Testel Australia Pty Ltd v Goulding

[2023] SASCA 116

SUPREME COURT OF SOUTH AUSTRALIA

(Court of Appeal: Civil)

TESTEL AUSTRALIA PTY LTD v GOULDING & ORS

[2023] SASCA 116

Judgment of the Court of Appeal  

(The Honourable President Livesey, the Honourable Justice Doyle and the Honourable Justice Stein)

9 November 2023

EQUITY - EQUITABLE REMEDIES - ACCOUNTS AND INQUIRIES - GENERALLY

EQUITY - EQUITABLE REMEDIES - EQUITABLE COMPENSATION - BREACH OF FIDUCIARY OBLIGATIONS

EMPLOYMENT LAW - TERMINATION AND BREACH OF CONTRACT - REMEDIES

This is an appeal against an account of profits awarded to the appellant for the respondent’s breaches of implied duties of good faith and fidelity, as well as his fiduciary obligations.

By a separate Notice of Appeal, the appellant also challenges the order that there be no order as to costs of the action.

The respondent worked as a client account manager for around five months between 10 March and 7 August 2012 in the appellant’s electrical equipment testing business.  The other respondents, TestCorp Pty Ltd (TestCorp) and ServiceCorp Pty Ltd, are companies through which the respondent conducted electrical and fire equipment testing businesses between 2012 and around 2018 after his employment with the appellant ceased. This appeal is concerned only with the appellant’s claims against the first respondent.

The trial judge found that whilst an employee of the appellant, the respondent actively engaged in competitive business activities through TestCorp including adapting some of the appellants operating documents for use in the new business, and secretly making notes of the appellant’s client information from its computer records and using this information to solicit the appellant’s clients both during and after his employment.

The trial judge held that whilst the breaches were numerous, they were overall ineffectual in inflicting any significant damage on the appellant or causing any substantial benefit or gain to the respondent.

Her Honour found that the true measure of the benefit obtained by the respondent in breach of duty was the modest ‘head start’ in establishing TestCorp’s business, and the misappropriation of two of the appellant’s clients.  The evidence did not show that the benefit resulting from the respondent’s breaches was the entire business of TestCorp that would not have otherwise existed but for those breaches.

The trial judge ordered that the respondent account to the appellants for his breaches of duty in the amount of $3,981.  She held that no sufficient or reasonable connection had been proved between the respondent’s breaches of duty to have any liability to either compensate the appellant for the alleged loss of revenue earned from the appellant’s former clients or to account for any profits made from providing services to those clients.

On appeal, the appellant challenged the trial judge’s findings in respect of a further client, UnitingCare Wesley.  The trial judge rejected the proposition that even though UnitingCare Wesley was a client of the appellant and became the first major client obtained by TestCorp in 2012, this was the result of the respondent’s breaches of duty.  The appellant challenged various findings supporting this conclusion, including credit findings.

Held, per the Court (dismissing the appeal):

1.The appellant has failed to establish any material error of fact or law in connection with the award made by way of an account of profits.

2.The trial judge was entitled to take the views that she did in relation to the credit and factual findings.  They were neither glaringly improbable nor contrary to compelling inferences.

3.The appellant has not established any material connection between the respondent’s alleged misuse of confidential information concerning UnitingCare Wesley and the success achieved by TestCorp in connection with the tender process.

In relation to the costs appeal, the Court held (granting leave to appeal but dismissing the appeal):

1.The appellant has failed to demonstrate any material error of fact, law or approach in the reasoning of the trial judge on costs. 

2.There is no reason to think that litigation of this kind could not have been litigated appropriately in the Magistrates Court.

District Court Act 1991 (SA) s 42; Magistrates Court Act 1991 (SA) s 3; Supreme Court Act 1935 (SA) s 50; Uniform Civil Rules 2020 (SA) rr 194.4, 194.5, 194.6, 213.1, 218.17, referred to.
Abalos v Australian Postal Commission (1990) 171 CLR 167; Allen v Chadwick (No 2) [2014] SASCFC 130; Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; Anwar v Mondello Farms Pty Ltd (No 2) [2015] SASCFC 136; ASIC v Rich (2009) 236 FLR 1; Boardman v Phipps [1967] 2 AC 46; Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66; Briginshaw v Briginshaw (1938) 60 CLR 336; Browne v Dunn (1893) 6 R 67; Burton v Litton Business Systems Pty Ltd (1977) 16 SASR 162; Coco v A N Clark (Engineers) Ltd (1968) 1A IPR 587; Coulton v Holcombe (1986) 162 CLR 1; Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; Dart Industries Inc v Décor Corporation Ltd (1993) 179 CLR 101; Del Casale v Artedomus (Aust) Pty Ltd (2007) 165 IR 148; Devries v Australian National Railways Commission (1993) 177 CLR 472; Fox v Percy (2003) 214 CLR 118; Frank Music Corporation v Metro Goldwyn Mayer Inc (1989) 886 F.(2)(d) 1545; Gassy v The King [2023] SASCA 90; Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; Lee v Lee (2019) 266 CLR 129; LifePlan Australia Friendly Society Ltd v Woff (2016) 259 IR 384; Maguire v Makaronis (1997) 188 CLR 449; Manildra Laboratories Pty Ltd v Campbell [2009] NSWSC 987; McDonald v Attorney-General for the State of South Australia [2022] SASCA 43; McEntee v SJ Berry [2022] SASCA 133; Meinhard v Salmon (1928) 164 NE 545; My Kind of Town Ltd v Soll [1982] FSR; Norbis v Norbis (1986) 161 CLR 513; Plus One International Pty Ltd v Ching (No 3) [2020] NSWSC 1598; Reid, Hewitt & Co v Joseph [1918] AC 717; Robinson Helicopter Co Inc v McDermott (2016) 90 ALJR 679; State Rail Authority (NSW) v Earthline Constructions Pty Ltd (In Liq) (1999) 73 ALJR 306; Testel Australia Pty Ltd v Goulding & Ors [2022] SADC 156; Testel Australia Pty Ltd v Goulding & Ors (No 2) [2023] SADC 57; United States Surgical Corporation v Hospital Products International Pty Ltd (1983) 2 NSWLR 157; Vines v Australian Securities and Investments Commission (2007) 233 FLR; Warman International Ltd v Dwyer (1995) 182 CLR 544; Warren v Coombes (1979) 142 CLR 531; Wessex Dairies Ltd v Smith [1935] 2 KB 80; Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598; Zibara v Ultra Management (Sports) Pty Ltd (2021) 283 FCR 18; Zomojo Pty Ltd v Hurd (No 2) (2012) 299 ALR 621, considered.

TESTEL AUSTRALIA PTY LTD v GOULDING & ORS
[2023] SASCA 116

Court of Appeal – Civil:  Livesey P, Doyle JA and Stein AJA

THE COURT:

Introduction

1. Testel Australia Pty Ltd, the appellant, succeeded at trial against its former employee, the respondent Mr Jarrad Lee Goulding, on the basis that he breached his implied duties of good faith and fidelity, as well as his fiduciary obligations.[1]  The respondent’s period of employment with the appellant was relatively brief.  The respondent worked as a Client Account Manager for around five months between 10 March and 7 August 2012 in the appellant’s electrical equipment testing business.[2]

   [1]     Testel Australia Pty Ltd v Goulding & Ors [2022] SADC 156 (Reasons), [446].

   [2] Reasons [3].

2. This appeal is concerned with the extent of the remedy awarded by way of an account of profits by the trial judge.  The appellant says that the award of $3,981 excluding GST was too low.[3]  By a separate Notice of Appeal, the appellant also challenges the order that there be no order as to costs of the action.

   [3] Reasons [37], [475]-[478].

3. Both at trial and on appeal the respondent was not legally represented.  This, as will be seen, presented the trial judge and this Court with a number of difficulties in the hearing and determination of a case that was not without some complexity.

   The other respondents

4. The other respondents, TestCorp Pty Ltd (TestCorp) and ServiceCorp Pty Ltd (ServiceCorp), are companies through which the respondent conducted electrical and fire equipment testing businesses between 2012 and around 2018. 

5. TestCorp was controlled by the respondent and his business partner, Mr Luke Stephen, from 2012 until early 2015 when the respondent sold his half interest in that company to Mr Stephen for $243,496.  Thereafter ServiceCorp was controlled by the respondent and competed with the appellant and TestCorp between 2015 and 2018, when it was deregistered.  Although the ServiceCorp business was not successful, it was the source of enmity between Mr Stephen and the respondent, motivating Mr Stephen to tell the appellant’s managing director, Mr Oszczypok, about the respondent’s breaches of duty. 

6. In return for Mr Stephen’s assistance and evidence, the appellant gave Mr Stephen and TestCorp the benefit of a deed of release.[4]  The trial judge was critical of the appellant’s failure to disclose this deed before trial and she viewed these arrangements with some concern.  They helped to explain why the trial judge rejected much of the evidence of Mr Stephen and Mr Oszczypok on contentious topics, even though she also rejected important parts of the evidence of the respondent.

   [4] Reasons, [151], [174].

7. No claims are now pressed against TestCorp or ServiceCorp.  This appeal is concerned only with the appellant’s claims against the respondent, Mr Goulding.

8. For the reasons that follow, the appeal should be dismissed.  The appellant has not shown that the findings made by the trial judge, particularly her credibility findings, were affected by error or were glaringly improbable or contrary to compelling inferences. 

9. The appellant has not demonstrated that any error was made in connection with the approach of the trial judge to the remedy of an account of profits.  In particular, the appellant cannot show that, but for the respondent’s breaches of duty, TestCorp would not have succeeded with the UnitingCare Wesley tender, or that winning that client was integral to the viability of the TestCorp business.  The inability to prove a material connection between the respondent’s breaches of duty and TestCorp’s success with UnitingCare Wesley renders problematic many of the arguments made on this appeal (for example, relating to the handwriting on the “Post-it Notes” evidence).  Even if errors were made as suggested, they do not demonstrate that there should be a different outcome.

10. On the question of costs, leave to appeal should be granted but the appeal against her Honour’s exercise of discretion dismissed.

11. These reasons are set out as follows:

    The appellant’s case in overview

    The grounds of appeal

    The approach of the appeal court

    The relevant legal principles

    The findings made by the trial judge

    Appeal grounds 1 and 2

    Appeal ground 7

    Appeal grounds 3 to 6 – the “Post-it Notes” taken as a whole

    Appeal grounds 8 to 10

    The costs appeal

    Relevant costs principles

    The appellant’s contentions on costs

    Conclusion

    The appellant’s case in overview

12. In overview, the appellant’s case was that, whilst still employed, the respondent actively competed for the business of his employer’s clients through the medium of TestCorp, breaching both the “conflict rule” and the “profit rule” in that he:[5]

    1.adapted the appellant’s operating documents to create templates for use in TestCorp’s business, principally the appellant’s short form quote and order form;

    2.directly and indirectly solicited various of the appellant’s clients, including Bianco Reinforcing and Mitsubishi, using the TestCorp master quote template adapted from the appellant’s short form quote and order form;

    3.copied aspects of the appellant’s client information, including pricing, onto around 239 “Post-it Notes” for the purpose of using that information in growing the client base of TestCorp by soliciting the custom of the appellant’s clients by undercutting its prices.

    [5]     Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society (2018) 265 CLR 1, [67]-[69] (Gageler J). See Reasons [23]-[25].

13. Although the appellant made a claim for damages by way of equitable compensation for the losses it sustained, after reasons were delivered and before judgment it elected to press its claim by way of an account of profits and that election did not change on appeal.[6]

    [6] Reasons [490]-[491].

14. The appellant’s claim for an account of profits against the respondent was made on a “head start” basis.  It is important to recognise that this claim was assessed in the context that the respondent’s attempts to take business from the appellant were found to be “largely unsuccessful”[7] and were “overall ineffectual in inflicting any significant damage on Testel or in causing any substantive benefit or gain to Mr Goulding (and Mr Stephen) through TestCorp or ServiceCorp”.[8]

    [7] Reasons [446], [476]-[477].

    [8] Reasons [21].

15. The award was accordingly a modest one, based only on the earnings made by TestCorp during the first twelve months of operations from the business of two of the appellant’s clients, Bianco Reinforcing and Mitsubishi.  On the findings of the trial judge, these were the only two clients lured from the appellant as the result of the respondent’s breaches of duty.

16. In that setting, a principal issue on this appeal is the appellant’s challenge to the findings made concerning another of the appellant’s clients, UnitingCare Wesley.  The trial judge rejected the proposition that even though UnitingCare Wesley was a client of the appellant and became the first major client obtained by TestCorp in 2012, this was the result of the respondent’s breaches of duty.  Various findings supporting this conclusion, including credit findings, are now challenged.

17. If the appellant succeeds in overturning those findings, then it contends that it is entitled to an increased account of profits for some or all of the $243,496 which was paid by Mr Stephen to the respondent for his interest in TestCorp in 2015.  In rejecting the claim made for the entire sum paid for the respondent’s share of the TestCorp business, the trial judge found:[9]

    It follows from my conclusions as to the appropriate equitable remedies, that I do not accept that winning this tender and UnitingCare Wesley [as a] client was such a major a step in getting TestCorp off the ground as a business that TestCorp’s business would not otherwise have come into existence at all but for Mr Goulding’s alleged breaches of duty in copying Testel client information onto a ‘Post-it Note’ to use in TestCorp’s business.  It was, as Mr Goulding said, a ‘help’ in establishing TestCorp but not its entire foundation. 

