Article by Micah Jenkins, Susan Moran
Businesses will need to review their dispute resolution processes in light of the new Civil Dispute Resolution Act 2011 (Cth) ('the Act'). The new Act commenced on 1 August 2011 and requires all parties to civil disputes wanting to commence Federal Court or Federal Magistrates Court proceedings to take 'genuine steps' to resolve their dispute before applying to those courts. The Act builds on the Government's policy of ensuring early resolution of disputes without having to resort to costly and time-consuming litigation.
The requirement to take 'genuine steps'
The Act requires:
- Applicants to file a 'genuine steps statement' detailing what steps they have taken to resolve the dispute prior to commencing proceedings, or if they have not taken any steps, the reasons why not; and
- Respondents to file a 'genuine steps statement' specifying whether they agree with the applicant's statement and, if not, why not.
How will the requirement to take 'genuine steps' affect my business?
The Act will impact on a wide variety of legal issues affecting businesses. Most notably, it will affect a business':
- Contractual disputes;
- Standard contractual dispute resolution clauses;
- Dispute resolution policies and procedures;
- Standard letter of demand.
What are considered 'genuine steps'?
No specific 'genuine steps' are prescribed by the Act so as to allow parties to develop flexible dispute resolution methods to meet their needs in the pre-litigation stages.
A party is considered to have taken 'genuine steps' to resolve a dispute when they have made a sincere and genuine attempt to resolve the dispute, having regard to the party's circumstances and the nature and circumstances of the dispute. The Act provides a non-exhaustive list of examples of 'genuine steps' including:
- Notifying the other party of the issues in dispute and offering to discuss these with them with a view to resolving the dispute;
- Responding to any such notification;
- Providing relevant information and documents to the other party to enable them to understand the issues involved and how the dispute might be resolved;
- Considering whether the dispute could be resolved through another alternative dispute resolution process;
- Attempting to negotiate with the other party with a view to resolving some or all of the issues in dispute.
Matters excluded from the requirement to take 'genuine steps'
The Act will apply to all federal civil law disputes except to proceedings under certain Acts or except in situations where it may be impractical or inappropriate. Examples of disputes which are excluded from the need to take 'genuine steps' include disputes under the Family Law Act 1975 and the Fair Work Act 2009.
Similarly, the requirements of the Act do not apply to:
- Proceedings relating to a civil penalty;
- Ex parte proceedings;
- Proceedings involving a vexatious litigant.
Who will be affected by the Act?
In short, all parties to a civil dispute which may end up in a Federal court except for those involved in excluded disputes, some of which are discussed above. Therefore, actions under a large number of federal laws will be affected. Importantly, the Act will impose its pre-litigation requirements on actions under such laws as the Corporations Act 2001 and the Competition and Consumer Act 2010.
What should businesses do to ensure compliance with the new Act?
Businesses should implement dispute resolution policies and procedures which comply with the new Act. For those already with dispute resolution processes a review of all current dispute resolution policies and procedures should be undertaken to ensure compliance with the new Act.
A review of a business' standard contract dispute resolution clause and standard letter of demand should also be undertaken to ensure compliance with the new Act.
Businesses should also ensure that they understand the basic requirements of the Act as it can affect a wide range of legal disputes and can have costly implications if its requirements are not adhered to.
Will the other party be able to use the information I disclose in the negotiation stage in court?
No. The information disclosed in the 'genuine steps' process will still be subject to the same protections from disclosure which currently exist under such provisions as the 'without prejudice' privilege found in section 131 of the Evidence Act 1995 which protects communications made and documents prepared in connection with an attempt to negotiate a settlement of a dispute.
Consequences of failing to take 'genuine steps'
Failing to comply with the legislation does not invalidate any proceedings which have been commenced. However, the court may take into account the failure to lodge a 'genuine steps statement' in exercising its discretion in relation to case management directions and in awarding costs.
The court may also make a costs order against a solicitor who has failed to comply with their duties under the Act. These duties are to advise their clients of the need to file a 'genuine steps statement' and to assist their clients in complying with this requirement.
The trend toward encouraging pre-litigation dispute resolution
Businesses should note that the Act is only one of a number of laws in Australia requiring an attempt to be made at resolving a dispute before it goes to court. For example, the Civil Procedure Act 2005 (NSW) requires parties to NSW disputes to take 'reasonable steps' to resolve their dispute before commencing court proceedings in courts other than the Supreme Court. Similarly, courts in Victoria have the power to make rules with respect to mandatory or voluntary pre-litigation processes under the Civil Procedure Act 2010 (Vic).
The new Civil Dispute Resolution Act 2011 imposes new pre-litigation steps on a large number of Federal civil disputes. Business should be aware of this Act and the consequences of failing to comply with its requirements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.