The judgment of Justice Reeves handed down on 6 September 2012
in the Federal Court decision of Superior IP International Pty
Ltd v Ahearn Fox Patent and Trade Mark Attorneys (No 2) 
FCA 977 is the first judicial consideration of the costs
consequences of failing to file a 'genuine steps statement'
as required by the Civil Dispute Resolution Act 2011 (Cth)
The primary judgment
The substantive issue in the proceeding related to an
application to set aside a statutory demand served by the
Defendant. Having previously found in favour of the Plaintiff in an
earlier judgment handed down in March 20121, Justice
Reeves directed the parties to seek independent advice on the
question of costs given the manner in which the case was conducted.
In particular, the parties had made no attempt to resolve the
dispute 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.
Determination of the issue of costs
Despite foreshadowing serious cost implications in its primary
judgment, the Court exercised its discretion not to award costs
against the Plaintiff or against either of the lawyers with conduct
of the litigation.
The reasons provided by the Court for adopting this approach
included the special and unusual features of responding to a
statutory demand under the Corporations Act 2001 (Cth)
(Corporations Act), the fact that the Plaintiff
was unrepresented at the time it commenced proceedings and the fact
that neither party sought to recover its costs from its
Of the reasons provided, the Court placed most weight on the
special and unusual nature of an application to set aside the
statutory demand under section 459G of Corporations Act
2001 (Cth). In accordance with the legislative framework, once
a company has been served with a statutory demand, there is only a
short period of time in which the company can apply under section
459G of the Act to set aside the demand.
After also highlighting the significant ramifications which flow
from the service of a statutory demand, Justice Reeves held that it
is "somewhat unrealistic and incongruous" to take genuine
steps to resolve the dispute under the CDR Act at such an advanced
stage of the statutory demand proceedings and in such a fraught
situation for the plaintiff company [at 10].
His Honour also took into account the fact that the Plaintiff
was self represented at the time it made its application,
suggesting that its ignorance of the provisions of the CDR Act was
"perhaps understandable" [at 11].
Ultimately, the only order for costs was for the Defendant to
pay the Plaintiff an amount equal to the cost of the filing fee for
its application. Critically, Justice Reeves also observed that, if
it were not for the fact that both clients had expressly rejected
the opportunity to seek to recover their costs against their
lawyers His Honour "would have been very likely" to issue
cost orders against the lawyers in an "attempt to deter
lawyers from engaging in that type of conduct" [At 13].
Points to take away
Given that the arguably lenient approach adopted by the Court in
this case arose from the nature of the particular application to
set aside a statutory demand, this decision serves as a reminder to
Australian Government agencies and their legal representatives to
take heed of the obligation in the CDR Act to file a "genuine
steps statement" 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) 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.
This was an interlocutory decision about the appointment of a tutor for the child appellant, to carry on his proceedings.
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