms of that put forward by the defendants is now irrelevant because the amount ultimately awarded exceeded the offers.
In Bashour v Australian and New Zealand Banking Group,[27] Tracey J said:
The costs consequences of a Calderbank offer lie in the discretion of the court. It will be exercised having regard to the particular circumstances of the case: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37] per Giles JA. Relevant principles were identified by Finn and Bennett JJ in Taleb v GM Holden Limited [2011] FCAFC 168 at [48]-[49]:
“[48] … [T]he non-acceptance of a Calderbank offer can be a relevant matter to be considered on the question whether the discretion to award costs under s 43 of the Federal Court of Australia Act 1976 (Cth) should be exercised on an indemnity basis rather than in accordance with the Court's usual practice of ordering party and party costs, if its non-acceptance is followed by a result to the offeree which is less favourable than the offer made: see MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) [1996] FCA 862; (1996) 70 FCR 236; on the primacy of the ordinary practice see Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) [1996] FCA 1942; (1996) 72 FCR 151; and see generally on Calderbank offers, Dal Pont, Law of Costs, [13.46]-[13.69] (2nd ed, 2009).
[49] The significance for costs purposes to be attributed to a rejected Calderbank offer falls, increasingly, for determination by reference to criteria of reasonableness: Was the offer a reasonable one in the circumstances? Was its rejection unreasonable when viewed in light of the circumstances existing at the time of its rejection? See eg University of Western Australia v Gray (No 21) [2008] FCA 1056]; (2008) 249 ALR 360 at 361ff; Dal Pont at [13.58]. In making that determination, the circumstances of the litigation and the parties' understanding of the strengths and weaknesses of their respective cases can be relevant considerations: see GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 688; (2003) 201 ALR 55 at [34]. The onus is on the offeror to show that the conduct of the offeree was unreasonable: Alpine Hardwoods (Aust) Pty Ltd v Hardys Pty Ltd (No 2)[2002] FCA 224; (2002) 190 ALR 121 at [21] and [28].”
An initial comparison is thus required of the terms of the offer and the outcome achieved by the offeree, in order to determine whether Calderbank principles are enlivened at all. If they are, a comparison often follows between the amount offered and the outcome in the proceeding in assessing whether rejection of the offer was unreasonable (see, e.g., Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721).
[27] [2017] FCA 163 at [147]-[148].
On the basis of that formulation, I agree with Mr Dal Cin’s submission that a discretion to award costs to the defendants on the basis of a failure by the plaintiff to accept a Calderbank offer does not arise if the amount ultimately awarded exceeds the offer, as it did here.
In case I am wrong about that, it is relevant to the exercise of any such discretion to consider that at the time the offers were being made and considered, significant developments were taking place which had significant effects on the litigation, and which entitled the plaintiff to reconsider its decision.
Following the series of offers and counter-offers outlined above, the following events took place:
·also on 1 September 2015, the defendants received the first report from Mr du Plessis, the forensic computer expert. They were entitled to see the results of his searches first, pursuant to orders of Master Rice, in case they had objection to the release of that information to the plaintiff. Those results demonstrated that the Active folder had been found by Mr du Plessis in the recycle bin on Mrs Rickard’s computer, and would have to be released to the plaintiff;
·this information was not disclosed to the plaintiff until 16 September 2015;[28]
·on 2 September 2015, after receiving Mr du Plessis’ letter, the defendants’ solicitors wrote the letter seeking clarification of ‘confidential information’ without mentioning the du Plessis report;
·the offer in the 2 September 2015 letter was left open only until 3 September 2015. Mr Dal Cin argued that if the matter had settled then, the plaintiff would never have known what information had been used by the defendants in the Active business;
·on 7 September 2015, the defendants released the printed version of the text messages between Mr Rickard and Mr Wilson in November 2011.[29] This added to the store of information about Mr Rickard’s participation in the Active business.
[28] Seventeenth Affidavit of Richard Dunstone Townsend, Exhibit ‘RDT-89’.
[29] Exhibit P18.2737-2748.
By the time all this information came to the surface, it was clear that Testel had a much stronger case against the defendants than previously. This amounted to a significant change in circumstances which, in my view, completely justified the withdrawal of the plaintiff from further negotiations, at least until the extent of the evidence disclosed by the computer searches became completely clear. The extent of that evidence was still being explored in further investigation by Mr du Plessis during the trial.
