c) seek to have any other investor approached to compete with Australis as to the terms upon which that investor might be permitted to exploit either, or both, Licence A or Licence B;
and in particular:
d) maintain his free-carried interest as described in the Joint Venture Agreement or negotiate the nature and extent of some other free-carried interest in the entity that would exploit the licences;
e) negotiate for a continuing role in, and provision of, management services in the operation of the licences or an interest in the operator entity;
f) negotiate for more extensive involvement in the provision of drama content programming and thereby the opportunity to earn more extensive fees from production of and/or procuring of drama;
g) negotiate for the provision of equipment and services by sale or lease to either or both of the operator of the licences or subscribers of Pay-TV services;
h) negotiate for rights as franchisee of regional broadcasting within the Pay-TV network established under the licences or either of them,
with Australis or any other investor."
That pleading, no doubt, covers the causes of action both under the Trade Practices Act and the Fair Trading Act and in deceit. There was no suggestion that the allegation of conspiracy produced any additional complications in relation to the claim for compensatory damages. Because counsel for Mr Hadid did not press separately for any component of damages arising from the "Licence A Representations" (and for reasons already given in relation to them), it is unnecessary to say more about that aspect of the case.
1101 In essence, then, Mr Hadid's claim is that each of the alleged wrongs done to him resulted in the loss of an opportunity to deal, in ways other than those in which he ultimately dealt, with his rights (as controlling shareholder and director of the two successful bidders) in relation to the two licences. He gave evidence as to ways in which he would have approached the exploitation of his rights, including in negotiations with LCI, if Australis' interest had been disclosed to him at various times from late October until 15 or 16 November 1993.
1102 The opening of the case on behalf of Mr Hadid and the evidence of experts whose reports he tendered suggested that the claim for damages was a very large one indeed, under several heads. Though, as will appear, that evidence played almost no part in final submissions on behalf of Mr Hadid, it (and evidence in response to it) occupied a good deal of time during the trial and it is appropriate that I describe it briefly and refer to difficulties with it which may well explain why it played so slight a part in the case on damages which senior counsel for Mr Hadid ultimately sought to make.
1103 Mr Ian Ferrier (Mr Ferrier), a senior and experienced chartered accountant, provided several reports. In his first report, he made what amounted to an estimate of the losses suffered by Mr Hadid as a result of his loss of the opportunity to deal with the two licences. Mr Ferrier valued the two licences using the discounted cash flow method, substantially on the basis of a UCOM business plan of October 1993. He applied a discount rate of 20 per cent. Mr Ferrier assumed, or accepted, the availability of a free carried interest of 30 per cent in each licence. Otherwise, though he carried out some testing, he proceeded on the basis that the assumptions of the model which he used were correct: assumptions, for example, as to the effect of competition from cable or MDS, penetration rates and "churn" rates (that is, loss of subscribers). He took no account of events after 17 November 1993. On that basis, he valued licence A at $627,000,000 and licence B at $599,000,000. That led to two possible outcomes for Mr Hadid, depending upon whether he retained a 15 per cent free carried interest in licence A or licence B. If the latter, Mr Hadid's interest in licence B was worth $90,000,000, his 2 per cent retained interest in licence A was worth $13,000,000 and (according to the report) Mr Hadid would have sold a 26 per cent interest (total available free carry of 30 per cent less 4 per cent free carry retained, as to half each, by Mr Hadid and LCI) having a value of $163,000,000. Thus the worth of Mr Hadid's interest would have been $266,000,000. If, on the other hand, Mr Hadid had retained 15 per cent of licence A, a similar calculation would have produced $262,000,000 as the value of his interest. In each case there should be deducted the total amount ($33,000,000) which he actually received in respect of each of the two licences, so the damages would be either $233,000,000 or $229,000,000. Mr Ferrier accepted that those figures required adjustment to take account of the interests of minority shareholders.
