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Gazing in the Gazette
In other words, unless the probability of P accepting D’s original offer of an 80:20 split is greater than 62.5% then P’s counter-offer of a 50:50 split has the same or better expected value for D than the hope that P will in the end accept an 80:20 split. Furthermore, if D doesn’t accept P’s offer then the situation will become a Mexican standoff and negotiations will be stalemated, meanwhile as each party continues paying their respective solicitors S gets smaller and smaller.1While this is a case of who blinks first, P is the one who is making a fair offer and D is the one who is seeking to profit from an unfair offer (although this would not be readily apparent to the casual observer) and for the reasons set out below, as a matter of principle, the parties should always adopt an even split of the Surplus.
If these negotiations were taking place on day one of the dispute, we would be looking at J = $100,000, C = $30,000 and S = $40,000. Whilst the values of J and C, assuming that the original calculations were accurate, will remain constant throughout the course of the litigation up to the time of judgment, however that is not true of S. S is the solicitor/client costs as will be incurred in the future. S does not include solicitor/costs which have already been paid or incurred in the past. This significantly effects the extent to which the parties are apart. If the offer of an 80:20 split was made by D on day one then it would come to an amount of $42,000 and P’s counter-offer of a 50:50 split would come to $66,000. Thus, they would be $24,000 apart. If those same offers were made half-way through the case when each party had spent $20,000 on their solicitors then they would only be $12,000 apart.
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It will be recalled that Equation (1) is: Ep = pJ + 2pC – C – S; and Equation (2) is: Ed = C – S – pJ – 2pC. If there is a 50:50 split that is the equivalent of adding S to both equations. Equation (1) therefore has the value of Ep = pJ + 2pC – C = $66,000 and Equation (2) has the value of Ed = C - pJ - 2pC = -$66,000. A symmetrical split has the effect of removing the Surplus from the calculations, whereas an asymmetrical split retains the Surplus. Thus as time passes and more and more money is spent on the lawyers and the experts in which case an asymmetrical offer will, with the progressive payment of legal costs, approach a symmetrical offer and if the only point of difference between the parties is whether the split should be symmetrical or asymmetrical then it is definitely the case that the only winner is the lawyers and the experts. If, on day one, all that separated the parties was the terms on which the Surplus was to be split, D wanting 80:20 and P wanting 50:50, which leads to a difference in offers of $24,000, a gap too large to bridge, but after each party has spent $20,000 in legal costs we have halved the gap which is no longer too large to bridge then all that has been achieved is that an extra $40,000 has been spent on lawyers and other experts and the parties are commensurately worse off. All of this would have been avoided had the parties from the outset adopted the principle of a 50:50 split of the Surplus.
SOME BRIEF OBSERVATIONS
The key to understanding and applying a games theoretic approach to settlement negotiations is to look at the whole picture and, in particular, to look at the position from both parties’ points of view and not to solely focus on one’s own position. One may be in a quandary but then one’s opponent may also be in quandary, which may or may not be as bad as one’s own position. Also, another important lesson to be drawn here is the fact that one should not be terrified of taking risks when reason and common sense tells one that these are risks worth taking. In short don’t be a dove. Similarly, it is far from obvious that there is any advantage in being a hawk and there is a very real risk that by adopting such a role one may only achieve lining the pockets of the legal profession.
At the end of the day litigious negotiations have a centre of gravity and that is a fair division of the pie. Not only is litigation a negative sum game but once it commences the parties lose control over their destiny insofar as their destiny is determined or shaped by the litigation. Apart from taking the matter through to a trial and judgment the only way for the parties to win back that loss of control is to cooperate with each other and ordinarily that can only be achieved through each treating the other fairly. The desire to be in control of one’s own destiny is a very powerful magnet which draws parties into being cooperative and therefore into settling their disputes fairly.
