Authorities
50 In recent years, applications by a successful party for an award of costs on an indemnity basis have become more frequent. One reason is that, as Cooper and Merkel JJ pointed out in Re Wilcox; Ex parte Venture Industries Pty Ltd (1996) 141 ALR 727, at 732, the issue has acquired greater significance as the gap between the two bases for the assessment of costs has grown. As their Honours pointed out:
'The gap has highlighted the conflict between two seemingly irreconcilable objectives. The first is protecting access to justice by only exposing an unsuccessful litigant in the usual course to an order for scale costs on a party and party basis. The second is relieving a successful litigant from the burden of costs which that litigant should not have been required to bear'.
51 Since the Costs Respondents accept that I am bound by the decision of the Full Federal Court in Dukemaster, it is appropriate to commence my consideration of their application for an award of indemnity costs with that case. In Dukemaster, the applicants sought damages for misleading and deceptive conduct and breach of contract against Dukemaster. Dukemaster made an offer of compromise pursuant to FCR, O 23, offering to pay the applicants a total of $22,972, inclusive of costs. The applicants rejected the offer. The applicants succeeded at trial in obtaining judgment for amounts totalling $347,781. However, an appeal by Dukemaster was allowed and the orders made by the trial Judge were set aside.
52 Sundberg and Emmett JJ noted that Dukemaster's offer did not fall within FCR, O 23 r 11(5), because the applicants had ultimately been wholly unsuccessful in the proceedings. (Conti J dissented on the appeal and thus did not need to address the question of indemnity costs.) Their Honours reasoned as follows (at [7]-[8]):
'The mere making of an offer of compromise and its non‑acceptance, followed by a result more favourable to the offeror, does not automatically lead to an order for payment of costs on an indemnity basis: John S Hayes & Associates Pty Ltd v Kimberley‑Clark Australia Pty Ltd (1994) 52 FCR 201 at 204‑206; MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 at 239. The applicant for a more generous award must show that the rejection of the offer was imprudent or plainly unreasonable: NMFM Property Pty Ltd v Citibank Ltd (No 2)("NMFM") (2001) 109 FCR 77 at 98; Australian Competition & Consumer Commission v Australian Safeway Stores Pty Ltd (No 3) [2002] FCA 1294 at [28]; Sydney Markets Ltd v Sydney Flower Market Pty Ltd[2002] FCA 283 at [16]‑[17] and [23].
Whatever the position may be with an offer made under Order 23, a Calderbank offer, or any offer of compromise outside the regime in Order 23, is unlikely to serve its purpose of attracting an indemnity award of costs if the rejecting applicant fails to recover more than what is offered, unless the offer is a reasonable one and contains a statement of the reasons the offeror maintains that the application will fail. In NMFM at [87]‑[88,] Lindgren J said:
"No doubt where a party puts with sufficient particularity to the opposing party the reasons why the latter must fail, yet the latter does not recognise the inevitable, this will be a factor pointing to an award of indemnity costs. …
The requirements of 'sufficient particularity' and 'inevitability of failure' are important. In their absence, it would be open to parties to put their respective cases to the opposing party urging it to recognise the merit of what is put in the hope that if it ultimately finds favour with the Court, an award of indemnity costs will follow. If this were correct, one might ask rhetorically, 'Why write a letter as distinct from simply relying on the pleadings?"'. (Emphasis in original.)
53 Sundberg and Emmett JJ concluded that the applicants' rejection of the offer of compromise was not imprudent or plainly unreasonable, bearing in mind that the applicants had succeeded at trial in obtaining a substantial sum by way of damages. The offer was for a 'derisory' sum that would not even have covered the applicants' costs to that stage of the litigation (at [9]). Moreover, the letter of offer had not attempted to explain why the applicants should have accepted so derisory a sum. For these reasons, their Honours refused to order the applicants to pay Dukemaster's costs on an indemnity basis.
54 None of the authorities referred to in Dukemaster concerned rejection of an offer of compromise made by a respondent to an applicant in compliance with FCR, O 23. Each involved a so-called Calderbank offer (that is, an offer made specifically with a view to being used in court on a costs application by the offeror, should the offer not be accepted by the offeree). In effect, the reasoning in Dukemaster applies the authorities governing a Calderbank offer to an offer of compromise made by a respondent under FCR, O 23, in the particular situation where the applicant rejects the offer but subsequently fails completely in the proceedings.