1104 What is immediately apparent is that the exercise which Mr Ferrier was asked to undertake resulted in a valuation of Mr Hadid's interest assuming that both licences were paid for at the current bid prices, that transmission would commence in July 1994, that equity investors would be found who would provide the necessary working capital (the projections contemplated negative cash flow for three years) and that a 30 per cent free carried interest would be available in the holder of each licence. The history of the search for investors up to late October 1993, makes it plain, I think, that some, at least, of those assumptions were heroic.
1105 That, however, is by no means the end of the matter. Mr Ferrier's valuation also depends largely on the validity of the assumptions underlying the model on which he based his work. A number of those assumptions were attacked by an expert witness called by the respondent and defended by Mr Peter John Cox (Mr Cox), a consultant to the media industry, called by Mr Hadid, whose experience in the industry extended over twenty years. Mr Cox was concerned, in summary, to do two things: first, to give an opinion as to the reasonableness of the assumptions on which the UCOM model used by Mr Ferrier was based and, secondly, to offer explanations, given the value of the licence acquired by Australis, for Australis' failure. The actual history of Australis from late 1993 can, I think, be fairly summarised as one of continuous but unsuccessful struggle against substantial odds, leading, in 1998, to its failure and liquidation. Mr Cox attributed the failure of Australis largely to what he characterised as a series of misguided decisions which it made.
1106 Unfortunately, Mr Cox's evidence exemplified, in a number of respects, the failings which the Court's practice direction, incorporating guidelines for expert witnesses, seeks to eliminate. Those guidelines, it should be said, were published after Mr Cox prepared his report, but they represent a common understanding of the proper role of an expert witness. It is plain that Mr Cox regarded his role as that of an advocate for the party by whom he was called. That approach vitiated a number of the opinions he expressed both as to the assumptions behind the model and as to decisions made by Australis. An example of the former may be found in his evidence about penetration rates (that is, broadly, the number of potential subscribers who, in a given period, became actual subscribers). In a series of paragraphs dealing with an opinion expressed by Mr Wayne Lonergan (Mr Lonergan), an expert accountant called by LCI and Mr Lenfest, to the effect that the penetration rates assumed in the model were unduly optimistic, Mr Cox referred to various models prepared by others and concluded:
"46 UCOM/Lenfest's projected penetration of Australian households is more conservative than major Australian stockbrokers.
47 The statement of Mr Lonergan that 'Mr Ferrier has overestimated the likely rate and timing of market penetration by New World (UCOM/Lenfest)' is unsupported and incorrect as at November 1993 and for a considerable time thereafter."
In cross-examination Mr Cox gave this evidence:
"Would you not agree generally that the penetration rates depicted in this model were optimistic in the extreme? - I don't think necessarily in the extreme but they were certainly optimistic.
Unrealistic, would you agree? - With the benefit of hindsight.
Unrealistic assessments to be made in November 1993 of the penetrations to be achieved by this business over the ten years to which the model relates, do you not agree? - Well, a number of parties made those assessments and they all believed them realistic.
Could you answer my question? - You mean in my opinion?
I want your view, whether you would regard … ? - I would regard them as optimistic.
Unrealistic? - Unlikely.
Improbable, do you agree? - To achieve the full amount, yes.
Not penetrations which you have advised were commercially realistic in November 1993, would you agree? - Correct."
A little later, after suggesting that he had been "badgered" into some of his earlier answers, Mr Cox gave this evidence:
"What you agreed with, Mr Cox, was that these penetration rates were commercially unrealistic. Do you want to withdraw that evidence? - The commercial - I think you were associating the word commercial with unrealistic. Are we drawing conclusions from the unrealistic on commercial or are we saying that they're unrealistic, the penetration levels? I can't draw a conclusion that as a result of them being unrealistic, that they're therefore not commercial which I think is what you're trying to draw all the time and I certainly, your Honour, if I have said that did not mean it to be that way.
You understood Mr Lonergan to be saying quite plainly … that these rates were too high? - Yes.