    [9] Reasons [483].

18. Alternatively, the appellant claims by way of an account of profits the sum of $27,871.60 excluding GST referable to the revenue earned by TestCorp for the first two years of its contract with UnitingCare Wesley.  This award is net of an allowance made for the skill and effort of the respondent and Mr Stephen in securing the contract and earning revenue.[10]

    [10] Reasons [479]-[481].

19. Before addressing the factual background, it is first convenient to outline the grounds of appeal and the approach required from this Court on appeal, together with the relevant legal principles.

    The grounds of appeal

20. The grounds of appeal are as follows:

    1.     The learned Trial Judge erred in rejecting the evidence of Mr Stephen that:

    1.1    the respondent was the source of the Post It notes produced to him whilst the respondent was an employee of the appellant and during the time that Mr Stephen and the respondent were setting up the Testcorp business;

    1.2    the printed item on an agenda for a meeting between Mr Stephen and the respondent on about 23 May 2012 relating to the establishing of Testcorp in terms “Current status of leads from Testel” related to information obtained by the respondent from the appellant’s business records and recorded on the Post It notes; R[82] and

    1.3    the handwritten note “183” made by Mr Stephen on a copy of the 23 May 2012 meeting agenda was a record of the number of Post It notes relating to the appellant’s clients that the respondent had produced as at the date of the meeting; R[82]; R[267]

    and in rejecting the evidence of Mr Stephen, the learned Trial Judge put undue weight on:

    1.4    Mr Stephen’s evidence that he was aggrieved by his dealings with the respondent;

    1.5    Mr Stephen’s evidence that he was willing to assist the appellant if it would “punish” the respondent;

    1.6    the fact that the appellant had reached an agreement with Mr Stephen to the effect that the appellant would not pursue Mr Stephen for his involvement in the respondent’s wrongdoing; and

    1.7    the fact that Mr Stephen’s evidence was found to be unreliable in respect of other matters, such as whether he had used the respondent’s computer during relevant periods.

    R[162]-R[175]

    2.The learned Trial Judge erred in accepting the evidence of the respondent to the effect that certain annotations on the Post It notes were not in his handwriting in circumstances where:

    2.1    the respondent had deposed in an affidavit sworn June 2017 and filed in the action and had given evidence in chief at trial that all the Post Notes, save for one annotation on one Post It note, had been made by him;

    2.2    the evidence of the respondent in respect of handwriting on the Post It notes was inadmissible opinion evidence;

    2.3    the respondent gave a false explanation for the circumstances in which he made the Post It notes, namely that he made them in order to make a neater record of information Mr Stephen had obtained when canvassing potential clients; R[286]-R[288]

    2.4    the respondent had conducted the trial, until his cross examination, on the basis that all the Post Notes, save for one annotation on one Post It note, had been made by him; and

    2.5    the respondent was demonstrated to be generally not creditworthy by reason of his past false statements and manipulation of documents to convey false information.

    R[205]; R[210]-R[214]; R[216]-R[217]; R[272]-R[277]; R[283]

    Post-It notes

    3.    The learned Trial Judge erred in her approach to analysing the circumstances on which the appellant relied to contend for an inference that the respondent made all of the Post It notes using information obtained from the appellant’s computer system in that the learned Trial Judge:

    3.1accepted the opinion evidence of the respondent that substantial parts of the handwritten notes were not in his handwriting;

    3.2accepted the respondent as a witness of truth;

    3.3did not accept the evidence of Mr Stephen as to source of the Post It notes;

    3.4did not accept the June 2012 Spreadsheet as reliable; R[305]

    3.5did not give sufficient weight to the extent of the consistency between the information on the Post It notes and the business records of the appellant;

    3.6gave weight to the possibility, unsupported by evidence, that evidence of consistency between the information on the Post It notes and the business records of the appellant was unreliable; R[51]; R[278]; R[282]; R[290]; R[296]; R[299]; R[300]; R[308]; R[310]; R[311]; R[313]; R[314]; R[317]; R[319]; R[369]; R[392]; R[393]; R[416]; R[501]; R[502]; R[503]; R[511]; R[522]

    and

    3.7gave weight to the fact that the appellant did not put forward documentary evidence that each and every annotation on a Post It note was mirrored in the appellant’s business records. R[315]; R[321]; R[394]; R[417]

    4.    The learned Trial Judge erred in finding that the respondent made some but not all of the Post It notes using information obtained from the appellant’s computer system. R[250]

    5.    The learned Trial Judge should have found the following circumstances and inferred from them that the respondent made all of the Post It notes using information obtained from the appellant’s computer system:

    5.1the respondent gave a false explanation for the circumstances in which his handwriting came to be on the Post It notes;

    5.2the respondent gave untruthful evidence as to annotations on the Post It notes that were said by him not to be in his handwriting;

    5.3Mr Goulding was the source of the Post It notes when Mr Stephen and Mr Goulding were setting up the Testcorp business and Mr Goulding was an employee of the appellant;

    5.4the fact that each Post It note relates to current or, in some instances, former client, of the appellant;

    5.5the sheer number of Post It notes and the volume of information on the notes shown to be consistent with the information contained in the business records of the appellant; R[99]

    5.6the fact that the appellant’s arrangement for “minimum fees” to be charged to some clients is recorded on some Post It notes;

    5.7the instances in which information recorded on a Post It note reflects the record in the business records of the appellant as at the time of the respondent’s employment but where that information was subsequently changed or corrected in the appellant’s records;  R [323], Annexure A

    5.8the instances in which the information recorded on a Post It note was consistent with the records of the appellant, but the information related to clients which had ceased to be current clients some time prior to the respondent’s employment; R[324]

    5.9the instances in which the information recorded on a Post It note reflects esoteric information in the appellant’s business records, such as client codes, past value of annual invoicing, the number of tests due in July or August 2012; R[264]; R[318]

    5.10the instances in which the Post It note records comments relating to whether the client was “big” or “good”;

    5.11the extent of the consistency between the Post It notes and the sample of the appellant’s business records comprising Exhibit A1 (TB4), which consistency was the subject of the appellant’s submissions in Annexure B of its closing address;

    5.12the fact that the Post It note relating to Mitsubishi, which had independently made contact with Testcorp through its web page as a result of which the respondent had contact information for Mitsubishi, recorded pricing but did not record contact information; R[369]

    5.13the fact that the respondent had a motive and opportunity to make the Post It notes;

    5.14the evidence of Mr Stephen that it was rare, if it ever happened at all, that a client would give pricing information when contacted on a “cold call”;

    6.    The learned Trial Judge erred in finding that:

    6.1there were significant instances where an inference could be drawn that the information on a Post It note was inconsistent with the records of the appellant; R[157]

    6.2it followed from a finding that not all the Post It notes were written at the same time that the sources of the information on them was variable; R[249]

    UnitingCare Wesley client

    7.The learned Trial Judge erred in failing to find that:

    7.1the respondent made the Post It note relating to Uniting Care Wesley from the business records of the appellant;

    7.2the information on the Post It note was used by Testcorp in sending an initial quote to Uniting Care Wesley and shortly thereafter preparing a tender for Uniting Care Wesley work;

    R[229]

    7.3the use of the appellant’s information caused or contributed to Testcorp successfully gaining Uniting Care Wesley as a client; and

    7.4that the wining of Uniting Care Wesley as a client was significant step in the establishing of the Testcorp business. R[102]-R103]

    [R25-R27]; R[384]-R[413]; R[460]; R[463]; R[479]-R[483]

    Account of Profits

    8.The learned Trial Judge erred in finding that the respondent was not required to account for an amount in the order of 30% of the profits made by the respondent resulting from his breach of duty, such profits being:

    8.1wages received as a director of Testcorp in FY2013 and FY2014 in the amount of $85,377; and

    8.2capital payment of $243,496 received upon the sale of his interest in Testcorp to Mr Stephen in March 2015.

    [R31]-R[35]; R[38]; R[110]; R[456]; R[458]

    9.The learned Trial Judge should have found that the conduct of the respondent:

    9.1in establishing the Testcorp business whilst an employee of the appellant;

    9.2using the appellant’s documents as templates for documents to be used in the Testcorp business;

    9.3unlawfully taking client information from the appellant’s computer system by way of the Post It notes; and

    9.4using client information recorded on the Post It notes to seek to obtain clients generally and in successfully obtaining Uniting Care Wesley as a client specifically,

    caused or contributed to the gains made by the respondent by way of wages as a director of Testcorp in the amount of $85,377 and the capital payment of $243,496 upon the sale of his interest in Testcorp.

    10.The learned Trial Judge should have found that the respondent was required to account to the appellant in the amount of $230,000 or some other amount which is a reasonable approximation of the gains made by the respondent.

1. In the course of argument, counsel for the appellant approached these grounds in the following way. 

2. Appeal grounds 1 and 2 were addressed first and concerned the findings made by the trial judge concerning credibility and, particularly, the rejection of certain aspects of the evidence of Mr Stephen and the acceptance of certain aspects of the evidence of the respondent. 

3. Appeal ground 7 was addressed next and concerned the finding that TestCorp did not secure UnitingCare Wesley as a result of the respondent’s breaches of duty.  Associated with this ground were appeal grounds 3 to 6, which concerned the findings made regarding the “Post-it Notes” generally and, particularly, the finding that some but not all of the “Post-it Notes” were made by the respondent from the appellant’s computer records, extending to the illicit recording of client details and pricing information.  

4. The appellant frankly conceded that if it failed on all of grounds 1 to 7 then it could not succeed on the balance of the appeal grounds, being appeal grounds 8 to 10.  These grounds concerned the remedy of an account of profits and the orders that should have been made were it not for the errors which the appellant contends the trial judge made regarding the facts upon which the assessment of an account of profits was undertaken.

5. Finally, and as mentioned, there was an application for leave to appeal concerning the order for costs made by the trial judge.  It is convenient to address that at the conclusion to these reasons.

   The approach of the appeal court

6. This Court is not authorised to intervene on an appeal by way of rehearing under s 50 of the Supreme Court Act 1935 (SA) and r 218.17 of the Uniform Civil Rules 2020 (SA) merely so as to substitute its own view as if it were hearing the matter afresh.[11]  As was explained in Coulton v Holcombe:[12]

   It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the court of first instance to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish.

   [11]   See generally, Pitt v Commissioner for Consumer Affairs [2021] SASCA 24, [114]-[118].

   [12]   Coulton v Holcombe (1986) 162 CLR 1, 7 (Gibb CJ, Wilson, Brennan and Dawson JJ).

7. Accordingly, the demonstration of material error in the reasons or approach of the trial judge is indispensable to a successful appeal.[13]

   [13]   Norbis v Norbis (1986) 161 CLR 513, 518-519 (Mason and Deane JJ), McEntee v SJ Berry [2022] SASCA 133, [36] (Livesey P).

8. This Court is required to conduct a real review of the trial record and an evaluation of the trial judge’s reasons.  The Court must form its own view as to the appropriate outcome.  In so doing, the Court ought not shy from the task of weighing conflicting evidence, or from drawing its own inferences or conclusions from primary findings which are not disputed, or which are not affected by error.[14] 

   [14]   Warren v Coombes (1979) 142 CLR 531; State Rail Authority (NSW) v Earthline Constructions Pty Ltd In Liq) (1999) 73 ALJR 306. See also Fox v Percy (2003) 214 CLR 118, [25] (Gleeson CJ, Gummow and Kirby JJ).

9. Nonetheless, this Court must proceed by recognising the “natural limitations” of a review proceeding “wholly or substantially on the record”.[15]  There is, as a result, a recognised reluctance to revisit factual findings which depend on credibility findings.[16]  It is necessary for the appeal court to proceed with restraint when addressing findings such as these because its review is conducted without the benefit of the opportunities available to the trial judge to evaluate the credibility of each witness and to experience the “feeling” of the conduct of a trial which cannot always be “fully shared” from reading the evidence on the page.[17]

   [15]   Fox v Percy (2003) 214 CLR 118, [23] (Gleeson CJ, Gummow and Kirby JJ),

   [16]   Abalos v Australian Postal Commission (1990) 171 CLR 167, Devries v Australian National Railways Commission (1993) 177 CLR 472, 479 (Brennan, Gaudron and McHugh JJ). See generally, Fox v Percy (2003) 214 CLR 118, [26]-[78] (Gleeson CJ, Gummow and Kirby JJ).

   [17]   Fox v Percy (2003) 214 CLR 118, [23] (Gleeson CJ, Gummow and Kirby JJ).

10. Having said that, in “some, quite rare, cases” though the facts may fall short of being “incontrovertible”, the appeal court may decide that the conclusion of the trial judge, even though affected by impressions about credibility, was  “glaringly improbable” or “contrary to compelling inferences”.[18]  These findings may include, as the High Court explained in Lee v Lee:[19]

    … findings of secondary facts which are based on a combination of these impressions and other inferences from primary facts[20]. Thereafter, “in general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge”.[21]

    [18]   Fox v Percy (2003) 214 CLR 118, [28]-[29] (Gleeson CJ, Gummow and Kirby JJ).

    [19]   Lee v Lee (2019) 266 CLR 129, [55] (Bell, Gageler, Nettle and Edelman JJ).

    [20]   Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 at 434-435 [144]; Thorne v Kennedy (2017) 263 CLR 85 at 104 [42].