55 The judgment in Dukemaster appears to assume rather than demonstrate that it is appropriate to apply the Calderbank principles to the particular situation that arose in Dukemaster itself - that is, where a respondent makes an offer pursuant to O 23, and the applicant fails entirely. It is perhaps arguable that a different approach should be taken where a respondent avails itself of a procedure specifically contemplated by O 23, but ultimately proves to be more successful in the proceedings than the terms of O 23 r 11(5) contemplate.
56 It is true, as Mr Sheahan pointed out, that an applicant who rejects an offer of compromise and ultimately obtains only a small sum by way of damages - perhaps even a nominal sum - will ordinarily be awarded costs incurred until the date of rejection of the respondent's offer, assessed on a party and party basis. It is also true that O 23 r 11(5) was apparently inserted into the FCR in 2004 in order to give a respondent the same opportunity to secure an award of indemnity costs as had previously only been available to an applicant. Prior to that time, where an applicant made an offer of compromise pursuant to FCR, O 23 and thereafter obtained a more favourable judgment than the terms of the offer, he or she was prima facie entitled to an order for costs on an indemnity basis as from the date the offer was made: O 23 r 11(4).
57 Even so, the result produced by Dukemaster seems anomalous. A respondent whose offer of compromise is rejected is prima facie entitled to an order for indemnity costs from the date of the rejection of the offer, provided the applicant obtains a judgment that is less favourable than the terms of the offer. Yet, according to Dukemaster, if the applicant fails completely, the respondent must show that the applicant's rejection of the offer of compromise was imprudent or unreasonable.
58 The simplest solution would be for the Federal Court to adopt a rule equivalent to UCPR, r 42.15A (extracted at [35] above). Such a rule would promote the important policy of encouraging the negotiated resolution of disputes. This is because a rule in this form would expose an applicant to the risk of a costs penalty, over and above an award of costs on a party and party basis, should the applicant press on with litigation in the face of an offer of compromise that, if accepted, would have yielded a more favourable result than that ultimately achieved. In my view, the benefits of a rule in the form of r 42.15A substantially outweigh any disincentive that such a regime might create for an applicant wishing to pursue arguable claims. The benefits apply particularly to mega-litigation which, as I have explained in the Principal Judgment ([1], [17]), exposes not only the parties, but also the Court and the wider community, to very substantial costs should the proceedings not be resolved by agreement.
59 It follows that there is a disconformity between the approach that, in my view, should be taken in a case such as this and the approach that Dukemaster requires me to take. For present purposes, Dukemaster holds that the applicant's rejection of an offer of compromise made by a respondent pursuant to O 23, where the applicant wholly fails in the proceedings, will not ordinarily lead to an award of indemnity costs against the unsuccessful applicant unless the rejection of the offer was 'imprudent or unreasonable'. It is that holding I must apply to the circumstances of this case.
60 It will be seen that I have omitted the word 'plainly' from the formulation of the holding in Dukemaster. I have done so because of the judgment of the Full Federal Court in Black v Lipovac. In that case, the defendant rejected Calderbank offers made by the plaintiff (the trial being conducted in the Supreme Court of the Australian Capital Territory). The Court referred (at [217]) to the line of authority in the Federal Court supporting the proposition that the mere refusal of a Calderbank offer does not of itself warrant an order for indemnity costs. Their Honours interpreted the authorities as requiring 'the offeror … to show the conduct of the offeree was unreasonable'.
61 Their Honours noted the decision of Rolfe J in Multicon ([33], above) and continued as follows (at [217]-[218]):
'His Honour [Rolfe J] considered that the non-acceptance of an offer more favourable to the offeree than the judgment ultimately awarded prima facie demonstrated unreasonable conduct and the offeree bore the onus of showing why indemnity costs should not be ordered.
In reality there is not a substantial difference between the two views; both accept that the reasonableness of the conduct of the offeree, viewed in the light of the circumstances which existed when the offer was rejected, is relevant to the exercise of the discretion to award indemnifying costs. To the extent there is a difference, we would prefer the by now well established line of authority in decisions of single judges of this court. However, we would not, with respect, necessarily endorse the view of Sheppard J in Sanko [Steamship Co Ltd v Sumitomo Australia Ltd [1996] FCA 22] that the conduct of the offeree has to be "plainly unreasonable". To adopt an especially high standard of unreasonableness would operate as a fetter on the discretion to award indemnity costs and diminish the effectiveness of the Calderbank offer as an incentive to settlement. There is in our view force in the comments of Byrne J in the Supreme Court of Victoria in Mutual Community Ltd v Lorden Holdings Pty Ltd (unreported, SC (Vic), Byrne J, No 10561/90, 28 April 1993, BC9303878) at 12-13:
"The policy of the court is to encourage litigating parties to undertake genuine settlement negotiations and, for that purpose, to face up to serious offers of settlement …
The response of a litigant in receipt of an offer of settlement will always be affected by the prospect that the sum which the court might order including party and party costs may be less advantageous than the terms of the offer. Experience, however, shows that this prospect alone is not always sufficient to compel a litigant to face up to the offer. The further prospect of a super-added costs penalty if a reasonable offer be not accepted is a salutary inducement to an offeree to undertake this often painful task"'.