And that is a proposition you yourself agreed with, is it not? - Yes.
Well, then how was it that you were able to swear, as you did … that you could not find a valid proposition of fact or assumption by Lonergan which undermined the validity of the assumptions in the UCOM model if that was the case? - Because on the whole basis of this report being done as to what other people thought the penetration rates should be, they weren't unrealistic. The UCOM/Lenfest ones I didn't consider to be unrealistic in those terms.
But you agreed with Lonergan's criticism, did you not? - I personally think that they may be too high, yes.
But you thought you should conceal that view from the Court, did you? - Well, as we found with yourself, we don't express all views each time. ….
If you were telling in your affidavit and your report, the truth, the whole truth and nothing but the truth on the topic of penetration rates you would have had to, would you not, reveal your own personal view that the penetration rates recorded in the UCOM model of 5 October 1993 were too high? - If I was giving my view, yes, I would have had to.
If you were telling the truth, the whole truth, and nothing but the truth you would have had to reveal that fact, would you not? - In expressing my own personal view I may have. I don't believe that I have to present all views though on all subjects. I don't see that as my responsibility."
A similar problem emerged in relation to Mr Cox's opinion as to the likelihood, in November 1993, of competition from cable operators and in relation to rates of churn.
1107 There are similar problems also with Mr Cox's evidence about decisions made by Australis. Two striking examples were evidence which Mr Cox gave about the availability of particular types of decoders ("set‑top boxes") at the time when Australis was attempting to start its business, and his evidence about the way in which Australis conducted negotiations with suppliers of programs. It is not necessary to go further into detail. As to the matters with which Mr Cox dealt, I prefer the evidence of Mr Lonergan and other witnesses called by the respondents, notably Mr Stanley Gunn and, on Australis' negotiations with the movie studios, Mr Kenneth Ziffren (as well as evidence which was given by both Mr Heller and Mr Price).
1108 For those reasons, which go to the assumptions upon which Mr Ferrier's evidence was based and the particular enquiry he undertook, I would not accept his evidence as a reliable guide in considering whether any, and if so what, loss was suffered by Mr Hadid as a result of a lost opportunity to deal with the licences other than in the way he did. Mr Ferrier provided a separate report as to the value of the "franchisee market": that is, the right to distribute Australis' subscription television services in areas of Australia not directly serviced by Australis itself. In that respect, however, Mr Ferrier does not - because the information he had did not enable him to - estimate any particular loss suffered by Mr Hadid. I do not accept Mr Hadid's evidence that he sought to negotiate, with LCI, arrangements in relation to franchising or equipment leasing. Mr Heller denied it and there is no suggestion in any of the contemporaneous notes or other documents that either matter was a topic discussed between Mr Hadid and Mr Heller. In any event, senior counsel for Mr Hadid made it clear in final submissions that no damages were sought specifically in relation to franchising or equipment leasing.
1109 Expert evidence was given also specifically in relation to the drama commissioning agency. Mr Hadid gave evidence that had he been negotiating under less pressure and had he realised that Australis was involved he would have negotiated an agency on a more advantageous basis. He would have sought to negotiate directly with Australis; he would have sought a longer term; and he would not have agreed to be tied exclusively to Australis. Mr Hadid tendered a series of reports of Mr Ian Bradley (Mr Bradley), a drama producer with long experience in the Grundy organisation. The essence of Mr Bradley's reports was that Mr Hadid, as owner of the drama commissioning rights, would be able to build upon them a business of producing and distributing Australian dramas through which he would earn substantial revenues. He used as his "template" a model based on a budget of $5,000,000 annually available from Australis and the use of Film Finance Corporation funding. That, in Mr Bradley's opinion, was a conservative approach and other methods of financing were available, the use of which might increase the return to the producer and distributor.
