On 16 June 2010 the Commonwealth Attorney-General, Robert McLelland, introduced a Civil Dispute Resolution Bill (Bill) into Parliament. The Bill encourages parties to consider alternative dispute resolution (ADR) options to resolve their dispute at the earliest possible time before becoming fixed in a litigious position. By requiring parties to take 'genuine steps' to resolve disputes, the Bill seeks to have the effect that the real issues between the parties are identified before proceedings actually commence.
In the Bill's second reading speech, the Attorney-General stated: "It encourages parties to resolve their disputes at the earliest possible opportunity, and to do so outside of the courts – promoting a move away from the often stressful, expensive adversarial culture of litigation".
The Bill demonstrates a policy shift from empowering courts to refer parties to ADR processes, to requiring parties to use ADR before court entry is possible. It implements reports that have emphasised the usefulness of ADR.
Background to the Bill
In September 2009 the National Alternative Dispute Resolution Advisory Council (NADRAC), an independent advisory body to the Attorney-General, issued its report The Resolve to Resolve – Embracing ADR to Improve Access to Justice in the Federal Jurisdictions. The report was in response to the Attorney-General's concern about barriers to justice in civil court and tribunal proceedings and how to encourage greater use of ADR.
NADRAC made recommendations proposing that a new legislative regime be introduced. The key recommendation was to require prospective litigants to take 'genuine steps' to resolve their disputes before being able to commence litigation.
The Civil Dispute Resolution Bill
The Bill applies to all general federal law matters in the Federal Court of Australia and the Federal Magistrates Court of Australia. Certain kinds of proceedings are excluded such as:
- Proceedings under legislation where significant dispute resolution methods are already in place such as the Native Title Act 1993, the Family Law Act 1975 and the Fair Work Act 2009
- Where ADR is not appropriate, for example: urgent ex parte proceedings or proceedings involving civil penalty provisions
- Appeals to the Federal Courts.
When an applicant commences federal civil proceedings, that person must file a 'genuine steps statement' setting out the genuine steps taken in an attempt to resolve the dispute. If no steps were taken, reasons for this must be provided in the statement.
The respondent must then file a response to the applicant's statement, which states whether it agrees or disagrees with the applicant's statement, and if it disagrees, the reasons why.
Lawyers have a duty to advise their clients of these requirements and to assist them to comply.
The Bill provides examples of actions that constitute genuine steps, including:
- Correspondence between the parties that notify and acknowledge what issues are in dispute
- Offering to discuss the issues in dispute with a view to resolving them
- Responding appropriately to such notification
- Providing relevant information and documents to enable the other party to understand the issues involved and how the dispute might be resolved
- Attempting to resolve the dispute by an ADR process, or if that does not work, considering a different process
- Attempting to negotiate with the other person, to try to resolve some or all of the issues in dispute.
It may not always be clear what 'genuine steps' may involve, and parties may feel pressured by the prospect of penalty to make unnecessary concessions. The Bill expressly provides that reasons for not taking steps to try to resolve the issues in dispute between the parties include:
- The urgency of the proceedings
- If the safety or security of any person or property would be compromised by taking such steps.
Disclosure of information
The Bill provides that taking genuine steps includes supplying relevant information and documents to the other person to enable them to understand the issues involved and how the dispute might be resolved.
This raises an issue as to the protection to be afforded to information provided prelitigation in an attempt to settle the proceedings. Such correspondence and information would usually be provided on a 'without prejudice' basis to ensure that any statement made is privileged from admission into evidence so as not to affect that person's legal rights. This enables free communication between parties whilst trying to avoid or compromise litigation.
Under section 131 of the Evidence Act 1995 (Cth) settlement negotiations are privileged from being adduced as evidence in proceedings where they are communications or documents prepared in connection with an attempt to negotiate a settlement of the dispute.
The Bill expressly states that it does not affect the operation of section 131 of the Evidence Act. Therefore pre-litigation settlement negotiations will continue to be privileged, but the fact that they have been held will have to be disclosed in the genuine steps statement.
However, the court may need to view prelitigation correspondence between the parties to decide whether genuine steps have been taken to resolve a dispute. In the absence of any statutory protection being provided, the parties should agree on the appropriate use of the material from the outset, for example not allowing the material to be admitted as evidence.
The provision of relevant information, could lead to a prospective plaintiff seeking prelitigation disclosure of documents that goes further than that allowed by current preliminary discovery rules of court. It could lead to 'fishing' on the part of the prospective plaintiff, but any such request would have to be dealt with carefully by the other party so as not to constitute noncompliance with the genuine step requirements.
Impact on the proceedings
The Bill does not force parties to settle, and they may terminate a dispute resolution process if it is proving unsuccessful or is not progressing in a timely manner. If a genuine steps statement is not filed, the proceedings are not invalidated.
The role of the genuine steps statement is to inform the court so it is able to make better orders and directions to manage the dispute. For example, the court may order compulsory mediation, or create a fasttracked timetable.
A major consideration for parties who do not file the genuine steps statement or take such steps will be its impact on the court's exercise of discretion in relation to costs. The Bill expressly provides the court may take this into account in relation to costs.
Further, a lawyer may ordered to bear costs personally (and must not recover them from their client) if he or she fails to advise and assist his or her client in relation to the genuine steps statement.
How this will effect you?
Parties contemplating litigation of matters that will be dealt with by the Federal Court of Australia or the Federal Magistrates Court of Australia must now consider ADR steps that may be reasonably taken before commencing proceedings.
A failure to do so may mean a court will exercise its discretion against a party when determining an award of costs.
ADR steps are generally cheaper and quicker than litigation, and allow parties more flexibility than submitting their claim to the court. However for some parties, mandatory ADR may increase the time and cost of the proceedings. The success of ADR is also questionable when it is held too early in proceedings before the issues in dispute are clearly defined and before evidence has been served.
It is also likely that pre-litigation or pre-filing obligations will lead to front loading of costs at the outset of a matter. However this will be off-set by an early settlement of the matter, which is what is envisaged by the Bill.
The Bill has been referred by the Senate to the Legal and Constitutional Affairs Committee for inquiry and report by 22 November 2010. A similar (but wider) bill has been introduced in Victoria, the Civil Procedure Bill 2010 (VIC). It is expected that New South Wales will follow a similar path.