62 It is not apparent that the insertion of 'plainly' before 'unreasonable' adds anything of substance to the statement of principle adopted in Dukemaster. However, if it does, I would prefer to apply the formulation in Black v Lipovac, rather than that in Dukemaster. The comments in Black v Lipovac represent the considered views of a Full Court on this issue. The joint judgment in Dukemaster did not refer to Black v Lipovac and gave no reason for rejecting the analysis in that case. In my view, the policy reasons given in Black v Lipovac for avoiding the word 'plainly' are persuasive (although the suggestion that there is no substantial difference between the views of Rolfe J in Multicon and the Federal Court authorities appears, with respect, to be somewhat less persuasive).
63 Two other points should be noted, both of which are referred to by Hely J in Port Kembla Coal Terminal v Braverus. First, in assessing whether an applicant acted unreasonably in rejecting an offer of compromise, its prospects of success on liability cannot be considered in isolation from its prospects of success in relation to the quantum of damages it claims: at [45]. Secondly, the party seeking a special costs order, such as an order for costs on an indemnity basis, must discharge any burden of proof: at [38].
A Difficult Task
64 The key question I must address, therefore, is whether the Costs Respondents have shown that Seven acted imprudently or unreasonably in rejecting the joint offer of compromise made on 16 August 2005. In some cases the presence or absence of imprudence or unreasonableness on the part of an applicant who rejects an offer of compromise will not be difficult to assess. An example is Dukemaster itself, where the respondents' offer of compromise was for an amount equivalent only to approximately six per cent of the damages the applicants were actually awarded at trial (although they lost the benefit of that judgment on appeal). The Full Court had no hesitation in refusing to order costs to be paid on an indemnity basis.
65 In other cases, of which this is one, the task of the Court is much more formidable. It must be remembered that the Court is required to consider whether the rejection of the offer of compromise was unreasonable by considering, among any other relevant circumstances, the strengths and weaknesses of the applicants' case, looking at the claim prospectively at the time the offer was made: Gretton v Commonwealth [2007] NSWSC 149, at [24], per Studdert J; Equity 8 Pty Ltd v Shaw Stockbroking Ltd [2007] NSWSC 503, at [33], per Barrett J.
66 The fact that the applicant ultimately failed in the proceedings, is a matter to be taken into account. Indeed, Wilcox J in Coshott v Learoyd, at [48], said that non-acceptance of an offer made pursuant to FCR, O 23 should be regarded as:
'providing to the offeror a good start in the task of persuading the Court to award more than party-party costs'.
Nonetheless, the fact that the unsuccessful applicant rejected an offer of compromise made by a respondent pursuant to O 23 is far from determinative on the question of indemnity costs, as the cases illustrate: see, for example, Flemington Properties Pty Ltd v Raine & Horne Commercial Pty Ltd [1998] FCA 53; Port Kembla Coal Terminal v Braverus.
67 The present case was very complex. Seven relied on many causes of action and advanced many alternative contentions. In a case of this kind, it can be especially difficult for the trial Judge to assess whether the rejection of an offer of compromise, in the circumstances prevailing at the time the offer was made, was 'imprudent' or 'unreasonable'. The Judge, in effect, has to assess the applicant's prospects of success at a particular time in the past and weigh the merits of the offer rejected by the applicant (an offer which, in retrospect, the applicant would have been better off accepting). The assessment has to be undertaken without the Judge necessarily having a clear idea as to which of the facts ultimately found were known or should have been known to the applicant at the time it rejected the offer of compromise.
68 The difficulties are compounded if the Court has not had occasion to consider the relief to which the applicant would have been entitled had it succeeded in establishing liability. As I have noted, both the reasonableness of an offer and the unreasonableness or otherwise of its rejection must depend in part on the applicant's prospects, not only of succeeding on liability, but of obtaining the relief it seeks. In particular, where the applicant claims many millions of dollars in damages - indeed, in this case, many hundreds of millions of dollars - the reasonableness of an offer to compromise for a given sum must depend not only on the applicant's prospects on liability, but also its chances of recovering damages in an amount substantially in excess of the sum incorporated in the offer of compromise.