1110 Mr Bradley did not, however, quantify any results which might be achieved by alternative approaches to financing, and the approach on which he based his template was subjected to detailed attack by two expert witnesses called by the respondents, Mr Matthew Carroll (Mr Carroll) and Mr John Borglund (Mr Borglund), both of whom had substantial experience in the field and were impressive witnesses. In the result, I would not find that Mr Hadid suffered a quantifiable loss, attributable to any of the wrongs alleged against the respondents, through being unable to proceed in the manner proposed by Mr Bradley. I appreciate that that is a brief and summary way of dealing with a question which involved a good deal of detailed and complex evidence. But there is, I think, little purpose to be served in selecting a mid‑point between that treatment and a detailed discussion of the evidence. And the latter course is not warranted, in my view, because no attempt was made in closing submissions of senior counsel for Mr Hadid to suggest a basis on which I would prefer the evidence of Mr Bradley over that of Mr Carroll and Mr Borglund or to suggest a basis on which I might hold, on that body of evidence, that Mr Hadid had, as a result of any of the alleged breaches of duty by the respondents, suffered a loss which could be quantified.
1111 There was a submission that the evidence indicated that, if one had an effective drama commissioning agency, one had the capacity to use the fees flowing from the agency "against the production of product directed toward not only satisfying the Australian content requirement but also to optimising the capacity of the product to be sold elsewhere". But that proposition does not advance matters far in suggesting an answer to the question whether Mr Hadid would have sought to obtain and, if so, would have obtained from LCI (let alone Australis) an agreement which would have permitted activities of the sort contemplated by Mr Bradley, rather than an agreement of the much more limited kind contemplated by the heads of agreement attached to the share sale agreement. It is not insignificant that Mr Cooper offered advice to Mr Hadid as to what he saw as deficiencies in the terms of the drama commissioning agency; and there is no evidence that Mr Hadid either himself took up, or instructed Mr Cooper to take up, any of those matters with LCI.
1112 The case put in final submissions was that if Mr Hadid had known about Australis' interest he would have been able to negotiate with LCI for a substantially better result than the one which, in the event, he obtained, and would have done so: a substantially better result both in relation to the terms on which he ceded control of licence B and as to the benefits obtainable from his control over the existing holder (UCOM Australia) and subsequent bids for licence A. The argument did not draw upon any of the expert evidence called by Mr Hadid, though it did claim some support in a report of Mr Mark Bryant (Mr Bryant), an expert accountant called by Bain and Dr Burt (though, it should be said, it reached a conclusion substantially at odds with that propounded by Mr Bryant). It was to the effect that LCI proceeded on the basis that the transaction with Australis was of great value. It would provide benefits to LCI - particularly, it would release a "premium" - which LCI, rather than lose entirely, must rationally have been prepared to share with Mr Hadid and the other UCOM shareholders. If Mr Hadid had known about the possibility or likelihood of a transaction with Australis, he would have pressed demands for much larger benefits than he actually obtained; and, because it would have appeared to be in the interests of LCI to do so, LCI would have substantially conceded those demands. When the matter is looked at in that light, it was said, later events are irrelevant. What mattered was LCI's perception in November 1993. Thus, for example, LCI's rational perception must have been that the technical services agreement which it had negotiated in principle with Australis was of substantial value; the fact that, in the event, no money was ever paid under that agreement and the fact that it was terminated are of no significance; nor are the actual struggles and ultimate demise of Australis of any significance. What matters, and all that matters, is the way things rationally appeared in November 1993.