    [21]   Warren v Coombes (1979) 142 CLR 531 at 551 per Gibbs A-CJ, Jacobs and Murphy JJ; see also Fox v Percy (2003) 214 CLR 118 at 127 [25].

11. If in the course of conducting its own review, after making all due allowance for the advantages available to the trial judge, material error is disclosed, the appeal court cannot “shrink from giving effect” to its own conclusions.[22]

    [22]   Fox v Percy (2003) 214 CLR 118, [28]-[29] (Gleeson CJ, Gummow and Kirby JJ); Robinson Helicopter Co Inc v McDermott (2016) 90 ALJR 679, [43] (French CJ, Bell, Keene, Nettle and Gordon JJ).

    The relevant legal principles

12. Whilst there appears to have been no dispute about the applicable legal principles, they formed the basis upon which the trial judge went about making her findings of both fact and law, particularly when formulating the relief which must be addressed on this appeal.

13. The obligations owed by an employee to an employer are informed by the terms of the employment contract.  Those terms and the scope of an employee’s duties are questions of fact.  The scope of an employee’s duties turns on the nature of the business in which the employee is employed, the employee’s seniority, role and responsibilities, as well as the employee’s level of access to confidential information.  As a general proposition, the more senior the employee, and the greater that employee’s access to confidential information, the more onerous will be that employee’s duties when compared with junior employees.

14. Whether as implied contractual terms, or in equity, an employee owes an employer duties of loyalty, good faith and fidelity, as well as a duty of confidence.[23] As was explained in Ancient Order of Foresters v Lifeplan, an employee’s fiduciary duty to act in the exclusive interests of the employer operates like any other fiduciary relationship, where the duty is owed “within the scope of the …undertaking” for which the fiduciary has undertaken or assumed responsibility to act in the exclusive interests of another.[24]

    [23]   Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66, 81 (Dixon and McTiernan JJ), Coco v A N Clark (Engineers) Ltd [1969] RPC 41 46-48 (Megarry J), LifePlan Australia Friendly Society Ltd v Woff (2016) 259 IR 384, [336-337] (Besanko J), reasons [13]-[14].

    [24]   Ancient Order of Foresters v Lifeplan (2018) 265 CLR 1, [67] (Gageler J).

15. Though it was not pleaded, the trial judge was satisfied that the duty of confidence owed by the respondent employee to the appellant employer was in issue because it informed the central role of the contentions made about the creation and use of the “Post‑It Notes” in this case.[25]

    [25] Reasons [118].

16. A contract may well contain express covenants restraining competition by a former employee.  Absent these, a former employee may solicit the custom of the clients or customers of a former employer where the names of the clients or customers have been remembered by the employee.[26]  By contrast, a former employee must not take or exploit an employer’s confidential information, such as confidential customer lists and trade secrets.  When that occurs, the former employee is at risk of being restrained from using the employer’s confidential information and the court may, in an appropriate case, order that it be delivered up by the employee to the employer.

    [26]   Plus One International Pty Ltd v Ching (No 3) [2020] NSWSC 1598, 480 (Hallen J); DelCasale v Artedomus (Aust) Pty Ltd (2007) 165 AR 148, [77] (Campbell JA)

17. A former employee is nonetheless entitled to use the skill and knowledge acquired from an employer, or obtained whilst employed, to compete with a former employer.[27]  For example, an employee is permitted to use the “know how” obtained from the employer or in the course of employment in competition with a former employer following the termination of employment.[28] 

    [27]   Wessex Dairies Ltd v Smith [1935] 2 KB 80, 89 (Maughan LJ).

    [28]   Del Casale v Artedomus (Aust) Pty Ltd (2007) 165 IR 148 [37] (Hodgson JA); Plus One International Pty Ltd v Ching (No 3) [2020] NSWSC 1598, 483 (Hallen J).

18. Whilst there may well be information which an employer would prefer was not generally known or aired in the relevant market, if it is not confidential and forms part of the employee’s “know how” it may be exploited by the employee.  Depending on the circumstances of the case, it may be both difficult and unrealistic to separate out from an employee’s general “know how” specific confidential information which cannot be exploited.  Where the line is drawn is a question of fact in each case. 

19. These situations must be contrasted with cases where, during employment, an employee conducts competitive business activities with the employer without the employer’s knowledge and explicit approval.  When that is done the employee will usually be found to have breached implied duties of fidelity, good faith and loyalty, as well as the fiduciary duties owed to the employer. 

20. What is regarded as competition for these purposes extends to steps preparatory to establishing a competing business.  Each case will depend upon the precise circumstances of what is done by way of competing with the employer and the nature of the employer’s information, if any, used in order to do so.[29]  Examples of conduct which may not be regarded as involving breaches of duty might include the incorporation of a company, the establishment of premises or the preparation of marketing materials.  Similarly, merely attending a job interview may not, in isolation, comprise a breach.  These kinds of steps may be contrasted with the wholesale copying of client lists, trade secrets or operating documents, as well as the active soliciting of an employer’s clients or staff whilst the employee remains employed.

    [29]   Manildra Laboratories Pty Ltd v Campbell [2009] NSWSC 987, [77]-[78].

21. There are cases where an employee may be found to have used information received in confidence in the course of employment but where, had it been received otherwise, the employee would have been free to use that information in competition with the employer.  These cases are sometimes referred to as “head start” or “springboard” cases. 

22. Where the benefit resulting from an employee’s breach of duty comprises an advantage in the form of a “head start” in the establishment of a business in competition with the employer, the remedies of injunction, damages or an account of profits must be moulded and assessed on a “head start” basis.[30]  That will occur even where the employer’s information, which has been used as a “springboard” by the employee to gain a “head start” can be independently ascertained.[31] 

    [30]   United States Surgical Corporation v Hospital Products International Pty Ltd (1983) 2 NSWLR 157, 233 (not reversed on appeal on this point); Reasons [124]-[126].

    [31]   Zomojo Pty Ltd v Hurd (No 2) (2012) 299 ALR 621, 679 [201] (Gordon J).

23. The cases recognise that it is necessary to undertake a principled balancing between the public interest in allowing employees to use their knowledge and skills, on the one hand and, on the other, denying employees any advantage gained from conduct undertaken in breach of duty.  This must be contrasted with the application of any artificial or arbitrary doctrine which is applied regardless of the facts before the court. 

24. In consequence, there are limits to the relief which may be granted where the gain is properly characterised as merely a “head start”.  The court must, in consequence, apply the rule that the remedy awarded must be proportionate to the advantage gained.  That will usually mean that the relief will not be of indefinite duration so as to, in effect, unjustly enrich the employer as well as unduly punish the employee.  To act in that way would be to threaten the broader public interest by unduly restraining the scope for legitimate competition.

25. The flexibility associated with the remedy of an account of profits was emphasised in Ancient Order of Foresters v Lifeplan.[32]  In that case it was recognised that it is not necessary that the employee’s benefit or gain meet the description of a “profit” in conventional accounting terms:[33]

    The benefit or gain can be expectant or contingent.  Indeed, it is commonplace that a benefit or gain the subject of an account might encompass an ongoing business.  And it is commonplace that the benefit or gain to be made the subject of an order might extend to the whole of the ongoing business or be limited to part of the business identified by reference to both a specified scope of commercial activities and a specified period of commercial activities which need not be confined to a past period but may be a period which extends into the future.

    [32]   Ancient Order of Foresters v Lifeplan (2018) 265 CLR 1, [75] (Gageler J).

    [33]   Ancient Order of Foresters v Lifeplan (2018) 265 CLR 1, [75] (Gageler J).

26. The principles applicable to the assessment of a fiduciary’s liability to account for breach of duty must be applied in a great diversity of circumstances.  Nonetheless the principles can only be stated in the most general terms.  It follows that they must be applied with “particular attention to the exact circumstances of each case”.[34]  In consequence, it is regarded as a cardinal principle that the remedy must be “fashioned to fit the nature of the case and the particular facts”.[35]

    [34]   Consul Development Pty Ltd v DPC EstatesPty Ltd (1975) 132 CLR 373, 393, citing Boardman v Phipps [1967] 2 AC 46, 123; see also Ancient Order of Foresters v Lifeplan (2018) 265 CLR 1, [82] (Gageler J).

    [35]   Warman International Ltd v Dwyer (1995) 182 CLR 544, 559; Ancient Order of Foresters v Lifeplan (2018) 265 CLR 1, [83] (Gageler J); Reasons [136].

27. The liability of an errant fiduciary to account for profit or benefit obtained in breach of duty is imposed to vindicate the high duty owed to avoid actual or potential conflicts between interest and duty, and so as to deter the fiduciary from taking advantage of any opportunity or knowledge derived from acting in the position of a fiduciary.[36]

    [36]   Warman International Ltd v Dwyer (1995) 182 CLR 544, 557; Maguire v Makaronis (1997) 188 CLR 449, 468.

28. As the trial judge recognised in this case, a liability to account does not depend upon whether the person to whom the duty is owed suffered any loss, nor does it depend upon proof of dishonesty or lack of bona fides in the fiduciary.[37] 

    [37] Reasons [128].

29. It is, accordingly, not a defence for an errant fiduciary to demonstrate that the person to whom the fiduciary duty was owed was unwilling, unlikely or even unable ever to profit from the subject matter of the account, nor will it avail the fiduciary to demonstrate that what was done was done both honestly and reasonably.[38]  

    [38]   Warman International Ltd v Dwyer (1995) 182 CLR 544, 558.

30. In this way fiduciaries are deterred from acting in conflict between interest and duty as well as from taking advantage of a position of trust.  The stringent nature of the rule ensures that fiduciaries conduct themselves “at a level higher than that trodden by the crowd”.[39] 

    [39]   Warman International Ltd v Dwyer (1995) 182 CLR 544, 557, citing Meinhard v Salmon (1928) 164 NE 545, 546 (Chief Justice Cardozo).

31. When undertaking an account it is necessary to determine the true measure of the profit or benefit obtained as a result of the errant fiduciary’s breaches of duty.[40]  Nonetheless, it has been recognised that an account of profits is a remedy which is difficult to assess.  The court is required to proceed by reference to reasonable approximation rather than mathematical exactness.[41]  This requires that the court exercise a judgment informed by equitable principle.  It is not merely a matter of judicial discretion still less is it merely a question of factual causation.[42] 

    [40]   Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 110; Warman International Ltd v Dwyer (1995) 182 CLR 544, 558.

    [41]   My Kind of Town Ltd v Soll [1992] FSR 147, 159 (Slade J).

    [42]   Ancient Order of Foresters v Lifeplan (2018) 265 CLR 1, [83] (Gageler J).

32. In order to prove the requisite causal connection between breach and profit or benefit, it is sufficient to demonstrate that the profit or benefit would not have been made “but for” the breach of duty.  Another way of expressing the same proposition is to frame the issue as being whether the relevant profit or benefit was obtained by reason of the fiduciary’s position or as a result of the fiduciary having taken advantage of an opportunity or knowledge derived from the position of fiduciary.  The focus must be placed on the overall effect of the errant fiduciary’s wrongful conduct and not on each act done in breach of duty, and its consequences, viewed in isolation.[43] 

    [43]   Ancient Order of Foresters v Lifeplan (2018) 265 CLR 1, [7]-[9] (Kiefel CJ, Keane and Edelman JJ), [69]-[70], [85]-[88] (Gageler J).

33. Accordingly an errant fiduciary will have no liability to account for an advantage which has not been caused by a breach of duty or which is not sufficiently connected with it.[44]  Correspondingly, an errant fiduciary may be in a position to demonstrate that the relevant benefit or advantage is beyond the scope of the liability for which an account may be taken because there is no reasonable connection between proved wrong‑doing and the relevant profit or benefit the subject of the account.[45]

    [44]   Warman International Ltd v Dwyer (1995) 182 CLR 544, 557, 561; Ancient Order of Foresters v Lifeplan (2018) 265 CLR 1, [83]-[85] (Gageler J).

    [45]   Frank Music Corporation v Metro‑Goldwyn‑Mayer Inc (1989) 886 F.(2)(d) 1545; Ancient Order of Foresters v Lifeplan (2018) 265 CLR 1, [85] (Gageler J).

34. Assuming breach and causation have been established, the onus will then pass to the errant fiduciary to demonstrate why there should not be an accounting for the full value of the profit or benefit obtained.[46]  The fiduciary may meet this burden by proving the need to make an allowance for labour and skill employed or costs incurred by the fiduciary.[47] 

    [46]   Warman International Ltd v Dwyer (1995) 182 CLR 544, 561-562.

    [47]   Dart Industries Inc v Décor Corporation Ltd (1993) 179 CLR 101, 111.

35. The outcome of an account taken will in any case depend upon a range of factors including the nature of the property, the fiduciary’s relevant powers and obligations, and the relationship which has been established between the obligations of the fiduciary and the profit or benefit which it is alleged was improperly obtained.[48] 

    [48]   Warman International Ltd v Dwyer (1995) 182 CLR 544, 560.

1. It is important to distinguish between cases involving a specific asset and those involving the acquisition and operation of a business.  Where a business is involved, it may well be thought inappropriate as well as inequitable to compel the fiduciary to account for all of the profits of the business, indefinitely.  That will be especially so where any profits and benefit derived are necessarily in part the product of the fiduciary’s skill, effort and resources. 

2. It follows that whilst the liability of the errant fiduciary to account is not governed by the doctrine of unjust enrichment, that concept will have a part to play because “the liability of the fiduciary should not be transformed into a vehicle for the unjust enrichment of the plaintiff”.[49] 

   [49]   Warman International Ltd v Dwyer (1995) 182 CLR 544, 561.

