FEDERAL COURT OF AUSTRALIA University of Western Australia v Gray (No 28) [2010] FCA 586 Citation: University of Western Australia v Gray (No 28) [2010] FCA 586 Parties: THE UNIVERSITY OF WESTERN AUSTRALIA v BRUCE NATHANIAL GRAY, SIRTEX MEDICAL LIMITED (FORMERLY KNOWN AS PARAGON MEDICAL PTY LTD) (ACN 078 166 122), CANCER RESEARCH INSTITUTE INCORPORATED (REGISTERED NUMBER 1001005); BRUCE NATHANIAL GRAY v THE UNIVERSITY OF WESTERN AUSTRALIA and YAN CHEN SIRTEX MEDICAL LIMITED (ACN 078 166 122) v BRUCE NATHANIAL GRAY and CANCER RESEARCH INSTITUTE INCORPORATED File number: WAD 292 of 2004 Judge: BARKER J Date of judgment: 10 June 2010 Catchwords: DAMAGES – assessment of damages for the loss of a commercial opportunity – whether legal costs recoverable as damages Legislation: Corporations Law 2000 (Cth) s 180, s 181 Fair Trading Act 1987 (WA) s 10, s 77, s 79 Federal Court of Australia Act 1976 (Cth) s 43 Trade Practices Act 1974 (Cth) s 82, s87 Federal Court Rules 1979 (Cth) O 62 r 6 Cases cited: A v B (No 2) [2007] 1 Lloyd's Rep 358 Bennett v Minister for Community Welfare (1992) 176 CLR 408; [1992] HCA 27 Berry v British Transport Commission [1962] 1 QB 306 Cachia v Hanes (1994) 179 CLR 403 Cockburn v Edwards (1881) 18 Ch D 449 Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 Gray v Cancer Research Institute Inc [2007] FCAFC 149 In re Bater & Mayor of Birkenhead [1893] 2 QB 77 Lonrho Plc v Fayed (No 5) [1993] 1 WLR 1489 Lord v Pacific Steam Navigation Co Ltd (The Oropesa) [1943] 1 All ER 211 Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20 McCourt v Cranston [2009] WASC 56 (S) National Westminster Bank Plc v Rabobank Nederland [2008] 1 Lloyd's Rep 16 Penn v Bristol & West Building Society [1997] 1 WLR 1356 Pilmar v Duke Group (2001) 207 CLR 165; [2001] HCA 31 Queanbeyan Leagues Club Ltd v Poldune Pty Ltd [2000] NSWSC 1100 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 Sirtex Medical Ltd v Cancer Research Institute Inc [2008] HCA Trans 153 University of Western Australia v Gray (No 10) [2007] FCA 377 University of Western Australia v Gray (No 13) [2007] FCA 397 University of Western Australia v Gray (No 20) (2008) 246 ALR 603; [2008] FCA 498 McGregor QC DCL SJD H, McGregor on Damages (18th ed, Thomson Reuters (Legal) Limited, 2009) Date of hearing: 10 November 2009 Date of last submissions: 12 November 2009 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 191 Counsel for the First Respondent: Mr AJ Meagher SC and Mr GKJ Rich Solicitor for the First Respondent: Goldsmiths Lawyers Counsel for the Second Respondent: Mr JD Elliot SC and Mr EJC Heerey Solicitor for the Second Respondent: Yeldham Price O'Brien Lusk IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 292 of 2004 BETWEEN: THE UNIVERSITY OF WESTERN AUSTRALIA Applicant AND: BRUCE NATHANIAL GRAY First Respondent SIRTEX MEDICAL LIMITED (FORMERLY KNOWN AS PARAGON MEDICAL PTY LTD) (ACN 078 166 122) Second Respondent CANCER RESEARCH INSTITUTE INCORPORATED (REGISTERED NUMBER 1001005) Third Respondent BRUCE NATHANIAL GRAY First Cross-Claimant THE UNIVERSITY OF WESTERN AUSTRALIA First Cross-Respondent to First Cross‑Claim YAN CHEN Second Cross-Respondent SIRTEX MEDICAL LIMITED Second Cross-Claimant THE UNIVERSITY OF WESTERN AUSTRALIA Cross-Respondent to Second Cross‑Claim BRUCE NATHANIAL GRAY Second Cross-Respondent to Second Cross‑Claim CANCER RESEARCH INSTITUTE INCORPORATED Third Cross-Respondent to Second Cross‑Claim JUDGE: BARKER J DATE OF ORDER: 10 JUNE 2010 WHERE MADE: PERTH The parties are to submit a minute of orders. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 292 of 2004 BETWEEN: THE UNIVERSITY OF WESTERN AUSTRALIA Applicant AND: BRUCE NATHANIAL GRAY First Respondent SIRTEX MEDICAL LIMITED (FORMERLY KNOWN AS PARAGON MEDICAL PTY LTD) (ACN 078 166 122) Second Respondent CANCER RESEARCH INSTITUTE INCORPORATED (REGISTERED NUMBER 1001005) Third Respondent BRUCE NATHANIAL GRAY First Cross-Claimant THE UNIVERSITY OF WESTERN AUSTRALIA First Cross-Respondent to First Cross‑Claim YAN CHEN Second Cross-Respondent SIRTEX MEDICAL LIMITED Second Cross-Claimant THE UNIVERSITY OF WESTERN AUSTRALIA Cross-Respondent to Second Cross‑Claim BRUCE NATHANIAL GRAY Second Cross-Respondent to Second Cross‑Claim CANCER RESEARCH INSTITUTE INCORPORATED Third Cross-Respondent to Second Cross‑Claim JUDGE: BARKER J DATE: 10 JUNE 2010 PLACE: PERTH REASONS FOR JUDGMENT assessment of damages 1 This judgment is concerned with the assessment of damages for the loss of a commercial opportunity payable by the first respondent (Dr Gray) to the second respondent (Sirtex) following the entry of the judgment against Dr Gray in favour of Sirtex on Sirtex's cross‑claim in the primary proceedings against Dr Gray: see University of Western Australia v Gray (No 20) (2008) 246 ALR 603; [2008] FCA 498. As far as possible, it uses the same abbreviated party names, acronyms and other relevant terms as are employed in the primary judgment. 2 In the primary judgment, French J, at [1612], found in respect of the cross‑claim that: 1612 In my opinion Sirtex is entitled to relief in respect of Dr Gray's breaches of his duties as a director and for misleading or deceptive conduct in contravention of s 10 of the Fair Trading Act 1987 (WA). Had it been aware of the correspondence it would, in all probability, have been advised to make further inquiries of UWA. It would either have been notified of a potential claim or would have negotiated a release for some consideration, perhaps by way of a share issue. It lost the opportunity to so resolve the matter with UWA and has been exposed to this litigation. The fact that the litigation was unsuccessful does not affect the Sirtex causes of action against Dr Gray in respect of his duties as a director and in respect of the claim for misleading or deceptive conduct. Sirtex is entitled to compensation or damages for the loss which it has suffered as a result of opportunity to avoid the instigation of these proceedings and to resolve matters in advance with UWA. The measure and assessment of damages will be a matter for a separate hearing if the quantum cannot otherwise be agreed between Sirtex and Dr Gray. Counsel for Sirtex indicated in argument that the recovery it would seek from Dr Gray would be related to the costs of the proceedings. If that is so, having regard to the outcome of the proceedings, the compensation or damages should be able to be agreed. issues 3 Sirtex measures its lost opportunity to resolve the matter with UWA by reference to the costs it has been forced to expend in responding, in various ways, to UWA's claim against it. On this basis, Sirtex claims as damages the costs incurred, which are principally legal costs and disbursements, under the following categories: (1) Sirtex's legal costs and disbursements incurred in defending the claim by UWA in these proceedings (on a full indemnity basis), less the costs recovered from UWA. (2) Sirtex's legal costs and disbursements incurred in the conduct of the cross‑claim against Dr Gray (on a full indemnity basis), less the costs recovered from Dr Gray pursuant to the current orders. (3) Sirtex's legal costs and disbursements incurred in the conduct of the cross‑claim against CRI (on a full indemnity basis). (4) Sirtex's legal costs and disbursements incurred in connection with the CRI/UWA settlement. (5) Legal costs and disbursements paid to Phillips Fox prior to 29 August 2006: (a) In respect of their investigation into the issues raised by the letter from Martin Bennett to Dr Gray, dated 31 December 2004. (b) In respect of their recommendations. (c) In respect of any overseeing of Freehills by Phillips Fox. (d) In respect of any work done to assist in the conduct of the proceedings (either the defence of the claim by UWA or the cross‑claim against Dr Gray) which does not fall within any of the above categories. (6) Costs and disbursements incurred in respect of company resolutions and meetings arising from or related to these proceedings. However, the cost of management involvement in those meetings is no longer pressed. (7) Legal costs and disbursements incurred by Sirtex in obtaining intellectual property advice from patent attorneys concerning the impact of these proceedings (including the judgment of French J) on Sirtex's rights and obligations, not including any costs falling within the above categories (but not costs incurred in relation to the provision of general intellectual property advice that was obtained by Sirtex as a result of the claim made by UWA). (8) Interest on these sums. 4 While Sirtex initially also claimed: · Any costs Sirtex is liable to pay UWA in respect of order 6 of the order of French J, made 17 April 2008 (cost of Sirtex's cross‑claim against UWA); · Expenses and certain time incurred by directors and officers of Sirtex in the course of the conduct of company meeting and the hearing of these proceedings not otherwise recoverable from UWA or under one of the other categories referred to above, these claims were not pressed at the assessment hearing. 5 The loss finally claimed by Sirtex is set out in a document produced and revised during the hearing (in general consultation with Dr Gray's solicitors and counsel) and finally marked "Further revised Annexure A dated 10 November 2009", as follows: 1. Legal costs and disbursements paid to Phillips Fox prior to 30 June 2006 (investigation costs) $109,448.71 - included in item 2. 2 Legal costs and disbursements incurred in the proceeding (on a full indemnity basis) less the costs recovered from UWA. $2,121,814.55 (being total costs of $5,633,996.00 (including GST) x 10/11 = $5,121,814.55 (excluding GST) less $3,000,000.00 to be recovered from UWA following settlement. 3. Legal costs and disbursements incurred in the conduct of the cross‑claim against Dr Gray (on a full indemnity basis) less the costs recovered from UWA. Included in item 2. 4. Legal costs incurred in the cross‑claim against CRI (on a full indemnity basis) Included in item 2. 5. Any costs Sirtex is liable to pay UWA in respect of order 6 of French J (costs of Sirtex's cross‑claim against UWA). Not pressed. 6. Legal costs and disbursements incurred in connection with the CRI/UWA settlement. Sirtex accepts that $50,715.96 referable to this item is already included in item 2 above. But this figure does not include items 6(a), (b), (c), (d) and (e) that follow. Sirtex also accept that if Dr Gray succeeds on his argument that this particular head of loss is not recoverable, then this sum should be deducted from the item 2 calculation. Sirtex disputes Dr Gray's contention that this item ought to be $83,875.89 based on Harris' report of 30 September 2009, on the basis that the opinion is highly qualified at [21] – [23], and even on that qualified basis the opinion only amounts to $68,851. Included in item 2. (a) Sirtex's liability for CRI's costs following Judgment of French J on 20 March 2007. $8,175.50 (not included in item 2) (b) Sirtex's cost of appeal to Full Court from Judgment of Graham J. $74,683.63 (excluding GST - not included in item 2). (c) Sirtex's liability to pay other parties costs of appeal from Graham J. $12,056.75 (not included in item 2). (d) Sirtex's cost of special leave application. $64,440.38 (not included in item 2). (e) Sirtex's liability to pay other parties' cost of special leave application. $14,902.70 (not included in item 2). 7. Application before Gilmour J. $2,106.50 (not included in item 2). 8. Costs and disbursements incurred in respect of company resolutions and meetings arising from or related to these proceedings. Included in item 2. 9. Legal costs and disbursements incurred by Sirtex in obtaining intellectual property advice from patent attorneys (not already included in items above). Included in item 2. 10. Interest on damages. The parties agreed towards the conclusion of the hearing that interest on damages should be calculated at the rate of 6% per annum from 1 April 2007 to judgment on the total costs incurred (excluding GST ) less any interest recovered from UWA. (The recoverability of costs recovered from UWA remained an outstanding issue for resolution for the Court pursuant to order 4 made by Barker J on 4 November 2009. That was subsequently resolved by consent order.) $2,298,180.01 Current total (excluding interest and subject to further costs from UWA) noted as: 6 Dr Gray's key submission is that the bulk of the damages claimed are not recoverable having regard to the well‑established principle that ordinarily costs of a legal proceeding are not recoverable as damages in a proceeding. 7 In the event that this key submissions fails, Dr Gray acknowledges that it has already been proved that his contravening conduct caused the loss of a commercial opportunity which had some value, in the sense that such a loss is compensable as explained in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 335 (Sellars) and Malec v JC Hutton Pty Ltd (1990) 169 CLR 638 at 643 (Malec). As a result Dr Gray says that the determination to be made by the Court must be by reference to the degree of probabilities or possibilities of a particular claimed lost opportunity and is not an "all or nothing" exercise. Rather, the Court is obliged to assess the degree of probability that an event would have occurred or might occur and adjust its award of damages to reflect the degree of probabilities. Dr Gray contends that no resolution would have been achieved in relation to the matter if Sirtex had approached UWA in late 1999/early 2000. Alternatively, Dr Gray says that if any settlement had been achieved it would have been on the basis that UWA should receive substantial royalty payments from Sirtex in respect of the use of Dr Gray's intellectual property, such that, when brought to account, the cost of the settlement would have exceeded the damages now claimed making the option uncommercial and therefore unlikely to have occurred. 8 Sirtex does not challenge the applicability of Sellars and Malec but contends that, when one looks at the facts of this case, it is an unusual case where there is such certainty about things that the Court need not make a finding based on probabilities but can find as a matter of fact that Sirtex would have resolved the matter of a release with UWA effectively at no cost to Sirtex. In short, Sirtex says that this is a case where the facts allow the Court to make a finding within the realms of certainty without allowing for any discount, or if a discount is required then with a very small discount based on the high probability of the events occurring. 9 If this second issue is resolved in favour of Sirtex issues remain concerning causation and quantum of some of the costs claimed. key issue – recovery of legal costs as damages 10 The parties agree that the key issue is whether costs incurred by Sirtex in relation to the primary proceedings determined by French J are recoverable as damages. 11 It follows from what French J found at [1612] that his Honour considered the deliberate non-disclosure of Dr Gray in question was misleading or deceptive conduct in breach of s 10 of the Fair Trading Act 1987 (WA) (FTA) as well as a breach of his duties as a director of Sirtex (see [1610]), including his statutory duty under s 180 and s 181 of the Corporations Law as it stood in 2000 (see [1604]). 12 Accordingly, in a primary sense, Sirtex's entitlement to damages for Dr Gray's misleading or deceptive conduct is governed by s 77 and s 79 of the FTA, which provisions are relevantly identical to s 82 and s 87 of the Trade Practices Act 1974 (Cth) (TPA). 13 Section 79(1) of the FTA (s 82(1) of the TPA) provides relevantly that "a person who suffers loss or damage by conduct of another person that was done in contravention of a provision … may recover the amount of the loss or damage by action against the other person or against any person involved in the contravention". 14 Section 77(1) of the FTA (s 87(1) of the TPA) provides relevantly that "where … the Court is satisfied that a person has suffered, or is likely to suffer, loss or damage by reason of conduct of another person that contravened a provision of this Act, the Court, whether or not it grants an injunction under …, may make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subs 3 of this section) for the purpose of compensating the first‑mentioned person wholly or in part for the loss or damage or of preventing or reducing the extent of the loss or damage". 15 I should note at this point that French J, at [1612], did not appear to see any obstacle in principle to the quantification of the lost opportunity suffered by Sirtex by reference to the actual (reasonable) costs of the litigation incurred by Sirtex. Nonetheless, I do not read what his Honour said at [1612], particularly the last two sentences, as constituting a finding that cannot be questioned in this part of the proceeding. It might be said that the trial judge presumed, based on the way the relevant parties had at all material times formulated and presented their cases, that the quantification of the damage suffered from the lost opportunity could and would be measured primarily by reference to the costs of the proceeding, although some other heads of damage or compensation might also be contended for. 16 In any event, if there is a fundamental legal principle preventing the recovery of the costs of the proceedings as compensation or damages for the lost opportunity, based on the way the relevant parties had at all material times formulated and presented their cases, in a case such as the present, it is best that it be determined now rather than some injustice or error of law be perpetuated through a failure to address the issue. 17 Dr Gray contends that compensatory provisions such as s 79 FTA and s 82 TPA must be construed so as to exclude the costs of the proceedings in which loss and damage for compensable conduct are incurred. 18 Counsel for Dr Gray refer to and rely upon a well established principle that a party's costs in the conduct of legal proceedings cannot be awarded as damages in that proceeding or a subsequent proceeding and the only costs recoverable in a proceeding are those awarded in the discretion of the Court, whether on a party and party basis or a full indemnity basis. 