Pre-litigation requirements under the amended Civil Procedure Act 2005 (NSW) and the Civil Dispute Resolution Bill 2010 (Cth)
On 23 March 2011, the Federal Senate agreed to the Civil Dispute Resolution Bill 2010 (Cth) (CDR Bill)1 which, together with changes to the Civil Procedure Act 2005 (NSW) (CPA), will require parties and legal practitioners likely to be involved in litigation to take reasonable or genuine steps to resolve the dispute or at least clarify and narrow the issues in dispute before commencing proceedings.
WHICH JURISDICTION DO THESE CHANGES APPLY TO?
The CPA amendments will apply to civil disputes and civil proceedings other than those excluded under the new section 18B, such as:
- disputes with a litigant who is subject to a vexatious proceedings order;
- disputes that involve claims that will result in the commencement of excluded proceedings, if the issues are not narrowed;
- proceedings in the Dust Diseases Tribunal;
- proceedings in the Industrial Relations Commission;
- proceedings in relation to the payment of workers compensation;
- ex parte proceedings; and
- any appeal of civil proceedings.
This is not a complete list of excluded proceedings. Further, the rules of court or the regulations may exclude various types of matter.
Importantly, the Civil Procedure Amendment (Excluded Proceedings) Regulation 2011 excludes civil proceedings commenced in the Supreme Court of New South Wales, until the enactment of similar federal provisions i.e. the CDR Bill.
The CDR Bill will apply to civil proceedings instituted in the Federal Court of Australia (FCA) or the Federal Magistrates Court (FMC). Sections 15 and 16 exclude certain kinds of proceedings and proceedings brought under certain acts, such as:
- proceedings that relate to a decision of, or a decision that is subject to review of the Administrative Appeals tribunal, the Australian Competition Tribunal, the Copyright Tribunal of Australia, the Migration Review Tribunal, the Refugee Review Tribunal, the Social Security Appeals Tribunal or the Veterans Review Board;
- proceedings in an appellate jurisdiction of the FCA or FMC;
- ex parte proceedings;
- proceedings to enforce an enforceable undertaking;
- proceedings involving, or in relation to, a vexatious litigant;
- proceedings under the Fair Work Act 2009 and Fair Work (Transitional Provisions and Consequential Amendments) Act 2009;
- proceedings under the Migration Act 1958;
- proceedings under the Family Law Act 1975; and
- proceedings under the Native Title Act 1993.
This is not a complete list of excluded proceedings. Further, the rules of court or the regulations may exclude other proceedings.
HOW CAN PARTIES AND PRACTITIONERS COMPLY?
Each person involved in a civil dispute (e.g. plaintiffs and defendants) is to comply with pre-litigation requirements2 having regard to a person's situation, the nature of the dispute and any applicable pre-litigation protocol to resolve the dispute or clarify and narrow the issues in dispute3. The CPA4 provides a non-exhaustive list of reasonable steps, such as:
- notifying the other person of issues in dispute, and offering to discuss them; provides a non-exhaustive list of reasonable steps, such as:
- exchanging appropriate pre-litigation correspondence, information and documents critical to the resolution of the dispute;
- considering options for resolving the dispute outside of court; and
- taking part in alternative dispute resolution.
The information and documents disclosed will be protected from being used other than in connection with the resolution of the dispute between the persons involved or resolving civil proceedings which arise from the dispute5. Failure to do so might be contempt of court6. If mediation takes place, admissions made or documents prepared for mediation are not admissible in any proceedings before any court or body7 unless the persons involved consent or evidence is required that mediation reached an agreement.
If a plaintiff commences proceedings to which Part 2A applies, they are to file a dispute resolution statement,8at the time the originating process is filed, which statement specifies the steps taken to resolve or narrow the issues in dispute or the reasons why no such steps were taken. Such reasons might be (but are not limited to) the urgency of the proceedings or whether the safety or security of a person or property would be compromised.
A defendant who is served with a copy of a dispute resolution statement must in turn file a dispute resolution statement at the time it files its defence9 which statement specifies whether it agrees with the statement filed by the plaintiff or if not, specify the respect in which, and reasons why, the defendant disagrees.
A legal practitioner who represents a person in a civil dispute has a duty to inform them about the pre-litigation requirements and advise them of alternatives to litigation (that are reasonably available)10. If a legal practitioner does not comply with this duty the court has the discretion to award costs against the lawyer11.
Failure to comply with the pre-litigation requirements does not preclude a party from commencing proceedings nor does it invalidate proceedings commenced by an originating processes or a response to an originating process. 12. However, a court may take into account a failure to comply in determining costs in the proceedings generally and any other orders it considers appropriate13
Ordinarily, each person is to bear their own cost of compliance with the pre-litigation steps, although the court has the discretion to make orders against a party as to costs of compliance if it is reasonable to do so.
Interestingly, the amendments will change section 56 of the CPA, such that it reads "[t]he overriding purpose of this Act and of rules of court, in their application to a civil dispute or civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings." Now, the 'just quick and cheap' approach must be taken before one steps into a courtroom.
If an applicant commences proceedings in the FCA or FMC, to which the CDR Bill applies, they must file a genuine steps statement14at the time of filing the application, which statement specifies the steps taken to resolve the issues in dispute or the reasons why no such steps were taken. Similar to the CPA, relevant reasons might be (but are not limited to) the urgency and compromised safety or security.