   The findings made by the trial judge

3. The appellant is a long-established provider of electrical testing services in South Australia, interstate and overseas.  This service requires periodic testing of electrical appliances in the workplace of clients.[50]

   [50] Reasons [40].

4. The appellant’s business is structured as a franchise.  The franchisees deliver the physical services required by clients.  The appellant maintains electronic records concerning clients, including all client details, pricing and information relating to the results of tests using a proprietary software programme known as ‘TES’.[51]

   [51] Reasons [41].

5. There was evidence to demonstrate that the electrical testing business is competitive, with low barriers to entry and a negligible capital investment required for a small operator to commence business.[52]  The appellant’s pricing structure revolved around charging a unit rate for each item tested although there was typically a minimum charge for attendance at a client’s premises.[53]  The appellant’s unit rates and minimum charge varied amongst its clients.  The rate charged for testing was determined by whether the test was a standard electrical test, a so‑called “push button” test of an RCD (or residual current device) or a test of emergency and exit lights.[54]

   [52] Reasons [45].

   [53] Reasons [47].

   [54] Reasons [48].

6. On 10 March 2012, the respondent commenced employment with the appellant as a client account manager.  The respondent had no prior experience in the electrical testing industry.[55]  As a client account manager, the respondent had authority to access client information recorded in TES, regardless whether the information concerned the clients he managed.  Accordingly, it was possible for the respondent to look up the details of any client in TES.  The trial judge found that the respondent did this when secretly copying some client information from TES.[56]  What remained in contention on appeal was the extent of the information he copied.

   [55] Reasons [52], [54].

   [56] Reasons [66]-[67] and [69].

7. Within only three weeks of commencing work with the appellant, the respondent commenced to take steps to set up a new business with Mr Stephen which, ultimately, became TestCorp.  That business was set up in the front room of the respondent’s home.[57] 

   [57] Reasons [74]-[75].

8. An important part of the appellant’s case was that the respondent improperly exploited his access to TES for the purposes of copying client information in handwriting onto numerous “Post-it Notes”.  This information extended to client names, the names of contact people, telephone numbers, email addresses and pricing.  The “Post-it Notes” were in evidence and, central to the appellant’s case was the proposition that the respondent wrote all of the “Post-it Notes” which were tendered.[58]

   [58] Most of the appellant’s evidence was contained in three bundles comprising a tender book, exhibit A1. The “Post-it Notes” were in bundle 2 between pages 176 and 269, whereas the original “Post-it Notes” were tendered as exhibit A5, see Reasons [23].

9. In addition to the “Post-it Notes”, there was evidence to demonstrate that the respondent had made electronic copies of what were described as “business process” documents used in the course of the appellant’s business which were adapted by the respondent for use in the TestCorp business.  The use of these documents commenced whilst the respondent was employed and continued after he left the appellant’s employment.[59]

   [59] Reasons [345], [433] and [439].

10. On 1 August 2012, the respondent gave seven days’ notice in writing of his resignation of employment with the appellant.  Before that date, TestCorp had commenced some trading.  The respondent left the appellant’s employment so as to operate TestCorp in competition with the appellant.[60]

    [60] Reasons [96]-[97].

11. On 6 August 2012, six quotations were prepared on behalf of TestCorp and addressed to clients of the appellant.  There were “Post-it Notes” for each of these clients.  Information relating to each of the six clients was contained in TES.[61]  One of the quotations was addressed to “United Care Wesley” rather than the actual name of the appellant’s client, “UnitingCare Wesley”.[62]  Significantly, the price quoted by TestCorp for standard electrical testing was lower than the price recorded on the “Post-it Note” or in TES relating to UnitingCare Wesley.[63]

    [61] Reasons [42] and [215].

    [62] Reasons [384], [391].

    [63] Reasons [399].

12. As will be seen, there is some dispute on the evidence as to whether these quotations were prepared by the respondent, which in part turned on the trial judge’s consideration as to whether the respondent was not at work but at home at the appellant’s premises on what was his penultimate day of employment with the appellant. 

13. The respondent’s final day of employment with the appellant was 7 August 2012.  A few days later, on 9 August 2012, the respondent prepared a formal tender document which was submitted to UnitingCare Wesley.  Although it took some time, this tender was ultimately successful.  Again, the price quoted for standard electrical testing was lower than the price recorded on the relevant “Post-it Note” and in TES relating to UnitingCare Wesley.[64]  As will be seen, however, the TestCorp tender utilised a pricing package that was different to the appellant’s pricing approach and, indeed, included some unit prices which were higher than those in the initial quotation.

    [64] Reasons [173], [403] and [411].

14. UnitingCare Wesley was an important early success for TestCorp.[65]  It was described in the evidence as TestCorp’s first big client.  Nonetheless, the trial judge said that it was an overstatement to describe obtaining this client as “seminal”.[66]  Securing this client enabled the respondent and Mr Stephen to commence drawing a wage of $500 each week from their involvement in the TestCorp business. 

    [65] Reasons [102], [388].

    [66] Reasons [103].

15. Of the five clients of the appellant who became TestCorp clients,[67] the trial judge made a specific finding that she was not satisfied that the respondent made the corresponding “Post-it Notes” as the appellant alleged.[68]  As part of the rejection by the trial judge of the proposition that the respondent created all of the “Post-it Notes”, particularly for the five clients who became TestCorp clients, the trial judge explained that the circumstances of only three of these clients – Bianco Reinforcing, Mitsubishi and UnitingCare Wesley - were the subject of detailed evidence about the way in which TestCorp won their custom.[69] 

    [67] Reasons [336].

    [68] Reasons [23]-[25].

    [69] Reasons [23].

16. Nonetheless, the trial judge was satisfied that the respondent breached his employment duties by directly and indirectly soliciting the custom of two of those five clients, Bianco Reinforcing and Mitsubishi, whilst he was an employee of the appellant.  Bianco Reinforcing was solicited directly by the respondent sending his cousin, an employee of Bianco Reinforcing, a TestCorp quote and order form.  The respondent indirectly solicited Mitsubishi by knowing about and participating in Mr Stephen’s conduct in preparing and sending a TestCorp quote to an employee of Mitsubishi, Mr Nietz.   In so doing, the respondent placed himself in the position that his personal interest conflicted with his duty to act in the appellant’s best interests and he “plainly preferred his own interests”.[70]

    [70] Reasons [24].

17. Importantly, as regards UnitingCare Wesley, the trial judge was not satisfied about the evidence concerning the circumstances surrounding the preparation of the TestCorp quote for the custom of UnitingCare Wesley.  In particular, her Honour was not satisfied that the respondent engaged in any conduct in breach of his employment duties in that regard. 

18. The trial judge gave a number of reasons for that finding.  The first concerned discrepancies between the information on the “Post-it Note” and information in the appellant’s computer records which meant that the trial judge was not satisfied that the “Post-it Note” was made by the respondent for Mr Stephen to use to prepare the quotation to UnitingCare Wesley.  Secondly, whilst the trial judge found that there was “some connection between the “Post-it Note” and Mr Stephen’s preparation of the quote”, she was not satisfied that the quote was ever sent.  In particular, her Honour was not satisfied that the quotation was not overtaken by the client’s request for TestCorp to participate in a tender after the respondent had left the appellant’s employment.  Thirdly and finally, the trial judge found that the evidence did not show that the respondent participated in or knew about the preparation of the quote by Mr Stephen. 

19. So far as TestCorp’s successful tender bid with UnitingCare Wesley was concerned, the trial judge was not satisfied that the unauthorised use of any Testel information played any material part in TestCorp winning what was a competitive tender to provide electrical testing services to UnitingCare Wesley.[71]

    [71] Reasons [25]-[27].

20. The trial judge said that it was important to observe that she did not reach these conclusions as a result of considering each breach in isolation:[72]

    I identified the impact of these breaches in the context of, and by reference to, the contribution they made to the overall effect of all Mr Goulding’s breaches as admitted and found.

    [72] Reasons [28].

21. From August 2012, a significant number of quotations were prepared for potential clients by TestCorp where there was a corresponding “Post-it Note”.  In every instance, the price quoted for standard electrical testing was less than the price noted on the corresponding “Post-it Note”.  As has been mentioned, these quotations did not generally result in the appellant’s clients leaving the appellant to become clients of TestCorp.  Most of the appellant’s clients rejected the invitation to join TestCorp. 

22. In October 2012 TestCorp succeeded with an important tender for work in Western Australia.  The volume of that work was substantial and securing it had nothing to do with the appellant’s clients or any of the “Post-it Notes”.[73]

    [73] Reasons [103].

23. By early 2015, the respondent and Mr Stephen agreed to separate.  Ultimately, in March 2015 the respondent sold his interest in TestCorp to Mr Stephen for $243,496.[74] 

    [74] Reasons [108].

24. Remarkably, the respondent then immediately set about establishing a new electrical testing business called ServiceCorp.  Unsurprisingly, the separation between the respondent and Mr Stephen was ultimately neither smooth nor without animosity.  The respondent left the original “Post-it Notes” with Mr Stephen.  Mr Stephen decided to tell the appellant’s principal, Mr Oszczypok, about the “Post-it Notes” and about the respondent’s conduct in breach of his duties before and after leaving his employment with the appellant. 

25. As a result, the appellant brought these proceedings against the respondent in 2017, as well as against TestCorp and ServiceCorp.[75]  The appellant’s case was built around the “Post-it Notes” and Mr Stephen’s evidence.  As mentioned, the appellant gave Mr Stephen and TestCorp a release from any liability.[76]

    [75] Reasons [10].

    [76] Reasons [9], [107], [151], [174].

26. The appellant’s case was presented at trial on two bases. 

27. The first basis was dependent upon the evidence of Mr Stephen about what had been said to him by the respondent about the “Post-it Notes”.  The effect of this evidence was that the respondent admitted that he copied confidential client information from the appellant’s TES program onto the “Post-it Notes” and he provided those “Post-it Notes”, or at least access to them, to Mr Stephen in connection with the establishment of the TestCorp business.  In addition, the appellant relied on contemporaneous electronic documents prepared in connection with the establishment of the TestCorp business, the genesis for which had been taken from the appellant and its document templates.[77]

    [77]   See, for example the tender book, Exhibit A1, at pages 143, 166, 321, 325 and 387.

28. In connection with this first basis, the appellant relied upon the sheer number of “Post-it Notes”, in the order of 239, which all named a client of the appellant, together with various details which appeared in TES.  The appellant also relied upon the quotations that TestCorp sent to clients of the appellant, some details of which corresponded with the information contained in TES, before and after the respondent ceased employment with the appellant.  Insofar as pricing was recorded, the price quoted was invariably lower than the price recorded on the “Post-it Note” relating to the relevant client.

29. The second basis for the appellant’s case concerned a sample of around one quarter of the “Post-it Notes”, which demonstrated what the appellant contended was a broad consistency between the information recorded on the “Post-it Note” in handwriting and the information contained in TES relating to that client of the appellant.

30. On these two bases, the appellant submitted that the court should have found that all of the “Post-it Notes” originated from the respondent’s unlawful conduct and breach of duty, that they were obtained and used in the business of TestCorp and, ultimately, that they resulted in the respondent gaining a profit when he sold his interest in the TestCorp business to Mr Stephen. 

31. Whilst the trial judge made a number of findings consistent with these two bases for the appellant’s case, she did not entirely accept the appellant’s case.

32. On the first basis for the appellant’s case the trial judge accepted, to a significant extent, the evidence from Mr Stephen that the respondent had brought “Post-it Notes” into the TestCorp business during the time when it was being established and on which he had written client information which had been improperly obtained from TES. 

33. Accordingly, her Honour necessarily rejected the respondent’s account that on no occasion did he ever write client information improperly obtained from TES onto any of the “Post-it Notes”.[78]  Associated with this was her rejection as implausible the evidence by the respondent that, insofar as his writing appeared on the “Post-it Notes”, this was because he re-wrote client information which had been obtained by Mr Stephen ‘cold-calling’ the relevant clients.[79] 

    [78] Reasons [23], [275] and [446].

    [79] Reasons [217], [250] and [286]-[288].

34. In consequence, her Honour found that the respondent was closely involved in the establishment of the TestCorp business which commenced within weeks of commencing employment with the appellant and that this extended to re-working the appellant’s standard form quotation document and adapting it for use by TestCorp.  Accordingly, her Honour rejected the respondent’s evidence that he was not actively involved in client development for TestCorp.[80]

    [80] Reasons [214].

35. Whilst the trial judge identified the sheer number of “Post-it Notes” relating to the appellant’s clients and the correlation between what was handwritten onto these and what was stored in TES as a strength in the appellant’s case, the appellant contended that she did not otherwise adequately bring these findings to bear in her reasoning.[81]  Indeed, the appellant contended that the trial judge erred in rejecting the evidence of Mr Stephen on important matters.  These included the following:

    1.The evidence of Mr Stephen that, at a meeting in May 2012, he and the respondent discussed the “Post-it Notes” that the respondent had created from information taken from TES and, by that stage, 183 “Post-it Notes” had been produced.  The trial judge rejected this evidence despite what was said to be a contemporaneous handwritten note made by Mr Stephen on his copy of the TestCorp agenda paper, essentially because her Honour found that Mr Stephen’s evidence displayed inconsistencies.[82]

    2.The evidence of Mr Stephen about the circumstances in which UnitingCare Wesley was secured as a client by TestCorp.[83]

    [81] Reasons [265].