1113 It may be said immediately, I think, that if the damages claimed represent the loss of an opportunity to negotiate a better deal with LCI, then senior counsel for Mr Hadid was right in submitting that future events, not in contemplation in November 1993, are not relevant. The case is not analogous to one in which what happens in the conduct of a business after its sale may throw light on its true value at the date of sale (Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281) or one where what, at the time of an accident, appeared as a possible or probable consequence has, by the time of the trial of an action for damages, either become fact or, on the other hand, ceased to be possible (Willis v The Commonwealth (1946) 73 CLR 105 at 109 per Latham CJ and at 116 per Dixon J). Nor, though there were numerous references in argument to Sellars v Poseidon Ltd (1994) 179 CLR 332, do I think that the principles stated in that case have much direct application to this. This is, after all, not a case in which, on Mr Hadid's argument, one is required to ascertain, first, on the balance of probabilities whether, in the absence of actionable conduct, a transaction would have been entered into in the past and then, by assessing the relative likelihood of various events which might have occurred had the transaction been entered into, to assess the damage sustained by reason of the loss of the opportunity to enter into it. The exercise here is, in a sense, much more straightforward: it is to ascertain how much more Mr Hadid might have demanded had he known all the circumstances and how much LCI would have conceded in order to gain the shares in New World and, then, enter into the transaction with Australis.
1114 Nor does the argument depend on Mr Hadid having been able to participate, in any way, in the transaction with Australis. Though it was not conceded that I should accept Mr Price's evidence that he would not be interested in a transaction which involved any continuing participation by Mr Hadid, the effect of the argument was that it did not matter whether I accepted that evidence or not: the benefits contended for would have come from LCI and would not necessarily have involved Mr Hadid having any continuing interest in the owner of licence B.
1115 The argument relied also on the 29 August agreement and on the correspondence between the parties as to how benefits might be shared if the shares in New World were sold. That aspect of the argument was expressed in oral submissions as follows:
"… so far as the Lenfest side of the negotiation or indeed the Ucom side of the negotiation is concerned the logical upper limit that Mr Lenfest would sensibly be likely to pay is simply that amount that Mr Hadid and his fellow shareholders [were] entitled to get anyway [if] the 29th agreement applied to the transaction in contemplation. That on the face of it is the 50/50 split of the benefits in crude terms because the transaction in contemplation does not envisage the use of free carry in the classic sense. It's using the surrogate of allowing any benefit to be released in an increase in the value of the shares."
The argument proceeded as follows. The value of the technical services agreement was equivalent, in LCI's collective mind, to the premium at which LCI acquired its Australis securities over the price at which those securities traded on the market. That was made explicit, it was said, in Mr Plant's memorandum to Mr Lenfest of 11 January 1994:
"For our investment of $A138 mm we received approximately 180 million shares of Australis at a buy in rate of $A.75. While Australis' stock was then trading at $A.52, we paid a premium in return for a technical services agreement providing revenue over 10 years on a formula basis."
Thus if the market's perception of the value added to Australis by its acquisition of licence B is reflected by the increase in the price at which Australis shares were traded in the period shortly following the acquisition, then the "premium" released to LCI was one-half (treating LCI as a 50 per cent shareholder of Australis) of the increase in Australis' market capitalisation; and one-half of that premium was what Mr Hadid, together with the other UCOM shareholders, was reasonably able to expect, having regard to the terms of the 29 August agreement. If one took 11 January 1994 (the date of Mr Plant's memorandum) as the appropriate date for ascertaining the premium, its amount was $234,000,000. If it were objected that the parties could not know, in mid-November, precisely what the premium would be, the answer was that the parties would have negotiated a "wait and see" arrangement under which Mr Hadid would receive his appropriate share of whatever the premium should in fact turn out to be.
1116 Alternatively, it was said, one might take as a guide to LCI's appreciation of the value of the licence a version of the UCOM business plan and projections. One might reasonably use that as a guide because of the substantial part played by the LCI representatives, particularly Mr Heller, in its development and refinement; and from the circumstance that LCI was prepared to use that document as the basis of its presentation to Cox and Continental. If one took a version of the business plan produced on 4 October 1993, it attributed to a business based on licence B a net present value of $190,000,000. That figure might rationally have been taken as the likely premium, one half of it ($95,000,000) being attributable to LCI and available to be shared with the UCOM shareholders, giving them $47,500,000.