There is no evidence of any later negotiations.
My conclusion then is that there is no basis in the above issues for making an order for costs against the plaintiff.
That was the first basis upon which the defendants argued that the plaintiff should pay its costs.
The Defendants’ Response – Second Argument
The second basis for the defendants’ application was that the plaintiff had imprudently refused their offers because the amounts offered were the maximum amounts that the defendants could raise. Even if the plaintiff received a higher award at trial, it is unlikely that it could recover more than the amounts offered. Evidence was presented as to the means of the defendants, and proposed loans from family members.
This is a novel proposition which cannot be accepted. It is not for the court to assess whether the plaintiff would have been better off accepting the defendants’ offers on the basis suggested. There may have been other reasons why the plaintiff may have preferred the outcome of a judgment beyond purely monetary considerations. The plaintiff is an experienced franchisor. There may have been commercial considerations of which I am unaware which influenced its decision.
I reject the defendants’ submission that the plaintiff imprudently rejected their offers in July and August 2015. I agree with the submissions of Mr Dal Cin that the plaintiff’s rejection of the defendants’ offers cannot have been imprudent since it received a higher amount in an award of damages.
Plaintiff’s Application - Conclusion
Returning to the plaintiff’s application for indemnity costs, the facts in this matter are similar in some respects to the facts in Australian Securities and Investments Commission v West & Anor.[30] In that case, ASIC was seeking the winding up of the second defendant company and an unregistered managed investment scheme. Mr West, the first defendant, had behaved unreasonably, in the words of Gray J.[31] He had deliberately blurred his contractual relationships, backdated documents, sought to avoid disclosure of documents evidencing statutory breaches, defended the proceedings when he knew that the company was hopelessly insolvent, and caused the disclosure process to become drawn-out and incomplete. Gray J said:[32]
In support of an award of indemnity costs in this case, ASIC referred to a category of case where the conduct of the unsuccessful party could be characterised as improper, in the sense that there were no prospects of succeeding on a point which had been raised, and where the unsuccessful party must have known that there were no prospects of success, if properly advised. The rationale for awarding costs in cases of this type is that “[i]n such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law”. In such circumstances, the Court is entitled to make a special order for costs in order to mark its disapproval of inappropriate conduct on the part of the party ordered to pay costs.
[Citations omitted]
[30] (2008) 100 SASR 496.
[31] At [217].
[32] At [216].
His Honour concluded:[33]
In these circumstances Mr West’s defence was unreasonable, and it may be inferred that it was pursued for the ulterior or collateral purpose of seeking to avoid full disclosure of the relevant facts and the making of a full assessment of the breaches of the Corporations Act. I consider that Mr West’s conduct was unmeritorious and that in the circumstances a special order for costs should be made.
[33] At [219].
In this case, the conduct of the defendants, in relation to both the claim and the cross-action, was similarly unreasonable and unmeritorious.
This is not a case where the defendants’ case has simply been rejected on the balance of probabilities. The basis for the rejection of their evidence goes beyond a question of reliability. For example, this is not a case of the type described by Campbell J in Lahoud v Lahoud:[34]
It is a common enough experience for a party to litigation, by the time he gives evidence, to be quite convinced in his own mind that his evidence is correct, even though it is evidence which the Court ultimately does not accept.
[34] [2006] NSWSC 126 at [18].
The defendants’ case was false, and they knew it was false. Their defence of the action was improper and unreasonable.
For those reasons, I order that the defendants pay the plaintiff’s costs of the action and cross-action on an indemnity basis.
Orders
Having regard to the above, I make the following orders:
1.    There be judgment for the plaintiff against the defendants in the sum of $144,812.63 plus interest in the amount of $28,100.
2. The first defendant is permanently restrained in terms set out at [17].
3.    The cross-action is dismissed.
4.    The defendants jointly and severally pay to the plaintiff costs of the action including all reserved costs, on an indemnity basis to be agreed or adjudicated.
5.    The first defendant pay to the plaintiff the costs of the cross-action including all reserved costs, on an indemnity basis to be agreed or adjudicated.
6.    Costs of the action and cross-action certified fit for counsel.