    [82] Reasons [165]-[167] and [267].

    [83] Reasons [171]-[172].

36. On the second basis for the appellant’s case, the trial judge undertook an extremely detailed, painstaking analysis of the “Post-it Notes” evidence, at times note by note, before concluding that there was a “materially less than complete correlation” between the information on the “Post-it Notes” and the information contained in TES.[84]  The trial judge described various “discrepancies” between the information handwritten onto the “Post-it Notes” and the information contained in TES.[85]  The appellant criticised these findings because it contended that the trial judge:

    1.failed to analyse and give weight to the extensive degree of consistency between the information handwritten onto the “Post-it Notes” and the information contained in TES as proved by its sample of 25 per cent of the “Post-it Notes” contained in bundle 4 of exhibit A1; and

    2.what were described by the trial judge as “discrepancies” were not examples where the evidence recorded in handwriting on the “Post-it Note” was different to what was contained in TES in 2012 but, rather, they were merely instances where the evidence before the court did not extend to direct proof of what information was contained in TES in 2012.

    [84] Reasons [295].

    [85] Reasons [312] and [320].

37. Speaking generally, the appellant remained critical of the trial judge’s dismissal of what it described as numerous consistencies, as well as the overall degree of consistency, between what was recorded in handwriting on the “Post-it Notes” and what was contained in TES.  The reasons given by the trial judge for dismissing these consistencies are addressed in the course of addressing the appellant’s appeal grounds.

    Appeal grounds 1 and 2

38. At a general level, the appellant invited this Court to intervene on the basis that the evidence of Mr Stephen should not have been rejected whereas the evidence of the respondent should have been wholly rejected.  This invitation was extended in a context where the trial judge was not wholly satisfied with the evidence of either witness. 

39. In effect, her Honour accepted some aspects of the evidence of each witness and rejected other aspects, in significant respects preferring the evidence of the respondent where his evidence conflicted with that of Mr Stephen.  This occurred in a case which required an evaluation of circumstantial evidence.[86] 

    [86] Reasons [11].

40. On the conflict between the evidence of the respondent and Mr Stephen, the trial judge explained that:[87]

    … the only rational explanation for the divergence between their evidence … was that one or both of them was not telling the whole truth.  This was not a case where one of them could have been completely mistaken.  Bearing in mind their significant falling out as close friends and business partners, I scrutinised their evidence carefully.  Whilst neither was a satisfactory witness, I had more serious difficulties in accepting much of Mr Stephen’s evidence as truthful or reliable …

    [87] Reasons [161].

1. In many instances, her Honour was called upon to resolve disputes between these witnesses which amounted to a clash of “oath against oath” around a decade after the relevant events had occurred, without the benefit of reliable contemporaneous records.[88] 

   [88] Reasons [11].

2. It is uncontentious that it is open to the trier of fact to make findings such as were made in this case, accepting some aspects of the evidence but rejecting others, particularly where the findings were not governed by evidence which was contemporaneous, objective and uncontradicted. 

3. A matter which received considerable attention from the appellant on the appeal before this Court concerned the respondent’s “about face” concerning his authorship of the “Post-it Notes”. 

4. In the period before trial and in the early stages of the trial, the respondent’s case was, essentially, that he prepared all but one of the “Post-it Notes” in his own handwriting. As has been mentioned, the trial judge generally rejected the respondent’s denial that he re-wrote illegible “Post-it Notes” made by Mr Stephen after Mr Stephen started cold-calling potential clients.  The trial judge rejected the respondent’s case that he was not involved in misusing his access to TES or otherwise acting in breach of his employment duties when creating “Post-it Notes”. 

5. Nonetheless, during the course of the respondent’s cross-examination he was asked by the trial judge whether he had checked all of the handwriting on the “Post-it Notes” to ensure that it was his. The respondent said that he had not carefully checked the notes for this purpose.  He was given an opportunity that day and overnight to do so.  After being given that opportunity, the respondent then denied, for the first time, that he had authored a number of the “Post-it Notes” or at least significant portions of the information recorded in handwriting on a number of the “Post-it Notes”. 

6. In broad terms, the trial judge accepted the respondent’s evidence on this topic and that acceptance of the respondent’s evidence is now criticised. 

7. It will be necessary to return to this issue when dealing with appeal ground 2.

8. So far as appeal ground 1 is concerned, Mr Stephen gave evidence that he received the “Post-it Notes” from the respondent and that all of the “Post-it Notes” had the respondent’s handwriting on them. Mr Stephen said that the respondent told him that he had obtained the information recorded in handwriting from the appellant’s computer system and that these represented “client leads”.  Mr Stephen also said that he and the respondent discussed the progress Mr Stephen was making by calling these clients of the appellant, including at a meeting in May 2012.  It was at that meeting that he said the respondent claimed to have produced 183 “Post-it Notes”.  At that same May 2012 meeting it was agreed that Mr Stephen should stop calling the appellant’s clients whilst the respondent remained an employee of the appellant. 

9. So far as UnitingCare Wesley is concerned, Mr Stephen explained that it was the respondent who first prepared a quotation in the name of TestCorp which was sent by email to an employee of UnitingCare Wesley, Mr Minigall.  They were then advised to submit a tender.  Both the original quote and the tender were set at prices below the appellant’s price.  Mr Stephen said that this was done by the respondent who prepared both the quotation and the subsequent tender. Mr Stephen said that UnitingCare Westley was TestCorp’s second client, but the first of significant value and, as a result, they could each start taking a wage of $500 per week from the business.

10. Mr Stephen also gave evidence that in the week the respondent finished employment with the appellant they sat together in the respondent’s home and started contacting clients on the contact list generated by the respondent from the information he had obtained from the appellant.  The “Post-it Notes” were kept in a filing cabinet and, after the respondent sold his interest in the business to Mr Stephen, Mr Stephen kept the “Post-it Notes” until he passed them on to the solicitor acting for Mr Oszczypok. 

11. The appellant challenged the rejection by the trial judge of the evidence of Mr Stephen concerning his notation of the number “183” on the May 2012 agenda paper, his evidence that it was the respondent and not he who prepared the UnitingCare Wesley quotation, and the evidence of Mr Stephen that he did not ever use the respondent’s computer, using the respondent’s username.[89] The appellant, both before the trial judge and in this Court, maintained that there was no reason for Mr Stephen to lie about the preparation of the UnitingCare Wesley quote or indeed to misrepresent any aspect of the respondent’s involvement in the establishment of TestCorp.[90]

    [89] Reasons [160]-[175].

    [90]   See, for example, para 38.3(v) of the written submissions of the appellant.

12. The trial judge recorded that her first impression of Mr Stephen’s evidence was that he was an unsatisfactory witness who intentionally overstated the respondent’s role and diminished his own role in the setting up of TestCorp.[91] 

    [91] Reasons [162].

13. In the course of explaining her reasons for rejecting Mr Stephen’s evidence, the trial judge rejected as untruthful Mr Stephen’s denial that he ever used the respondent’s laptop and username or account.  The starting basis for this finding, an admittedly serious one, is that six TestCorp quotes were prepared on 6 August 2012 on the respondent’s laptop using his user account. 

14. There was evidence from the respondent to the effect that he did not prepare these quotes and did not use his computer on that day.  There was also evidence that this was the respondent’s penultimate working day with the appellant.  Although the appellant challenged this as an insufficient basis for the finding made by the trial judge, it was not the only basis and there was no evidence to demonstrate that the appellant did not require that the respondent work out his notice period until 7 August 2012, or that the respondent did not in fact attend work on that day during what were his normal working hours.  Accordingly there was, it must be said, a basis for her Honour’s finding that the quotations of 6 August 2012 were not prepared by the respondent but by Mr Stephen.

15. Importantly, this finding was made in a context where her Honour generally rejected a number of aspects of Mr Stephen’s evidence about his level of interest and involvement in the setting up of TestCorp.[92]  The trial judge gave detailed reasons for her findings about these matters.  For example, the trial judge referred to a number of inconsistencies in Mr Stephen’s evidence about the number of “Post-it Notes” which he claimed the respondent had provided to him during 2012.[93]  Mr Stephen’s evidence was not consistent on this topic.  Whilst the appellant contends that the trial judge should have found that these discrepancies merely represented a failing in Mr Stephen’s memory, it was open to her Honour to make the finding which she did, namely, that they represented a tendency in Mr Stephen to overestimate the involvement of the respondent and underestimate his own involvement in the establishment of TestCorp.   

    [92]   See, for example, Reasons [164], [382]-[384].

    [93] Reasons [165].

16. As for whether Mr Stephen gave untruthful evidence concerning the use of the respondent’s laptop and user account, the trial judge explained her reasoning in some detail, adding to the point made about the respondent being at work on 6 August 2012:[94]

    As stated, I found Mr Stephen was untruthful in his repeated evidence that he only ever used his own laptop with the user account ‘luke stephen’, never used Mr Goulding’s laptop and did not know Mr Goulding’s user account because he never used it,[95] never shared a computer with Mr Goulding when they worked out of his front room or missed a day bringing his own laptop to work there.[96]  His evidence is contradicted by his earlier evidence that he prepared the Mitsubishi quote[97] given the file properties show it was created and last modified on Mr Goulding’s computer by the user ‘Jarrad’s’.  The properties of the Microsoft Word files for the six TestCorp quotes prepared on 6 August 2012 during business hours whilst Mr Goulding was at work at Testel indicate Mr Stephen prepared them,[98] contrary to his evidence about not ever using Mr Goulding’s laptop or user account.  I therefore prefer Mr Goulding’s evidence to the effect they shared his laptop in the early days when Mr Stephen worked from Atrill Avenue and have found Mr Stephen prepared these quotes using Mr Goulding’s computer as the user ‘Jarrad’s’.[99]

    The topic of TestCorp’s first dealings with UnitingCare Wesley was another unsatisfactory passage of Mr Stephen’s evidence in examination-in-chief.[100]  When asked by Testel’s counsel whether he remembered how these dealings commenced, he gave a lengthy answer to the effect that Mr Goulding prepared and sent the quote in Mr Stephen’s name during a week they spent together in their office in Mr Goulding’s front room at Attrill Avenue ‘cold-calling’ prospective clients.  Mr Stephen said Mr Minagall, the UnitingCare Wesley contact, was on Mr Goulding’s ‘list’ and the quote led to Mr Minagall telling them about the tender, which they won.  Mr Stephen said he knew about Mr Goulding sending the quote because Mr Goulding continually ‘rubbed’ in his face that he had won their very first client.  As to pricing, Mr Stephen volunteered that their original pricing was only a bit less than Testel’s, then quickly corrected himself to say it was significantly less, but they put up the price when they submitted their tender, “...Still being under Testel’s price…”.[101]

    Overall, his evidence on the topic was unconvincing and again appeared rehearsed.  Whilst I accept that he and Mr Goulding started ‘cold-calling’ clients together immediately after Mr Goulding left Testel, Mr Stephen had his dates wrong.  Mr Goulding’s last day at Testel was on 7 August 2012, the day after the six quotes (including this one for UnitingCare Wesley) were prepared.  All six quotes were prepared during business hours by Mr Stephen using Mr Goulding’s laptop and user account. Indeed, Mr Stephen’s evidence about the pricing showed a degree of knowledge consistent with his involvement in pricing the original quote, bearing in mind it is uncontentious that it was Mr Goulding who prepared TestCorp’s tender submission.

    Mr Stephen’s tendency to understate his involvement and exaggerate Mr Goulding’s role tainted all of his evidence and is explained by his frank admission that he gave evidence in this proceeding because “it’s of benefit for me to see Jarrad punished for his wrongdoings,”[102] knowing he would not be chased for his part because of the Deed of Release made in his and TestCorp’s favour.[103] 

    [94] Reasons [171]-[174].

    [95]   T287.29-288.4.

    [96]   T369.16-.29.

    [97]   Exhibit A1/2/44/349; T317.8-26.

    [98]   Each quote was created and last modified during the Mr Goulding’s usual working hours and in three cases saved as a PDF file during the day using Mr Goulding’s username.  Exhibit A6\Quotes\Quotes\SA Quotes for Bonney Health Care Group, Camden Community Centre, Unibooks, United Wesley Care, Viterra and Warburton Builders.

    [99]   T442.3-444.37.

    [100] T317.33-320.33.

    [101] T318.14.

    [102] T344.4.-.7.

    [103] T344.10-.13.

17. The appellant also submitted that there was a serious flaw in the approach taken by the learned trial judge to the evidence of Mr Stephen.  That concerned the provenance and integrity of the “Post-it Notes”.  The trial judge explained why she was not satisfied about the provenance and integrity of all of the “Post-it Notes” in the following passage:[104]

    The variable characteristics of the ‘Post-It Notes’ and their history bring into question their provenance and integrity.  Whilst the collection of ‘Post-it Notes’ quite plausibly may comprise some made by copying Testel client information from TES, some original notes made in the course of speaking to clients and those rewritten as a neater record, it is also possible in the circumstances of this case that some notes or parts of notes were made later than others, both legitimately or otherwise.  Whilst such a possibility is a serious allegation that was not pleaded or properly ventilated at trial, it cannot be dismissed as fanciful in the circumstances of Mr Stephen’s strong animosity towards Mr Goulding and the following gaps in the evidence.

    [104] Reasons [278].

