Most Read Contributor in Australia, September 2016
The Federal Court weighs in on the "genuine
steps" requirement under the Civil Dispute Resolution Act 2011
The case of Superior IP International Pty Ltd v Ahearn Fox
Patent and Trade Mark Attorneys  FCA 282
(Superior IP) offers substantial insight into how
the Courts will apply the "genuine steps" requirement
under the Civil Dispute Resolution Act 2011 (Cth)
(the CDR Act) in respect of applications made in
the Federal Court to set aside statutory demands.
It illustrates that parties must comply with the CDR Act when
seeking to set aside a statutory demand in the Federal Court;
otherwise, parties (and their lawyers) risk facing an adverse costs
A company served with a statutory demand has 21 days from the
date it is served to either comply with the demand, agree to a
payment arrangement or file and serve an application under section
459G of the Corporations Act 2001 for an order that the
statutory demand be set aside.
The CDR act imposes obligations on federal civil litigants and
their lawyers to engage in "pre-action" negotiation for
the resolution of disputes and then file a "genuine steps
statement" at the time of commencing proceedings (specifying
the actions the applicant has taken to resolve the dispute). The
respondent must also file a response to the genuine steps
This decision concerns an application to set aside a statutory
demand under section 459H of the Corporations Act 2001
The Respondent is a firm of patent and trade mark attorneys that
was engaged by the Applicant to prosecute an application for a
patent for "an improved connector for timber" in a number
of countries. The Respondent issued a number of invoices to the
Applicant for the services it says it provided under its engagement
with the Applicant. A dispute arose as to the amounts claimed in
nine unpaid invoices totalling $10,706.33 and the Respondent served
the Applicant with a statutory demand in respect of this unpaid
amount. The Applicant filed an application in the Federal Court
seeking an order that the statutory demand be set aside.
No attempt had been made to resolve the dispute before the
Applicant filed its application and no "genuine steps
statement" had been filed.
The Court found that a genuine dispute existed in respect of 6
of the nine invoices. The other 3 invoices totalled $1,057.03. As
this amount is less than the statutory minimum under s459E, the
Court set aside the Respondent's statutory demand.
Regarding the issue of costs, Justice Reeves held that both the
Applicant and the Respondent had behaved in a manner which was the
"absolute antithesis" of the overarching purpose of civil
practice and procedure. Not only had no attempt been made to
resolve the dispute prior to the hearing, but when questioned as to
the fees incurred so far by the parties, the total of the fees was
almost twice the amount of the statutory demand in question.
Consequently, the parties were directed to seek independent
legal advice on the question of costs in the proceeding, and the
lawyers concerned were joined as parties to the proceeding for the
purpose of determining the issue of costs.
Furthermore, Justice Reeves referred the lawyers involved to the
Queensland Law Society, the Bar Association of Queensland and the
Legal Services Commission.
This case serves as a reminder to federal litigants to ensure
that they comply with the CDR Act by taking genuine steps to try to
resolve their dispute before they apply to the Federal Court for an
order to set aside a statutory demand.
A party seeking to set aside a statutory demand will want to
consider the following matters:
If the application is to be made in the Federal Court, then the
obligations to file a genuine steps statement in accordance with
the CDR Act applies to the parties involved and their lawyers.
As an application to set aside a statutory demand must be filed
and served within 21 days after the demand is served on the
company, any efforts to resolve the dispute will also need to occur
well within that 21 day time period.
There is no prescription in the CDR Act as to what steps
constitute "genuine steps" to try and resolve the
dispute. However, if time permits, it may be advisable that a
letter is sent to the other party setting out in detail the basis
on which the Applicant says the statutory demand should be
The CDR Act only applies to Federal Court proceedings. Parties
way wish to reconsider the court within which they bring their
application to set aside a statutory demand. Given the tight
timeframe within which parties must apply to the court to have a
demand set aside, there may be a greater tendency for parties to
make their application in a state court as opposed to the Federal
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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This was an interlocutory decision about the appointment of a tutor for the child appellant, to carry on his proceedings.
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