In adopting these three categories, the hawk, the owl and the dove may be seen by many as an over-simplification. Human beings are not so easily defined, they are much more subtle and nuanced with no two people being exactly the same. None of which can be denied. However, the intention here is to identify different points on a spectrum which at one end there is an extreme version of the hawk strategy and at the other there is an extreme version of a dove strategy, with the centre being occupied by the owl. Essentially the hawk, the owl and the dove are conceptual models with each sufficiently delineated from the others to separate out three quite different strategies. The significance of which is to demonstrate that whilst an even division of the pie is the centre of gravity in respect of the negotiating process that point, however, is not set in stone. The point at which a dispute ultimately resolves is a matter which can be substantially affected by strategy, particularly in those cases where one of the parties/players adopts a bad strategy, such as being a dove. Thus, so long as neither party is adopting a bad strategy the process of negotiations ought to arrive at a good approximation to a fair division of the pie. It will be recalled that the centre of gravity in the example is S + Ep (i.e. $66,000), in the case of P, and S + Ed (i.e. -$66,000), in the case of D. A properly informed intuition would ordinarily regard any offer which was substantially outside the range of $55k to $70k as not being acceptable to the party disadvantaged by that offer. In which case the offer would be refused leaving the offeror with the choice of going to trial the expected value of which would be less advantageous than to settle somewhere between $55k and $70k. Hence, so long as that range is more attractive to both parties than going to trial then in the majority of cases the matter ought to settle at some point within the range constituted by the Surplus.
Up to this point it has been tacitly assumed that the parties’ involvement in litigation is a one off or that it is only on rare occasions in which the parties find themselves involved in litigation. That of course overlooks those parties who are serial litigants, a classic example of which would be an insurer. In the case of a serial litigant that party has open to it the opportunity to make a credible threat
of putting a take or leave it offer that is not a bluff. Let us suppose B always makes an offer which allocates 80% of the Surplus to it, leaving only 20% to the other party. If that offer is not accepted the matter will invariably go to trial and B develops a notorious reputation of doing just that. Whilst on those rare occasions when the other party courageously takes them on, they would on average be worse off than had they split the Surplus. That loss, however, would be relatively minor compared to the gains which they would make in the vast majority of cases wherein the other party accepted the only rational alternative which was available to them. In the case of serial litigants, it may well pay to be a hawk and in which case settlements would not be fair.
ATTITUDES TO AND ASSESSMENT OF RISK
Civil litigation has, in the community, a bad reputation and one which is richly deserved. Going to court is an undertaking which only the foolhardy would ever embrace with enthusiasm. One of the most common descriptions which experienced legal practitioners use in respect of litigation is that it is a lottery. Modern jurisprudence is a body of learning that no human being could hope to master in a lifetime. The tax legislation alone is impenetrable to all but those who do nothing but tax and have had years of experience in doing so and even they could not hope to master all aspects of their particular discipline. Over the course of a trial it is far from uncommon for everyone deeply involved in the matter to come away at the end of the trial knowing twice as much about that matter than when the trial first began and this is despite countless hours of pretrial preparation. It is therefore little wonder that litigation is such a lottery. Throw in the idiosyncrasies of individual judges and the whole thing becomes a very opaque process. If all of that wasn’t enough, before the trial even begins, the system opens up the case of each of the parties to attack through pleadings battles, discovery and a rich variety of other interlocutory proceedings, such as forum applications, Anton Pillar orders, third party discovery, medical and other expert examinations and reports. On top of all of this is the irrepressible outflow of funds in the payment of lawyers and other experts.
