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New steps required to be taken prior to commencing proceedings in Federal Magistrates Court and Federal Court

24 May 2011

The Civil Dispute Resolution Act 2011 (Cth) (‘the Act’) received royal assent on 12 April 2011, and will come into effect on a day to be fixed by proclamation, or on about 13 October 2011 (whichever occurs sooner).

The object of the Act is to ensure that, as far as possible, people take genuine steps to resolve disputes before certain civil proceedings are instituted.

New requirements pursuant to the Act

An applicant who institutes civil proceedings in the Federal Court or the Federal Magistrates Court must file a genuine steps statement at the time of filing the application.

The genuine steps statement must specify the:

  1. steps that have been taken to try to resolve the issues in dispute between the parties; or
  2. reasons why no steps were taken.

Whilst the Act does not specify what genuine steps need to be taken, the Supplementary Explanatory Memorandum defines ‘genuine steps’ as steps taken to resolve a dispute by a person which 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.

Some examples of genuine steps include:

  • Notifying the other party of the issues in dispute and inviting them to discuss the issues with a view to resolving the dispute.
  • Providing relevant information and documents to the other person to enable the other person to understand the issues in dispute.
  • Alternative Dispute Resolution processes.

What civil proceedings will be covered by this Act?

The Act only covers civil proceedings commenced in the Federal Court or the Federal Magistrates Court of Australia.There are already a number of ‘excluded proceedings’ to which the act states that a genuine steps statement is not necessary. 

Arguably, a genuine steps statement will be required before commencing winding up applications or bankruptcy proceedings but not for public examinations in the Federal Court and the Federal Magistrates Court.

Effect of failing to file a genuine steps statement

If an applicant fails to file a genuine steps statement with their application, the court may take that into consideration when performing functions or exercising their powers.

This means that if the court is not satisfied that genuine steps have been taken they may:

  1. refer the matter to alternative dispute resolution;
  2. dismiss the proceedings; strike out, amend or limit a party’s claim;
  3. disallow or reject any evidence; or
  4. order a party to produce a document in their possession, custody or control.

The court may also consider the failure to file a genuine steps statement when awarding costs.

What this means to applicants

Once the Act comes into effect, before commencing proceedings in the Federal Court or the Federal Magistrates Court you will need to take genuine steps to try and resolve the issues in dispute.

The genuine steps can be undertaken before you see a lawyer, or can be done by your lawyer on your behalf.

Comparison with other jurisdictions

The Act sets in place similar obligations which were implemented in New South Wales on 1 April 2011 under recent amendments to the Civil Procedure Act 2005 (NSW) which requires parties to take ‘reasonable steps’ (as opposed to ‘genuine steps’) before commencing proceedings in a court other than the Supreme Court.

Victoria had previously implemented obligations on parties to take ‘reasonable steps’ before commencing proceedings, but these obligations were repealed earlier this year and replaced with a general power for the Court to make rules relating to specific civil proceedings for mandatory or voluntary pre-litigation processes.

At this point in time, Queensland state courts impose no obligations on applicants to take either ‘reasonable steps’ or ‘genuine steps’ prior to commencing proceedings.It remains to be seen how the state courts will respond, if at all, to the obligations now set to be imposed at the federal level.

Hynes Legal's litigation team specialises in making applications to the Federal Court and the Federal Magistrates Court, and are available to assist you in complying with the obligations which will be imposed on applicants once the Act comes into effect.