1117 Other aspects of the evidence were referred to as supporting the proposition that LCI must have seen the licence as having, in Australis' hands, a value much greater than the sum LCI paid to acquire it. There was an extremely optimistic valuation issued by BT Securities Australia Ltd, a version of which was received by Mr Lenfest and a more detailed version by Mr Plant, at the beginning of October. Secondly, there was Mr Dougherty's proposal. A draft agreement was submitted by Mr Dougherty's company, Pankhan, to Mr Hadid, and a copy was sent to Mr Heller, on 15 October 1993. By that agreement Pankhan would have bought the shares in New World for $15,000,000. It would have provided the following additional benefit:
"The purchaser will on the written request of the vendor
(a) cause the vendors' nominee or nominees to receive 5% of the issued shares in the company;
(b) pay to the vendors' nominee or nominees the sum of $15,000,000.00 at the discretion of the vendor such option or payment not to be exercised or required before the expiration of three years from the date of issue of the licence."
1118 The argument seems to assume that the 5 per cent shareholding and the additional payment were cumulative, rather than alternative, benefits. I am by no means sure that that is right. In any event, the argument relied upon Mr Plant's written suggestion that Mr Dougherty's offer be pursued "without panic" and his evidence that, after discussions with BBY, he regarded the offer as having some credibility. Reliance was placed also on the circumstance that on 16 November BBY stated in writing that it was prepared to enter an underwriting agreement "subject to terms and conditions to be agreed … to assist in raising the required amount of capital for the B Licence". The submission was that LCI must at least have regarded the Australis transaction as having a greater value than Mr Dougherty's offer, to the extent that LCI was prepared to part with a very large sum of money in order to bring the Australis transaction about (the Pankhan transaction, of course, would not have required LCI to part with any more money at all).
1119 In reliance on Mr Hadid's evidence, it was submitted also that Mr Hadid, if forewarned about the Australis transaction and having ascertained beyond doubt that LCI would not finance the acquisition of licence A, would have both resumed the search for investors in licence A and also have negotiated (successfully) with LCI, as a fall-back, for the provision of a deposit on the next bid should the current bid cascade, so that Mr Hadid would then have been in the position to negotiate in relation to licence A without time pressures and would thus have been able to obtain greater benefits than he did in relation to the bid the deposit on which was paid on 3 December.
1120 I am not inclined to place much weight on the Pankhan proposal. Mr Lenfest gave evidence that towards the end of October he believed that "it was a common understanding that that was not a real proposal …"; Mr Heller's note of the meeting on 12 November with Mr Hadid, Dr Gadir, Mr Blanks and Mr Cooper recorded a statement by him, in response to a question by Mr Hadid, that Mr Dougherty "wasn't for real". The 16 November letter from BBY, even if LCI knew about it, was hardly calculated to inspire confidence.
1121 One difficulty - and a considerable one - with the way in which the damages case was put is that none of those involved - particularly Mr Lenfest - was directly confronted with any of its elements. I have discussed already (pars 672 to 681) the question whether, in the circumstances of the actual negotiations, Mr Lenfest was prepared to offer more than $13,000,000 (particularly $15,000,000) and found that he was not; and I have referred to the fact that he was not challenged, in cross-examination, about his evidence that he authorised Mr Heller to offer no more than $13,000,000 and instructed him, if that was not accepted, to "come home". That finding, and the considerations on which it is based, provide obvious difficulties in the path of the present argument. It does not, however, theoretically rule out the possibility that if confronted with a knowledgeable, and accordingly more aggressive, Mr Hadid, Mr Lenfest might have taken a different approach. It is not easy, however, to conclude that he would have done so where the circumstances which, it is said, would have activated him have not been put to him for comment. For that and for several other reasons, to which I shall come, I do not think that Mr Hadid's argument is made out.