The above description of the litigious process may not look pretty but it is extremely effective in achieving one of its primary functions. In this case the function which is sought to be achieved is to deflate the expectations of both parties in respect of the litigation. When litigation commences it is often common for both to feel a sense of profound indignation of how they have been treated, in the case of the plaintiff, or of what they have been accused, in the case of the defendant. This deep sense of indignation leads to both sides developing overly optimistic expectations about their chances of success. With such high expectations it is very hard for either party to accept a settlement in which one, or the other or both feel they have sold themselves short. Consequently, those expectations have to be deflated and at times that can be very hard to achieve and when that is achieved it is not only at considerable financial cost to the litigants but also it takes its toll in stress and anxiety on both them and their legal representatives. The most effective weapon which the system deploys in this regard is to engender a real fear that it is just a lottery, that both parties each have a 50% chance of success and also the fear that the whole exercise could quickly turn into a nightmare. The inscrutability of interlocutory proceedings also goes a long way in deflating expectations. If properly conducted interlocutory proceedings should provide no sign or encouragement from any judicial officer to either party that their case is somehow blessed and that their decision to sue or defend was the right one. The appearance of impartiality is not only designed to give litigants confidence in the system but also to discourage them from any feeling of over-confidence in the system.
Not only does the litigious system deflate any exuberance of over confidence amongst litigants, the system isn't designed to cater for cases in which the outcome is either virtually certain or reasonably close to certainty. Take the example which I have used throughout this paper. If P’s chances of success were 90% then, according to Equation (4), the case ought to settle for $114,000 even though she has only claimed $100,000 and she has spent nothing in costs. Obviously, where the plaintiff has spent nothing in costs, the most she could hope to recover in a settlement is the amount of her claim. If a defendant admits both liability and quantum then that ought to be the effective end of the litigation. The logic behind Equation (4) breaks down as the probabilities approach certainty. If, in the unlikely event, a plaintiff with a near certain chance of success were to refuse all reasonable offers to settle the matter then Calderbank offers and the making of formal offers under the Rules plus applications based on an abuse of process would arguably all come into play. Such cases in extremis are not ordinarily the subject of litigation nor are they the subject of this analysis. Thus, one is looking at cases where the plaintiff’s chances of success will range from say 35% to 75%. There will not be many parties who are involved in that litigation who will not take the risks seriously and be immune from having their exuberant expectations deflated.
Putting an actual number to the plaintiff’s chances of success will not be capable of a high degree of precision. One would be doing well if in theory one had a margin of error of say 5% or 10%. Assigning probabilities to different cases is little more than applying an impressionistic weighting of one case in comparison with another. At best one could rank different cases as to their respective chances of success and to convert those ranks into a number between 0 and 1. But beyond that, the hope that one could achieve any greater precision would be illusory. One could always independently poll 10 or 20 experienced litigators all of whom had studied the relevant material in depth, however that would not be practical, but at least in theory the assignment of probabilities could be meaningful and therefore impressionistic and unbiased estimates may be regarded as an inexact measure of a real and meaningful number.
Rather than making quantitative estimates of the plaintiff’s probability of success one could begin by making qualitative statements with probabilities assigned to each rank. Thus, one could say that the plaintiff’s case was: Very strong 70% Strong 60% Neither strong nor weak 50% Weak 40% Very weak 30%
and leave at that. Over the course of time as more is discovered about a given case there may well be a need to reclassify and adjust all other calculations accordingly. The full range could go from 25% to 75% and the numerical spaces between each grade could be used in respect of cases which fall between each grade. Cases which fall outside this range are either so strong or so weak that they should be regarded as falling into special categories and subject to a separate analysis. The underlying thesis here is that litigation, although not random, is drawn towards random outcomes. So that one begins the assessment of the chances of success at 50% and moves up or down from that point only where there is a clear justification to do so. Extreme assessments at either end of the scale should be viewed with suspicion.