18. Emphasis was placed by the appellant upon the phrase “both legitimately or otherwise” in this passage.  It was submitted by the appellant that the prospect that Mr Stephen made any notation on the “Post-it Notes” but later claimed that they were in the handwriting of the respondent was never put to him nor “remotely contemplated in the evidence”. 

19. Whilst it may be that the phrase “both legitimately or otherwise” was intended to refer to the legitimate recording of information as distinct from the illegitimate recording of information in breach of duty, let it be assumed that the appellant was correct in its interpretation of this passage.

20. As will be seen, the utility of this evidence is problematic, particularly when assessing why TestCorp succeeded with the UnitingCare Wesley tender.  Nonetheless, it is far from clear that her Honour was making any positive finding of dishonesty by Mr Stephen in this passage.  This observation did not appear as part of in the trial judge’s assessment of Mr Stephen's credibility and reliability, but rather in a separate section concerned with the documentary evidence.  It seems that her Honour was primarily emphasising her absence of confidence in the provenance and integrity of the “Post-it Note” records.  The trial judge highlighted the absence of evidence from witnesses in the appellant’s camp proving what was in effect the ‘chain of evidence’ concerning the handling of the “Post-it Note” records.[105]

    [105] Reasons [279]-[283].

21. In any event, it cannot be said that the trial judge was wrong to make the findings she made about the evidence of Mr Stephen being both unreliable and untruthful, or in rejecting much of his evidence on contentious topics.[106]  That is especially so where Mr Stephen admitted creating the Mitsubishi quote even though that quote was created and modified on the respondent’s computer using the respondent’s user account.[107]

    [106] Reasons [175].

    [107] Reasons [169], [366].

22. Although the appellant submitted that Mr Stephen was frank about his feelings towards the respondent and that the release weighed in favour of the reliability of Mr Stephen’s evidence, because he did not have to be concerned about exposing himself to liability, neither of these matters speaks against the impression formed or the findings made by the trial judge.  For example, she was satisfied that Mr Stephen was motivated to punish the respondent.   In context, that finding is both understandable and open on the evidence.  The trial judge’s findings on these issues have not been shown to be affected by error.  Her Honour’s findings were made with the benefit of seeing and hearing Mr Stephen’s evidence, particularly its variations, during the time he spent in the witness box.  They were made with the benefit of being in a position to compare the respondent’s evidence on the same topics.  They are neither glaringly improbable nor contrary to compelling inferences. 

23. Finally, the appellant says that the trial judge overlooked the difficulties experienced in receiving Mr Stephen’s evidence by video-link.  The passages relied on by the appellant do not demonstrate that the trial judge was wrong to have regard to Mr Stephen’s demeanour when formulating her views about his lack of credibility and reliability. 

24. Appeal ground 1 should be dismissed.

25. As for the evidence of the respondent, appeal ground 2, the effect of the challenge is that because the respondent was shown to be lacking in credibility and reliability in relation to a number of important aspects of his evidence, it was wrong for the trial judge to accept any aspect of his evidence, particularly his evidence that he did not create all of the handwriting on the “Post-it Notes” which were in evidence before the trial judge.  

26. In his pleadings and an affidavit filed before trial, the respondent had said that he had reviewed the “Post-it Notes” and that they were all in his handwriting save one note.[108]  The respondent’s evidence-in-chief was that, apart from one “Post-it Note”, all of the handwriting on the “Post-it Notes” was his handwriting.[109] 

    [108] Reasons [205].

    [109] Reasons [204].

27. The appellant also emphasised that the respondent’s evidence should not have been accepted where important parts of it were rejected as untruthful.[110] A number of examples were given.  First, the appellant points to the fact that the respondent lied in his letter of resignation insofar as he said that he was leaving because he had been offered a financial planning position.[111] Secondly, the appellant highlights that the trial judge found that the respondent lied in his professional profiles insofar as he made false claims about his experience and accomplishments.[112]  Thirdly, the appellant relies on the fact that the trial judge also found that the respondent falsely altered his TAFE certificate so as to suggest that he had a relevant electrical testing training certificate for a decade longer than in fact was the case[113] and, finally, as has already been mentioned, her Honour rejected as untruthful the respondent’s claim not to have been actively involved in the development of the TestCorp client base and in connection with the creation of most of the “Post-it Notes”.[114]

    [110] Reasons [208].

    [111] Reasons [209].

    [112] Reasons [210]-[212].

    [113] Reasons [213].

    [114] Reasons [214], [217], [250] and [286]-[288].

28. Before addressing the respondent’s belated change in position regarding the extent of his handwriting on the “Post-it Notes”, it is first helpful to note the approach generally taken to the evidence of the respondent by the trial judge.

29. The trial judge recorded that she took a cautious approach, and gave careful consideration to the reliability and truthfulness of the respondent’s evidence, particularly where it diverged from the evidence of other witnesses, including the evidence of Mr Stephen. 

30. The trial judge assessed the respondent’s evidence bearing in mind that he was not legally represented and that he did not always appreciate what he was required to do to properly conduct his defence.  The trial judge recognised that the respondent did not at times listen carefully to the questions put to him and that he, at times, answered thoughtlessly. The effect was that his evidence was unstructured and at times unclear.  The trial judge also had regard to the court’s obligation, as described in Whisprun Pty Ltd v Dixon, to avoid approaching a case:[115]

    … as some kind of sport or contest wholly reliant on the way in which the case was presented by a party.  Litigants are represented in our courts by advocates of differing skills. Litigants are sometimes people of limited knowledge and perception.  Occasionally, they mistakenly attach excessive importance to considerations of no real importance.  In consequence, they may sometimes tell lies, or withhold the entire truth, out of a feeling that they need to do so or that the matter is unimportant or of no business of the court.  This is not to condone such conduct.  It is simply to insist that, where it is found to have occurred, it should not deflect the decision-maker from the substance of the function assigned to a court by law. 

    [115] Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598, [120] (Kirby J).

31. After outlining her general approach, the trial judge summarised her conclusion regarding the respondent’s evidence in the following terms:[116]

    My overall conclusion was that Mr Goulding was a naïve and sometimes all too candid a witness.  This reflected his apparently casual nature as much as being a result of his being unrepresented and uncensored in his evidence.  Generally, despite Testel’s submission to the contrary, he was co-operative in giving evidence to the best of his limited recall and answered questions in cross-examination directly, with an occasional riposte by way of submission.  His lack of recall of matters of detail of such dated matters is difficult to fairly criticise.  He answered my questions directly and, at times, carelessly volunteered evidence that was quite unhelpful to his case. 

    [116] Reasons [203].

1. It must be interpolated here that, while counsel for the appellant was able to resolve some of the discrepancies adverted to by the trial judge, this did not undermine the force of, let alone demonstrate error in, the judge’s reasoning.  The first reason for this is that she allowed for the possibility that some of the anomalies may be capable of resolution, for example, by reason of different or greater information being accessible in TES than was available to the Court.  The second is that even though the appellant’s counsel proffered explanations for a number of the discrepancies, it was not suggested that they could all be resolved.

2. Importantly, as the trial judge highlighted, it was “more troubling” that although this client was significant to the appellant’s case, the relevant UnitingCare Wesley “Post-it Note” was omitted from the sample of TES records and “Post-it Notes” reproduced by the appellant in volume 4 of Exhibit A1 and the analysis contained in Annexure B of the appellant’s closing address.  As her Honour explained, the discrepancies regarding this “Post-it Note” were accordingly not all addressed when they should have been addressed directly.[158]

   [158] Reasons [395].

3. The absence of proof as to whether the quotation prepared by Mr Stephen was ever sent to UnitingCare Wesley, and whether it was overtaken by a direct request from Mr Minagall to participate in a tender, have already been mentioned.  There was, her Honour found, a “material gap” in proof of the appellant’s claim that the tender only came about because of the misuse of confidential information recorded on a “Post-it Note” and transposed onto a quotation.[159]

   [159] Reasons [396].

4. In the course of undertaking what was a difficult, detailed analysis of the circumstantial evidence and the inferences that might properly be drawn from it, her Honour pointed to the absence of proof about the source of the pricing TestCorp used.  Though some clients told suppliers such as TestCorp what their pricing was, there was no evidence as to whether Mr Minagall ever told the respondent or Mr Stephen the prices UnitingCare Wesley paid the appellant.  Whilst the trial judge was sceptical as to whether Mr Minagall would, if asked, have told a tenderer what his current supplier’s prices were, she could not exclude that circumstance.[160]

   [160] Reasons [397].

5. The appellant had submitted at trial that all of the TestCorp pricing was set by discounting the appellant’s pricing which had been copied by the respondent onto the “Post-it Notes” from TES.  However, the trial judge pointed out that whilst the quoted pricing was less than those on the “Post-it Note” they were identical to those which Mr Stephen quoted to other clients.  While some criticism was made on appeal of her Honour’s analysis of the timing of the preparation of various quotations, and whether the same pricing was used across the board, that did not undermine the conclusion her Honour reached that Mr Stephen may have set prices by simply copying pricing from one quotation to the next rather than by reference to the appellant’s prices obtained by the respondent in breach of his duties.[161]

   [161] Reasons [400].

6. Having regard to these reasons and all relevant circumstances, her Honour concluded in the following terms:[162]

   Weighing all these circumstances, I am not satisfied that the UnitingCare Wesley ‘Post-it Note’ was made by Mr Goulding copying information from TES for Mr Stephen to use in preparing the quote. Whilst I cannot be satisfied that the ‘Post-it Note’ was used to prepare the quote, I am satisfied, however, that it is connected to the preparation of the UnitingCare Wesley quote in some way given its file name replicates the error in the client’s name on the ‘Post-it Note’. That said, I cannot be satisfied which came first (the quote or the ‘Post-it Note’) or if the ‘Post-it Note’ came first, that the prices were on the ‘Post-it Note’ when the quote was made. I am also not satisfied the quote was sent by Mr Stephen to UnitingCare Wesley and not overtaken by receipt of UnitingCare Wesley’s request for tender on about 9 August 2012, after Mr Goulding had left Testel’s employment. 

   In the absence of any evidence showing that Mr Goulding participated in or knew about Mr Stephen’s preparation of this quote or knew about Mr Minagall’s approach whilst he was a Testel employee, I am not satisfied that whilst Mr Goulding was an employee of Testel he engaged in any conduct regarding the preparation of a quote for UnitingCare Wesley in breach of his employment duties.

   [162] Reasons [401]-[402].

7. As for the UnitingCare Wesley tender, the issue of timing associated with the request to tender has already been mentioned.  Although the appellant maintained that the request for tender followed receipt of a quotation prepared by the respondent with the benefit of confidential information taken from TES in breach of duty, the trial judge held that this was not the effect of Mr Minagall’s evidence, notwithstanding his “understandably limited” recollection 10 years after the events.[163]

   [163] Reasons [405].

8. The effect of Mr Minagall’s evidence has already been explained.  The trial judge added that the request for tender appeared to have been issued well before the TestCorp quotation was prepared on 6 August and that the TestCorp response appeared to have been last modified by the respondent on 9 August 2012.

9. One issue about these findings should be addressed at the outset.  The reasoning by the trial judge on the question whether the respondent or Mr Stephen made the error in the client’s name on the “Post-it Note” is a little difficult to understand in a case where the respondent did not deny that this portion of the note was in his handwriting.  It is possible that her Honour accepted or entertained in relation to this Post-it Note, at least to some extent, the respondent’s case that this was a transcription error made by the respondent of something which had been recorded by Mr Stephen.

10. Next, it must be acknowledged that her Honour undertook a very detailed analysis of the evidence.  This extended to revisiting a suggestion she made in the course of evidence (which the respondent had accepted) that the respondent must have known about the UnitingCare Wesley tender before he left the appellant’s employment.  On reflection, her Honour found that, as a matter of logic, the tender must have been prepared after the quotation “since there would be no point in quoting if it was already known that a formal tender submission was required”.[164]

    [164] Reasons [407].

11. Ultimately, the trial judge was unable to make a finding as to whether Mr Minagall spoke to Mr Stephen or the respondent about the tender, assuming that he spoke to one of them. 

12. “Most fundamentally” her Honour found that there was no cogent evidence as to why TestCorp succeeded with the tender.  It was here that the question of the appellant’s pricing evidence became acute.  Although the appellant’s case was based on the proposition that the respondent had misused the appellant’s pricing information on the “Post-it Note” or, at the very least, on the quotation and tender documents, Mr Minagall’s clear evidence was that price and price alone was “not determinative”.  On this basis, the trial judge rejected the appellant’s submission that the submission of prices at less than those charged by the appellant implied that the respondent exploited an unfair advantage associated with knowing the appellant’s pricing as a result of his breaches of duty.[165] 

    [165] Reasons [408].

13. More importantly still, her Honour found that there was a material difference between the appellant’s standard pricing as reflected in the “Post-it Note” when compared with TestCorp’s pricing schedule in its tender.[166]  The trial judge pointed to the use of two sets of rates in the TestCorp tender, being lower rates for metropolitan sites and higher rates for country sites.  Indeed, the TestCorp tender utilised 16 prices, only three of which were comparable to those contained on the “Post-it Note”.  Given the lack of correlation, the trial judge held that it was the packaging of pricing that was likely important:[167]

    Accepting that competitive pricing would have been a material factor in a competitive tender winning as a matter of commercial common sense, I consider that it was the overall package of prices offered that was important.  Accordingly, on the evidence, I am not satisfied that offering three marginally lower prices than Testel for metropolitan sites was in the scheme of things a material cause of TestCorp being selected as the winning tenderer.