19 Sirtex reject Dr Gray's contention and, as to the proper construction of the damages or compensation recoverable under the FTA/TPA, put a number of propositions: · Firstly, that Dr Gray's submission seeks to undermine the findings made by the trial judge, French J. · Secondly, they ignore the fact that the very subject matter of Sirtex's cross‑claim against Dr Gray was the costs incurred. · Thirdly, that the approach taken by Dr Gray seeks to undermine federal and state laws of very high importance in relation to the welfare of the community, namely, the trade practice and fair trading laws, and the attempt is done by simply relying on a costs rule that ordinarily puts costs of proceedings in the discretion of the court. · Fourthly, that the rule in relation to costs and the line of authority relied upon by counsel for Dr Gray to establish the principle underlying the rule, are based on a need to ensure the due administration of justice. An attempt to apply this rule in the circumstances of the case brought by Sirtex against Dr Gray would fundamentally be inimical to the due administration of justice. · Fifthly, if the costs rule relied upon were to apply in the circumstances of this case it has exceptions such that the rule is inapplicable because those exceptions apply. For example, French J found that Sirtex was misled by the deliberate conduct of Dr Gray about the position of UWA and its claims in relation to the relevant intellectual property. His Honour found that UWA knew all the relevant facts in relation to the development of the inventions for Dr Gray (see [1110]). The University knew about the prospectus, the contents of the prospectus and had considered the prospectus. Having done all those things and having had that knowledge, the University consciously chose not to sue Sirtex. As of 2002, on the facts found by French J, had the UWA made a claim against Sirtex it would have failed in any claim to damages or ownership in relation to the patents in question. Therefore, on this premise the only loss Sirtex was truly exposed to by the misleading conduct of Dr Gray and by his breach of director's duties, were the costs and expenses incurred because UWA had the ability to change its mind in 2003/2004, contrary to the position that it held in 2000, and decided to sue Sirtex. In other words, the protection against large scale litigation was the very subject matter of the wrongful conduct and the breach of duty of Dr Gray. In those circumstances if Dr Gray is correct in his submissions on costs, Sirtex is left devoid of any remedy notwithstanding that Dr Gray deliberately misled Sirtex, allowed a public vote to go ahead on a false basis and constantly chose to engage in conduct which constituted a breach of his duties. The effect of the submissions made on behalf of Dr Gray, if they are considered correct, would mean that Sirtex would "get nothing". Thus, counsel for Sirtex submit that the attempt on behalf of Dr Gray to rely on the costs rule is to fundamentally undermine the process of compensating Sirtex where wrong has been done to it by Dr Gray. 20 Courts are usually empowered by statute to award costs in proceedings depending on the outcome of the case. The Federal Court's power to award costs derives from s 43 of the Federal Court of Australia Act 1976 (Cth) (FCA) and O 62 of the Federal Court Rules 1979 (Cth) (FCR). Section 43 of the FCA provides: 43 Costs (1) Subject to subsection (1A) and section 570 of the Fair Work Act 2009, the Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which this or any other Act provides that costs shall not be awarded. (1A) In a representative proceeding commenced under Part IVA or a proceeding of a representative character commenced under any other Act that authorises the commencement of a proceeding of that character, the Court or Judge may not award costs against a person on whose behalf the proceeding has been commenced (other than a party to the proceeding who is representing such a person) except as authorised by: (a) in the case of a representative proceeding commenced under Part IVA—section 33Q or 33R; or (b) in the case of a proceeding of a representative character commenced under another Act—any provision in that Act. (2) Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge. (3) Without limiting the discretion of the Court or a Judge in relation to costs, the Court or Judge may do any of the following: (a) make an award of costs at any stage in a proceeding, whether before, during or after any hearing or trial; (b) make different awards of costs in relation to different parts of the proceeding; (c) order the parties to bear costs in specified proportions; (d) award a party costs in a specified sum; (e) award costs in favour of or against a party whether or not the party is successful in the proceeding; (f) order a party's lawyer to bear costs personally; (g) order that costs awarded against a party are to be assessed on an indemnity basis or otherwise. 21 Order 62, r 6 of the FCR provides that: 6 Order for payment Subject to this Order or to the effect of any agreement between the parties a party to a proceeding in the Court shall not be entitled to recover any costs of and incidental to the proceeding from any other party to the proceeding except under an order of the Court. 22 It is well understood that the Court's discretion under s 43 FCA is to be exercised "judicially" and in accordance with the rule that costs ordinarily follow the event – that is to say, the successful party will get their costs – and ordinarily will be taxed (or assessed) on a more limited "party and party" basis, rather than a more generous "solicitor and client" or indemnity basis, unless the circumstances of the case warrant a departure from the usual order: see, for example, Colgate‑Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225. 23 In Colgate-Palmolive Company v Cussons Pty Ltd, Sheppard J explained that under s 43 FCA and O 62 FCR the Court was empowered to award costs to be taxed (or assessed) on five different bases: party and party, common fund, trustee, solicitor and client and indemnity. At 230, his Honour considered the provisions of s 43 conferred on the Court a wide power to select the appropriate basis of taxation having regard to the circumstances of the case. However, Sheppard J ruled that under the FCA and FCR, the ordinary rule is that where the Court orders the costs of one party to litigation be paid by the unsuccessful party, the order is for payment of those costs on a party and party basis. Consequently, the Court will not usually make an order for the payment of costs on some other basis unless appropriate circumstances have been made out. This usually means that the party with the benefit of an ordinary costs order following successful litigation is not fully indemnified and often suffers a discrepancy in respect of the costs they have actually incurred with their lawyer to prosecute or defend the proceeding. 24 That there might be a discrepancy between what the Court orders by way of party and party costs and on an indemnity basis has long been understood by courts and lawyers. In Cachia v Hanes (1994) 179 CLR 403 at 410 – 411, the majority of the High Court stated: It has not been doubted since 1278, when the Statute of Gloucester [footnote omitted] introduced the notion of costs to the common law, that costs are awarded by way of indemnity (or, more accurately, partial indemnity) for professional legal costs actually incurred in the conduct of litigation. They were never intended to be comprehensive compensation for any loss suffered by a litigant. 25 Notwithstanding that there may be, and often is, such a discrepancy between costs actually incurred and costs assessed in a proceeding on a party and party basis under the FCA and FCR, there is also a general principle that the legal costs a person incurs in the course of either prosecuting or defending a civil proceeding in a court (or the shortfall) are not recoverable as damages, either as part of damages awarded in the primary proceeding or in a subsequent proceeding for damages: Cockburn v Edwards (1881) 18 Ch D 449 (Cockburn v Edwards). 26 In Penn v Bristol and West Building Society [1997] 1 WLR 1356 (Penn), the English Court of Appeal considered the principle stated in Cockburn v Edwards applied also to costs incurred in the primary action and claimed in a related cross‑claim. In Penn, the defendant building society was held to be not entitled to recover the costs of defending the claim of the plaintiff against it, or of prosecuting the cross‑claim against the plaintiff by way of damages against the cross‑defendant solicitors. 27 In Queanbeyan Leagues Club Ltd v Poldune Pty Ltd [2000] NSWSC 1100 (Queanbeyan), Hamilton J applied Penn and held, at [45] and [46], that in proceedings in the New South Wales Supreme Court a defendant cannot as a cross‑claimant recover as damages against a cross‑defendant any part of the costs of the proceedings and that all cost of all parties in multi‑party proceedings should be dealt with by a costs order made in the exercise of the Court's discretionary power to make such orders. 28 Penn and Queanbeyan were in turn applied in this respect by Templeman J in McCourt v Cranston [2009] WASC 56(S). 29 Counsel for Sirtex generally accept the existence of the general principle stated in Cockburn v Edwards, but question the relevance of the decision in Penn under the FCA and the FCR and say that, for reasons set out above, the general principle is inapplicable in a case such as the present. 30 The general principle that costs of a civil proceeding are not recoverable as damages in that proceeding or in a related or subsequent proceeding, as noted above, is undoubted. However, it is recognised as being subject to a number of clear exceptions in relation to certain tort and contract claims. In Berry v British Transport Commission [1962] 1 QB 306, the appellant, as plaintiff, had brought an action for malicious prosecution against the British Transport Commission. She had initially been charged for breaching the Regulation of Railways Act 1868 (UK) and convicted and fined. She then successfully appealed to Quarter Sessions where the conviction was quashed and an award of costs was made in her favour of 15 guineas. The plaintiff considered that award of costs only partly recompensed her for the costs she had in fact incurred in the earlier proceedings before a recorder. In the malicious prosecution action the plaintiff particularised special damage suffered by her to include the full costs of her defence. The defendant contended that, this being the only damage claimed, and it not being recoverable as part of costs of a proceeding, the action should be dismissed for failing to disclose a cause of action. At first instance, Diplock J upheld the contention and dismissed the action. On appeal the English Court of Appeal reversed that decision. 31 Lord Justice Devlin, at 318, noted that a claim for malicious prosecution could not be sustained without proof of damage. At 319, his Lordship noted authority that provided that as a general principle the right to costs must always be considered as finally settled in the court where the question to which that right as accessory was determined, so that if any costs were awarded nothing beyond that sum taxed according to the Rules of the Court could be recovered; or if costs were expressly withheld in a particular case, none would be recoverable by suit in any other court. His Lordship noted that the principle "is part of the general law of damage and is not specifically related to actions for malicious prosecution". 32 As to the general principle, Devlin LJ, at 320, observed that the rule is not easy to apply with justice "because it embodies a presumption, which the law finds it convenient and may be necessary to make; but which it has to, and does in other contexts, admit not to be in accordance with fact". The presumption to which his Lordship referred was that "party and party" costs constituted a substantial indemnity for costs actually incurred in an action. His Lordship, at 320 – 321, added: The reason for the rule is not that the costs incurred in excess of the party and party allowance are deemed to be unreasonable; it is that what is presumed to be the same question cannot be gone into twice. The rule appears to have been first laid down by Mansfield C.J. in Hathaway v Barrow ((1807) 1 CAMP. at 151) where he put it on the ground that 'it would be incongruous to allow a person one sum' as costs in one court, and a different sum for the same costs in 'another court'. If in the earlier case there has been no adjudication upon costs (as distinct from an adjudication that there shall be no order as to costs), a party may recover all his costs assessed on the reasonable, and not on the necessary, basis. 33 Lord Justice Devlin, at 321, stated that the rule does not apply in any case in which the legal process does not permit an adjudication in respect of costs in the first instance and noted the decision of In re Bater & Mayor of Birkenhead [1893] 2 QB 77. 34 Lord Justice Devlin, at 321, then observed that: It follows that if as the result of a breach of contract … or a tort … a person brings unsuccessfully an action against a third party or loses an action brought by a third party, he may recover against the wrongdoer who has broken his contract or committed the tort the costs of the suit; and he will get all the costs he has reasonably expended. The wrongdoer may not argue that the plaintiff is entitled only to party and party costs, notwithstanding that that is all he could or would have got from the third party if he had been successful. At 322 - 323, Devlin LJ formulated the exception to the general principle in this way: I find it difficult to see why the law should not now recognise one standard of costs as between litigants and another when those costs form a legitimate item of damage in a separate cause of action flowing from a different and additional wrong. … The stringent standards that prevail in a taxation of party and party costs can be justified on the same sort of ground …It helps to keep down extravagance in litigation and that is a benefit to all those who have to resort to the law. But the last person who ought to be able to share in that benefit is the man who ex hypothesi is abusing the legal process for his own malicious ends. In cases of malicious process Mansfield C.J.'s rule … has not always been applied. (Emphasis added) 35 To similar effect, Danckwerts LJ, at 338, concluded that "expenses incurred by the plaintiff in the course of her defence in the court of summary jurisdiction and before the recorder, over and above the sum of fifteen guineas awarded to her", were sufficient to support an action for malicious prosecution, and so he allowed the appeal. Danckwerts LJ, at 336, noted that: … the theory that taxed costs are a sufficient compensation for a successful defendant, at any rate in a civil action, seems to me an unreal or, perhaps even a cynical view, which ought not to have any place in the conditions of an action for malicious prosecution. 36 Lord Justice Ormerod expressed agreement with the views of the other members of the Court and said that in light of the exhaustive discussion of Devlin LJ in his judgment it was perhaps unnecessary for him to say anything further. At 317, Ormerod LJ noted the general principle that costs incurred in excess of the sum allowed on taxation in a civil suit cannot be recovered as damages. He also noted that "considerable doubt" had been expressed from time to time as to the reality of that view, but that it was well established and not for the Court to disturb it. His Lordship considered that although costs had been awarded in earlier criminal proceeding against the plaintiff which had been dismissed, they had been awarded on the basis of what the Court had considered "reasonable" in respect of the costs incurred. His Lordship noted that it may well be that the costs awarded may have no relation to those actually incurred. 37 Reasoning similar to that laid out in Berry v British Transport Commission explains why actions for the torts of false imprisonment and conspiracy and in respect of the breach of the terms of some contracts are not affected by the ordinary rule that the costs of proceedings cannot be recovered as damages in a subsequent proceeding: see generally, McGregor QC H, McGregor on Damages (18th ed, Thomson Reuters, 2009) (McGregor) [17‑024], [17‑044]. 38 So far as breach of contract is concerned, it is useful to return to the decision in Penn, to which earlier reference has been made. As noted, Penn was relied on in the Australian decisions of Queanbeyan and McCourt v Cranston to support the extension of the ordinary rule that costs are not recoverable as damages in circumstances where a cross‑claimant seeks to recover the legal costs of the primary proceedings against a cross‑defendant. In Penn a husband and wife jointly bought a house with the assistance of a mortgage loan. After incurring business debts, the husband and his business partner executed a mortgage fraud by purporting to sell the house to a purchaser, party to the fraud, who had obtained the purchase price (in part) from a building society and with the money thus obtained, discharged the business debts. The husband instructed a solicitor who mistakenly believed that he was also instructed to act for the wife. In the course of contractual negotiations leading to completion, the solicitor warranted to the purchaser's solicitors that he was acting for the husband and wife jointly. Unknown to the solicitor, the husband forged his wife's signature on the documents. At all times, the solicitor knew that the purchaser's solicitors were instructed on behalf of the building society who would be lending part of the purchase price to the purchaser by way of mortgage. Upon completion, relying on the solicitor's warrant that said he was acting for both husband and wife, the building society and the solicitors arranged for the purchaser to execute a charge and advance the necessary funds that were used to pay out the mortgage and the husband's business debts. On the wife's claims against the building society, and on the building society's counterclaim, the judge declared that the contract of sale was null and void and that the building society was subrogated to the original mortgagee. Significantly, the judge also allowed the building society's counterclaim against the solicitor for damages for breach of warranty and ordered the solicitor to pay the building society's costs of defending the wife's action on an indemnity basis. The solicitor appealed against the order as to liability and against the order that the costs be taxed on an indemnity basis. 39 The Court of Appeal allowed the appeal on costs, stating that where a plaintiff recovered damages and costs on a "standard basis" (the terminology of the relevant rule of court) against a defendant and the defendant was entitled to an indemnity from a third party, the defendant's costs of defending the plaintiff's action were recoverable from the third party, but an order for the taxation of those costs on an indemnity basis was not justified merely because the costs of defending the action would have been recoverable as damages had separate proceedings been brought; and that accordingly in the absence of other factors justifying taxation on an indemnity basis, the judge's order would be varied so as to provide for the building society's costs to be taxed on a standard basis. This finding plainly accepts that if the third party indemnity proceeding had been run separately after the verdict in the primary action was known, the result would have been different. 