Evaluation
69 The Costs Respondents do not contend that Seven's case was hopeless from the outset, nor that Seven should have appreciated in August 2005 that it was hopeless. As Mr Meagher observed in his submissions, a separate line of authority deals with the award of indemnity costs in such cases: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, at 401, per Woodward J; Re J-Corp Pty Ltd and Australian Building Labourers Federated Union of Workers - Western Australian Branch (unreported, 19 February 1993, French J); Yates Property Corporation Pty Ltd v Boland (No 2) (1997) 147 ALR 685, at 693, per Branson J. Mr Meagher submitted that it is enough in the circumstances of the present case for the Costs Respondents to show that Seven faced (in the words of Wilcox J in Coshott v Learoyd, at [50]) 'enormous problems' in this litigation and that Seven must have appreciated the difficulties it confronted when it rejected the joint offer of compromise in August 2005. Once that proposition is accepted, so Mr Meagher argued, the unreasonableness of Seven's rejection of the substantial offer of settlement becomes apparent.
70 The Costs Respondents, so it seems to me, have advanced a number of cogent reasons in support of their contention that Seven either appreciated or should have appreciated in August 2005 that important aspects of its case faced serious difficulties. These include the following:
· The Principal Judgment finds that Seven 'leaked' to the press the very information which provided the foundation for its cause of action based upon alleged breaches of confidentiality ([2965], [2973]-[2974]). The fact that the information had been leaked to the media in late 2000 would, of course, have been known to Seven in August 2005.
· Similarly, Seven must have known in August 2005 that it did not intend to utilise access to the Telstra Cable for the purpose of enabling C7 to provide retail pay television services to subscribers ([2802]). This finding was critical to the rejection of Seven's case under s 45(2) of the TP Act that, by denying C7 access to the Telstra Cable, Foxtel and Telstra gave effect to a provision in the BCA that was likely to have the effect of substantially lessening competition in the retail pay television market ([2805]-[2806]).
· Seven's claim that Foxtel was prepared to pay a predatory price in 2000 for the AFL pay television rights was undercut, at least to a considerable extent, by Mr Stokes' concession in evidence that he regarded the price paid by Foxtel (of $30 million per annum) as a good one for the purchaser ([2253]). The predatory pricing claim formed a significant element in Seven's purpose case under s 46 of the TP Act. Moreover, Seven placed the alleged anti-competitive purpose of News, Foxtel and PBL at the forefront of its submissions on market definition ([1801]).
· Seven's experts agreed that their evidence as to the existence of the AFL and NRL pay rights markets depended upon a particular understanding of the operation of the anti-siphoning regime created by the Broadcasting Services Act 1992 (Cth). Specifically, both of Seven's experts assumed that the anti-siphoning regime operated in a manner that eliminated, or at least severely limited, the opportunity for pay television operators to acquire exclusive rights to AFL or NRL matches of relatively high quality ([1824], [1827]). Seven would have been aware, well before August 2005, that pay television operators did not necessarily receive the worst matches under the anti-syphoning regime ([1834], [1852]).
· The joint bid by Seven and Ten for the AFL broadcasting rights in 2005 was not helpful to Seven's case, insofar as that case rested on the existence of the wholesale sports channel market ([1995] ff). The nature of the joint bid for the AFL broadcasting rights would, of course, have been known to Seven by August 2005.
· Mr Stokes gave evidence in the proceedings that supported the Respondents' contention that there was no separate functional wholesale sport channel market ([1981] ff). On one view, Seven should have been aware of Mr Stokes' views on this topic well before the hearing commenced.
· One major difficulty facing Seven's case that the Master Agreement Provision had the effect of substantially lessening competition in the retail pay television market (a market which the Preliminary Judgment finds existed at the relevant times ([2264])) was the parlous state of Optus' retail pay television business in late 2000 or early 2001 ([2289] ff). Much of the evidence that led to findings that Optus would not have continued operating as an independent retail pay television provider was available to Seven by August 2005 (although not the witness statement of Mr Lee, whose evidence relating to these matters I accepted ([2854])).
71 The matters to which I have referred thus far relate to Seven's prospects of establishing liability. Seven claimed a wide variety of remedies. As is evident from the fact that Seven did not press some of its more extravagant claims, I do not think that Seven could reasonably have expected in August 2005 that it had a realistic chance of obtaining the full panoply of remedies claimed by it.
