The Civil Dispute Resolution Act 2011 (Cth) (Act), received assent on 12 April 2011, with Part 1 coming into effect on that date. Parts 2 to 5 of the Act came into effect on 1 August 2011.
The Act requires parties to take genuine steps to resolve a dispute before certain civil proceedings are commenced in the Australian Federal or Federal Magistrates Court. Both the parties to disputes and the lawyers acting for them have obligations imposed on them under the Act.
Requirements of the Act
The Act imposes three main requirements:
- when a party commences proceedings in the Federal Court or Federal Magistrates Court they must file with the court a genuine steps statement setting out either genuine steps that have been taken to seek to resolve the dispute, or the reasons why no such steps have been taken (section 6);
- if a respondent to proceedings is given a genuine steps statement, the respondent must file their own genuine steps statements in response, wither stating that they agree with the other party’s genuine steps statement, or explaining in what respects they disagree with it (section 7); and
- lawyers acting for a party who is required to file a genuine steps statement under the Act must advise their client of the requirement and assist them to comply with it (section 9).
The Act applies unless the type of proceedings falls within one of the stated types of excluded proceedings. Excluded proceedings being:
- proceedings imposing a pecuniary penalty for contravention of a civil penalty provision;
- Commonwealth criminal proceedings;
- ex-parte proceedings;
- judicial review proceedings from nominated tribunals including the Australian Competition Tribunal, the Copyright Tribunal of Australia and the Administrative Appeals Tribunal;
- proceedings in relation to an exercise of a power to compel a person to answer questions, produce documents or appear before a person or body under a law of the Commonwealth;
- proceedings in relation to the exercise of power to issue a warrant or power under a warrant;
- proceedings relating to vexatious litigants;
- proceedings to enforce an enforceable undertaking;
- proceedings brought under various Commonwealth Acts including the Fair Work
- Act 2009, Proceeds of Crime Act 1987, 2002, Migration Act 1958 and the Family Law Act 1975;
- proceedings proscribed by regulation as excluded.
For example: proceedings for a sequestration order under section 43 of the Bankruptcy Act, proceedings to wind up a company under section 459P of the Corporations Act for non-compliance with a statutory demand, proceedings for review of a registrar’s of the Federal or Federal Magistrates Court.
What are “Genuine Steps”?
Genuine steps are defined in section 4(1A) of the Act as:
“A person takes genuine steps to resolve a dispute if the steps taken by a person in relation to the dispute, 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 Explanatory Memorandum for the Act explains that the definition of ‘genuine steps’ has been kept flexible deliberately, to enable parties to take steps that are best suited to the particular circumstances of a dispute. Section 4(1) of the Act lists the following seven examples of taking genuine steps to resolve a dispute:
- notifying the other person of the issues that are, or may be in dispute, and offering to discuss them with a view to resolving the dispute;
- responding appropriately to any such notification;
- providing relevant information and documents to the other person to enable the other person to understand the issues involved and how the dispute might be resolved;
- considering whether the dispute could be resolved by a process facilitated by another person, including an alternative dispute resolution process;
- if such a process is agreed to, agreeing on a particular person to facilitate the process and attending the process;
- if such a process is conducted but does not result in resolution of the dispute, considering a different process; and
- attempting to negotiate with the other person, with a view to resolving some or all the issues in dispute, or authorizing a representative to do so.
Failure to comply
A failure to file a genuine steps statement in proceedings does not invalidate the proceedings. The Act’s Explanatory Memorandum suggests that where a person has failed to take genuine steps, the Court may:
- refer the dispute or parts of the dispute to alternative dispute resolution processes, including mediation;
- dismiss the proceeding in whole or in part;
- strike out, amend or limit any part of a party's claim or defense; or
- make an alternative costs award.
In deciding whether to award the relief sought by a party including costs, the Act states that the Court may have regard to:
1. whether the party filed a genuine steps statement as required; and
2. whether that party in fact took genuine steps to resolve the dispute.
Of particular note to lawyers the Act at section 12(2) states that the Court may take into account in exercising a discretion to award costs in a civil proceeding any failure by a lawyer to comply with the duty imposed by section 9 of the Act to advise their client of the need to take genuine steps and assist those clients comply. Section 12(3) notes where a lawyer is ordered to bear costs personally because of a failure to comply with section 9, the lawyer must not recover the costs from the lawyer’s client.
Section 17A of the Act states that that it does not limit or exclude the operation of Commonwealth, State or the common law (including equity) relating to use or disclosure of information, production of documents or admissibility of evidence preserving privilege.
The Act requires parties in dispute to turn their minds to making genuine attempts at settling the dispute prior to any civil proceedings being initiated in the Federal Court or Federal Magistrates Court. Practically, as a result of the duty imposed on lawyers and the resulting costs consequences for non-compliance, lawyers should consider:
- the adequacy of their fee agreements and any estimates of fees provided to clients;
- whether a proforma letter would be of use to provide to all clients setting out the requirements of the Act for clients, the potential cost consequences of non-compliance, and avenues available for taking genuine steps to resolve the dispute, prior to commencing proceedings;
- incorporating into existing litigation checklists a section relating to actions that may constitute “genuine steps” for reference by staff prior to commencing proceedings in the Federal Magistrates or Federal Court.
- is this a matter excluded from operation of the Act?;
- Is this a matter where there is urgency for action to be commenced or a need to protect the safety or security of a person or property?
■ If not:
- has a letter of demand been issued;
- have undertakings been sought for the cessation of action and delivery up of items or payment of damages;
- has an offer been made to participate in mediation or a mediation been undertaken pursuant to for example the Franchising Code of Conduct;
- have any dispute resolution provisions in agreements been complied with e.g. conciliation, arbitration, case appraisal, appointment of an expert;
- have the parties attempted to negotiate an outcome setting out all the issues in dispute and providing relevant documents to each other;
- have the legal representatives for the parties attempted to negotiate an outcome; etc
- developing internal guidelines for lawyers on the circumstances where there is an expectation that compliance with the genuine steps requirements are not necessary amended in accordance with any case law that arises as these provisions are considered by the Courts.
- incorporating the new Federal Court forms prescribed to be completed and filed setting out
- compliance with the Act into precedent suites.
The Act is designed to focus the parties and their lawyers on resolving disputes prior to recourse to Courts.
Victoria has had since 1 January 2011 similar legislation and other states were either considering adoption or had in place variant processes of their own.
Lawyers who practice in the relevant jurisdictions will need to be conscious of the new requirements and incorporate, where necessary, processes or procedures that address the Act requirements to assist their client’s comply and fulfill their own duties.