Where extremes prevail with respect to either party, be it in terms of strategy, chances of success or in attitudes towards risk, the distance between offer and counter-offer will, more often than not, be too great to bridge. Consequently, the parties need first to converge on the middle ground in respect of strategy, attitudes towards risk and assessments of risk. Where the parties adopt an owl strategy, are realistic about the prospects of success and failure and are risk neutral then there is a sound basis for a settlement to be reached. If any of those three factors are allowed to go into overdrive then achieving a settlement will become ever more difficult B
Endnotes 1 (1960) 3 Journal of Law and Economics 1- 44. 2 This is taken from Wikipedia. In this case an externality is a social cost, such as pollution, which doesn’t appear in the profit/loss statement of the polluter. In this context Pareto efficiency simply refers to maximising the profit which can be gained from a given resource. Unfortunately, in respect to the Coase Theorem there is a variety of ways in which it can be formulated. Put succinctly the theorem is that where bargaining is possible and transaction costs can be ignored an efficient allocation of resources is invariant to the initial legal assignment of property rights with respect to those resources. See also H Hovenkamp: “Coase” Encyclopedia of Law and
Economics Springer (2013) at 28-1. 3 Originally this methodology was first applied to criminal matters. See Landes WM “An Economic
Analysis of the Courts” (1971) 14 Journal of Law and Economics 61-108. 4 See Bielen S, Marneffe W and Vereeck L:
“Litigation Decision” (2015) Encyclopedia of Law and Economics; Springer at 589-1. 5 Both Decision and Games Theory are branches of mathematics and neither are particularly difficult to understand for a novice. 6 S is always the projected future solicitor/client costs so as time goes on and money is paid to the solicitor for work which has already been performed S gets smaller and smaller. 7 Oosterbeek, H., Sloof, R. & van de Kuilen,
G. “Cultural Differences in Ultimatum Game
Experiments: Evidence from a Meta-Analysis.”
Experimental Economics 7, 171–188 (2004). https:// doi.org/10.1023/B:EXEC.0000026978.14316.74 8 Andersen S et al “Stakes Matter in Ultimatum
Games” American Economic Review 101 (December 2011): 3427–3439 http://www.aeaweb.org/ articles.php?doi=10.1257/aer.101.7.3427 9 Ibid at 3434. 10 As noted earlier, S are projected solicitor/client costs in the future therefore, with the passage of time, S gets smaller and smaller. 11 As noted earlier, S are projected solicitor/client costs in the future therefore, with the passage of time, S gets smaller and smaller.
Family Law Case Notes
CRAIG NICOL AND KELEIGH ROBINSON, THE FAMILY LAW BOOK
CHILDREN – MOTHER’S “FIXED” BUT UNFOUNDED ALLEGATIONS OF SEXUAL ABUSE BY FATHER WERE DAMAGING TO THE CHILDREN
In Syms [2021] FamCAFC 38 (26 March, 2021) the Full Court (Aldridge, Watts & Austin JJ) heard an appeal where a mother unsuccessfully argued that her three children were at unacceptable risk of sexual abuse by their father, the Court fi nding that the mother’s fi xed but unfounded views posed an unacceptable risk of emotional harm and that the children live with the father.
The mother’s time was to be supervised after a four-month moratorium. Such supervision was to continue at the discretion of the father.
The Full Court said (from [93]):
“… [H]er Honour was not satisfi ed that the children were describing actual events of abuse. … [94] … [I]t was found that the allegations … [by the children to the mother] ‘began a course of action akin to a mission to establish that the children had been sexually abused by the father’ (at [170]). ( … ) [106] The single expert … considered that the probability of the father being a sexual abuser was ‘fairly low down the list’. There is no reason whatsoever to consider that her Honour did not have regard to … the entirety of the single expert’s evidence.”
As to the risk posed to the children by the mother, the Full Court said (at [116]): “… [T]he most relevant time for considering whether the mother posed a risk of emotional harm ... due to her fi xed belief that they had been sexually abused … was at the hearing before the primary judge. …”
As to the father’s discretion to determine when supervision would cease, the Full Court said (at [140]):
“We do not accept that the order is … for permanent supervision. The primary judge expected that the father would act reasonably, but if he did not, the mother could return to Court to … lift the supervision requirement. In doing so, she would not be bound by the rule in Rice and Asplund [1978] FamCA 84 because the primary judge expressly envisaged such an application. …”
The mother lost her appeal and was ordered to pay costs.
