Gen­uine steps before going to court

In brief — Increased impor­tance of attempts to resolve a dispute

On 24 March 2011 the Aus­tralian Par­lia­ment passed the Civ­il Dis­pute Res­o­lu­tion Bill 2011, which will require prospec­tive lit­i­gants to take gen­uine steps to resolve a dis­pute before pro­ceed­ings are com­menced in the Fed­er­al Court or Fed­er­al Mag­is­trates Court. Once the Bill receives Roy­al Assent, it will become the Civ­il Dis­pute Res­o­lu­tion Act 2011 (Cth).

Pur­pose of the Civ­il Dis­pute Res­o­lu­tion Act

The new leg­is­la­tion seeks to ensure that wher­ev­er pos­si­ble, dis­putes between par­ties are com­plete­ly resolved before court pro­ceed­ings have com­menced. Par­lia­men­t’s Explana­to­ry Mem­o­ran­dum states that the Bill encour­ages the res­o­lu­tion of civ­il dis­putes out­side of the courts and seeks to improve access to jus­tice by focus­ing par­ties and their lawyers on the ear­ly res­o­lu­tion of disputes.” 

Gen­uine steps statement

The key require­ment of the Act is that at the time when court pro­ceed­ings are com­menced, a state­ment out­lin­ing gen­uine steps that have already been tak­en to resolve the dis­pute must be filed with the court by the par­ty com­menc­ing pro­ceed­ings. This state­ment, which is called a gen­uine steps state­ment, must spec­i­fy either the steps that have been tak­en to try to resolve the issues in dis­pute, or the rea­sons why no such steps have been taken.

Any respon­dent to the pro­ceed­ings must then file their own gen­uine steps state­ment, either con­firm­ing that they agree with the con­tents of the oth­er par­ty’s gen­uine steps state­ment, or iden­ti­fy­ing in what respects they dis­agree with it.

The Act defines gen­uine steps sim­ply as steps that con­sti­tute a sin­cere and gen­uine attempt to resolve the dis­pute” and it leaves the par­ties with broad dis­cre­tion to decide upon the types of steps they should take to resolve the mat­ter, hav­ing regard to the par­tic­u­lar cir­cum­stances of the dispute.

What are gen­uine steps?

Rather than pre­scrib­ing the steps that must be tak­en in a par­tic­u­lar case, the Act lists sev­en exam­ples of what might be seen as gen­uine steps to resolve a dispute:

  • Noti­fy­ing the oth­er par­ty or par­ties of the issues that are, or may be, in dis­pute and offer­ing to dis­cuss and seek to resolve those issues with them
  • Pro­vid­ing an appro­pri­ate response to any noti­fi­ca­tion of the type referred to in the point above
  • Pro­vid­ing rel­e­vant infor­ma­tion and doc­u­ments to the oth­er par­ty or par­ties to enable the oth­er par­ties 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
  • Attempt­ing to nego­ti­ate with the oth­er per­son, with a view to resolv­ing some or all the issues in dis­pute, or autho­ris­ing a rep­re­sen­ta­tive to do so

The Act also states that par­ties are free to take fur­ther steps not falling with­in these examples.

Excep­tions to the need to take gen­uine steps

The Act acknowl­edges that in some cas­es, com­mu­ni­cat­ing with the oth­er par­ty or par­ties to a dis­pute before pro­ceed­ings are com­menced could give rise to seri­ous con­se­quences. Accord­ing to the Act, rea­sons that could pos­si­bly be giv­en in a gen­uine steps state­ment for gen­uine steps not hav­ing been tak­en before a pro­ceed­ing is com­menced include:

  • Urgency of proceedings
  • Poten­tial com­pro­mise of the safe­ty or secu­ri­ty of any per­son or property
Pro­ceed­ings exclud­ed from the Act

The Act excludes cer­tain kinds of pro­ceed­ings from its oper­a­tion. This includes pro­ceed­ings under cer­tain Acts like the Native Title Act 1993 and the Fam­i­ly Law Act 1975, which already include sig­nif­i­cant dis­pute res­o­lu­tion meth­ods. The Act also excludes oth­er pro­ceed­ings where alter­na­tive dis­pute res­o­lu­tion is not appro­pri­ate, such as pro­ceed­ings involv­ing civ­il penal­ties pro­vi­sions and appeals. 

Con­se­quences of not com­ply­ing with the Act

The Act pro­vides that in exer­cis­ing a dis­cre­tion to award costs, per­form­ing any func­tions or exer­cis­ing any pow­ers in rela­tion to pro­ceed­ings, the court may take into account whether the require­ment to file a gen­uine steps state­ment has been com­plied with and whether a par­ty has tak­en gen­uine steps to resolve the dis­pute. The fail­ure of any lawyer to advise and assist their client in com­ply­ing with require­ments of the Act may also be tak­en into account and could result in a lawyer being ordered to bear costs of the pro­ceed­ings personally.

What the Civ­il Dis­pute Res­o­lu­tion Act means for par­ties and their lawyers

The date of com­mence­ment of the Act is yet to be announced. Once it comes into effect, it will be impor­tant for any­one involved in a dis­pute that could poten­tial­ly be heard by the Fed­er­al Court or Fed­er­al Mag­is­trates Court to pay close atten­tion to the require­ments of the Act. Any­one in this posi­tion (and their lawyers) will need to ascer­tain quick­ly whether the gen­uine steps require­ments of the Act apply to the dispute.

If the require­ments do apply, it will be nec­es­sary to deter­mine what steps should be tak­en to seek to resolve the mat­ter and ensure that any steps to resolve the mat­ter are tak­en appro­pri­ate­ly and in the par­ty’s best inter­ests, hav­ing regard­ing to all of the rel­e­vant circumstances. 

The impor­tance of alter­na­tive meth­ods of resolv­ing dis­putes and attempt­ing ear­ly res­o­lu­tion of dis­putes has long been recog­nised by Aus­tralian courts. Giv­en the require­ments of the Act, these mat­ters are going to be seen as vital and manda­to­ry from the ear­li­est stages of a dis­pute. Par­ties and their lawyers will need to be will­ing to engage in dis­pute res­o­lu­tion activ­i­ties from the out­set and be gen­uine in their approach to those activities.

Sim­i­lar changes in New South Wales

The require­ments imposed by the com­mon­wealth Act are sim­i­lar to the require­ments intro­duced by Part 2A of the Civ­il Pro­ce­dure Act 2005 (NSW) which com­menced on 1 April 2011, but under tran­si­tion­al pro­vi­sions will only apply to pro­ceed­ings com­menced on or after 1 Octo­ber 2011

The full text of the final form of the Civ­il Dis­pute Res­o­lu­tion Act can be found at the web­site of Fed­er­al Par­lia­ment.

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