The new Civil Dispute Resolution Act 2011 (Cth) requires potential litigants to take, as far as possible, genuine steps to resolve disputes before initiating civil proceedings. The introduction of the CDR Act is part of a broader trend of legislative reform at both Commonwealth and State level towards promoting resolution and encouraging a move away from an adversarial approach to litigation.
The Act applies to proceedings in the Federal Court of Australia or Federal Magistrates Court commencing after 1 August 2011.
The CDR Act requires a party commencing proceedings in either Court to lodge a genuine steps statement setting out either that:
Similarly, a respondent to proceedings must file their own genuine steps statement in response either stating that they agree with the other party’s genuine steps statement, or explain in what respects they disagree with it.
The CDR Act does not prescribe what steps the parties must take. The definition of genuine steps in the CDR Act has been kept flexible deliberately so that parties involved can decide what steps are appropriate to their circumstances. Some examples of “genuine steps” that parties might decide to take provided in the CDR Act include:
The examples provided in the CDR Act are not exhaustive and any step taken by the parties will be considered a “genuine step” if it is “a sincere and genuine attempt to resolve the dispute” in light of the circumstances and nature of the dispute. The CDR Act also requires lawyers to fully inform clients about options to resolve disputes and alternatives to legal action.
The CDR Act aims to shift the adversarial culture often associated with disputes and get litigants thinking about early resolution through negotiation before becoming entrenched in litigation.
The Act supports the approach Courts are already taking, for example, facilitating agreements between the parties and court-referred alternative dispute resolution.
Where disputes cannot be resolved the CDR Act aims to assist the Courts to control and reduce litigation costs by requiring parties to engage in genuine negotiations before commencing litigation.
Litigation costs has long been viewed as being a barrier to accessing justice and despite case management techniques and court-referred ADR, the Courts have struggled to ensure litigation costs are kept reasonable. By requiring parties to turn their mind to what steps can be taken to resolve the dispute before litigation will aid the Courts in trying to keep litigation costs reasonable.
This shift at the federal level seems to favour the approach of mandating pre-action protocols introduced at State level, at least in New South Wales. Amendments to the Civil Procedure Act 2005 (NSW) were introduced in December 2010 with the overriding purpose of “just, quick and cheap resolution of the real issues to civil disputes before they are commenced in court. It is interesting to note however that a similar regime was implemented in Victoria through the Civil Procedure Act 2010 (Vic), but has recently been repealed by the incoming Liberal government on the basis that the intended regime was too rigid in a setting that inherently requires flexibility.
The Federal Court in particular has expressed that it is unhappy with the imposition of the CDR Act. It seems likely that the Courts will adopt a flexible approach where a party fails to comply with the CDR Act. A failure to lodge a genuine steps statement or to take genuine steps will not invalidate the proceedings. However, the CDR Act is clear that in exercising its discretion to award costs, the Courts will take into account whether a genuine steps statement is filed or genuine steps are taken. Best practice clearly requires the filing of a genuine steps statement given the potential costs consequences for failing to comply.
Separately but related, the Federal Court has general powers under the Federal Court Rules 2011 to manage the conduct of a proceeding to achieve its “overarching purpose” under the Federal Court of Australia Act 1976 (Cth) to facilitate the just resolution of disputes “as quickly, inexpensively and efficiently as possible”. In such proceedings it is possible that, where a party fails to comply with the CDR Act, the Federal Court may stay the proceedings pending the filing of a genuine steps statement or take other punitive action.
The CDR Act is intended to encourage parties to think broadly about alterative means of resolving the dispute outside the courtroom and to focus on resolving disputes as early as possible. Even if matters progress to court, costs will be saved and the time required for a court to determine a matter will be reduced as the issues in dispute will be better understood and narrowed.
The CDR Act does not mandate the pre-actions steps that must be taken. Potential litigants and their lawyers should assess cases early to determine the steps they wish to take.
In doing so, consideration should be given to:
Likewise, if a litigant decides not to take any steps to resolve a dispute, it is important to assess whether the Court is likely to consider whether there is sufficient reason in the circumstances for not taking such steps to resolve the dispute and the consequences that may follow if the Court finds that steps should have been taken.
The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.