03 Aug 2011
Genuine steps in the right direction? The Civil Dispute Resolution Act 2011
by Karen Ingram, Julia Virgo, Michael Chan
The Civil Dispute Resolution Act 2011 commenced on 1 August 2011. It applies to proceedings in the Federal Court and the Federal Magistrates Court.
Similar to legislative changes made in other jurisdictions, such as NSW, the object of the Act is to promote a cultural shift away from litigation by encouraging parties to take "genuine steps" to resolve their disputes before filing proceedings in court.
Genuine Steps Statements
Specifically, the Act requires:
an applicant who is commencing proceedings to file a "genuine steps statement" at the time of filing their originating application, listing the steps taken to try to resolve the dispute prior to filing, or the reasons why no steps were taken; and
the respondent to that application to file a genuine steps statement in reply prior to the first return date, stating the respondent's agreement or disagreement with the steps recorded in the applicant's statement as being taken, and any reasons for disagreement.
"Genuine steps" is flexibly defined under the Act as steps taken to resolve a dispute that constitute a:
"sincere and genuine attempt to resolve the dispute, having regard to the person's circumstances and the nature and circumstances of the dispute".
The Federal Attorney-General's Second Reading Speech for the Act outlined a number of examples of "genuine steps":
- writing to the other side outlining the dispute and how it might be resolved;
- exchanging relevant documents and information in a timely and cost-effective manner;
- agreeing to participate in discussions about the dispute; or
- undertaking alternative dispute resolution processes such as mediation, conciliation or arbitration.
Where parties have failed to take pre-litigation steps to resolve the dispute, and do not provide a satisfactory excuse, or simply fail to file a genuine steps statement, proceedings are not, by that fact, invalidated.
For example, the Federal Court has already indicated that its registries will accept filing of originating applications whether they are accompanied by a genuine steps statement or not (this is also confirmed under section 10(2) of the Act).
However, the Court is likely to take non-compliance into account when exercising its existing case management powers in relation to the proceedings, and also in exercising its discretion as to costs.
The Act makes clear that the normal rules of privilege apply to protect any steps taken, and any associated negotiations attempted, to resolve the dispute.
The Act obliges lawyers to advise their clients about the requirements of a genuine steps statement and to assist their clients in compliance. The court's discretion over costs may extend to the making of a personal costs order against any lawyer who fails to appropriately advise or assist his or her client in relation to the genuine steps statement.
Proceedings that are exempt from the Act
The Act excludes certain types of proceedings, such as appeals, civil penalty proceedings, ex-parte proceedings, proceedings arising from certain tribunals or arising under certain Acts. Relevantly, the Civil Dispute Resolution Regulations 2011 also exclude proceedings under section 459A of the Corporations Act 2001 to wind up a company in insolvency for failure to comply with a statutory demand.
Where part of a proceeding is excluded, a genuine steps statement must still be filed, but does not need to relate to that part of the proceeding which is excluded.
Transition to the Act
The Act applies immediately to all proceedings filed in the Federal Court or Federal Magistrates Court as from 1 August. For proceedings commenced immediately after 1 August 2011, the parties will effectively be required to provide a genuine steps statement in relation to steps (if any) which were taken prior to the commencement of the Act. Existing proceedings are exempt from this requirement.
Practical impact of the Act
Although the Act makes the genuine steps statement a mandatory pre-litigation requirement, the practical impact of the Act may be less onerous where parties are used to negotiating over disputes before filing. Clearly the extent and nature of the steps taken to meet the requirements of the Act will depend on the complexity of the issues in dispute.
The practical change is that the parties are forced to tell the Court, at the time of filing, whether and what steps they have taken to try to resolve or narrow the issues in dispute prior to proceedings being commenced.