    [166] Reasons [410].

    [167] Reasons [411].

14. It will be noticed that in this passage the trial judge referred to a “material cause” rather than the more orthodox requirement that a claimant demonstrate that any requisite harm or gain be caused by reason of a breach of fiduciary duty, or that harm would not have been sustained “but for” the errant fiduciary’s breach.[168]  However when one considers the whole of her Honour’s reasons, including this passage in its proper context, there is no reason to think that the correct test was overlooked, still less that the wrong test was applied.

    [168] As explained earlier in these reasons, for example, by reference to Ancient Order of Foresters v Lifeplan (2018) 265 CLR 1, [7]-[9] (Kiefel CJ, Keane and Edelman JJ), [69]-[70], [85]-[88] (Gageler J).

15. The trial judge went further and pointed to the other criteria likely necessary for a successful tender bid which included relevant experience, ability to perform the work, equipment, software and reporting, insurances and OH&S policy.  Aspects of the statements made by TestCorp on these matters in its tender were false.  Whilst her Honour acknowledged that the claims made by TestCorp about its experience and size “no doubt gave Mr Minagall comfort”, the “falsity of these claims, whilst plainly misleading and dishonourable” was not material in establishing the respondent’s liability to the appellant because it could not be said to connect the relevant “Post-it Note” information with the alleged breaches of duty and, in turn, with TestCorp’s success in the UnitingCare Wesley tender process.[169]  As her Honour concluded:[170]

    On all the evidence as I found it, I am not satisfied that the unauthorised use of any Testel information acquired by Mr Goulding in breach of duty played any material part in TestCorp winning a competitive tender to provide electrical testing services to UnitingCare Wesley, let alone was the key circumstance in its success as alleged by Testel.

    [169] Reasons [412].

    [170] Reasons [413].

16. The appellant’s challenge was essentially one pitched at the probabilities.  The appellant submitted that when the evidence was viewed as a whole, the absence of any pre-existing relationship between TestCorp and the six clients the subject of the quotations prepared on 6 August 2012 meant that there was “no rational basis for quoting different rates” apart from going below the rates taken from the appellant’s TES information.  The appellant also challenged the proposition that the $2 rate used in the UnitingCare Wesley quotation was used “across the board”.

17. Whilst it might be said that, as a matter of fine detail, there may be some scope to criticise the findings about timing of the preparation of the quotations, and whether $2.00 was used across the board, that does not positively demonstrate what the source of the pricing information was, nor does it undermine her Honour’s broader findings and reasoning about the lack of a connection between the sending of the UnitingCare Wesley quotation and the request that the appellant participate in the tender, together with the different pricing package used by TestCorp in its tender. 

18. Whilst there was clearly a basis for suspicion given the way in which the respondent went about assisting with the establishment of TestCorp’s business, the appellant cannot overcome the trial judge’s rejection of the inferences it asked her to draw, especially as a number were influenced by credibility findings.  The appellant is unable to overcome the finding that any claimed misuse of the appellant’s pricing was not proved to be material to, still less causative of, TestCorp’s success in the UnitingCare Wesley tender process.  That is to say, the appellant cannot demonstrate that the trial judge erred in refusing to find that this gain was caused by the respondent’s breach of duty.

19. In particular, it cannot be said that there was any material error made with respect to these latter findings, nor can it be said that they are glaringly improbable or contrary to compelling inferences.   

20. In these circumstances, appeal ground 7 must be dismissed.

    Appeal grounds 3 to 6 – the “Post-it Notes” taken as a whole

21. The case which was made by the appellant and the findings which were made by the trial judge on the “Post-it Note” evidence have already been reviewed.  The appellant addressed a number of the findings made, line by line, suggesting a very large number of criticisms of the findings and reasoning of the trial judge, inviting this Court to arrive at a different conclusion.

22. Whilst the appellant’s concern about the respondent’s flagrant misconduct is understandable, a review of the “Post-it Note” evidence taken as a whole cannot overcome the limited success of TestCorp in attracting the custom of the appellant’s clients and in producing any loss to the appellant or gain to TestCorp and, in consequence, to the respondent.

23. It is not necessary to rule on all of the challenges made.  That is because, ultimately, an acceptance of the appellant’s case on those challenges does not demonstrate that the trial judge erred with respect to the critical findings made about the UnitingCare Wesley tender or about the limited success of TestCorp in attracting the custom of the appellant’s clients more generally.  As the trial judge observed in connection with her costs reasons:[171]

    If I had concluded that Mr Goulding had made all the ‘Post-it Notes’ in breach of duty, the result would have been substantially the same.  Testel’s share of the lost revenue would still have been nominal … This is because the client connections successfully misappropriated by Mr Goulding were immaterial and the overall effect of his breaches of duty was a modest ‘head start’ in setting up TestCorp.  The evidence plainly showed that the establishment and limited success of TestCorp’s business did not depend on Mr Goulding’s breaches of duty, either entirely or in a material way.

    [171] Testel Australia Pty Ltd v Goulding & Ors (No 2) [2023] SADC 57, [42] (Thomas DCJ) (Costs Reasons).

24. For example, let it be assumed that the trial judge erred in every one of the issues suggested.  That assumption does not demonstrate that TestCorp attracted more custom from the appellant’s clients than in fact it attracted.  Nonetheless, an assumption of that kind might suggest that the case in favour of a finding that the respondent recorded the pricing on the UnitingCare Wesley “Post-it Note” in his own handwriting was stronger than the trial judge appreciated.  Let it also be assumed that the trial judge should have made the further finding that this pricing information was recorded on the UnitingCare Wesley “Post-it Note” by the respondent in breach of his duty.

25. Those hypothetical findings do not, however, overcome the further findings made by the trial judge which resulted in the conclusion there was a failure to prove a material causative connection between the respondent’s alleged misuse of confidential information concerning UnitingCare Wesley and the success achieved by TestCorp in connection with the tender process.  Apart from any other issue, the absence of a correlation between the pricing recorded on the UnitingCare Westley “Post-it Note” and the pricing package offered by TestCorp in its tender is decisive. 

26. These appeal grounds must be dismissed.

    Appeal grounds 8 to 10

27. As has been observed, the appellant frankly conceded that if it failed in respect of appeal grounds 1 to 7 then it could not succeed with these appeal grounds.

28. Nonetheless, the appellant submitted that even though TestCorp’s first financial year of trading depended upon 74 per cent of its revenues being earned from clients with no connection to the appellant, it maintained that the trial judge should have had regard to “the converse”.  That is, that 26 per cent of TestCorp’s revenue was earned from clients who formerly had a connection to the appellant.[172]  Together with its submissions about UnitingCare Wesley, the appellant submitted:[173]

    Her Honour should have found, on the facts, that Mr Goulding’s gains, both from TestCorp’s trading and his capital gain upon the sale of his interest to Mr Stephen, would not have been made “but for” his breaches of duty, such that the causation requirement for an account of profits was satisfied, albeit that there were other factors contributing to those gains.  The “but for” test is addressed by Gaegler J in Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1, [88]-[96] and Derrington J in Zibara v Ultra Management (Sports) Pty Ltd (2021) 283 FCR 18, [284]‑[287].

    [172] Written submissions of the appellant [82].

    [173] Written submissions of the appellant [83].

29. In circumstances where the challenge to the key findings made in respect of UnitingCare Wesley have failed, the appellant cannot succeed with these submissions on appeal. 

30. It simply does not follow that there would have been no TestCorp business but for the respondent’s breach of duty where nearly three quarters of its revenues were derived from clients who had nothing to do with the appellant.  Similarly, there is no basis for the appellant’s alternative claim for an account based on an accounting in respect of the revenues earned from the successful UnitingCare Wesley tender.

31. In consequence, these appeal grounds must be dismissed.

    The costs appeal

32. The grounds of appeal on costs are as follows:

    1.The exercise by the learned Trial Judge of her discretion as to costs and in deciding (at Reasons [32]) that this was not an appropriate case to override the operation of UCR r194.5(11) miscarried in that the learned Trial Judge:

    1.1    Found that it was a matter of little or no weight that if a costs order was not made in favour of the Appellant, the First Respondent would benefit from his misconduct (Reasons [35]) in circumstances where the misconduct of the First Respondent:

    (i)was in the nature of secretly and contrary to his duties as an employee, taking information from the Appellant for the purpose of establishing a business in competition with the Appellant;

    (ii)included conducting his case the basis of a false explanation for the creation of Post It notes in the handwriting of the First Respondent; and

    (iii)deposing in affidavits filed on 27 June 2017 and 6 July 2017, and giving evidence in chief at trial that all but one Post It note was in his handwriting and then giving evidence in cross examination, which was ultimately accepted, that his handwriting did not appear on all or parts of about 135 Post It notes.

    1.2    Had regard to the irrelevant consideration that the misconduct of the First Respondent was relevant to liability but not to the amount of the award (Reasons [36]).

    1.3    Failed to have regard to the relevant consideration of the real uncertainty in determining whether on the Appellant’s claim for an account of profits the court would order the First Respondent to account in respect of the capital amount received by the First Respondent upon the sale of his interest in TestCorp and if so, the real uncertainty in determining in what amount an accounting would be ordered. (Reasons [37] and [40])

    1.4     Proceeded upon the erroneous factual basis that the significant difficulties, as found by the learned Trial Judge (Reasons [38] and [40]), in pursuing an account of profits in respect of the sale by the First Respondent of his shares in TestCorp should have been obvious from the information the Appellant had from Mr Stephen.

    1.5    Proceeded upon the erroneous basis that the First Respondent’s change of position at trial had not bearing on the value of the claim (Reasons [41]-[42]) and failed to have regard to the relevant circumstance that at trial the First Respondent changed his position as to whether his handwriting was on the Uniting Care Wesley Post It note, which was relevant to whether the misconduct of the First Respondent had directly led to TestCorp gaining its important early success.

    1.6    Proceeded upon the erroneous basis that the manner in which the First Respondent conducted the proceedings was only a relevant consideration if it was found to be relevant to whether the outcome of the proceedings would have been an award to the Appellant in an amount greater than the amount provided for in UCR r194.5(11).

    1.7     Undertook a close examination of the course and conduct of the proceedings as a whole and had regard to the view the learned Trial Judge took upon that matter, in circumstances where neither evidence nor submissions were put to the court in respect of the course and conduct of the proceedings as a whole. (Reasons [45])

    1.8     In the alternative to ground 1.7, failed to have regard to any delays and extra cost occasioned by the Appellant’s conduct of the proceedings as a factor which favoured a reduction in the proportion of costs awarded to the Appellant rather than that there be no orders as to costs in favour of the Appellant.

    1.9    Proceeded upon the erroneous basis that the circumstance that the monetary outcome in favour of the Appellant was nominal was a factor which necessarily outweighed the circumstance that the claim involved substantial questions of both law and fact, in respect of a matter of public interest, namely the breach by an employee of duties owed to an employer by improperly taking information of the employer for the purposes of commencing a business in competition. (Reasons [46]-[47])

    2. The learned Trial Judge should have found that in the whole of the circumstances of the case, this was an appropriate case not to apply UCR r194.5(11) and should have ordered that the First Respondent pay the Appellant’s costs of the action on a standard costs basis or a substantial proportion of those costs.

1. The trial judge was of the opinion that it was just in the circumstances of this case that the appellant should not recover the whole or part of its costs of action, and she made that finding having regard to r 194.5(11) of the Uniform Civil Rules 2020 (SA), which provides:

   In any other monetary claim in respect of which the Magistrates Court has jurisdiction, costs of the claim are not payable to a successful applicant if the amount awarded is less than $60,000 unless the Court is of the opinion that it is just in the circumstances of the case that the applicant should recover the whole or part of the costs of action.

2. As the trial judge recognised, this rule reflects the substance of s 42(2) of the District Court Act 1991 (SA), which provides:

   (2)     If—

   (a)     an action for the recovery of damages or any other monetary sum is     brought in the Court; and

   (b)     the action might have been brought in the Magistrates Court; and

   (c)     the plaintiff recovers less than an amount fixed by the rules for the      purposes of this paragraph,

   no order for costs will be made in favour of the plaintiff unless the Court is of the opinion that it is just in the circumstances of the case that the plaintiff should recover the whole or part of the costs of action.

3. The trial judge made an order that neither party could recover its costs of action.  In arriving at that order, her Honour rejected the respondent’s contention that he should have been awarded costs because of what he claimed was an unreasonable failure by the appellant to accept any or all of three offers he made between June 2017 and July 2018 for amounts in the range of $32,000 through to $45,100, inclusive of costs.  Her Honour found that the appellant’s failure to accept these offers was not unreasonable. 

4. The respondent has not cross-appealed on the question of costs. A modest costs award was made in favour of ServiceCorp and that is not now in issue.

5. The appellant accepts that it requires leave to appeal the question of costs but it submits that leave should be granted.[174]

   [174] See r 213.1(c) of the Uniform Civil Rules 2020 (SA) and McDonald v Attorney-General for the State of South Australia [2022] SASCA 43, [21] (Livesey P and Bleby JA).

6. The appellant put its costs appeal on two bases.  The first assumed success on the appeal.  That may be put to one side.  The second basis was that the exercise of discretion by the trial judge in relation to costs was said to have miscarried on a large number of grounds. 