72 At the trial, Seven's claims for damages were ultimately put by reference to three 'mutually exclusive scenarios' ([99]). Seven did not proceed with its claim, foreshadowed in opening addresses, of up to $1.1 billion in damages (including interest) ([18]). The most substantial claim pressed by Seven ('Scenario 1') sought damages equivalent to the net present value of the business opportunity Seven lost by reason of having been deprived of the AFL pay television rights for the 2002 to 2006 seasons.
73 In its Closing Submissions at the trial, Seven put the value of this lost opportunity at between $194.8 million and $212.3 million ([100]). These amounts were to be adjusted for interest and the consequences of income tax (the latter requiring the application of a multiplier of 1.429 ([101])). This assessment of the value of the lost opportunity rested very heavily on the evidence of Professor McFadden. Since I have not been asked to address the quantum of damages, to date I have not had to make findings about the cogency or otherwise of Professor McFadden's analysis. The cogency of his evidence, however, bears on Seven's chances of obtaining a substantial damages award in the proceedings, had it succeeded on liability.
74 The analyses in the written and oral Closing Submissions suggest to me that Professor McFadden's assessment of Seven's damages would be most unlikely to be adopted as a measure of any losses sustained by Seven, at least not without substantial modifications. Professor McFadden's assessment depends on a large number of assumptions, the bulk of which were vigorously challenged by the Respondents. My impression is that Seven would find it difficult to sustain certain of the important assumptions underlying Professor McFadden's approach. These include assumptions that Seven would have acquired the 2002 to 2006 AFL pay television rights for $22 million per annum; that subscriber numbers could have been expected to grow at the rates incorporated in Professor McFadden's calculations; that 'competitive arbitrage' was an appropriate means of estimating C7's likely revenue from retail pay television operators; and that C7's return in the long run would have greatly exceeded the weighted average cost of capital.
75 My strong impression is that the maximum award of damages Seven could have expected, assuming it succeeded on questions of liability, would not have been anything like the figures mooted in Professor McFadden's report. I think it likely that, at best, Seven's damages on Scenario 1 would be assessed in some tens of millions of dollars, rather than in the order of $200 million (to which, on Seven's case, interest and an allowance for income tax would be added). I repeat that this is my impression of the maximum Seven could expect to obtain. The Court would need to address many arguments raised by the Respondents, in addition to those considered in the Principal Judgment, before reaching this point, even if Seven were to succeed in establishing liability.
76 The difficulties with Professor McFadden's analysis became apparent during the course of argument, but would not necessarily have been apparent to Seven or its advisers in August 2005. It is fair to say, however, that Seven or its advisers would have had material available that should have alerted them to the real prospect that Professor McFadden's analysis would prove to be vulnerable on some issues.
77 A further matter in the Costs Respondents' favour is that the joint offer of compromise was made shortly before the trial, at a time when Seven had the benefit of very nearly all the statements or reports (other than statements or reports in reply) on which the respondents intended to rely. Furthermore, I am prepared to infer that the position papers exchanged at the mediation which preceded the joint offer of compromise would have drawn Seven's attention to what the respondents asserted at the time were the significant weaknesses in its case.
78 While the matters relied on by the Costs Respondents have considerable force, it is necessary, as Mr Sheahan argued, to take into account a number of factors in Seven's favour on the indemnity costs issue. In my view, these include the following:
· Seven succeeded in establishing one of the four markets on which it relied, namely the retail pay television market ([2077]). It did so over the strenuous opposition of the Respondents. This finding opened a pathway to a favourable outcome for Seven's case under s 45(2) of the TP Act, insofar as it was based on anti-competitive effects of the Master Agreement Provision.
· I made other findings in the Principal Judgment that were favourable to Seven's case. These included a finding that the Master Agreement existed and that the Master Agreement Provision was likely to have the effect that Foxtel would acquire the AFL pay television rights for 2002 to 2006 ([2281]).
· Seven's effects case under s 45(2) of the TP Act included its contention that the Foxtel-Optus CSA had the effect or likely effect of substantially lessening competition in the retail pay television market. This contention failed, largely because of findings that Optus would not have continued as a serious competitor in the retail pay television market, regardless of the alleged anti-competitive conduct (see, for example, [2309]-[2310]). While there was material available to Seven in August 2005 that suggested that such findings would be made, the material was by no means unequivocal. Moreover, Mr Lee's statement had not been filed at that time (it was dated 16 September 2005). Accordingly, if the position is viewed as at August 2005, Seven was reasonably entitled to consider that the Respondents might not have obtained the findings they sought in relation to Optus' role in the retail pay television market.
