The New South Wales Government announced on 23 August 2011 that it will postpone for 18 months the commencement of laws requiring potential litigants to take reasonable steps to resolve their disputes before initiating court proceedings, casting doubt on whether this initiative will ultimately be pursued in the longer term.

The legislative requirements, which already appear in Part 2A of the Civil Procedure Act 2005 (NSW) but are yet to begin operation, would have required the parties to many types of civil dispute to take part in a range of measures aimed at resolving the dispute between them or narrowing the contested issues before commencing proceedings.  Depending on the nature of the dispute, these steps could have ranged from relatively straightforward actions that are already often undertaken as a matter of good practice, such as engaging in pre-litigation correspondence, to more involved, time-consuming and costly steps like a pre-litigation exchange of documents or participation in alternative dispute resolution procedures such as mediation, expert determination or arbitration.

In announcing the postponement, the Attorney-General, the Hon. Greg Smith SC, noted concerns that have arisen among many practitioners that the new requirements could have had unintended consequences (such as requiring parties to disclose commercially sensitive information outside the confines of a court-ordered and supervised discovery process) and that they may, in fact, increase the time and cost involved in commercial dispute resolution.  Mr Smith said that New South Wales would monitor the success of similar pre-litigation requirements which operate in the Federal Court in order to ensure that compliance with such obligations will reduce, and not add to, the cost of resolving disputes.

The federal provisions, set out in the Civil Dispute Resolution Act 2011 (Cth) came into force on 1 August 2011.  They require parties to take genuine steps to resolve their disputes before commencing proceedings.  On litigation being commenced, parties are required to file a statement outlining the genuine steps they took, and a failure to comply with these requirements can lead to adverse costs consequences.  For more information on these requirements, see our earlier Alert.

The Victorian government recently repealed similar laws that had been introduced in that State (as we reported here).  The New South Wales government’s apparent lack of confidence in the reasonable steps measures casts further doubt on the utility of mandatory pre-litigation requirements and their efficacy in reducing the costs of resolving civil disputes. 

In light of the delay in implementing these laws in New South Wales, it will be interesting to see whether there emerges a marked trend toward commencing proceedings, which might otherwise have been commenced in the federal jurisdiction, in the Supreme Court’s Commercial and Corporations Lists.  The Supreme Court shares with the Federal Court the jurisdiction to hear many types of commercial dispute, arising under key federal statutes, to which the federal pre-action requirements apply.  Such a trend could lead to a scarcity of evidence as to the operation of those requirements. 

This could well stymie the New South Wales government’s intention to adopt a considered, evidence-based approach in deciding whether to proceed with the reasonable steps requirements under the Civil Procedure Act, which could lead to those requirements being on hold for much longer than the presently contemplated 18 months.