1122 I accept that, if he had known about the Australis proposal, Mr Hadid would very likely have increased his demands and been more persistent in them. He might well have taken an optimistic view of the likely worth, and of market perception of the worth, of licence B in the hands of Australis. And Mr Lenfest himself was clearly of the view that if Mr Hadid were informed about Australis he would demand more money; he would take an "unreasonable" approach to negotiations; he would "hang up" the deal. But I have already referred at length to Mr Heller's notes and his communications with Mr Lenfest during the November negotiations. There is no sign in that material of any perception on the part of either Mr Heller or Mr Lenfest that, if only they could acquire New World from Mr Hadid and his fellow shareholders, they would have possession of a gold mine. The "pull out" and "come home" evidence and notes suggest not an artificial constraint resulting from a deliberate decision to keep Mr Hadid in the dark but a real limit on what LCI was prepared to pay or provide in order to acquire the New World shares.
1123 And the indications as to what LCI might reasonably be expected to think do not all point in the direction for which Mr Hadid contends. Hi Vision and UCOM both bid at levels well in excess of the amounts tendered by established media organisations. Both Cox and Continental had expressed the view that the prices bid for both licences were too high. Mr Heller made a note recording that reaction as late as 29 October 1993. Time Warner had, earlier, reacted similarly (par 155). Mr Lenfest and Mr Heller approached Dr Malone seeking assistance from TCI on 6 October. Mr Lenfest attributed this response to Dr Malone:
"We think … Hadid paid too much for the licences. I don't think you'll be able to get the US investors, and I think you made a mistake and I'm not interested."
There is no reason to doubt Mr Lenfest's evidence on that matter. Dr Malone's reaction, when asked to provide his written consent as a director in November, amply corroborates it. Mr Price gave evidence that at St Louis he thought, and said, that "most of the critics of the process were indicating that the prices that were being talked about were absolutely outrageous". When at West Chester he discovered that the total amount expended was $138,000,000 rather than $130,000,000, he said that he told Mr Lenfest that "I thought he was off his mind". I accept that evidence. Obviously, what was said at West Chester merely reinforced what had been said earlier: it was too late to have any effect on LCI's conduct of its negotiations with Mr Hadid.
1124 Then there is the Meridian option. I have referred to the calculations made by Mr Heller both before and during the Regent Hotel negotiations. It was submitted on behalf of Mr Hadid that little weight should be attributed to the Meridian option. Though it was in fact the next bid for licence B, and though it was generally thought likely to be the next in line, Mr Heller (and hence LCI) did not know that that was the case. Additionally, however, the New World bid was not about to cascade (time had not begun to run) and there must have been at least some room for doubt about what Mr Hadid might have been able to achieve in relation to the New World bid and, for that matter, what claims he might have made in relation to the Meridian bid. Those are potentially significant considerations. There are, however, in my view two problems with them. One is that, again, they were given no investigation in evidence; they were not explored with Mr Lenfest or Mr Heller. The other is that, whatever the logic of it might have been, Mr Heller's notes and his recommendations to Mr Lenfest treat a deal with the UCOM shareholders and exercise of the Meridian option as true alternatives, so that it made sense to compare the respective costs of taking each course. As I have commented previously, I find the evidence about the approach taken by Mr Lenfest and Mr Heller at the time of the negotiations a good deal more persuasive than inferences which might be drawn from ex post facto justifications prepared by Mr Plant largely, apparently, for the benefit of Dr Malone or anything that might be inferred, for example, from documents prepared by LCI's bankers.
1125 Other matters were referred to by counsel for LCI and Mr Lenfest. It was said, for example, that it was not appropriate to suppose that LCI would regard the division of "premium" as appropriate to be done by analogy with the 29 August agreement. The crucial difference was that that agreement - and subsequent correspondence about the division of sale proceeds - did not contemplate LCI outlaying, in cash, the full amount required to pay up the licence. It was said on behalf of Mr Hadid that the cash outlaid, or part or it, might have been recouped from the subsequent underwritten offering of Australis shares (Mr Plant accepted, in his evidence, that such a transaction was a possibility). And bank documents indicate that at least in discussions between LCI and its bankers the possibility of a return of capital from an initial public offering was contemplated (but this clearly arose from negotiations commenced before the suggestion of Project Midsummer: the proposal was that the $85,000,000 facility might be used by LCI to finance the purchase of either or both licences and that:
"In the event that the Borrower receives return of capital from any initial public offering of equity or other offering of equity raised in connection with one of the Licenses, such return of capital shall be used to permanently prepay outstandings under the Facility. However, if the Borrower intends to use such return of capital for the purchase of the other License, the foregoing shall not apply."