40 In the course of dealing with the indemnity costs issue, Waller LJ (with whom the other members of the Court agreed) first noted what was said in Halsbury's Laws of England, 4th ed (1975) Vol 12, page 423, [1120], namely that: A party to court proceedings may not recover his costs of those proceedings from any other party to them except by an award of costs by the Court. The costs of other proceedings, however, stand on a different footing. Where, as a result of the defendant's wrong, the plaintiff has incurred costs in other proceedings, the plaintiff may, subject to the rules of remoteness, recover those costs from the defendant as damages. In light of this statement (obviously accepted by Waller LJ), his Lordship then observed, at 1364 – 1365: Thus a party cannot claim by way of damages for those parts of the costs incurred which he will not recover on taxation against his opponent either in the same action or in a separate action. On the other hand if in a separate action a party seeks damages which include fighting an action against a third party, the damages for incurring costs will be assessed in the same way as any other damages at common law. His Lordship, at 1365, then noted what was stated in The [English] Supreme Court Practice 1997 which suggested that if a plaintiff succeeds against a defendant, and the latter against a third party, then where the defendant is entitled to an indemnity against the third party, the defendant may be entitled to an order for the costs of fighting the plaintiff on an indemnity basis, but an order from the Court in that regard is necessary. His Lordship said that what the note did not make clear was whether the basis for being entitled to an order for indemnity costs in relation to those costs for fighting the plaintiff was thought to arise from an express indemnity, or whether it is said to arise where the claim is to damages and to an indemnity by virtue of that claim. He did not find it easy to establish what the correct approach was to the problem. His Lordship added, at 1365, that: Furthermore, for sound commercial reasons, because the difference in costs on a standard basis and on an indemnity basis are not so great as to justify expenditure on detailed argument, we have had the benefit of only very brief submissions. (This latter reference to the difference in the costs bases not being so great is to be understood by reference to the "sea change", as McGregor, at [17–004] describes it, that the English rules underwent when the Civil Procedure Rules 1998 (CPR) took over from the former Rules of the Supreme Court. Under the CPR, the "standard basis" costs reflect reasonable costs incurred by a party and have apparently to a large extent reduced the discrepancy between former party and party costs and the costs actually incurred by a successful party to litigation. Nonetheless, by way of further observation, McGregor, at [17–014], suggests that it is unusual for more than 80% of the costs actually incurred by a claimant to be allowed him or her on a standard basis assessment and for more than 90% on an indemnity basis.) 41 Waller LJ went on to observe, at 1365, that the problem seemed to him to be that there are competing considerations which do not necessarily lie easily together. The first consideration is that a wrongdoer should indemnify in damages for the wrong done. The second is that when it comes to costs, a wrongdoer is only liable to pay on a standard basis unless it appears to the Court to be appropriate to order costs to be taxed on an indemnity basis. His Lordship thought it important that O 62, r 3(2) of the relevant Rules of the Supreme Court (RSC) provided that "No party to any proceeding shall be entitled to recover any of the costs of those proceedings from any other party to those proceedings except under an order of the Court". He therefore held: Thus a defendant cannot claim as part of his damages against a third party the costs of fighting the plaintiff, and it also follows that even if the third party is bound to indemnify the defendant under an express contract of indemnity, the note in The Supreme Court Practice 1997 … is correct in saying that an order for costs awarded on an indemnity basis would have to be obtained if an indemnity is to be achieved. 42 His Lordship, at 1365, then expressed concern as to the accuracy of the note in the Supreme Court Practice in so far as it might "encourage the thought that in any situations in which costs might have been recoverable as damages if separate proceedings had been brought, it would be appropriate on that basis alone to order taxation on an indemnity basis". His Lordship considered the philosophy that lay behind O 62, r 3(2) RSC was to prevent costs being included in an award of damages in the third party and other proceedings in the same action. 43 However, his Lordship did not reject the possibility that it would be open to a party in a position of the building society not to pursue third party proceedings against a party in the position of the solicitor in this case in the primary proceeding, but to await the outcome of the primary proceeding and then, if necessary, commence separate proceedings claiming as damages the legal costs actually incurred in prosecuting or defending the earlier proceeding. This follows from what Waller LJ stated at 1366, where his Lordship said: The other side of the coin, I accept, is that it could be said that if the court does not order indemnity costs where such costs would have been recoverable as damages if a separate action had been brought, that will discourage the bringing of third party and other claims in the one action. That, however, I do not think is a serious risk having regard to the many other benefits of proceeding in one action and having all issues tried at the same time. In any event the philosophy which lies behind Ord. 62, r. 3(2) would seem to me to be clear. If it is followed, it should not by itself be a ground for awarding indemnity costs that the costs of defending or fighting another party would have been recoverable as damages if separate proceedings had been brought. I have accordingly concluded that for an order for indemnity costs to be appropriate there should be some additional factor of the nature which normally gives rise to such an order. 44 McGregor criticises the decision of the Court of Appeal in Penn on two grounds: first, that the Court failed to have regard to other Court of Appeal authority; and secondly, because the Court gave O 62, r 3(2) RSC a "dubious" interpretation. McGregor, at [17–044], suggests the interpretation is dubious "because there is nothing in the provision to suggest that it requires the court to order that the costs need to be on the standard basis only and that the costs cannot be awarded as damages". 45 One of the Court of Appeal authorities that McGregor suggests should have been regarded was Lonrho Plc v Fayed (No 5) [1993] 1 WLR 1489. At 1510, Evans LJ, having noted that the fiction that taxed costs are the same as costs reasonably incurred (commented upon by Devlin LJ in Berry v British Transport Commission at 323) had now largely disappeared because costs under O62, r 12 RSC were assessed on a "reasonable amount" basis by reference to costs reasonably incurred, added: There is authority, however, that no such bar exists to a claim for unrecovered costs against a third party, that is, against a person who was not a party to the original action. Such claims are commonplace as damages for breach of contract, and they have been admitted also in tort …. The measure of such damages under the old costs rules was the difference between the plaintiff's costs of the action taxed as between solicitor and client and as between party and party…. Now that the fiction has become largely fact … it is questionable whether the right to recover so-called extra costs is still justified, even when the claim is made against a third party to the original action. McGregor also refers to a number of contract cases which the learned author suggests undermine the holding in Penn. 46 In National Westminster Bank plc v Rabobank Nederland (No 3) [2008] 1 Lloyd's Rep 16, in breach of an anti‑suit clause, the defendant bank brought proceedings in California which the claimant bank successfully defended but without being awarded as costs more than the very limited items of expenditure allowed in California. It was held that the very substantial shortfall in costs were recoverable as damages in the United Kingdom. Sir Anthony Colman, at [24], noted that: If the winning party can formulate a claim for the whole or part of such costs in the English courts as a claim for damages for breach of a separate cause of action… there is … no reason as a matter of public policy or otherwise, why he may not recover them subject to ordinary damages rules. 47 In A v B (No 2) [2007] 1 Lloyd's Rep 358, a party to an arbitration agreement which provided for a Swiss arbitration attempted, without success, to invoke the supervisory jurisdiction of the English courts and the successful party was held entitled to recover its costs of proceedings in the English courts on an indemnity basis. In doing so, Colman J made an award of costs that reflected the measure of damages which that party could recover in proceedings for breach of the arbitration agreement: see [8]. Colman J, at [10], did not consider it necessary that the claimant should have to bring a separate action for damages for the extra costs and noted that to require a separate action: Would involve delay in obtaining compensation properly due and a formalistic and cumbersome procedure which in itself would involve more costs and judicial time. 48 This latter approach suggests that, in appropriate circumstances, the power of a court to award damages and not merely costs, may be considered appropriate in multi‑party actions such as Penn. 49 In Queanbeyan, Hamilton J in the Supreme Court of New South Wales had regard to a number of the authorities, including Penn, but not the more recent contract authorities just referred to, in deciding that he should follow Penn in relevant respects. His Honour however expressed the view, at [46], that he had "greater doubt" about the proposition that the general principle in Cockburn v Edwards should apply to a cross‑claim in the proceeding than he did about the general principle itself. His Honour, at [46], noted a lack of Australian authority for the proposition. However, having regard to the terms of the civil practice rules of the Supreme Court of New South Wales which included a rule similar to O 62, r 3(2) RSC considered in Penn, his Honour came to the conclusion that the decision of the English Court of Appeal in The Tiburon (Sea Vision Investments SA v Evennett (The "Tiburon") [1992] 2 Lloyd's Rep 26) that rejected the suggestion that the rules were beyond power, as purporting to take away a common law right of damages, was not open. His Honour also noted the anomaly averted to by Waller LJ in Penn, that costs could be pursued as damages in a separate action if care were taken to avoid running a cross‑claim or third party action with a primary proceeding. Hamilton J, at [46], said that he agreed with the view that the best conclusion is that the rule that all costs of all parties in multi-party proceedings should be dealt with by costs orders made in the exercise of the Court's discretionary power to make such orders as appropriate. 50 Counsel for Sirtex contend that Penn, Queanbeyan and McCourt v Cranston which applied Penn, are not binding on this Court, and to the extent that Dr Gray submits that s 43 FCA and O 62, r 6 FCR ought to stand in the way of damages under s 82 TPA as broadly interpreted by the High Court, such a submission should be rejected, for these reasons: · Section 43(2) FCA is confined to "the award of costs". · Order 62 FCR says nothing at all about the Court's powers to make orders for damages or relief under provisions such as s 77 of the FTA, or s 87 of the TPA. · Order 62, r 6, which may be considered, broadly speaking, in terms similar the rules of the SCR considered in Penn, contains the proviso "except under an order of the Court". Counsel for Sirtex submit that the order for damages or relief of the type Sirtex seeks is not precluded in terms of O 62, r 6. Indeed O 62, r 6 specifically operates subject to any order the Court may make, which includes the orders presently sought by Sirtex. Order 62, r 6 does not say in the proviso "except under an order of the Court under Order 62". Counsel submits that, in other words, O 62, r 6 leaves the door open for the Court to make an order that legal costs of the proceedings be paid as damages if there is otherwise a basis for doing so. There does not appear to be any analysis of this kind in Penn, Queanbeyan or McCourt v Cranston. Put simply, there is no apparent basis why s 43 FCA and/or O 62 FCR ought to "trump" the clear language of s 77 FTA and s 87 TPA and the very broad interpretation for such provisions established by the numerous High Court authorities concerning compensation or damages payable under those provisions. 51 For my part, while perhaps it is not ultimately necessary for me to do so, I am not, with respect, convinced by the line of reasoning in Penn and the authorities which apply it. If it were necessary to do so, I would find myself agreeing with the criticisms made in McGregor of Penn. While O 62, r 6 FCR may be said, in substance, to be similar to the English rule relied upon by Waller LJ in Penn as the controlling consideration, it is subject to the proviso noted. It does not appear, on its face, to be a rule that is capable of denying the application of a broader principle that costs can, in appropriate cases, be recovered as damages. I would have thought, as a matter of principle, that in a situation where a party is put to the trouble of maintaining an action or defending an action by reason of the wrongdoing of another party, and is entitled to an indemnity from that party, then absent usual principles such as those relating to mitigation of damage and the reasonableness of legal costs incurred, they should be able to recover as damages those costs expended either in a separate action subsequent to the primary action or in a related proceeding in the primary proceeding. I do not see anything unreasonable about that. In public policy terms, it may well serve the useful purpose of encouraging settlement of proceedings. 52 In the case currently before the Court, Sirtex is entitled to recover against Dr Gray damages and compensation respectively for specified conduct pursuant to s 77 and s 79 FTA and s 82 and s 87 TPA. In many respects the statutory right of action to claim damages and compensation for specified conduct may be seen as statutory extensions of general law causes of action designed to meet consumer expectations in a modern economy. On that view, one might say that ordinarily a successful claim for damages for loss flowing from misleading or deceptive conduct under, say, s 52 of the TPA, would not entitle the applicant to a full recovery, as damages, of all costs reasonably incurred in maintaining the action. This would follow from an appreciation that such costs only become payable in circumstances where the applicant establishes liability in the primary proceeding and the Court orders in its discretion that the respondent pay the applicant's costs (on one basis or another). Until a costs order is made in such a proceeding, there is no separate liability on any party to pay costs and it cannot be said, in my view, that there is a legitimate item of damage in a separate cause of action flowing from an additional wrong, as Devlin LJ put it in Berry v British Transport Commission. Accordingly, in such circumstances the general principle identified by the authorities, that costs of a proceeding may not be recovered in the same or a related or subsequent action as damages, is applicable. 53 Where, however, the compensable loss is, as identified by French J in the primary judgment at [1612], the loss of the opportunity to resolve prospective litigation with the applicant in the primary proceeding, such that the aggrieved party has been exposed to litigation, then it seems to me that the assessment of the loss by way of damages or compensation payable for that lost opportunity necessarily comprehends the possibility of reasonable costs actually incurred by the aggrieved party in the ensuing litigation. In that sense, the item of loss claimed (legal costs in defending a proceeding) is comprehended by the primary statutory right of action arising from the contravening conduct of Dr Gray in this proceeding. It is not necessary for costs actually to be awarded under the Court's statutory power to award costs for any entitlement to recover them to arise. The right to claim the reasonable costs of defending the applicant's action in the primary proceeding constitutes damage in a separate cause of action flowing from a specific wrong that is not dependant upon any award of costs being made in the primary proceeding. For these reasons, I consider the principle that ordinarily a party may not recover, as damages, the costs of a proceeding, is not relevant to the assessment of the damages in the proceeding between Sirtex, by way of cross‑claim, against Dr Gray. 54 It follows, in my view, that O 62, r 6 FCR is not directed at a case in which costs are recoverable as damages, and the decisions of Penn, Queanbeyan and McCourt v Cranston are not ultimately relevant to the determination of this key issue. However, for the reasons set out above, I doubt the application of those decisions to the recovery of costs as damages in a cross‑claim in this Court in any event. the probability or possibility of sirtex resolving the matter with uwa 55 I now turn to the second issue. As noted above, Sirtex contends that there is considerable certainty – and that no discount in fact should be provided in respect of this probability assessment – that an agreement would have been reached between Sirtex and UWA concerning the use of the intellectual property such that Sirtex would have avoided any of the costs and expenses it now seeks to recover from Dr Gray. At this time, Sirtex was about 12 months away from a public listing. 56 On the other hand, Dr Gray contends that it is highly probable that had Sirtex attempted to resolve its dispute with UWA in 2000, no agreement would have been reached between them. Alternatively, any agreement would have required Sirtex to pay UWA royalties the amount of which would have exceeded the damages now claimed. 57 In Sellars, the High Court dealt with the question of damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of the TPA. In the joint judgment of Mason CJ and Dawson, Toohey and Gaudron JJ, at 355, their Honours observed that such damages should be ascertained by reference to the Court's assessment of the "prospects of success of that opportunity had it been pursued". Their Honours went on to explain that in the case before them the applicant had shown "some" loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had "some" value (not being a negligible value), the value being ascertained by reference to the "degree of probabilities or possibilities". 