· Seven's case on the other three markets propounded by it was supported by detailed reports prepared by two well-credentialled experts. While Seven must have known that the experts would be strongly challenged and must also have appreciated that certain assumptions made by them might be difficult to sustain, this is by no means unusual in a case involving complex market definition issues. Seven could reasonably have taken the view in August 2005 that it had an arguable case in relation to the existence of the AFL and NRL pay rights markets and of the wholesale sports channel market. Moreover, both of Seven's competition experts were made aware of the proposal by Seven and Ten in 2005 to acquire the AFL broadcasting rights for 2007 to 2011. Both indicated that the information did not alter the opinions they had expressed.
· The discovery process elicited documents that, on their face, provided support for some of Seven's key contentions. These included the internal Telstra communications referring to Mr Blomfield's 'killing C7' statements ([2529]-[2530]); the congratulatory email sent by Mr Mansfield, the Chairman of Telstra, on 20 December 2000 ([1112]); and documents perhaps suggesting that written statements of Mr Macourt and Mr Philip were not necessarily to be accepted at face value.
79 In addition, as Mr Sheahan pointed out, the sum of $10 million incorporated in the joint offer of compromise in effect was grossed up for interest and tax. Even if Seven's damages should realistically have been regarded as limited to a maximum figure in the tens of millions of dollars, rather than hundreds of millions, the offer of compromise valued Seven's claim at a very low figure indeed. It is true that Seven, had it accepted the offer, would have received a very substantial sum by way of costs. But the sum of $10 million would have been unlikely to make up the deficiency between the costs actually incurred by Seven up to August 2005 and the amount it would have recovered from the respondents, given that the offer provided for costs to be assessed on a party and party basis.
80 It must also be remembered that the offer of compromise was made on behalf of all respondents. If Seven accepted the offer, it would have foregone the opportunity to pursue any of its causes of action. The offer did not invite Seven to distinguish between its speculative, if not hopeless, causes of action and its arguable contentions.
81 On balance, although the question is not easy to resolve, I do not think that the Costs Respondents have established that Seven's rejection of the offer in August 2005 was imprudent or unreasonable. It may well have been both imprudent and unreasonable for Seven to press so many contentions at the trial, having regard to what it knew or should have known before the trial got under way. It also might well have been imprudent and unreasonable for Seven not to have refined its case, both to make it more manageable (and therefore less costly to everyone involved) and much more focussed. As I indicated in the Principal Judgment, the massive costs incurred in the conduct of this litigation have been greatly disproportionate to what is truly at stake. But these are not the matters upon which the Costs Respondents rely in order to support their claim for costs to be awarded on an indemnity basis. They rely only upon the rejection of the joint offer of compromise in August 2005.
82 The joint offer of $10 million, inclusive of adjustments for interest and income tax, plainly reflected the respondents' collective view that Seven's prospects in the litigation were bleak. The result, at least to this stage of the litigation, has vindicated the respondents' view. But looking at the offer prospectively as at August 2005, I think the sum of $10 million offered can be regarded as very modest, although I would not characterise it as 'derisory'.
83 The description of the offer as very modest is apt, in my opinion, not merely when the offer is compared with Seven's more optimistic claims for relief but also (so far as I can judge) when compared with quantum of damages that Seven could have realistically hoped to achieve, if it had succeeded in establishing liability. It is true that the offer of compromise included payment of Seven's costs on a party and party basis and that, by August 2005, Seven had incurred very substantial costs. Nonetheless, if Seven had accepted the respondents' offer of compromise in August 2005 it would have gained nothing from the litigation.
84 While there were aspects of Seven's case that were untenable and should have been recognised as such in August 2005, in my view the core of Seven's case based on alleged contraventions of ss 45(2) and 46 of the TP Act could reasonably have been seen at the time as having some prospects of success. If Seven had succeeded in establishing the liability of some or all of the Consortium Respondents, it might have obtained an award of damages considerably greater than the sum of $10 million proposed in the joint offer of compromise. As I have explained, I do not think that there was ever any realistic chance of Seven obtaining the full range of remedies sought by it. Although I think it very likely that the maximum award of damages that Seven could have realistically hoped to achieve would be measured in the tens of millions of dollars, as at August 2005 an award of damages substantially greater than $10 million was not a fanciful prospect.