A respondent who is provided with a genuine steps statement must in turn file a genuine steps statement before the hearing date 15 which statement must state whether it agrees with the statement filed by the applicant or if not, specify the respect in which, and reasons why, the respondent disagrees.
A lawyer acting for a party is required to file a genuine steps statement and has a duty to advise the person of the requirement 16 If a lawyer does not comply with this duty the court has the discretion to award costs against the lawyer, which costs the lawyer cannot recover from the client 17
Neither an application, nor a response thereto, will be invalidated by a failure to file a genuine steps statement although the court may have regard to it. 18 Furthermore, failure to file a statement may be taken into account when the court awards costs. 19 Further, the Court may consider whether a person took genuine steps 20
The amendments agreed by the Senate on 23 March 2011 (and subsequently agreed to by the House of Representatives on 24 March 2011) define genuine steps as "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 CDR Bill21 provides a non-exhaustive list of genuine steps, such as:
- notifying the other side of issues in a dispute, and offering to discuss them;
- providing relevant information and documents to the other side; and
- considering alternative dispute resolution.
The CDR Bill does not affect the operation of the Evidence Act 1995 (Cth)22 which applies, such that evidence is not to be adduced of communications made between persons within the dispute in an attempt to negotiate a settlement, or documents prepared in connection with an attempt to negotiate a settlement.23
WHEN DO THESE CHANGES TAKE EFFECT?
On 1 April 2011, the CPA will be amended by the Courts and Crimes Legislation Further Amendment Act 2010 (NSW) to include Part 2A. However, the obligation to take pre-litigation steps will only apply to proceedings commenced after 1 October 2011. The CDR Bill awaits Royal Assent. The obligation to take pre-litigation steps will apply on a date fixed by proclamation, but not later than six months after the date upon which the CDR Bill receives Royal Assent.
These dates might mislead parties and practitioners. The obligation to take pre-litigation steps will actually fall upon us rather soon. For example, if you are likely to be involved in District Court litigation which would commence 2 October 2011, you are going to need to take pre-litigation steps by at least September 2011, if not early August 2011. We expect that Courts will issue guidelines or protocols which deal with such matters, shortly.
On 29 March 2011 a bill 24 received Royal Assent in Victoria, which repealed similar pre-litigation requirements from the Civil Procedure Act 2010 (Vic). Why would the Victorian Government do such a thing, less than a week after the Federal Government agreed to the CDR Bill and two days before the CPA amendments come into force?
The explanatory memorandum to the bill explained that such requirements "add unnecessarily to the costs of resolving a dispute and make it more difficult for disputants to access the courts" and "provide an opportunity for disputants who were not prepared to negotiate in good faith to delay a settlement or decision and thereby prevent or delay disputants with legitimate claims from gaining access to the courts."
The repeal of similar pre-litigation requirements was driven by a change in state government. The underlying reason, as the second reading speech indicates, is that "the government's view, and the view of many practitioners, is that to seek to compel parties to do so through these heavy-handed provisions will simply add to the complexity, expense and delay of bringing legal proceedings".
The introduction of pre-litigation requirements will change litigation practice significantly for parties and their legal practitioners. Notwithstanding the repeal of similar requirements in Victoria, the pre-litigation requirements will come into force in NSW on 1 April 2011 and federally, shortly thereafter. While it is clearly in the parties' interests to attempt dispute resolution before litigious proceedings are commenced (and costs accumulate), it remains to be seen whether mandatory pre-litigation will work.
1 The Senate agreed to the Bill on 23 March 2011 with amendments. The House of Representatives agreed to the Bill on 24 March 2011. The Bill requires Royal Assent.
2 s18D Civil Procedure Act 2005 (NSW) (as amended)
3 s18E(1) Civil Procedure Act 2005 (NSW) (as amended)
4 s18E(2) Civil Procedure Act 2005 (NSW) (as amended)
5 s18F Civil Procedure Act 2005 (NSW) (as amended) .
6 s18F(3) Civil Procedure Act 2005 (NSW) (as amended)
7 s18O Civil Procedure Act 2005 (NSW) (as amended)
8 s18G Civil Procedure Act 2005 (NSW) (as amended)
9 s18H Civil Procedure Act 2005 (NSW) (as amended)
10 s18J(1) Civil Procedure Act 2005 (NSW) (as amended)
11 s18J(2) Civil Procedure Act 2005 (NSW) (as amended)
12 s18K Civil Procedure Act 2005 (NSW) (as amended)
13 s18N Civil Procedure Act 2005 (NSW) (as amended)
14 s6 Civil Dispute Resolution Bill 2010 (Cth)
15 s7 Civil Dispute Resolution Bill 2010 (Cth)
16 s9 Civil Dispute Resolution Bill 2010 (Cth)
17 s12(3) Civil Dispute Resolution Bill 2010 (Cth)
18 s11 Civil Dispute Resolution Bill 2010 (Cth)
19 s12 Civil Dispute Resolution Bill 2010 (Cth)
20 s11(b) Civil Dispute Resolution Bill 2010 (Cth)
21 s1(1) Civil Dispute Resolution Bill 2010 (Cth)
22 s14 Civil Dispute Resolution Bill 2010 (Cth)
23 The FCA and FMC retain their respective powers under s53B of the Federal Court Act 1976 (Cth) and s34 of the Federal Magistrates Court Act 1999 (Cth): s13 Civil Dispute Resolution Bill 2010 (Cth)
24 Civil Procedure and Legal Profession Amendment Bill 2011
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