PROPERTY – “WHOLESALE INJUNCTION” RESTRAINING WIFE FROM CONTINUING ALL PROCEEDINGS IN SINGAPORE SET ASIDE
In Obannon & Scarffe [2021] FamCAFC 33 (10 March, 2021) the Full Court (Kent, Watts & Austin JJ) heard the wife’s appeal from an order that restrained her from continuing all proceedings in the Family Justice Courts in Singapore.
After restating Voth v Manildra Flour Mills Pty Ltd [1990] HCA 5 and Henry [1996] HCA 51 (at 592–593), the Full Court said (from [106]):
“The primary judge erred in principle … by ignoring or overlooking that the parties had resolved that the Singapore proceedings would continue with respect to [divorce, spousal maintenance, parenting issues and child support] … [107] The authorities make clear that it is not the requirement to strictly compare the two forums … to decide which is the more appropriate forum. Here, the primary judge … appears to consider the central issue to be a direct comparison of the two countries’ family law procedures. ( … ) [110] One legitimate purpose of comparing the law in each jurisdiction is to identify the existence of any juridical advantage to a party. … However it is not a legitimate purpose of such a comparison for a trial judge to thereby assess the comparative merits of the manner in which a case is determined as between the local and foreign tribunal. In this case the primary judge appears to give emphasis to his conclusions about the merits of Australian law in the manner in which property cases are determined, as compared to Singapore, rather than confi ning the consideration to one of effective dealing with the dispute arising from the breakdown of the parties’ marriage involving divorce, parenting issues, spousal maintenance and child support. We consider that to be an error ( … )
[112] … [I]it is clear from the authorities that the test of whether the same controversy is before each Court is not one that requires complete satisfaction that every aspect of the litigation is identical.”
PROPERTY – BANKRUPTCY – JUST AND EQUITABLE SETTLEMENT IDENTIFIABLE WITHOUT HUSBAND’S PARTICIPATION OR DISCLOSURE
In Hicks & Trustee of the Bankrupt Estate of Hicks [2021] FamCAFC 19 (18 February, 2021) the Full Court (Ryan, Aldridge & Kent JJ) heard an appeal by a trustee in bankruptcy from property adjustment orders made by Loughnan J in the absence of the husband.
The orders were such that the husband received $651,747, being the amount required to satisfy the husband’s proven debts in bankruptcy.
Addressing the justice and equity of the orders, the Full Court said (from [58]):
“ … [H]is Honour considered Commissioner of Taxation & Worsnop and Anor [2009] FamCAFC 4 and … other [Full Court] decisions … in expressing the conclusion that the creditors, represented by the trustee, do not have priority over the wife ( … ) [89] … [F]ailure by parties to provide credible evidence relating to aspects of their fi nancial affairs does not entitle the Court to dismiss applications or to relieve the Court of the responsibility of applying the provisions of the Act … [90] In this case the primary judge recorded that the husband … had elected not to take part [in the proceedings] … and his Honour was satisfi ed that … it was appropriate to make orders on an undefended basis as against the husband ( … ) [116] ... [T]he primary judge was plainly cognisant of the … cases as to the approach to attributing responsibility as between married parties for acquired debts in the s 79 process. It bears some emphasis that … [the] authorities identifi ed guidelines for the exercise of the s 79 discretion, and not binding principles constraining that exercise. ( … )
[119] … [I]t was within the ambit of a legitimate exercise of s 79 discretion for the primary judge to deal with the husband’s debts in the manner in which his Honour did. …”
The Full Court dismissed the trustee’s appeal but no order was made as to costs.
CHILDREN – HAGUE ABDUCTION CONVENTION – FATHER FOUND TO HAVE CONSENTED TO MOTHER’S WRONGFUL OVERSEAS REMOVAL OF CHILD
In Commissioner of Police for State Central Authority of South Australia & Garnett [2021] FamCA 86 (3 March, 2021) Williams J heard an application by the Central Authority of South Australia for the return of a 10 year old child to the UK pursuant to the Family Law (Child Abduction Convention) Regulations 1986.
