Testel Australia Pty Ltd v Goulding

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…