7. The essential complaint made on appeal is that the appellant was the successful party and it should have been awarded costs even though its monetary claim was assessed at much less than $60,000 referred to in r 194.5(11) of the Uniform Civil Rules 2020 (SA), or the $100,000 jurisdictional limit of the Magistrates Court assumed by s 42(2)(b) of the District Court Act 1991 (SA). The appellant relied, amongst other matters, on what it described as the respondent’s two egregious lies – that he had not copied a large number of “Post-it Notes” from TES in breach of duty and that he had only transcribed what Mr Stephen had recorded from cold calling.

8. The trial judge gave a number of reasons for her conclusion that it was not just in the circumstances of this case that the appellant should recover the whole or part of its costs.

9. The first reason was that the amount recovered by the appellant was nominal and well below the jurisdictional minimum of the District Court and the jurisdictional minimum of the general jurisdiction of the Magistrates Court (being $3,981 excluding GST, plus interest of $1,984).  As the trial judge pointed out, this was not a case where the amount recovered was substantial though less than the amount fixed by r 194.5(11). Her Honour described this as an important consideration. Her Honour later emphasised that this was a case where the amount ultimately awarded was equivalent to a small claim of $12,000 or less.[175] 

   [175] See s 3 of the Magistrates Court Act 1991.

10. Secondly, the trial judge acknowledged that the effect of depriving the appellant of its general costs of action affected the costs incurred on various pre-trial matters, including interlocutory applications where costs orders had been reserved which might otherwise have become the general costs of action under the presumptive costs rules.[176] 

    [176] See, for example, r 194.4 of the Uniform Civil Rules 2020 (SA).

11. Though making that acknowledgment, the trial judge had regard to the effect of r 194.5(11) and s 42(2), which her Honour described as both penal and deliberate, to discourage a party from litigating in a more expensive jurisdiction than was necessary, where there is likely to be both disproportionate cost and inconvenience involved.

12. Thirdly, the trial judge rejected the proposition that denying the appellant its costs would allow the respondent to benefit from his misconduct because, ultimately, what proved problematic was not the proof of misconduct but the extent of the remedy which the appellant could establish.  As to this, the trial judge was not convinced that there was any real uncertainty in assessing the value of the appellant’s claims, especially in circumstances where 12 months before instituting proceedings it had the benefit of Mr Stephen’s assistance, had entered into a deed of release with Mr Stephen and with TestCorp, and two months before the proceedings were instituted it had downloaded TestCorp’s electronic files. 

13. With the benefit of this material, the trial judge found that the appellant knew that its claim for equitable compensation was nominal, as only five “Post-it Note” clients became clients of TestCorp and the impact of competition from TestCorp on the business of the appellant was known to be negligible.  There were significant difficulties proving the only substantial remedy in issue which was a claim for the respondent’s payout from Mr Stephen. 

14. As the trial judge explained it, these problems with proof of remedy operated regardless of any uncertainty created by the respondent’s late change of position at trial regarding his handwriting on the “Post-it Notes”.  Her Honour’s reasoning on this issue was set out in some detail.  The trial judge explained that the respondent’s late change of position was not pivotal to the amount of the award and that “what mattered” was the use made of the “Post-it Notes” and the overall effect of any breaches of duty:[177]

    If I had concluded that Mr Goulding had made all the ‘Post-it Notes’ in breach of duty, the result would have been substantially the same. Testel’s share of lost revenue would still have been nominal:  $7,935 (excluding GST)[178] as compared to $1,226.23 (excluding GST).[179] This is because the client connections successfully misappropriated by Mr Goulding were immaterial and the overall effect of his breaches of duty was a modest ‘head start’ in setting up TestCorp. The evidence plainly showed that the establishment and limited success of TestCorp’s business did not depend on Mr Goulding’s breaches of duty, either entirely or in a material way.

    [177] Costs Reasons, [42].

    [178] Reasons [13].

    [179] Reasons [474].

15. Fourthly, the trial judge addressed the appellant’s reliance on the respondent’s failure to comply with his discovery obligations. This was said to be an example of the respondent’s unreasonable conduct of the proceeding which warranted, or at least supported, the making of an order for costs under r 194.5(11) and s 42(2). Having identified this issue, the trial judge relied on the Master’s remarks which, her Honour found, did not demonstrate that the respondent had failed to comply with his discovery obligations. Rather, there was a question whether discovery was sufficient under the then relevant rule. Her Honour found that this was not a sufficiently important factor to justify an order that the appellant recover the whole or part of its costs of action.

16. Fifthly, the trial judge had regard to an offer made by the appellant to settle its claim on the basis of a substantial discount.  Whilst acknowledging that this was a genuine offer, her Honour found that it did not relevantly inform her discretion because the offer materially exceeded the amount ultimately awarded.

17. Finally, the trial judge then considered the relative conduct of the parties in connection with the conduct of the litigation.  As her Honour put it, neither party in this case had a “monopoly on virtue”.  The trial judge pointed to unnecessary delay and costs occasioned by the appellant’s adjournment of the trial, together with the flaw in the appellant’s case that all relevant information was in its computer in TES and that the documentary evidence was overwhelming when, as her Honour found, it was not.  

18. Her Honour concluded in the following terms:[180]

    Finally, it should not be accepted that the importance of Testel’s claim outweighs the need for proportionality between the time and costs incurred in Testel pursuing its claim against Mr Goulding.  In my view, there is no private or public benefit in litigants pursuing nominal claims in this jurisdiction, particularly where the proceeding has taken many years to bring to trial and consumed valuable Court resources in doing so.  This case is a prime example, involving the filing of 93 documents, 23 interlocutory hearings and 10 days of trial between 6 June 2017 and 14 March 2023. 

    As stated, the evident purpose of Rule 194.5(11) is to protect the private and public interest in litigation being just, efficient and cost-effective such that the time and costs involved are proportionate to the outcome. This purpose is achieved by providing that the costs of a successful claim are not payable in this Court where the award is less than $60,000 unless the justice of the case otherwise demands.   That is not this case in my view.

    [180] Costs Reasons, [46]-[47].

19. It is first convenient to address the relevant costs principles.

    Relevant costs principles

20. It is well recognised that the court’s discretion with respect to costs is both unfettered and to be exercised judicially.  The discretion must be exercised having regard to the particular facts and circumstances of the individual case before the court. 

21. The general principle, mirrored by r 194.5(2) of the Uniform Civil Rules 2020 (SA), is that costs follow the event.  This means that the party who on the whole succeeded with the action will be awarded the costs of that action.[181]  This general principle is, however, subject to any relevant statutory provision or rule, together with the common law principles applicable to the recovery of costs.

    [181] Reid, Hewitt & Co v Joseph [1918] AC 717.

22. The trial judge also had regard to a number of authorities when considering whether the failure to accept an offer could be said to be unreasonable.[182] 

    [182] Allen v Chadwick (No 2) [2014] SASCFC 130, [36]; Anwar v Mondello Farms Pty Ltd (No 2) [2015] SASCFC 136, [5] and Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435, [25] (Warren CJ, Maxwell P and Harper AJA).

23. In this case the starting point is the effect of s 42(2) of the District Court Act 1991 (SA), together with r 194.5(11) of the Uniform Civil Rules 2020 (SA).  These reflect an important policy by which litigants are required to proceed in the lowest court in which the proceeding can be entertained.  Where litigation has been brought in a higher court than was necessary or appropriate, prima facie as measured by the monetary outcome, the policy is backed by the imposition of a prohibition on the recovery of costs.  The prohibition is however rendered subject to the exercise of discretion by the court, expressed in very broad and unfettered terms.

24. It has been recognised that the effect of provisions such as these may at times appear to confer a windfall on an unsuccessful respondent but that this, however, is the intended purpose.[183]  The trial judge described the evident policy of the rule in the following terms:[184]

    Substantive weight should be given to this evident policy rationale in deciding whether to exercise the Court’s discretion to allow costs where the amount recovered by an applicant is less than the amount fixed by the Rules.  This follows because there is an important public interest in ensuring that the time and costs incurred in litigation are reasonable and proportionate to the value and importance of the proceeding. This Rule is not solely for the respondent’s protection.  There is a heavy burden imposed on public resources and a concomitant impact on other litigants when higher courts’ resources are used to determine claims of disproportionate value to the time and costs involved than is necessary or appropriate.

    [183] Burton v Litton Business Systems Pty Ltd (1977) 16 SASR 162, 171 (King J).

    [184] Costs Reasons [26].

25. When considering whether the court should depart from the prima facie effect of s 42(2) and r 194.5(11), the court may have regard to any factors it considers relevant, including those set out in r 194.6. These factors include any misconduct or unreasonable conduct in connection with the proceeding, the making or not making of an offer in settlement, the non-acceptance by a party of an offer made to resolve the proceedings and the value and importance of the relief sought or any relief claimed. These factors will usually be considered together as part of the review by the court of all of the relevant facts and circumstances of the case.

    The appellant’s contentions on costs

26. The appellant’s contentions commenced with a review of the circumstances which are relevantly taken into account when determining whether to make an order for costs in favour of a plaintiff notwithstanding the terms of r 194.5(11) and s 42(2). These include:[185]

    1.Whether the matter involves substantial questions of both fact and law.

    2.Whether the assessment of damages involve many of the uncertainties attended upon an assessment of damages.

    3.Whether the uncertainty was in part derived from the fact that necessary information was in the possession of the defendant. 

    [185] Burton v Litton Business Systems (1977) 16 SASR 162, 171 (King J).

27. The principal matter relied upon by the appellant was the failure of the trial judge to give proper weight to the circumstance that the respondent would benefit from his misconduct if no order for costs was made.  The appellant submitted that the respondent was guilty of a serious breach of trust and that he engaged in false explanations in order to hide his wrongdoing.  It was submitted that the policy of the rule should not be taken to be to penalise a plaintiff who is the victim of a breach of trust. 

28. Whilst the nature of a case may have some bearing on the operation of the relevant costs provisions, particularly where, by its nature, the case raises issues of difficulty and complexity, the mere fact that the claim is one involving breaches of employment or fiduciary duties does not, of itself, advance the appellant’s position. For example, whether the matter is one involving a claim of negligence or theft does not suggest that a different approach should be applied to s 42(2) and r 194.5(11). A case involving breach of fiduciary duty may or may not be appropriately litigated in the Magistrates Court. Whether any case is appropriately litigated in the Magistrates Court must invariably depend on the particular facts and circumstances of the case.

29. Whilst the appellant’s submission that the respondent’s late change in position is a matter deserving of some consideration, the appellant was unable to point to any error in the reasoning of the trial judge that this made no material difference to the appellant’s remedy.  In particular, the handwriting issue did not ultimately affect the proposition that the appellant could only point to five of its clients who had become clients of the appellant and it did not affect the difficulties in proof confronting the appellant in endeavouring to demonstrate that the respondent’s breaches of duty were a material cause of TestCorp winning the UnitingCare Wesley tender or any of the appellant’s other clients apart from Bianco Reinforcing and Mitsubishi. 

30. Whilst this late change in position by the respondent may be criticised, it was not shown to have added materially to the time or costs involved, nor was it shown to have rendered any pre-trial steps otiose.

31. Insofar as the appellant criticised the treatment by the trial judge of the respondent’s conduct of the litigation before trial, the appellant is ultimately unable to demonstrate that her Honour was wrong to consider that both parties had a role to play in causing delay and expense before trial.  In addition, once the trial was underway, there was clearly mixed success over whose evidence was found to be both credible and reliable. 

32. Finally, it is appropriate to consider a further matter which was not raised by the appellant. 

33. In many cases where a successful party is endeavouring to overcome the effect of s 42(2) and r 194.5(11) (or their counterparts), that party can point to the difficulty and complexity of the litigation in support of the submission that the litigation was appropriately pursued in a higher court, where it may be expected that the judicial officer is better placed to address the issues raised.

34. Whilst that is a relevant matter it cannot be said that it affects the exercise of discretion made in this case. 

35. Firstly, it cannot be said that this issue was wholly overlooked, although no emphasis was given to it by the trial judge.  It is, at the least, implicit in her Honour’s approach to a number of the issues she addressed.  Secondly, and perhaps more importantly, her Honour appears to have been, at the least, implicitly critical of the approach of the appellant to this litigation.  A great deal of time was spent in demonstrating a connection between the appellant’s TES programme and the “Post‑it Notes” evidence.  Notwithstanding the respondent’s belated change of position on the handwriting issue, the essential problem for the appellant in this case was and remained the lack of clarity in proof of the requisite causal connection between the respondent’s breaches of duty and the trading and success of TestCorp. 

36. Making all due allowance for the complexity of the factual issues and material in this case, including the fine analysis required in connection with the correlation between what was stored on TES and what was recorded in handwriting on the “Post-it Notes”, there is no reason to think that litigation of this kind could not have been litigated appropriately in the Magistrates Court.

37. Ultimately the appellant has failed to demonstrate any material error of fact, law or approach in connection with the reasoning of the trial judge on costs.  No error in the exercise of her Honour’s discretion has been established.

38. Insofar as it is required, leave to appeal should be granted but the appeal on costs dismissed. 

    Conclusion

39. The appellant has failed to establish any material error of fact or law in connection with the award made by way of an account of profits.  The appeal should be dismissed. 

40. Leave to appeal the costs decision should be granted but the appeal on costs should also be dismissed.

41. Subject to hearing from the parties, the appellant must pay the respondent’s costs of these appeals, to the extent that a costs claim is open to the unrepresented respondent.