The mother had removed the child from the UK but said that when the father found her packing suitcases, she informed him she wished to return to Australia, whereupon the father handed the mother the Australian passports for herself and the child and assisted her with her bags into a taxi. The mother and the child travelled to Australia that day.
Williams J found that X was habitually resident in the UK and that the father was exercising rights of custody at the time of removal ([80]).
After citing Wenceslas & Director-General, Department of Community Services [2007] FamCA 398 Williams J said (from [87]):
“ … Consent has to arise before the act of removal or retention ( … ) [104] The father’s own evidence suggests … that he was acutely aware that the mother intended to leave the UK with X … and that notwithstanding the mother’s repeated intention of travelling to Australia with X, he handed her the passports which would enable her to do so. … … I do not accept that handing over passports … does not amount to consent for X to leave the country. … [105] … It is not a situation where the father was advised by the mother for the fi rst time in the heat of the moment … that the mother wished to end the relationship and return to Australia. [106] The father’s … own evidence supports the contention that he knew implicitly and unambiguously that the mother intended to fl y with the children and that is why she required the passports. ( … ) [109] I am satisfi ed that the conduct of the father, in handing the child’s passport to the mother, when he knew she intended to travel to Australia with the child, is clear and cogent evidence of the father’s real and unequivocal consent to X departing the UK and travelling to Australia.”
Williams J exercised her discretion not to return X to the UK and dismissed the application of the State Central Authority. B
A MONTHLY REVIEW OF ACTS, APPOINTMENTS, 3 APR 2021 – 2 MAY 2021 REGULATIONS AND RULES COMPILED BY MASTER ELIZABETH OLSSON OF THE DISTRICT COURT OF SOUTH AUSTRALIA
ACTS PROCLAIMED
Spent Convictions (Decriminalised Offences) Amendment Act 2020 (No 42 of 2020) Commencement: 12 April 2021 Gazetted: 8 April 2021, Gazette No. 21 of 2021
Statutes Amendment (National Energy Laws) (Omnibus) Act 2021 (No 3 of 2021) Commencement: 15 April 2021 Gazetted: 15 April 2021, Gazette No. 22 of 2021
ACTS ASSENTED TO
Criminal Law Consolidation (Causing Death by Use of Motor Vehicle) Amendment Act 2021, No. 11 of 2021 Gazetted: 8 April 2021, Gazette No. 21 of 2021
Correctional Services (Accountability and Other Measures) Amendment Act 2021, No. 12 of 2021 (amends Correctional Services Act 1982 and Public Sector Act 2009) Gazetted: 8 April 2021, Gazette No. 21 of 2021
APPOINTMENTS
Nil
RULES
Nil
REGULATIONS PROMULGATED (3 APRIL 2021 – 2 MAY 2021) REGULATION NAME REG NO. DATE GAZETTED
Spent Convictions (Decriminalised Offences) Variation Regulations 2021 38 of 2021 8 April 2021, Gazette No. 21 of 2021 National Electricity (South Australia) (Commercial Arbitration Acts) Variation Regulations 2021 39 of 2021 15 April 2021, Gazette No. 22 of 2021 National Gas (South Australia) (Commercial Arbitration Acts) Variation Regulations 2021 40 of 2021 15 April 2021, Gazette No. 22 of 2021 Firearms (Gel Blasters) Variation Regulations 2021 41 of 2021 15 April 2021, Gazette No. 22 of 2021 Retail and Commercial Leases (Prescribed Lessee) Variation Regulations 2021 42 of 2021 22 April 2021, Gazette No. 23 of 2021 Single-use and Other Plastic Products (Waste Avoidance) (Plastic Spoon Exemption) Variation Regulations 2021 43 of 2021 29 April 2021, Gazette No. 25 of 2021
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