58 Their Honours in the joint judgment made these statements of principle by reference to the principle earlier recognised in Malec. Their Honours observed, at 355, that the principle recognised in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. In Malec, in the joint judgment of Deane, Gaudron and McHugh JJ, their Honours observed, at 643, in respect of events which have or have not occurred, damages are assessed on an "all or nothing" approach. But in the case of an event which it is alleged would or would not have occurred, or might or might not yet occur, the approach of the court is different: The future may be predicted and the hypothetical may be conjectured. But questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration or proof. If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high – 99.9 per cent – or very low – 0.1 per cent. But unless the chance is so low as to be regarded as speculative – say less than 1 per cent – or so high as to be practically certain – say over 99 per cent – the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability. The adjustment may increase or decrease the amount of damages otherwise to be awarded. This approach was endorsed in the joint judgment referred to in Sellars, at 350. 59 Ultimately, in this case, once I have assessed the relevance and quantum of the costs claimed as damages, and made any further deductions that may be shown as appropriate on account of achieving a hypothetical settlement of the matter (for example by taking legal or other advice in relation to the proposed settlement), the question arises whether that sum should be discounted wholly or partially by reason of the probability or possibility of no settlement, or a settlement of the matter with UWA for no consideration, or a settlement on the basis of a share issue with no cash component, or a settlement with a royalty – these being a range of possibilities identified by the parties. 60 Accordingly, if the Court were to make a finding that the probability of a settlement for no consideration or for a share issue with no cash component or royalty was 100%, there would be no discount. However, if the Court did not rate the probability of such a settlement at 100% then the Court would need to ascribe some percentage of probability and discount the damages assessed accordingly. By contrast, if the Court were to find the probability was 100% that there would have been no settlement at all, then the lost opportunity would have a nil value. If there is a possibility that there may have been no settlement at all, that possibility must also be taken into account in assessing the extent of the probability of a settlement where the probabilities are that a settlement for no consideration or for a share issue with no cash component or royalty would have been achieved. 61 I should note at the outset of this exercise, that French J, at [1612], left quite open the possibilities, following an inquiry of UWA by Sirtex, of Sirtex being notified of a claim or of achieving a resolution of the matter. However, his Honour made many findings and observations that materially bear on the assessment of probabilities and possibilities I must now undertake. 62 In the primary judgment, French J provided a summary of his findings about implementation of the intellectual property policy and regulations of UWA in the period 1985 – 2006, at [246]. It is unnecessary for me to repeat that summary in full here, but items 26 – 36 might be noted: 26. In February 1994 Professor Michael Barber was appointed to the new position of Pro Vice-Chancellor (Research). His duties included maintaining and ensuring adherence to intellectual property policies. 27. Professor Barber was never appointed to a Patents Committee and knew nothing of the existence of such a committee. 28. UWA adopted an Intellectual Property Policy together with IP Regulations and established an Intellectual Property Committee in 1996. 29. The Intellectual Property Committee first met in December 1996. 30. The IP Regulations came into effect no earlier than 30 November 1997. 31. Neither Professor Barber nor UWA put in place any procedures for the enforcement of notification obligations under the Patents Regulations or the IP Regulations. 32. Professor Barber had power under the IP Regulations to deal with inventions on behalf of UWA including any assignment or waiver of UWA's rights in relation to them. 33. UWA legal officers were involved in issues relating to commercialisation of intellectual property projects. 34. In January 2001 UWA established an Office of Industry and Innovation. One of its functions was to train researchers in relation to intellectual property processes and its regulations in relation to intellectual property. Dr Andrew Sierakowski was appointed as its director. He reported to Professor Barber. 35. In November 2001 Mr Kim Heitman was appointed as an intellectual property lawyer in the Legal Services Office of UWA. In November 2002 he became Director of Legal Services. 36. Professor Barber resigned from UWA late in 2002. 63 On 22 January 1997, Professor Barber replied to a letter from Mr Gorn, chairman of CRI, of about 17 January 1997. The full text of Mr Gorn's letter is set out in the primary judgment at [947]. That letter attached a proposed draft letter. Professor Barber was invited, if that draft letter was acceptable to the University, to prepare the letter and forward it to CRI. The draft was in the following terms: I confirm that the University of WA has no interest financially or otherwise in the technology or intellectual property described in your letter and referred to as: – The use of small ceramic particles to treat patients; – The use of a new matrix for transport of an anti‑cancer drug; – The use of targeted hyperthermia in the treatment of patients. 64 In his reply to that letter, as set out in the primary judgment, at [956], Professor Barber stated: I confirm that, on the basis of the facts in your letter, the University has no interest financially or otherwise in the CRI funded technology (or intellectual property in it) described in your letter and referred to as: (a) the use of small ceramic particles to treat patients; (b) the use of new matrix for transport of an anti-cancer drug; (c) the use of targeted hyperthermia in the treatment of patients. 65 In the primary judgment, at [957] and [958], French J refers to communications between Professor Barber and Dr Gray the day following the sending of this letter concerning the use of the letterhead and whether Mr Gorn was signing as chairman of CRI or chairman of CACS. He asked Dr Gray to liaise with CRI so its letterhead could be better adjusted to reflect the real situation. 66 At [959], French J noted, concerning Professor Barber's letter, that Professor Barber was aware from the Gorn letter that the letter he had been asked to provide was sought for the purpose of CRI's negotiations with a third party financier. He also noted two limitations in the letter where the release was confirmed "on the basis of the facts in your letter" and that the technology was "CRI funded". There was no suggestion that the truth of the facts was assumed as distinct from known, nor was there any suggestion that CRI funding was limited to any particular aspect of the technology concerned. 67 At [960], French J accepted the Sirtex contention that an independent third party reading the letter would properly infer that UWA was not making a conditional release but a release based upon its own inquiries or satisfaction. At the same time, French J said that he accepted "that Professor Barber was prepared to sign his letter in reliance upon that provided by Mr Gorn. His less than rigorous approach in this respect was consistent with his less than hard line attitude to the enforcement of what he and others thought were UWA's intellectual property rights". 68 French J, however, at [960], said he would not go so far as to conclude that Professor Barber's letter reflected an informed consent by UWA to Dr Gray or CRI or anyone else exploiting what it believed to be its intellectual property rights in relation to the three technologies. 69 Nonetheless it is important to note the finding by French J that Professor Barber in this dealing adopted a "less than rigorous approach" which was "consistent with his less than hardline attitude" to the enforcement of what he and others thought were UWA's intellectual property rights. 70 Professor Barber's approach is important to note in assessing the probabilities and possibilities of issues surrounding the ownership of the intellectual property in late 1999/early 2000, because Professor Barber was the representative of UWA with a responsibility for ensuring adherence to policies on intellectual property. The evidence elsewhere suggests that it is highly probable that Sirtex would have acted on the advice to make further inquiries of UWA and would have approached Professor Barber either directly or have been referred to him by the Vice-Chancellor Professor Schreuder. I will return to that observation later. 71 Between 1 January 1993 and 4 February 2004, Professor Robson held the position of Deputy Vice-Chancellor and Provost of UWA. He gave evidence that as from 1993, with reference to reg 4(1)(ii) of the Patent Regulations 1971 of UWA, it was contemplated that UWA may well abandon its interests in relation to any intellectual property that it had taken some interest in previously (transcript 522 (20 – 22)). It should also be noted at this point that Dr Gray had a strong antipathy towards Professor Robson and considered Professor Robson to be behind UWA's resistance to his actions at material times. 72 Professor Robson's understanding was that the University's 1996 Intellectual Property Regulations gave Professor Barber as Pro Vice-Chancellor (Research) the power to deal with inventions on behalf of UWA, including any assignment or waiver of UWA's rights in relation to the inventions: affidavit of Professor Robson, sworn 6 December 2006, at [50]. 73 Professor Robson accepted that from 1993 through to 1999, if UWA was told the prospects of the invention becoming commercially exploitable were either non-existent or remote, it would have made a decision based on the probabilities of the invention being profitable. That is to say, it would not have been interested in the invention (transcript 521 (31‑38)). Similarly, if Professor Robson had been informed in 1993 through to 1999 that the prospects of commercially exploiting the DOX-Spheres patent were either non‑existent or remote, it would not have been interested in securing the protection for that intellectual property (transcript 521 (40 –­ 46)). 74 Professor Barber gave evidence confirming that, as from 1996, UWA could vest the intellectual property in the funding body (transcript 741 (12) – 742 (14)). UWA was prepared to contemplate arrangements in which an external party wished to develop its intellectual property and UWA would vest its intellectual property rights back into the funding body and that there were examples of that (transcripts 742 (10 – 14)). 75 Professor Barber said that from around 1996 and through to at least 1999, the philosophy that underpinned UWA's approach to intellectual property and commercialisation was not commercially focused. Rather, it was focused on such matters as gaining research funding, supporting PhD students and, above all, gaining reputation from academic publication in peer reviewed journals: affidavit of Professor Barber sworn 5 December 2006, at [48] and transcript 793 (24 – 37); see also the primary judgment at [230]. 76 Professor Barber said that if the University had been commercially focussed, this would have entailed being more proactive in the commercial exploitation of intellectual property (transcript 793 (40-43)). Professor Barber said that commercialisation of intellectual property was a by‑product, and there were only a few examples of any substantial commercialisation during this period: see primary judgment at [230]. 77 Professor Barber said that, in all cases, UWA was reactive rather than proactive. The driver of any commercialisation of intellectual property was the researcher and/or his or her external contacts. If a proposal was put forward then he would consider it as the relevant UWA officer under the Intellectual Property Regulations: Professor Barber's affidavit sworn 5 December 2006 at [53]. If a researcher approached Professor Barber suggesting research could have commercial value and he or she wished to speak to third parties, UWA would generally work with them to follow this through. An example was the commercialisation of the production of nanopowders through Advanced Powder Technology Pty Ltd between 1999 and 2000: see primary judgment at [231]. 78 It seems fair to conclude UWA took the information supplied at face value and would work with external parties to facilitate their activities. If a proposal was brought forward, UWA would try to make it happen. Professor Barber relied on the people who came to him with propositions to bring all the relevant information. UWA was not proactive: see primary judgment at [231]. 79 Professor Barber also said that the position either under UWA's 1971 Patent Regulations or UWA's 1996 Intellectual Property Regulations was that if UWA intended to take an interest by way of ownership of intellectual property, it had to assume some responsibility for the costs of doing so, with the qualification that there would be an issue about the process by which the necessary resources were to be raised (transcript 810 (28 – 35)). 80 Professor Barber considered in relation to costs that the general view would have been that UWA would not be prepared to bear them directly and they would be matters in respect of which UWA would negotiate in good faith to establish the position it would have in relation to the intellectual property thereafter (transcript 810 (37 – 47)). 81 If between 1997-1999 someone had said to Professor Barber that UWA was entitled to ownership of certain inventions by reason of either patents, or regulations, but also told him it was going to take several million dollars to develop inventions and there were no guarantees UWA would receive any return on investment, as Pro Vice-Chancellor (Research) he would have been extremely careful in committing UWA funds. He would have been reluctant to commit funds but not unwilling to contemplate doing so (transcript 793 – 794). 82 All of this evidence provides good grounds for considering, at first blush, that UWA would not have been instinctively opposed to Sirtex's use of the intellectual property here in question had Sirtex made an inquiry of UWA in late 1999/early 2000. 83 In the primary judgment, at [702] – [711], French J dealt with evidence concerning Dr Gray's meeting with Professor Barber on 11 May 1994, and Dr Gray and Mr Shervington's meeting with Professor Barber on 15 August 1994. At [711], French J found that the probability was that Dr Gray did raise and discuss with Professor Barber his intention of establishing a commercial vehicle to raise venture capital for the exploitation of the technology. 84 At [821], French J found as to Professor Barber's knowledge of Dr Gray and Sirtex in late 1995, as follows: Professor Barber's recollection was that he had been aware of Dr Gray's directorship of Paragon Medical when Linda Key brought it to his attention in or about December 1995. He agreed that he was aware from that time that Dr Gray was a director of Paragon Medical and that the company would be working in conjunction with the Institute. He was aware that Paragon Medical was interested in the commercialisation of research. He said he would have discussed the matter with Professor Gale. They tended to discuss such things at the executive team meetings on Friday mornings. 85 At [901] – [909], French J made findings as to the letter from Dr Gray to Professor Barber, dated 26 July 1996 concerning the "first proposal". At [908], French J noted that Professor Barber did not regard the statement that CRI controlled the intellectual property as unusual. It was consistent with the position in other Category B Centres where parties other than UWA owned the intellectual property used in CACS. He accepted the statement at face value. 86 At [909], French J took account of the evidence that, after receiving the letter, Professor Barber had a company search carried out in relation to Paragon Medical which revealed that Dr Gray was one of its directors. Professor Barber became concerned about the potential for a conflict of interest which could affect students detrimentally. This had happened previously in unrelated circumstances. He had discussions with another university person over the next few months. They also had discussions about the structures necessary to give effect to the proposed funding and research arrangements between CACS, CRI and Paragon Medical. 87 Significantly, in my view, Professor Barber also gave evidence that, as of January 1997, he would have baulked at the idea of spending half a million dollars of UWA's limited discretionary funds on the intellectual property in Gray's proposal as there was no proof or certainty that the invention would work (transcript 808 (38 – 42)). 88 Professor Barber said that, as at 15 January 1997, he considered that the $500,000 in Mr Lennon's memo in this regard was only an estimate. In his experience, such estimates are usually exceeded, so he considered the "build cost" would be greater than that: affidavit of Professor Barber sworn 5 December 2006, at [77]. 89 I have already made some reference to the letters passing between Professor Barber and Mr Gorn in January 1997. The details of these letters is dealt with in the primary judgment under the heading "The Gorn and Barber Letters – January 1997" between [944]‑[960]. I have referred to some of the content, particularly Professor Barber's reply above. 90 Professor Barber gave evidence that as of January 1997 his normal practice involving legal issues and intellectual property, such as in responding to Mr Gorn's letter, was to discuss such matters with Mr Lennon and have him prepare a draft letter for his (Professor Barber's) signature: affidavit of Professor Barber, 5 December 2006, at [107]. 91 As of 20 January 1997, Professor Barber accepted and agreed with the proposition from both Mr Lennon's memo and Mr Gorn's letter that it was important to clarify matters in relation to ownership of intellectual property in order to move forward with capital funding from other sources. However, he saw no reason to instruct CRI in this regard: affidavit of Professor Barber, 5 December 2006, at [113]. As at 20 January 1997, he appreciated that it was quite critical for the University to understand its position before third party investors became involved (transcript 797 (1-3)). 92 In the primary judgment, at [994] and [995], French J dealt with evidence dealing with the topic "Barber/Gray re Paragon Medical directorship – February/March 1997". Here, French J noted Professor Barber's concern about a conflict of interest if Dr Gray were to engage in research/commercial activities and also meet his teaching obligations at the University. 93 To this point nothing in these findings and this evidence suggests Professor Barber was likely to adopt a strong position against a proposal from Paragon Medical (Sirtex) for a release in respect of the intellectual property, but it does suggest Professor Barber would have taken a considered approach. 94 Consistent with this observation, in my view, in the primary judgment, at [1110], French J dealt with UWA's knowledge in November 1999, in the following terms: By November 1999 Professors Schreuder and Robson and Ms Key were aware of the following matters: 1. That Dr Gray told the ACC that the microsphere technology being used by Sirtex had been developed by him in Melbourne and Perth. 