Both the Commonwealth and the New South Wales Parliaments have recently enacted legislation which sets out pre-litigation requirements to be observed before the commencement of proceedings in the Federal and certain New South Wales Courts (with the exception of the Supreme Court).
These changes aim to facilitate the “just, quick and cheap resolution” of disputes, in accordance with the overriding purpose of the Civil Procedure Act, by encouraging parties to resolve a matter prior to the commencement of legal proceedings. It is anticipated that the changes will increase the chances of settlement prior to the commencement of proceedings, thereby reducing costs.
The requirements are couched in general terms and do not mandate particular action, but instead allow the parties to tailor pre-litigation steps to their particular dispute. Both the parties themselves and the lawyers acting for them have obligations under both Acts.
A. Commonwealth law
Genuine Steps Statement
The Civil Dispute Resolution Act 2011 (Cth) (CDR Act) was enacted on 24 March 2011 and comes into effect on 1 August 2011. The CDR Act requires that when an applicant commences proceedings in either the Federal Court or the Federal Magistrates Court, they file a ‘genuine steps statement’ which sets out the steps they have taken in an attempt to resolve the matter or if no steps have been taken, the reasons why. Such reasons may relate to the urgency of the proceedings and the extent to which steps to resolve the dispute would have compromised the safety or security of a person or property. The respondent to the proceeding is also required to file a ‘genuine steps statement’ prior to the hearing date which either agrees with the statement filed by the applicant or states the reasons why the respondent disagrees .
Certain proceedings are excluded such as those under the Native Title Act 1993 and Family Law Act 1975 which already have significant dispute resolution processes. Also excluded are civil penalty provision and appeal proceedings.
What are “genuine steps”?
The CDR Act states that a person takes genuine steps to resolve a dispute “if the steps taken by the person in relation to the dispute constitute a sincere and genuine attempt to resolve the dispute, having regard to the person’s circumstances and the nature and circumstances of the dispute” . The Act does not prescribe the steps that will constitute genuine steps, so as to enable the parties to take steps tailored to their particular dispute.
The CDR Act provides seven examples of ‘genuine steps’ which include:
- notifying the other person of the issues that are, or may be, in dispute, and offering to discuss them, with a view to resolving the dispute;
- esponding appropriately to any such notification;
- providing relevant information and documents to the other person to enable the other person to understand the issues involved and how the dispute might be resolved;
- considering whether the dispute could be resolved by a process facilitated by another person, including an alternative dispute resolution process;
- if such a process is agreed to:
(i) agreeing on a particular person to facilitate the process; and
(ii) attending the process;
- if such a process is conducted but does not result in resolution of the dispute—considering a different process;
- attempting to negotiate with the other person, with a view to resolving some or all the issues in dispute, or authorising a representative to do so .
Steps that do not fall within the above examples may also constitute genuine steps under the Act.
Failure to Comply – Negative Cost Implications
The CDR Act imposes a duty on legal practitioners to advise and assist the person they are acting for in filing a genuine steps statement. The fact that a party does not file a genuine steps statement does not of itself invalidate the proceedings, however it may have an impact on whether costs are awarded against the party who failed to comply with the requirements of the CDR Act. In addition, the Court may make a variety of orders including referring the dispute to alternative dispute resolution. If a lawyer is ordered to bear costs of proceedings personally, the CDR Act prohibits the lawyer recovering those costs from their client.
Information and Documentation
The Act will preserve existing law in relation to the use or disclosure of information, including the existence of “without prejudice” privilege (which in general terms prevents a party using evidence of settlement negotiations in court).
B. New South Wales law
The Courts and Crime Legislation Further Amendment Act (NSW) in 2010 inserted a new Part 2A into the Civil Procedure Act 2005 (NSW) (“CPA”). This Act commenced on 1 April 2011 but will not come into effect until 1 October 2011.
Excluded Proceedings – Supreme Court
The new Part 2A of the CPA applies to all civil proceedings in courts other than the Supreme Court and certain proceedings excluded by section 18B(3) of the CPA . Concerns over the effectiveness of pre-litigation requirements and the potential to use the requirements to delay proceedings and add unnecessary costs may have prompted the exclusion in Part 2A of the Supreme Court .
Taking Reasonable Steps
The CPA requires that all parties to a civil dispute in the relevant courts must comply with pre-litigation requirements before commencing civil proceedings.
This involves each party:
- Taking reasonable steps to resolve the dispute by agreement; or
- Clarifying and narrowing the issues in dispute.
Examples of the reasonable steps include notifying the other person of the relevant issues in dispute and offering to discuss them, or taking part in an alternative dispute resolution process.
Alternative dispute resolution processes may include mediation (whether or not by a referral under the CPA). Section 18O deals with the disclosure and publication of information concerning mediation undertaken for the purposes of Pt 2A. Each party must not unreasonably refuse to participate in these processes, however a party is not required to provide any correspondence, information or documentation that might tend to incriminate them .
Dispute Resolution Statement
At the time proceedings are commenced, a plaintiff is required to file a dispute resolution statement which sets out the steps that have been taken to either resolve the dispute or narrow the issues in dispute. At the time a defence is filed, a defendant is required to file a dispute resolution statement which either agrees with the plaintiff’s statement or sets out the areas of disagreement and what steps they believe can be undertaken to try and resolve the dispute .
Failure to Comply – Negative Cost Implications
Lawyers are required to advise parties they represent on the applicability of the pre-litigation requirements and to advise on the alternative dispute resolution mechanisms which are available. Failure to comply with the pre-litigation requirements does not invalidate the proceedings ,however the Court may take the failure into account when determining costs in the proceedings or making procedural obligation orders or any other order the court considers appropriate. The court may also make a costs order under s 99 against a legal practitioner who causes a client to fail to comply with the pre-litigation requirements.
Statements and documentation
The Act specifically affords protection to evidence of anything said or any admission made during a mediation conducted as part of the pre-litigation requirements. Such evidence is inadmissible in any subsequent proceedings and includes documents prepared for the purposes of the mediation. Limits are also placed on the use of information and documents disclosed, to ensure they are used only for the resolution of the dispute or civil proceedings arising out of the dispute (provided they are otherwise admissible). A person may seek to be released from the obligation by leave of the court. The court may treat a failure to comply with this obligation as a contempt of court if it is satisfied that there was no lawful or reasonable excuse for the failure .Publications made during a mediation also attract the usual protection from defamation proceedings that applies to publications made in court.