Australia: Civil Dispute Resolution Bill introduced into parliament
Commercial Litigation and Dispute Resolution Update

In June this year we provided commentary on the Civil Dispute Resolution Bill (the Bill) which aims to promote a move away from the often stressful and expensive adversarial culture of litigation.

The Bill lapsed when parliament was adjourned in July, however it was re-introduced to the House of Representatives on 30 September 2010. The Bill was subsequently referred for inquiry to the Legal and Constitutional Affairs Legislation Committee (Committee) which released its report last week.

The Bill will require litigants to take 'genuine steps' to resolve their legal disputes before commencing court proceedings.

Background

The Bill follows on from the Access to Justice (Civil Litigation Reforms) Act 2009 and implements key recommendations made by the National Alternative Dispute Resolution Advisory Council (NADRAC) in their 2009 report, The Resolve to Resolve. NADRAC is an independent body that provides policy advice on the use and development of alternative dispute resolution (ADR).

The ultimate objective of the Bill is to reduce the matters requiring judicial determination, and to save time, costs and distress for the parties and the courts. Furthermore, the Bill allows the court to better assess the real issues in dispute from the outset of a matter and better equips it to use its discretionary powers to make further ADR orders at an early stage.

What does the Bill say?

The Bill requires a prospective litigant to file a 'genuine steps statement' outlining the steps already taken to reach a resolution and an explanation as to why a resolution has not yet been attained. The respondent is then obliged to either agree with the applicant's genuine steps statement or provide a statement outlining why they disagree

Clause 4 of the Bill provides a loose definition of 'genuine steps' by way of some examples of what could constitute genuine steps, though it does not prescribe when or how genuine steps must be taken. The overriding purpose of avoiding a prescriptive definition is to accommodate the needs of parties and issues involved in particular disputes.

When determining what is meant by 'genuine steps', the Bill requires consideration of the circumstances surrounding the particular case and could include anything that will narrow the issues in dispute including:

1. an exchange of correspondence between the parties which outlines the issues in dispute and suggestions for resolution;
2. an informal exchange of documents between the parties similar to the discovery process in litigation; or
3. more formal methods such as mediation or conciliation.

The Bill should not be construed as a barrier to justice because failure to file a genuine steps statement in proceedings will not necessarily invalidate the application instituting the proceedings, a response to such an application or the proceedings. The court will however, be able to exercise its discretion to award penalty costs for non-compliance.

Who does the Bill apply to?

The Bill applies to matters commenced in the Federal Court or the Federal Magistrates Court. There are however, the following exceptions:

1. matters concerning the Native Title Act 1993 and the Family Law Act 1975 are excluded as a result of existing requirements for ADR;
2. matters involving civil penalty provisions are excluded on the basis that it is inappropriate; and
3. matters on appeal to the Federal Court are excluded on the grounds that attempts to resolve disputes have already been made.

What does the Committee say?

The Committee provided a number of recommendations for amendments to the Bill and a number of pertinent criticisms.

Defining 'genuine'

Submissions to the Committee referred to the Victorian legislation which uses the term 'reasonable steps' rather than 'genuine steps'. It was argued that use of the word 'genuine' introduces a degree of subjectivity which 'reasonable' does not. The Committee therefore concluded that 'genuine' is a more meaningful term to encourage parties to consider what they can do to attempt to resolve the dispute which also reflected the views of NADRAC. The Committee ultimately recommended that the Bill be amended to provide an inclusive definition of the word 'genuine'.

Increased cost

The Bill's purpose is to reduce cost and delay in litigation. Submissions made to the Committee, however, identified that it is foreseeable that the process will encourage satellite litigation, cause increased interlocutory applications and result in further disputes as to whether genuine steps have actually been taken. Furthermore, there is the risk that parties will use the process as a fishing expedition.

The Committee recommended that the Bill be amended to include provisions that prevent information disclosed during the genuine steps obligation from being used for any other purpose other than the resolution of the dispute at hand. Also, because such provisions already exist in the course of normal litigation, it would be an important recommendation for the protection of commercial litigants.

An alternative approach

During the public hearings of the inquiry into the Bill on 11 November 2010, an alternative approach to the Bill was proposed which would require a person contemplating litigation to serve on the prospective respondent a short statement of their case which provides adequate description of the factual and legal claim, and which could stand as their statement of case in any subsequent litigation.

The Committee concluded that it is difficult to make any assessment as to increased costs in the abstract and recognised that, considered holistically, the Bill is aimed at encouraging a cultural shift towards increasing access to justice and speed of resolution. It is uncertain whether the suggested changes will be appropriate when dealing with the complex commercial legal issues, though they may prove effective in expeditiously disposing of less contentious disputes.

Something to remember

It is important to note that the Bill does not force parties to settle, or abandon their legal rights. As with usual ADR methods, parties will be able to terminate the process if attempts to resolve disputes are unsuccessful or if they are not progressing in a timely manner. Moreover, though the Bill comes close to mandating ADR, failure to file a genuine steps statement will not be destructive of a claim but may be the subject of a penalty costs order. It is important to keep in mind that the Bill approaches 'genuine steps' quite broadly, taking into consideration the circumstances of the dispute before the court and the parties involved.

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