2. Dr Gray had been employed by UWA from the time he came to Perth about 1999. 3. There were grounds for suspecting that some of the work done in the development of the microspheres technology might have been done in the course of Dr Gray's employment. 4. Paragon Medical had lodged applications for certain patents and had been granted the patents. 5. There were grounds for suspecting that the patents applied for by Paragon Medical might not be covered by the Barber letter of January 1997. 6. UWA did not regard itself as having assigned any of its interests in the intellectual property. 7. Paragon Medical was conducting its business on the basis that it owned the microsphere technology being used. 8. Dr Gray regarded UWA as having no interest in the intellectual property being used by Paragon Medical. Professor Schreuder was not called to give evidence. I infer that he knew of the information contained in his letters to Dr Gray and took no action upon Dr Gray's defiance of his demand for information. 95 Noting that Professor Robson was Acting Vice-Chancellor, in lieu of Professor Schreuder, from 5 November 1999, until 11 November 1999, including at the time of Professor Schreuder's letter to Dr Gray of 9 November 1999, the findings of French J at [1199] – [1204], concerning UWA's decision not to take action against Sirtex in light of its prospectus in July 2000 are also important to note: Barber declines to act on Sirtex prospectus – July 2000 1199 Professor Barber first saw the Sirtex prospectus in 2000 when Linda Key brought it to his attention. They had some earlier discussion about the question of intellectual property held by Paragon and Sirtex. He said some such discussion had occurred between October 1999 and August 2000. 1200 In the context of Sirtex's initial public offering Ms Key told Professor Barber in July 2000, that, in her opinion, UWA had an interest in the intellectual property. When he saw the prospectus Professor Barber thought that if UWA were to make a claim in respect of the intellectual property it could affect the share offer and expose UWA to a counterclaim for damages. He agreed in cross-examination that he could have asked Linda Key to seek advice from external lawyers which was common UWA practice at the time. However he did not do so. Nor did he conduct any investigation at the time or ask Linda Key to assemble a file of records and information. He accepted that there was nothing to stop him making inquiries of the auditors or independent accountants named in the prospectus about matters contained in. He could have inquired of Mr Lennon who had recently left UWA and he could have contacted other staff members and Dr Gray. He could have written to Sirtex. He did none of these things. 1201 Professor Barber was cross-examined on the prospectus. He accepted that it appeared from the prospectus that the continued services of Dr Gray and Dr Stephen Jones were vital to the ongoing welfare of Sirtex. He also recalled reading a statement in the document that the directors could not exclude the possibility that someone might in the future might claim an ownership interest in the technology. He understood when he read that statement that it meant that the directors were not aware of any claim and that potential investors would have understood that the directors did not believe the claims had been made. Professor Barber also said that the prospectus indicated that the investment would be highly speculative and that large sums of money would have to be expended in a short time. The directors of Sirtex were giving no assurance about the prospects of the business. 1202 Professor Barber said in his affidavit evidence that any investigations into whether UWA had an interest in the intellectual property would be difficult because of the "messy lineage" of the work carried out in the first eleven months of the operation of CACS. It would have been relevant to a decision to commence action against Sirtex that the company had suffered a loss in every trading period for that year. In light of the negative factors, Professor Barber did not think there was a real prospect of an investigation turning anything up. He told either Linda Key or Professor Landau that he harboured the hope that if Dr Gray made a lot of money out of the float he might donate a "Gray Chair of Surgery" to UWA. He concluded that the risks of legal action were not outweighed by the likely benefits. He did not remember raising the matter with Professor Robson but would probably have mentioned it to him. 1203 At this time Ms Key and Ms Frodsham were preparing to prosecute an intellectual property case against Dr Gray. I accept the Sirtex submission that Professor Barber, acting on behalf of UWA, and in consultation with its legal officers, considered making a claim but decided not to do so because of the cost to UWA and the risk of a counterclaim. I also accept, as was the case, that Professor Barber had already shown a reluctance to invest money on behalf of UWA in what would have been an expensive development process including the possible outlay of some $500,000 for equipment for the hyperthermia hysteresis project. 1204 Professor Barber's knowledge may be taken to be that of UWA for all material purposes in these proceedings. I also find that it is probable, as he said, that he told Professor Robson of his discussions about the prospectus with Ms Key. 96 In my view these findings – in respect of a period soon after the material period of non‑disclosure by Dr Gray in late 1999/early 2000 – lend strong support the view that in all probability UWA would not have pursued a claim against Sirtex in late 1999 and early 2000. In turn, this supports a finding that it was highly probable that any approach by Sirtex to UWA to deal with a release for the intellectual property case would then have been successful. As to the basis of such a settlement I will return. 97 It is also important to note, as Sirtex submit, what French J found at [1174] of the primary judgment in assessing the conduct of Dr Gray in not disclosing the possibility of a claim: In my opinion, despite this knowledge, he [Dr Gray] decided not to disclose the possibility to Sirtex. In all likelihood that was because he took the view that there was not much chance that the University would follow through. He had convinced himself that the Schreuder correspondence was part of a tactic by Professor Robson to bring about his resignation. He had resigned and therefore there would be little or no purpose in UWA pursuing him. He took a calculated risk in not disclosing the correspondence to Sirtex. This tends to support the view that Dr Gray himself had reason to believe that UWA would capitulate "when push came to shove" over a release. 98 A contrast in UWA's attitude in the period after 2003 is evident, however, when compared with the earlier period just outlined. French J made findings in this regard as to the renewed interest in Dr Gray and Sirtex in 2003 by UWA's new director of Office and Industry and Innovation, Dr Sierakowski and Mr Heitman (UWA's internal solicitor), at [1252] – [1258]. To emphasise the point, Sirtex point out that at the hearing on 15 August 2008, regarding Sirtex's cross‑claim, in the context of what approach UWA would have taken to any settlement with Sirtex in 2000, French J put to Dr Gray's former counsel the following (transcript 33 (12 – 14), 15 August 2008): You would have to accept, wouldn't you, that there was a considerable contrast between the approach taken in 2003, driven by Heitman and Sierakowski and that taken in 2000? Dr Gray's counsel accepted that proposition "entirely" (transcript 33 (16)). 99 French J then further noted: We can't judge, if you like, the hardness of the university's response when approached in 2000 by reference to what was happening later on, because it really had shifted. The best person you could deal with was Professor Barber, in a sense, because he had, as it were, fobbed off the Frodsham Key plan to actually bring action against Dr Gray, hadn't he? Dr Gray's counsel agreed in the following terms: He had evaluated it and determined not to do it, I think. More than fobbed off, he had said no. 100 I adopt the observations of French J and take them into account as my own, supported as they are by his Honour's own findings and the evidence recounted in the primary judgment. 101 Sirtex's general approach to resolving commercial issues relating to ownership of the intellectual property in question must also be noted. At [893], French J found that in regard to Sirtex's financial position in July 1996: 893 At that time Paragon Medical had little money. It needed additional capital to continue to function. Indeed as Mr Karlson put it, by the time Nomura/JAFCO approached Dr Gray Paragon Medical was desperate for capital and had not been able to attract any other interest. 102 At [910] – [918], French J found as follows as to Sirtex's efforts in 1996 to resolve any potential claims against its intellectual property: Intellectual property clearances pursued – September/October 1996 910 Dr Gray and Dr Panaccio met at CRI on 2 September 1996 where presentations were given on the relevant science and technology. Dr Panaccio asked Dr Gray what other parties were involved in the development of the relevant intellectual property or could potentially claim ownership in some or all of it. He asked whether UWA or RPH owned any of the underlying technology or patient data. Dr Gray told him that CRI had funded all the research and the underlying ownership of the intellectual property had been transferred to CRI sometime ago. Clinical trials for patients had taken place at the Prince of Wales Hospital in Hong Kong, but neither the hospital nor the Chinese University of Hong Kong Medical School, with which it was affiliated, claimed any ownership over the relevant intellectual property. Dr Gray also told Dr Panaccio that Monash University had assisted in developing the ceramic microspheres but did not own anything because it was only contract research. 911 Dr Panaccio asked Dr Gray to inform each of the parties of the proposed investment and to obtain written confirmation from them that they would not claim any interest in the technologies. The purpose of his request was to obtain security from Nomura/JAFCO before implementing the proposal. Gray and Panaccio – September/October 1996 912 In September and October 1996 Dr Panaccio again asked Dr Gray to get third party clearances on intellectual property associated with the technologies. About this time, Ms Goh of the Evaluation Department of Nomura/JAFCO visited CRI and Dr Gray with a view to preparing an evaluation report in relation to the proposed investment by Nomura/JAFCO. 913 Dr Gray wrote to Dr Panaccio on 16 September 1996. He reported that he had met with ARI to discuss securing approval for the SIR-Spheres from the TGA and that meetings with the TGA would follow. He was also finalising an agreement between Paragon Medical and ARI about the production marketing and distribution of the SIR-Spheres. He had had discussions about regulatory requirements to allow the use of the product in Asia. He was proposing to sell it initially in Australia and New Zealand under a TGA Special Access Scheme, get TGA approval and then apply to regulatory authorities in Asia. He anticipated that approval by the Federal Drugs Administration in the United States and by European regulators would be facilitated by TGA approval. 914 The Paragon Medical board met on 25 September 1996. Dr Gray reported on his visit to ARI. Under their proposed arrangement ARI would neutron activate, package, market and distribute Yttrium microspheres on behalf of the company. The majority of the profit on sales would come back to Paragon Medical. The minutes also recorded that Dr Panaccio had recommended to Nomura/JAFCO that it fund Paragon Medical. A business consultant would come from Nomura/JAFCO in the next two weeks. This was a reference to Ms Goh. 915 On 14 October 1996 Dr Panaccio and Dr Gray met with ANSTO and TGA representatives in Canberra. Dr Panaccio remembered being told by Professor Li at about this time, that neither the Prince of Wales Hospital nor the Chinese University of Hong Kong claimed any the ownership in the intellectual property of the technologies. On 15 October 1996 Dr Panaccio met with Professor Mary Gani at Monash University. She told him that Monash University did not make any claim to the intellectual property for the ceramic microspheres. At some time prior to 21 October 1996, according to Dr Panaccio, he had a conversation with Dr Gray about seeking confirmation that the relevant parties had no interest in the intellectual property. Dr Gray later had told him he had obtained verbal assurance but nothing in writing. 916 On 21 October 1996 Ms Goh met with Dr Gray, Mr Karlson, Mr Peter Jones, Dane Gorn the chairman of CRI, Dr Stephen Jones and Jillean Winter of CRI. The meeting lasted all day with presentations about hyperthermia and ceramic microspheres. 917 On 26 November 1996 Professor Peter Darvall, Deputy Vice-Chancellor at Monash University, sent a letter to Dr Gray at Paragon Medical about the project involving plasma processing of microspheres. This was a reference to the ill-fated hollow Yttrium microspheres project. He confirmed that Monash University recognised that the intellectual property associated with microspheres had been brought to the project by Dr Gray. The University would not in future "have any claim on the technology for using Yttrium microspheres in cancer treatment". Dr Panaccio sent a copy of the letter to Nomura/JAFCO's legal department. 918 In November 1996 there was an exchange between Mr Karlson and Dr Gray in relation to the shareholding of Paragon Medical. Dr Gray had set out a proposed shareholding based inter alia on "pre-investment" and "post investment" contributions by himself, CRI, Hong Kong University, Mr Karlson, Mr Peter Jones and Pine Ridge Holdings Pty Ltd. Under the proposal Mr Karlson and Mr Jones would get 15,000 shares each, valued at $30,000, in recognition of their respective contributions of $10,000. Mr Karlson, in a handwritten response, asked who Pine Ridge Holdings was. He also asked "where is Steve Jones?" He did not agree that the $30,000 worth of shares allocated to him and Peter Jones was enough given the directors' hours they had contributed in addition to their cash inputs. 103 French J found as follows, at [930] – [932], as to the basis upon which Dr Panaccio and Nomura/JAFCO were prepared to invest in Sirtex which focussed on securing all intellectual property ownership and obtaining a public listing within five years: The Nomura/JAFCO offer – 13 January 1997 930 On 13 January 1997 Dr Panaccio sent to Dr Gray a copy of the term sheet representing Nomura/JAFCO's offer. It was an "indicative primary term sheet". It was not intended to be legally binding. It was subject to "satisfactory legal and financial due diligence". As summarised by Dr Panaccio in his affidavit the investment proposal in the term sheet included: 1. A staggered transfer of $3,000,000 by Nomura/JAFCO upon the achievement by Paragon Medical of certain milestones over two years in consideration of three share tranches at each instalment. 2. The execution of a subscription and shareholding agreement. 3. An employee option scheme. 4. Conditions precedent including satisfactory due diligence, satisfactory transfer of all intellectual property and documented representations and warranties. Under the proposed shareholders agreement the Fund would have the right to appoint two directors to the Board. Dr Gray would undertake to remain an employee and director of the company and maintain a minimum shareholding, agree to non-competitive clauses and that the company activities would be his main business focus. These undertakings would apply for three years after the initial public offering. 931 It was proposed in the term sheet that the current shareholders of Paragon Medical and the Fund would use their best endeavours to achieve a listing of the company within five years on the stock market (clause 16). Conditions precedent to the offer included satisfactory completion of legal due diligence and: . Satisfactory transfer of all intellectual property to Paragon Medical. . Satisfactory documentation of the proposed investment including representations and warranties. 932 The term sheet reflected Dr Panaccio's key objective which was to secure the technology and the ongoing involvement of those who had contributed to its development. He had determined that Dr Gray and certain CRI staff such as Dr Stephen Jones were contributors to the technology and should remain involved. Dr Jones had been introduced to him by Dr Gray as an employee of CRI. Dr Panaccio had been told by Dr Gray that Dr Gray was funding all or part of Dr Jones' salary. He said that prior to the commencement of the present proceedings he was not aware that Dr Jones was employed by UWA. Dr Gray counter-signed the terms sheet on 14 January 1997. 104 French J also found as follows, at [969] – [970], as to the approval of these terms by Sirtex's other directors and the ongoing involvement of those directors: Paragon board meets – 22 January 1997 969 The Paragon Medical Board met on 22 January 1997. Dr Gray, Mr Karlson and Mr Peter Jones were present. Professor Li was an apology. 970 The minutes recorded that Dr Gray outlined the heads of agreement reached with Nomura/JAFCO. The Board unanimously agreed to accept the proposed arrangements subject to a final document to be discussed at the next board meeting. It was expected that the final document would be available within three weeks. At the same meeting it was agreed that there should be a minimum of five directors. The current directors Messrs Karlson, Gray, Jones and Li were reaffirmed. Dr Panaccio and a further nominee of Nomura/JAFCO were accepted as additional directors to be appointed following the first investment from Nomura/JAFCO. Dr Gray was appointed managing director. 105 Other evidence, including Dr Gray's sworn evidence that he took comfort that Mr Karlson and Peter Jones were on the board of Sirtex as he felt they brought expertise and had been brought onto the board to drive the commercialisation process (affidavit of Dr Gray, sworn 15 January 2007, at [32] – [34]) is also relevant to assessing the probabilities of Sirtex resolving the matter with UWA at material times. Mr Karlson also gave evidence that he saw his role in the venture as to providing advice to Dr Gray in relation to the best possible way in which he could obtain a listing for a float of Paragon Medical (transcript 4206). 106 Further, Dr Panaccio gave evidence that, as at 1 March 1997, six weeks before the transaction between Sirtex and Nomura/JAFCO was entered into, "if the lights had been switched on", he would have had no reservation in offering shares to UWA (transcript 3916 (35 – 38)). 107 Dr Panaccio said that if he had been told before May 1997 that Monash or UWA claimed an interest in the technology, he would have made it clear that Nomura/JAFCO would not have proceeded with the investment unless everybody had agreed to transfer their rights to the technology to the new company and that it was not dilutive of Nomura's position (transcript 3669). If he had anticipated an interest claimed by Monash or UWA, he would have had negotiations with them (transcript 3669 (46 – 48)). This is important, direct evidence bearing on the probabilities of how Sirtex would have proceeded. 