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The recent Federal Court decision of Superior IP International
Pty Ltd v Ahearn Fox Patent and Trade Mark Attorneys [2012] FCA 282
provides the first substantial insight into how the Courts will
interpret and apply the obligations set out in the Civil Dispute
Resolution Act 2011 (Cth) (CDR Act) which came
into force on 1 August 2011. Although the costs consequences of non
compliance with the CDR Act were not considered in the judgment
handed down on 23 March 2012 by Justice Reeves, the Court was
highly critical of the parties and their lawyers for their flagrant
disregard of their statutory obligations to attempt to resolve the
matter.
The case concerned an application to set aside a statutory
demand served by the Defendant on one of its former clients.
Despite the statutory demand being for an amount of $10,706.33, the
Plaintiff filed 300 pages of affidavit evidence and the Defendant
filed 150 pages. Critically, no attempt to resolve the dispute had
been made by either party prior to the commencement of proceedings
and no "genuine steps statement" had been filed pursuant
to the CDR Act and the Federal Court Rules 2011.
Even after the matter was adjourned briefly to allow settlement
negotiations to occur and Reeves J had asked the lawyers for the
parties to disclose their fees to their clients (which totalled
nearly twice the amount of the statutory demand in question), the
matter remained unresolved.
Reeves J indicated in his judgment that at this point his Honour
was "bereft of any other means to force the lawyers and their
clients to see some sense" and described the behaviour of the
parties and their legal representatives as the "absolute
antithesis" of the overarching purpose of civil practice and
procedure to facilitate the resolution of disputes according to law
and as quickly, inexpensively and efficiently as possible.
Notwithstanding a finding that the Plaintiff had wholly
succeeded in the substance of its application, on the issue of
costs his Honour referred to the failure of the parties and their
lawyers to comply with the obligations and duties of the CDR Act.
Given the potential conflict between the interests of the lawyers
and their clients in relation to this issue, his Honour adjourned
the matter to allow the parties to make submissions as to how the
issue of costs should be addressed.
This decision serves as a reminder to insureds and insurers to
take heed of the obligation in the CDR Act for parties or potential
parties to take "genuine steps" to resolve a dispute
before proceedings are commenced in any federal court.
Section 4 of the CDR Act provides guidance as to the kinds of
steps which will satisfy the obligations imposed by the legislation
and includes the following:
notifying a prospective defendant(s) or cross-defendant(s) and
offering to discuss how resolution of the dispute can be
achieved;
responding appropriately to a notification of intention to file
proceedings received from another party;
attempting to negotiate with the other party with a view to
resolving some or all the issues in dispute, or authorising a
representative to do so; and
providing documentation to another party to help inform them
about the dispute or facilitate a resolution.
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.
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