There is no suggestion in the Project Midsummer proposal or the St Louis document which suggests that it was specifically contemplated in relation to the Australis transaction. Indeed, Dr Burt's letter of 1 November contemplated raising funds from the public "to fund the start up cost of Pay TV by satellite and MDS" and the 3 November letter prepared by Mr Heller spoke of a public offering "to raise additional capital for the operation of the company". In short, there is no evidence of any contemplation, in the context of the Australis transaction, that capital contributed by LCI would be returned; and in fact it was not returned. (Mr Lenfest gave evidence that, far from actually making a profit, LCI ultimately lost more than $US132,000,000).
1126 Counsel for LCI suggested also that, having regard to the amount outlaid by LCI, one half of the supposed premium was by no means such a windfall that LCI should readily be supposed to be likely to share it equally with the UCOM shareholders: when the uncertainties of a new and untried business are taken into account, as well as the size of LCI's capital commitment, that submission has obvious force. And even the agreement actually reached with Mr Hadid required a greater cash outlay than the facility arranged by LCI permitted. Mr Lenfest borrowed $US5,000,000 personally to make up the difference.
1127 In the end, I think, and perhaps at the risk of oversimplifying, there are two alternative ways of viewing the situation. One is that LCI saw in Project Midsummer the prospect of great profit, a prospect which it concealed from Mr Hadid so as to ensure that it would pay as little as possible for the New World shares, thus maximising its own profit; but in circumstances where it knew it would have had to pay more, and would have done so, had Mr Hadid, fully informed, insisted upon it. That is the view propounded by Mr Hadid. The other is that LCI saw in Project Midsummer a means of protecting and capitalising upon the investment (in the form of the deposits) which it had already made, offering greater certainty than any other transaction in prospect and worth pursuing if the New World shares could be obtained at a price which LCI, in addition to the other money it had already outlaid and would outlay, was prepared to pay: but that it was unlikely that Mr Hadid would agree to terms which LCI considered reasonable - particularly, would accept the maximum that LCI was prepared to offer - if he knew that New World would be acquired by Australis. That is the view that LCI propounds and it is, in my view, the view which is, on the evidence, substantially the more probable. It is sufficient to find, as I do, that LCI would not have agreed to pay more than it did.
1128 There remains the question of licence A. I see no ground in the evidence to think, however, that Mr Hadid would have succeeded in attracting investment in licence A in time to fund UCOM Australia's bid. The history of the unsuccessful attempts to find investors over many months suggests that such an outcome would have been extremely unlikely, even if the prospect that licence B would be funded (and transferred to Australis) were known. The reasons already given preclude, in my view, a finding that Mr Lenfest would have agreed to provide a deposit on the next cascade of licence A. Additionally, it must be remembered that he refused to do so during the actual negotiations; and he refused, once the Australis transaction was known, to advance the date for payment of the $13,000,000 due to the UCOM shareholders in order to enable a deposit to be paid. In any event, I would not conclude, on the evidence, that Mr Hadid could or would have achieved an outcome, in relation to licence A, better than that which he in fact achieved with Uncanny and then Century. I do not think there is any reliable evidence supporting a finding that he might have done better.
1129 For those reasons, in my view, even if I am wrong as to liability, Mr Hadid's claim to compensatory damages, or equitable compensation, is not made out. It is inappropriate, in the circumstances, that I consider the claim for exemplary damages. Such a claim would succeed only if, in several respects, findings were made very different from those I have made; and nothing is to be gained by considering what those findings, or their result, might be.