108 Mr Karlson also accepted that from late 1998 through to 1999, he was anticipating a cash flow crisis and a shortage of cash for Sirtex (transcript 4196 (42 – 43) in cross‑examination by Dr Gray's counsel). 109 Other evidence led, including the Sirtex Annual Report 1999 which showed Sirtex had a total operating loss of $1,355,047 in 1999 and $1,132,907 in 2000, also confirms the clear view that Sirtex had very little cash and needed a secure income stream. 110 French J found, at [1125], that in a meeting of Sirtex's due diligence committee, Dr Gray discussed the issuing of shares or options to the researcher Dr Burton as follows: 1125 Dr Gray said that shares or options could be issued to other persons including Dr Burton and a new managing director at some time prior to or at the initial public offering. The company had not determined how many options would be issued or their terms. He and Dr Panaccio were to prepare a list of proposed option holders, the numbers of options proposed to be issued and a description of their terms. The point here is, which I accept, that French J found that the company "had not determined how many options would be issued or their terms". 111 French J, at [1140], found as follows as to Dr Gray's explanation to the Sirtex due diligence committee in early 2000 of Dr Burton's potential claim for Sirtex's intellectual property and Sirtex's proposal to offer him shares or options: 1140 Dr Gray explained that Dr Burton had been involved at CRI in the development of the resin microspheres during the 1980s and had developed a technique of fixing Yttrium to such microspheres. Patent protection had not been sought because of want of novelty. Dr Gray said he would write to Dr Burton to seek confirmation that he would make no claim in relation to ceramic microspheres used by the company. The company might offer shares or options in exchange for that confirmation. In cross-examination Dr Gray said that Dr Burton had not had much to do with ceramic microspheres but more with the resin microspheres. The reference to ceramic microspheres in the minutes could have been a mistake. I accept that it was intended to be a reference to resin microspheres. The committee resolved that Mr Mellos would discuss the intellectual property issues with Mr Cherry and report to the committee at the following meeting. The point to note here is that Dr Gray said that he would write to Dr Burton to seek confirmation that he would make no claim and that the company might offer shares or options in exchange. 112 The Sirtex prospectus (exhibit 36A at 58) also deals with the question of shares or options being issued as part of the IPO. 113 At [1612], in light of all this evidence and these findings, French J found, as noted at the outset of this judgment, that if Sirtex had been made aware of the Schreuder correspondence, Sirtex would have been advised to make an inquiry of UWA. 114 Whilst the possibility existed (and cannot entirely be discounted) that UWA might then have rejected any inquiry and simply notified a claim, the findings and evidence I have noted support the view that there was a distinct possibility that not only would Sirtex's inquiry of UWA not have been rejected out of hand, but that an accommodation would have been found through the provision by Sirtex of some consideration. 115 In determining whether UWA and Sirtex would have negotiated a settlement at material times in 1999/2000, it is relevant to recall exactly the point to which the Schreuder correspondence had developed as of the end of November 1999. That correspondence is included in the primary judgment at [1102] – [1108], and the background to it precedes those paragraphs. In the Schreuder/Gray letter of 17 June 1999, at [1102] of the primary judgment, Professor Schreuder challenged Dr Gray in the following terms: Would you explain the origin of the intellectual property rights in the microsphere technology, now allegedly owned by Paragon Medical Limited and provide particulars of any purported transfer of intellectual property rights to that company. If you allege that the intellectual property was created outside your employment by the University please indicate where the work was conducted and at what time. 116 In the Gray/Schreuder letter of 28 September 1999, at [1103], Dr Gray dealt the intellectual property question as follows: With regard to the company Paragon Medical Limited, the intellectual property resident in that company relating to yttrium microspheres has been derived exclusively from a program of research undertaken by the Cancer Research Institute Inc. Dr Gray also said in his letter: You should be aware that Professor Barber sits as your representative on the Advisory Committee of the Centre for Applied Cancer Studies together with myself and the Chairman of the Cancer Research Institute Inc. Intellectual property issues relating to the Institutes and the University have been discussed openly at those meetings on several occasions. Dr Gray also denied having any conflicts of interest. 117 There was subsequent correspondence including the Schreuder/Gray letter of 11 October 1999 and the Gray/Schreuder letter on 17 November 1999. In the letter of 17 November, Dr Gray asked Professor Schreuder to clarify "the facts upon which it is suggested that the University might be legal owner of the intellectual property …". In what might be considered a "stone-walling" tactic, he said that: When this information is provided I may be in a better position to assist you and clarify the misunderstandings that you may have. He concluded in the letter: In the meantime, I confirm that I am no longer employed by the University of WA. 118 This reply in effect threw down the gauntlet to UWA. Would UWA take up the challenge? There was no reply by UWA to the letter from Dr Gray. Professor Robson did not remember why UWA did not respond. Professor Schreuder was not called to give evidence. At [1110], French J inferred that Professor Schreuder knew of the information contained in the letters to Dr Gray and took no action upon Dr Gray's defiance of his demand for information. 119 While Sirtex had no knowledge of the Gray/UWA 1999 correspondence at material times what French J found at [1111] – [1115] is also relevant to the issue I must now determine: Sirtex's knowledge of Gray/UWA 1999 correspondence 1111 Dr Panaccio said that prior to the present proceedings he was not aware of the existence of the correspondence between Professor Schreuder and Dr Gray between June and October 1999. Had he been aware of those letters he would have recommended to Nomura/JAFCO not to advance the final amount of $1 million until the issue with UWA had been resolved. He said he would have also recommended to Nomura/JAFCO to instruct solicitors to advise on any possible breaches of warranties or representations by Dr Gray, CRI and Sirtex. 1112 Mr Karlson had not seen the correspondence prior to the current proceedings. He would have expected Dr Gray to inform the Board of it and, in particular, each and every time an allegation was being made against him by UWA. He said that had he been shown the correspondence or been made aware of its subject matter he would have been concerned because UWA was asserting an interest in the intellectual property of Sirtex which was contrary to his understanding of the position. This would have raised a number of issues for investigation. He did not see how the company could have proceeded with its planned float, which was intended to take place in 2000, unless the issues raised by UWA were resolved. 1113 Dane Gorn gave similar evidence. He added that he had participated in regular meetings of the CACS Advisory Board and that representatives of UWA were members of the Board. He recalled an Advisory Board meeting on 9 September 1999 which was attended by Professor Landau. The discussion did not include, to the best of his recollection, any discussions about UWA's assertions against Dr Gray at that time. He did not recall Professor Landau raising the matter with him at the meeting or at any other time that UWA considered it had an interest in the intellectual property of the technology being developed by Paragon Medical. As far as Mr Gorn was aware, UWA had no interest in the intellectual property of the business of Paragon Medical/Sirtex and there was no issue in that regard. He was very surprised when he first became aware that litigation had been commenced between Sirtex and CRI. Mr Boyce also gave evidence that prior to the litigation he was not aware of the existence of the correspondence between UWA and Dr Gray in 1999. 1114 The evidence of Dr Panaccio, Mr Karlson, Mr Gorn and Mr Boyce that Dr Gray did not disclose the correspondence between himself and UWA in 1999 was not challenged. I find that it was not disclosed. Dr Gray was asked in cross-examination whether he thought, with the benefit of hindsight, he ought to have drawn Professor Schreuder's letter to the attention of the board of Paragon Medical. With the benefit of hindsight he said he was sorry he didn't because it would have obviated some of the problems that had arisen as a result. He said however that he believed then and still believed that he was right to take legal advice and to raise the matter with the Due Diligence Committee. The latter was a reference to the Due Diligence Committee set up in connection with the IPO of Sirtex shares in 2000. He said that he raised the correspondence with Mr Cherry of Freehills who was working with the committee. For reasons given below, I find that he did not raise that correspondence with Mr Cherry or the Due Diligence Committee. 1115 Had Dr Gray disclosed the 1999 correspondence to the board, particularly the letter of October 1999 from Professor Schreuder, the board would have been put upon inquiry as to the security of the intellectual property upon which it was to rely the following year in proceeding to a public float. I also accept that Nomura/JAFCO would have been put upon inquiry in the way indicated by Dr Panaccio. Dr Panaccio was not the kind of person to gloss over that kind of issue when his primary's money was at stake. 120 What clearly comes out of these findings of French J, as Sirtex submits and I accept, are the following points: · Nomura/JAFCO on Dr Pannacio's advice would not have advanced the final amount of $1 million due as a third tranche payment until the issue with UWA had resolved – and they would have investigated possible breaches of warranties or representations by Dr Gray, CRI and Sirtex. · Mr Karlson could not see how the company could have proceeded with its planned float, unless the issues raised by UWA were resolved. · Mr Gorn's position was similar to these two positions. · Dr Gray, with the benefit of hindsight, was sorry he had not brought Professor Schreuder's correspondence to the attention of the Board of Paragon Medical (Sirtex) "because it would have obviated some of the problems that had arisen as a result". 121 It was in these circumstances that French J ultimately found, at [1612], that had Sirtex been aware of the correspondence: it would, in all probability, have been advised to make further inquiries of UWA. It would either have been notified of a potential claim or would have negotiated a release for some consideration, perhaps by way of a share issue. 122 It is important to note that French J did not here find that a commercial settlement of some sort would have been achieved, only that Sirtex would have been advised to make further inquiries of UWA. Nonetheless it is relevant to note that, having regard to his findings, French J immediately listed a share issue as a possible means of a resolution. 123 Nonetheless, Dr Gray contends that although a failure to resolve a dispute with UWA at that time would have meant that the listing of Sirtex was unable to proceed later in 2000 as scheduled, the probabilities are that Sirtex would have sought legal advice as to the strength of UWA's claim and consistently with a position that Sirtex subsequently took in defending these proceedings (no doubt on the basis of legal advice) Sirtex would have come to the view that it had good prospects of defeating UWA's claim. In those circumstances, Sirtex is unlikely to have settled with UWA. Rather, those with a stake in Sirtex would have protected their valuable interests by ensuring that Sirtex did not capitulate to UWA. Litigation would then have ensued and the costs and expenses now sought would have been incurred in any event. 124 Dr Gray contends that this view should be adopted with regard to these considerations: · There is no evidence from Sirtex or UWA to the effect that, had Dr Gray disclosed the 1999 correspondence, it is likely that the ensuing negotiations between Sirtex and UWA would have resulted in a binding agreement, which finally resolved their dispute without litigation. · When the 1999 correspondence and UWA's claim did become known to Sirtex, far from negotiating a consensual resolution, Sirtex and UWA litigated their dispute over some three and a half years, including a trial that lasted some 50 days. That is not consistent with a proposal that they would have reached a commercial settlement in 2000. There is no evidence that they ever came close to resolving their dispute. The Court could not be satisfied that things would have been materially different in 2000. · The evidence as to what settlement offers were in fact exchanged between Sirtex and UWA reveals that when fully informed and having had the benefit of legal advice, Sirtex and UWA each held quite different views as to what would be an acceptable resolution of their dispute: see letter from Jackson MacDonald, dated 5 September 2006, exhibit 243A; letter from Jackson MacDonald dated 10 March 2007 – affidavit of Mr T Price dated 12 May 2008, exhibit TRP1; letter from DLA Philips Fox, dated 14 March 2007 and attached deed, affidavit of Mr T Price, 12 May 2003, exhibit TRP2. · As the primary judgment demonstrates, UWA did not have a particularly strong (let alone unanswerable) claim against Sirtex (see for example, the primary judgement at [9] – [15]). This means that Sirtex would not have done a deal with UWA at any cost and is more likely to have taken a hard line in any negotiations. · Although UWA was not pressing its claims against Sirtex in 1999 and 2000, a passive attitude was adopted in circumstances where Sirtex was not seeking to negotiate and UWA were instead faced with the prospect of commencing expensive and risky legal proceedings (French J at [1200], [1202], [1203]). French J indeed found that UWA "considered making a claim (in 2000) but decided not to do so because of the cost to UWA and the risk of a counter­‑claim": [1203]. By contrast, the present claim is premised on the notion that Sirtex would have entered into negotiations with UWA. There is no reason to think that UWA would have meekly accepted what was offered to it in those negotiations. UWA's later conduct indicates that despite its initial reluctance to commence proceedings against Sirtex, it was quite prepared to stand its ground and to vindicate its perceived rights via litigation if necessary. 125 Dr Gray further submits that in the event that an agreement was reached for consideration payable by Sirtex to UWA it would most likely have taken the form of a royalty and in that regard Dr Gray contends: · A lump sum payment is unlikely to have been a viable option for Sirtex in the period prior to the listing (unless it were nominal), given Sirtex's financial position at the time. Sirtex concedes as much in its submissions of 12 August 2008 at [9.4]. However, it is possible that the parties would have agreed upon a lump sum to be paid after the listing. It is known that later several documents from both parties included a lump sum payment (being payments of $1.25m and $1.5m respectively): see letter from Jackson MacDonald, dated 10 March 2007 – affidavit of Mr T Price 12 May 2008, exhibit TRP1; letter from DLA Philips Fox, dated 14 March 2007 and attached deed – affidavit of Mr T Price 12 May 2008, exhibit TRP2. Some allowance should therefore be made for the possibility that the agreed consideration would have taken the form of or included a lump sum payment by Sirtex by UWA, but payable after the listing. · An allotment of new (additional) Sirtex shares to UWA can be ruled out. The evidence of Dr Panaccio is that Nomura/JAFCO would not have agreed to any allocation of shares to UWA which had the effect of diminishing Nomura/JAFCO's shareholding interest in Sirtex (Dr Panaccio's affidavit of 18 December 2006 at [60], [108.3.2]). The directors and remaining shareholders of Sirtex were not empowered to procure an increase in Sirtex's share capital over the object of Nomura/JAFCO and/or Dr Gray (articles 2.1, 2.3, 4, 12.1 – 12.5 and 14.8 of Sirtex's Articles of Association and cl 3.1 – 3.5, 8.1 and 8.2 of the Subscription and Shareholders Agreement). · An allotment to UWA of some of the Sirtex shares that would otherwise have been issued to Nomura/JAFCO can likewise be ruled out. Again, Dr Panaccio says that Nomura/JAFCO would not have agreed to diminish its own shareholding interest in Sirtex: see Dr Panaccio's affidavit dated 18 December 2006 at [60], [108.3.2]; transcript 3449 (31–41); transcript 3708 (24–27), 3714 (6), 3830 (43), 3831 (7). The directors and remaining shareholders of Sirtex were not empowered to procure such an arrangement over the objection of Nomura/JAFCO (articles 2.1, 2.3, 4, 12.1‑12.5 and 14.8 of Sirtex's Articles of Association; and cl 3.1‑3.5, 8.1 and 8.2 of the Subscription and Shareholders' Agreement). · Similarly, an allotment to UWA of some of the Sirtex shares that would otherwise have been issued to Dr Gray could not have been effected without the consent of Dr Gray. The same provisions of the Articles of Association of Sirtex and Subscription and Shareholders' Agreement as last referred to are here relied on. It is submitted that it must be remembered that Dr Gray was a "critical component [of the Sirtex business] going forward" (transcript 3708 (30) – Dr Panaccio) and Dr Panaccio said (transcript 3708 (34)) "if Bruce wasn't involved, we probably wouldn't have invested". Nor is Dr Gray alone in being averse to any arrangement whereby UWA would acquire a shareholding and a say in the affairs of Sirtex. The Chief Executive Officer of Sirtex, Mr Wong, gave evidence in his affidavit of 21 December 2006 at [21]; Given the significant hostility that exists between Professor Robson [of UWA] and Dr Gray, it would be detrimental to Sirtex and its business if any relief were granted in these proceedings relating to Sirtex which resulted in both UWA and Dr Gray holding a significant shareholding in Sirtex which may (or is likely to) result in both UWA and Dr Gray having representation on the board of Sirtex. Sirtex has referred to the "ease with which shares or options could be issued as part of the IPO" (Sirtex's submissions 12 August 2008 at [9.2]). However, that submission ignores the fact that those shares and options were issued pursuant to an agreement between all of the shareholders of Sirtex (see Supplemental Subscriptions and Shareholders Deed). Mr Wong's evidence suggests that Sirtex would have had similar reservations about inviting UWA on to its share register. · An allotment to UWA of some of the Sirtex shares that would otherwise have been issued to CRI could also not have been effected without the consent of CRI and Dr Gray (articles 2.1, 2.3, 4, 12.1‑12.5 and 14.8 Sirtex's Articles of Association; cl 3.1‑3.5, 8.1 and 8.2 of the Subscription Shareholders Agreement). · On the other hand, an agreement with UWA for the payment of a royalty based on net sales: (a) would not have required Sirtex to pay any amount to UWA unless and until it was earning sales revenue in excess of its costs of sale; (b) would not have diluted the shareholding of any party; and (c) would not involve inviting UWA on to the Sirtex share register or give UWA a say in the affairs of Sirtex. · It is also likely to have been acceptable to Nomura/JAFCO. In that regard: (a) The deal which Nomura/JAFCO had struck with its co‑shareholders in Sirtex had an inbuilt "ratchet" mechanism, whereby the number of Ordinary Shares which Nomura/JAFCO was entitled to receive upon a sale or listing of Sirtex was calculated by reference to the IRR (compounding annualised internal rate of return) which Nomura/JAFCO earned on its investment in Sirtex shares (see article 13.1 of Sirtex's Articles of Association and definition of "relevant number" and "IRR" in article 1.1. See also transcript 370 (35), per Dr Panaccio). To the extent that a royalty might have affected the price or value of Sirtex shares at the time of listing, then depending on the IRR (after the royalty) that ratchet mechanism may well have protected Nomura/JAFCO's return on investment. (b) It is apparent from Resolution 7 in Schedule 3 to the Supplemental Subscription and Shareholders' Agreement that there were 450,000 Deferred Shares in existence at the time of the Listing. Under the Articles of Association, Deferred Shares were only to come into existence if the "relevant number" of A Preference Shares (held by Nomura/JAFCO) which converted to Ordinary Shares upon listing was less then 1,499,999 (articles 13.1(e) and (f)). At the time of the listing therefore, Nomura/JAFCO received 1,049,999 Ordinary Shares in place of its A Preference Shares (i.e. 1,499,999 less 450,000). This is the number prior to the conversion dealt with in Resolution 8 in Schedule 3 of the Supplemental Subscription Shareholders' Agreement whereby each Ordinary Share was converted into 11.225646 Ordinary Shares. Thus Nomura/JAFCO's 1,499,999 A Preference Shares and one C Preference Shares became 11,786,928 Ordinary Shares: see Prospectus at 58. Further, since the "relevant number" of A Preference Shares which converted to Ordinary Shares upon listing was 450,000 less than 1,499,999, the IRR must have been 70 or more (see the definition of "relevant number" in article 1.1 and page 7 of the Term Sheet which Dr Panaccio sent to Dr Gray on 13 January 1997, exhibit BMG‑7 to the affidavit of Dr Gray, made 22 September 2009). This means that any reduction in the IRR that was caused by a royalty agreement with UWA would have resulted in Nomura/JAFCO receiving more Ordinary Shares (i.e. up to 450,000 more) upon listing than it in fact received. (c) This protection, which the ratchet mechanism afforded to Nomura/JAFCO, makes it unlikely that Nomura/JAFCO would have objected to a royalty arrangement with UWA and insisted that there be an allocation of shares to UWA. (d) Although Dr Panaccio gave evidence that Nomura/JAFCO's position was that parties claiming an interest in the intellectual property were to be offered shares in Sirtex, (see his affidavit 18 December 2006 at [60], [108.3.2] and transcript 3030 (43), 3031 (7)) that evidence was given in a context where the present damages issue had been excised from the hearing before French J. Not surprisingly therefore, Dr Panaccio was not cross‑examined as to how he would have reacted to a settlement proposal which involved the payment of royalties to UWA. Nor was he questioned as to the significance which the ratchet mechanism would have played in his decision‑making process when presented with such a proposal. (e) Nomura/JAFCO was a venture capital investor whose modus operandi was to make investments and then exit those investments at a profit: see Dr Panaccio's affidavit of 18 December 2006 at [10] – [12]. · It is also likely that UWA would have accepted a royalty arrangement, given: (a) Professor Barber (UWA) said that the Sirtex Prospectus indicated that an investment in Sirtex shares would be highly speculative: see primary judgment at [1201]. (b) The Sirtex Prospectus has stated that the directors "are unable to provide potential investors with reliable revenue or profit projections or forecasts" (page 25 thereof). (c) The evidence of Professor Barber, Pro Vice-Chancellor (Research) UWA, in his affidavit of 5 December 2006 at [48] was that: The philosophy that underpins UWA's approach to intellectual property and commercialisation… through to at least 1999 … was not commercially focussed. It was focussed on matters such as gaining research funding, the support of PhD students and, above all, kudos and reputation from academic publication … A royalty arrangement which provided a regular income stream to fund research and to fund PhD students would have been consistent with that philosophy, whereas a speculative shareholding does not sit well with the approach outlined by Professor Barber. (d) There is also evidence that, at least in 1987, UWA's Deputy Vice-Chancellor (Finance) took the view generally that UWA "should not be involved as shareholders" and that "royalties etc seems a better way: any share‑dealing in this area could leave the University with public disfavour if funds raised using our name are subsequently lost": see exhibit 615, page 2. (e) The central element of the settlement offer which UWA made to Sirtex in September 2006 was a licensing arrangement whereby Sirtex would pay UWA 4% of the Net Price of sales for relevant products: letter from Jackson McDonald, dated 5 September 2006, exhibit 243A. (f) UWA proposed final orders in these proceedings which made reference to a royalty arrangement that would have obliged Sirtex to pay UWA 4% of the Net Price on sales of relevant products: affidavit of Mr T Price 12 May 2008 at 29 and 39. 126 In the event, I have little doubt, having regard to the evidence and findings recounted, that Sirtex firstly would have acted on advice to make further inquiries of UWA. The probability of that happening, in my view, is sufficiently great not to discount that probability in any respect. The parties do not contend otherwise; it is assumed Sirtex would have made the inquiries. From Dr Panaccio's point of view as noted, if he had been aware of the Gray/UWA correspondence, he would have halted the fund payment due from Nomura/JAFCO and undertaken investigations. I have no doubt that he would have caused inquiries to have been made of UWA to explore and resolve the question of a release for the use of the intellectual property. He had already evinced in 1997 a willingness to deal with organisations such as Monash or UWA who might have expressed some entitlement to intellectual property. The proposed float was 12 months away. Dr Gray had expressed strong views about his entitlement to the intellectual property concerned and there was no follow up to the Schreuder correspondence to suggest that UWA had assumed either a clear, let alone an implacable position on the ownership of the intellectual property. 127 It may also be reliably assumed that if an initial inquiry had been made of Vice‑Chancellor Schreuder in the material period in late 1999/early 2000 that in all probability Sirtex's representative(s) would have been referred to Professor Barber. Justice French, in the course of his exchange with counsel on 15 August 2008 on this point noted above, suggested as much. Professor Barber at those relevant times was UWA's representative with a responsibility for ensuring adherence to its policies on intellectual property. I rate this probability at the highest level. 128 I consider it highly probable that in an exploration of the issues apparently raised in the correspondence passing between Dr Gray and UWA, Sirtex's representative(s) would have approached the matter with a concern to receive from UWA a formal release, consistent with what Sirtex (and Dr Gray) had previously understood to be the position, namely, that UWA did not claim ownership of the intellectual property concerned. Professor Barber no doubt would have been reminded of the letter he provided to Mr Gorn in January 1997 in which he confirmed that, on the basis of the facts in Mr Gorn's letter, "the University has no interest financially or otherwise in the CRI funded technology (or the intellectual property in it)". 129 I find that Professor Barber's views would have been of considerable influence to the outcome of UWA deliberations at all material times when Sirtex made its inquiries of UWA and endeavoured to obtain a formal release to obviate the difficulties suggested by the correspondence that Dr Gray had received. As noted, he had been involved in intellectual property issues for some time for the University. Professor Robson had noted his power as Pro Vice-Chancellor (Research) to deal with inventions and assign or waive UWA's rights. Others, such as Vice‑Chancellor Schreuder, would have accorded great weight to his advice. 130 The probable attitude of Professor Barber then becomes important. In this he was "wisely alive to the hazards of litigation", as French J put it during exchanges with counsel on 15 August 2008. This observation is borne out by French J's findings in the primary judgment, including: · Professor Barber took a less than hard line attitude to the enforcement of what he and others thought were UWA's intellectual property rights: see [960]. · Professor Barber was fully informed of UWA's rights in 2000 and chose to do nothing: see [1199] – [1204]. · Professor Barber was harbouring a hope that the matter might be resolved on such an amicable basis as Dr Gray deciding to donate a "Gray Chair of Surgery" to UWA: see [1202]. 131 It is also clear enough that the board of Sirtex would have been very keen to resolve the matter – there was simply too much swinging financially on the ownership of the intellectual property to ignore the issues the correspondence raised and not resolve it. Within commercial reason, Sirtex would have accommodated UWA's claims. 132 In my view, then, it is highly probable that when Sirtex made its inquiries of UWA, it would have been prepared, within commercial reason having regard to its cash flow position and the apparent strength of its case (albeit based on Dr Gray's claims and assertions) concerning the ownership of the intellectual property, to do what was necessary to get UWA over the line to provide a release. 133 Consequently, I do not accept the contention of Dr Gray that UWA may be expected to have played hardball, at least not after a short period of negotiation. While UWA took an intransigent position later, following 2003, I do not consider that what happened later is a good guide to what probably would have happened if these issues had been raised in late 1999/early 2000. At this point, UWA had raised some issues concerning the issue of ownership of the intellectual property but had not taken firm positions. Rather, as the flow of correspondence in late 1999 between Dr Gray and UWA is concerned, when Dr Gray effectively stonewalled the request for information contained in Professor Schreuder's letter of 11 October 1999, by stating that when the facts upon which it was suggested that the University might be the legal owner of the intellectual property were provided, he "may be in a better position to assist you and clarify the misunderstandings that you may have", there was no reply from UWA. 134 Having regard to the knowledge UWA then had, as detailed in the primary judgment at [1110] and while one cannot discount the possibility that UWA would then have notified a claim in the face of an inquiry from Sirtex, in the event I consider it most probable that UWA would ultimately have provided a release for any consideration. Despite the University's in‑house lawyer, Linda Key, having pressed the University's case for claiming ownership of the intellectual property concerned, UWA had shown a marked reluctance to do so. An approach from Sirtex may have emboldened it in late 1999, but only, in my view, having regard to the probabilities, to the extent of requiring some consideration for a release. If one thing is clear up to this point, and soon after in relation to the prospectus, UWA had exhibited a clear disinclination to take the litigation path. This historic approach strongly supports the probability that UWA, if offered a reasonable commercial opportunity, would have been prepared to provide a release for consideration. 135 I do not accept Dr Gray's contention that because UWA may be said not to have had a particularly strong (let alone unanswerable) claim against Sirtex at this point would have meant that Sirtex would not have done a deal with UWA at any cost and Sirtex was more likely to have taken a hard line in the negotiations. Sirtex, as I have indicated, based on Dr Gray's claims and assertions, would have held the clear view that UWA did not have a strong claim. But Sirtex would, in light of Dr Panaccio's evidence as to the position of Nomura/JAFCO, have been very keen to resolve commercially any possible difficulties relating to the ownership of intellectual property to permit the float to occur on time. 136 What Sirtex would not have been prepared to offer in all probability was any lump sum payment or other payment of significance. Due to Sirtex's cashflow position both parties accept a lump sum payment of significance was not at all a realistic option and I discount it completely. I consider the most obvious consideration Sirtex would have been prepared to offer was a "share issue", as immediately suggested by French J in his ultimate finding at [1612]. So far as a share issue was concerned, Sirtex had countenanced it in the past to resolve commercial demands. The due diligence committee of Sirtex (including Dr Panaccio and Dr Gray) had earlier considered such possibilities in relation to such persons as Dr Burton. The evidence that Mr Karlson was, from late 1998 through to 1999, anticipating a cash flow crisis for Sirtex supports this assessment. By contrast, the issue of shares is a relatively painless exercise. As a matter of law the issue of shares by a company in such circumstances would not represent a loss to the company see Pilmar v Duke Group (2001) 207 CLR 165; [2001] HCA 31, at [64]. The question however would have been – from whose existing allocation of any shares was a share allocation to UWA to come? 137 So far as an argument is concerned that the issue of shares or options to UWA would have increased Sirtex's costs of capital or caused some other loss, I accept Sirtex's contention that the Court can infer that any shares would have been issued from the proportions allocated to Dr Gray and/or CRI and this would have had no appreciable impact on Sirtex's costs of capital. I consider, given the attitude of Nomura/JAFCO through Dr Panaccio, that if any settlement had to be achieved with UWA at the relevant period, in advance of the float of Sirtex and in light of the fact that the issue concerned Dr Gray's ownership of the intellectual property, in all probability the share allocation would have come from the proportions allocated to Dr Gray and/or CRI. I do not accept the submission of Dr Gray that his consent to an allocation of shares to UWA out of his allocation would in all probability have been resisted by him. Similarly, I do not accept the submission that any allocation from the allotment to CRI would have been resisted by Dr Gray. Commercial reason demands the conclusion that in all probability the allocation of shares to UWA would have to come from those that would otherwise have been allotted to Dr Gray and CRI. Nomura/JAFCO would have pointed to the financial support they had provided and were yet to provide by way of the third tranche payment to make the float a success. They would not be the one to take a reduction of equity. Dr Gray and CRI would have had no commercial leverage in this argument. They would also not have wished to stand in the way of the realisation of Dr Gray's lifetime of work to see the commercialisation of the microsphere technology, not to mention the significant personal financial gain each stood to make on a float. No party suggests there would have been a new allotment of additional shares in the company to UWA and I completely discount this possibility. 138 Dr Gray further contends, however, that if there were consideration to be given for a resolution of the matter with UWA it is more probable that a royalty based on net sales would have been the cost of the resolution rather than a share issue. He says the commercial attractiveness of this form of settlement would have been that: · It would not have required Sirtex to pay any amount to UWA unless and until it was earning sales revenue in excess of its costs of sale. · It would not have diluted the shareholding of any party. · It would not have involved inviting UWA onto the Sirtex share register, giving UWA a say in the affairs of Sirtex. 139 In support of this contention, Dr Gray makes the points that: · Professor Barber had disclosed an unwillingness to assume highly speculative investments, where as a royalty stream, if it were to come about, would in effect be prohibitive in nature. · Generally, UWA preferred not to be involved with share holders. · Dr Gray would have been strongly opposed to UWA being on the share register and having any influence over the affairs of the company due to his poor personal relationship with Dr Schreuder and others at UWA. 140 So far as a royalty payment is concerned, counsel for Dr Gray referred to the annual reports of Sirtex and also handed up a document called "Royalty Payments" for the purposes of argument. By reference to this document, senior counsel submitted that, over time from 2000 a payment of 1% would have generated to date, $1.5 million. Thus a rate of 6% would have produced a payment of $9 million. 141 Senior counsel for Sirtex submitted that the "Royalty Payments" document was a fiction, on two levels. First, the document itself lacked logic. What it sought to do was rely on the net sales revenue figures from the annual reports of the company from 2000 to 2009. While the University would take royalties, no adjustment was made to the net sale revenue for the following year. Accordingly the net sales revenue figures used for 2001, 2002, 2003 and so on until 2009 used the wrong number, which should be reduced, and which would have a corresponding reduction in relation to the royalty paid. Secondly, it contemplates Dr Gray, in concert with Sirtex, would have agreed to a 6% royalty. 142 There is in my view very little evidence to suggest that, in the hypothetical circumstances the Court is required to consider, Sirtex would have agreed to a settlement with UWA on the basis of a royalty stream over time, although the possibility cannot be entirely discounted. The first thing that the parties would have been obliged to do on this basis is identify the likely value of the royalty payments. Some regard in 2000 terms to a net present value would have been called for. Sirtex would have been most unlikely to agree to any substantial sum. This would have been for the same reason I consider it highly unlikely that any significant lump sum would have been offered by Sirtex to UWA – because the company was then suffering a cash flow crisis and would have been most unlikely to have given up any future cash flow stream. By contrast, a share issue is, as I have said, a relatively painless solution, particularly from the viewpoint of the controlling shareholder Nomura/JAFCO. 143 In the circumstances I consider it highly probable that not only would an inquiry from Sirtex to UWA have resulted in negotiations concerning the release from UWA of any claim of ownership to the relevant intellectual property, but that an accommodation would have been arrived at, comprising a release given in consideration of a share allotment in Sirtex in favour of UWA in the forthcoming float of the company. For the reasons I have expressed above, I consider it highly probable that that share allotment would have come out of either the allotments earmarked for Dr Gray and/or CRI. Nomura/JAFCO would have held all the commercial leverage in such a commercial setting. Dr Gray and CRI would not have had a commercial leg to stand on in the face of these demands. Moreover, the financial harvest each individually stood to reap was dependant on the continued financial support of Nomura/JAFCO. Given Dr Panaccio's evidence that, had he seen the correspondence between Dr Gray and UWA he would have investigated the possibility of breaches of his duties by Dr Gray, it can be said with confidence that in all probability Nomura/JAFCO would have exploited its commercial position at the expense of Dr Gray and/or CRI and that the incentives for Dr Gray and CRI to accept its proposals would have been irresistible. 144 In these circumstances, I rate as improbable the likelihood that Sirtex would have taken the commercial chance of calling the bluff of UWA (as Dr Gray apparently was prepared to do by ignoring its requests for information) and to have refused to entertain any proposed reasonable settlement. I find it highly probable that Sirtex and UWA would have entered negotiations and UWA would have provided a release following negotiations, based upon a share allocation in Sirtex in the pending float. 145 While I find that it is highly probable that UWA would have provided a release to Sirtex in return for the allotment of shares in the float of the company taken from Dr Gray's and/or CRI's allotments, a question is raised about the degree of probability of this happening. The exercise I am required to undertake is entirely hypothetical. I do not consider that one can say that the probability I have identified is a 100% probability, as Sirtex contends it is. It is a high probability. It is not a probability that is merely a little more likely than not to have happened. In other words, it is much, much more than a 50/50 possibility. But it is not a probability without reservation. There were a range of possible alternatives to such a settlement. While the attitude of Professor Barber suggests a very high probability of resolution on the basis of a share allocation to UWA out of Dr Gray's and/or CRI's allocation, a settlement on other forms of consideration cannot be considered entirely improbable. In light of the dealings between UWA and Dr Gray up to this point and the tone of Professor Schreuder's demands of Dr Gray, if given the commercial opportunity UWA may well have been prepared to drive for a harder bargain than a share allocation. For that reason, I consider a discount of the certainty of such a share issue resolution out of Dr Gray's and/or CRI's allotment in the range of 10% – 15% to be appropriate. I would settle this discount at mid‑range, or 12.5%. I would then determine the probability of such a share settlement at 87.5%. Because I also consider one cannot entirely discount the possibility that an inquiry of UWA by Sirtex might have come to nought – given the ambivalent attitude of UWA to this point and the tone of Professor Schreuder's demands – and that Sirtex may have been notified of a claim, that possibility must consciously be factored into the probability assessment. As a result, I would further discount the 87.5% probability of the share settlement as described by around 2%, reducing it to 86% (2% x 87.5 = 1.74; rounded off to 1.5. 87.5 – 1.5 = 86%). Consequently, I finally determine that there was an 86% probability of a settlement on the basis of a share issue as described. 146 In the result, then, Sirtex is entitled to 86% of those costs and disbursements that have an appropriate causal connection to Dr Gray's impugned conduct. specific categories of loss claimed by sirtex 147 I will now deal with the categories of loss claimed in the order in which they appear in the Further Revised Annexure A dated 10 November 2009 that forms the basis of the submissions made by the parties. 148 Item 1: in this item the category of loss is legal costs and disbursements paid to Phillips Fox prior to 30 June 2006 – which Sirtex calls the "investigation costs". 149 Phillips Fox commenced acting for Sirtex on the Court file on 29 August 2006. The costs paid prior to that date are stated in the amount of $109, 448.71. They were incurred by Sirtex in respect of their investigation into issues raised by the letter from Martin Bennett of Bennett and Co to the solicitor for Dr Gray dated 31 December 2004; in respect of Phillips Fox's recommendations; in respect of overseeing of Freehills by Phillips Fox for work done and in respect of work done to assist in the conduct of the proceedings (either the defence of the claim by UWA or the cross‑claim against Dr Gray) which does not fall under the other claims in respect of defending the UWA claim or maintaining the cross‑claim. 150 In earlier correspondence, Dr Gray, through his former solicitors resisted this category of costs on the basis that Freehills should never have been retained, so that any duplication of costs was unnecessary and inappropriate. Sirtex denies duplication and says that Dr Gray himself retained Freehills on behalf of Sirtex without making any disclosure to Sirtex or Freehills about the matters the subject of Sirtex's ultimately successful cross-claim against him. 151 In my view, these expenses were incurred as a direct consequence of Dr Gray's breach of duty as found by French J. The costs claimed are appropriate. There is no proper basis to the duplication claim. 152 I would allow this item. 153 I note that the amount claimed in item 1 is in fact included in the figure under item 2. 154 Item 2: Under this item, legal costs and disbursements incurred in the proceedings (on a full indemnity basis) less the costs recovered from UWA are the subject of claim. They total $2,121,814.55 (although some other items are also including in this figure, such as item 1). This sum is calculated on the basis of the total costs of $5,633,996 (including GST) multiplied by 10/11 giving $5,121,814.55 (excluding GST) less $3 million to be recovered from UWA following settlement of the costs order in the primary proceeding. 155 In my view, these costs were directly caused Dr Gray's breaches found by French J. 156 I would allow this item of damage. 157 Item 3: This category is described as legal costs and disbursements incurred in the conduct of the cross‑claim against Dr Gray (on a full indemnity basis) less the costs recovered from UWA. This sum has also been included in item 2, namely the $2,121,814.55. The issue here is whether Sirtex is entitled by way of damage to be fully indemnified in respect of the costs incurred on maintaining the cross‑claim. In my view, there is no doubt, on the view I have taken concerning the costs‑as‑damages issue that Sirtex is entitled to be fully indemnified by way of damages for having to vindicate its rights against Dr Gray in proceedings by way of cross‑claim. An assessment of the damages in respect of the cross‑claim costs on the basis of party and party or some other basis less than the full indemnity costs is not warranted in such circumstances. 158 I would allow this item. 159 Item 4: The category of loss claimed here is legal costs incurred in the conduct of the cross‑claim against CRI (on a full indemnity basis). The amount claimed is also within the sum of $2,121,814.55, set out in item 2. 160 These costs are not the subject of challenge and I consider they are directly caused by Dr Gray's breaches found by French J. 161 I would allow this item. 162 Item 5:The category of loss here is described as any costs Sirtex is liable to pay UWA in respect of order 6 of French J (costs of Sirtex's cross‑claim against UWA). This is no longer pressed. The amount is not included in the item 2 figure. 163 Item 6: The category of loss here is described as legal costs and disbursements incurred in connection with the CRI/UWA settlement. 164 At a certain point in the proceedings, Sirtex sought to restrain the implementation and approval of a settlement between UWA and CRI; see University of Western Australia v Gray (No 10) [2007] FCA 377; University of Western Australia (No 13) [2007] FCA 397; Gray v Cancer Research Institute Inc [2007] FCAFC 149; Sirtex Medical Limited v Cancer Research Institute Inc [2008] HCA Trans 153. 165 Sirtex submits that the steps taken by it were an attempt to preserve the assets of CRI to meet any judgment on Sirtex's cross‑claim. Sirtex submits these were natural and legitimate steps for Sirtex to take to protect its own interest and that the cost of taking these steps, as in the case of all of Sirtex's other costs in the litigation, should be recoverable against Dr Gray unless it is shown they were grossly unreasonable. The total quantum under this head of damage is $202,079.31. 166 Dr Gray contests the causation issue and raises questions of quantum. As to causation, the point is made that Sirtex's various applications were made after its counsel had informed the Court of his instructions in relation to Sirtex's then proposed cross‑claim against CRI. By correspondence dated 10 October 2006, Sirtex advise that if CRI settled with UWA, Sirtex would withdraw its application for leave to file a cross‑claim or seek leave to discontinue any cross‑claim and would not object to current freezing orders against the shares of CRI being lifted or varied to permit any settlement to occur. At this point, CRI had a receiver appointed. 167 On 22 February 2007, the receiver of CRI and UWA entered into a settlement agreement which they subsequently sought to have approved in the first mentioned proceeding. Sirtex opposed the approval on the basis that by virtue of its cross‑claim it was a contingent creditor of CRI. In University of Western Australia v Gray (No 10), Graham J, at [38], noted that the Court would not ordinarily approve a settlement which had the result of divesting a cross‑defendant of its assets, but held that Sirtex could not be heard to complain about the approval in the face of the letter of 10 October 2006. 168 Sirtex then sought an injunction restraining the implementation of the terms of the settlement so that CRI's assets would remain available to satisfy the cross‑claim that Sirtex had previously said it would discontinue. French J refused the application in University of Western Australia v Gray (No 13) and said, at [30], that Sirtex seemed to be engaged "in an exercise of fine distinction to enable it to resile from a position it had previously adopted and which it does not now wish to maintain". His Honour found that Sirtex's conduct in the representations it made by counsel and in correspondence weighed against the grant of the relief sought although the balance of convenience was in Sirtex's favour, absent consideration of its representations, it was of somewhat uncertain extent. 169 Sirtex then appealed the decision of Graham J and the Full Court rejected its criticisms and dismissed the appeal: Gray v Cancer Research Institute Inc. 170 Sirtex then applied for special leave to appeal to the High Court, which application was discontinued (with costs) when the primary judgment in these proceedings was delivered on the day before the hearing: Sirtex Medical Limited v Cancer Research Institute Inc [2008] HCA Trans 153. 171 I accept the submission made on behalf of Dr Gray that the costs incurred by Sirtex and the costs that Sirtex was ordered to pay in connection with the applications outlined were not in any material sense caused by Dr Gray's failure to disclose the 1999 correspondence; they were caused by Sirtex itself. Specifically, by the representations that were made on its behalf and by its subsequent conduct in resiling from those representations. It was that conduct for which Dr Gray was not responsible that led to the Court, at various stages, refusing Sirtex's later applications and to make costs orders against it. 172 This is not a case such as Bennett v Minister for Community Welfare (1992) 176 CLR 408; [1992] HCA 27 (Bennett's case) where the Court found there was no intervening act to break the chain of causation. In my view, even though the disabling acts in question were those of Sirtex itself, Sirtex's conduct in taking the position it did, from which it later resiled, constitutes an intrusion of "a new cause which disturbs the sequence of events, something which can be described as either unreasonable or extraneous or extrinsic": Lord v Pacific Steam Navigation Co Ltd (The Oropesa) [1943] 1 All ER 211 at 215, per Lord Wright, cited with approval by McHugh J in Bennett's case at 428. It is not open to Sirtex, in effect, later to elect to ignore its own conduct in claiming that the costs incurred following the notification of its position were relevantly caused by Dr Gray's breaches of duty and conduct. 173 It follows that, in my view, none of the amounts listed in item 6 are recoverable. Those already included in item 2 should be deducted from item 2. 174 In this regard, Dr Gray contends that the deducted sum should be $83,875.89, not the sum of $50,715.96 suggested by Sirtex under this item. Dr Gray relies on Ms Harris' report of 30 September 2009. I accept the contentions of Sirtex, however, that Ms Harris' opinion is highly qualified (at [21] – 24]), and even on that qualified basis her opinion only amounts to $68,851.00 (at [24]). I am content on an overall assessment to adopt the Sirtex figure. 175 This means that $50,715.96 should be deducted from item 2. The other items mentioned in this category were not included in item 2 and so do not need to be deducted. 176 Item 7: The category of loss here is described as the cost of the application before Gilmour J. The amount claimed is $2,106.50. It is not included in item 2. 177 This item is not in contention. Senior counsel for Dr Gray at the hearing (transcript 53) indicated there was no issue as to the fact that these costs were incurred or that they were reasonably incurred and that counsel for Sirtex did not need to trouble himself with seeking to establish the causal link. 178 I would allow this item. 179 Item 8: The category here is described as costs and disbursements incurred in respect of company resolutions and meetings arising from or related to these proceedings. The figure is included in item 2 above. 180 In respect of the company resolutions and meetings, the following costs are claimed: (a) Legal costs and disbursements incurred by Sirtex in connection with the resolutions of Dr Gray and his associates to remove Sirtex's Chairman, Richard Hill, at an extraordinary general meeting (EGM) on 6 October 2006 and the annual general meeting (AGM) on 24 October 2006. (b) Legal costs and disbursements incurred by Sirtex in connection with the resolution of the Board to remove Dr Gray at the EGM on 23 January 2007. (c) Legal costs and disbursements incurred by Sirtex in connection with Dr Gray's objections to the receiver voting CRI's shares at the AGM of 23 October 2007. (d) Expenses of Sirtex incurred in conducting the EGMs on October 2006 and 23 January 2007. 181 In my view, there is a direct causal link between the steps taken by Sirtex in connection with its endeavours to respond to Dr Gray's moves to remove Sirtex's chairman at the EGM and steps taken by Sirtex to deal with Dr Gray's objections to the receiver voting CRI's shares at the AGM and the resolution of the board to remove Dr Gray at the EGM on 23 January 2007. The battle lines between the parties were drawn then and they were drawn by reason of the allegations that Sirtex ultimately succeeded on in the cross‑claim against Dr Gray. 182 As in the case of item 7, senior counsel for Dr Gray indicated there was no issue as to the fact that these costs were incurred or that they were reasonably incurred and there was no need for Sirtex to establish a causal link. 183 I would allow this item. 184 Item 9: Legal costs and disbursements incurred by Sirtex in obtaining intellectual property advice from patent attorneys (included in item 2). 185 As in the case of items 7 and 8, senior counsel for Dr Gray indicated that there was no issue as to the fact that they were incurred, or that they were reasonably incurred and there was no need for Sirtex to establish the causal link. 186 I would allow this item. 187 Item 10: This category of loss is interest on damages. While there was some dispute during the course of the hearing concerning the appropriate period during which interest should be calculated, it was finally agreed towards the end of the hearing. As agreed, I would order that interest on damages be calculated at the rate of 6% per annum from 1 April 2007 to judgment on the costs incurred. other costs of effecting settlement 188 Dr Gray argues that if any settlement on the basis contended for by Sirtex were to be found probable, as I have found, there would have been substantial transaction costs in taking appropriate professional and legal advice in negotiating and effecting a settlement which should also be accounted for in the assessment process, perhaps in the order of $40,000. The evidence to support the likelihood or quantum of such expense is simply not established on the evidence. In any event, I consider that in discounting by 12.5% the certainty of a share issue settlement occurring such expenses are reasonably accounted for. 189 I reject the submission that any such further allowance should be made. final assessment of damages 190 In these circumstances, Sirtex is entitled to recover 86% (being the probability of the realisation of the lost chance earlier identified in these reasons) of the costs and disbursements as I have allowed them. orders 191 I will now invite counsel to bring forward a minute of the orders that should be made taking into account these findings. I certify that the preceding one hundred and ninety-one (191) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker. Associate: Dated: 10 June 2010