A new requirement for both parties to file a "Genuine Steps" statement should further streamline dispute resolution in the franchise sector. The Civil Dispute Resolution Act 2011 (Cth) (Act) and new Federal Court Rules commence from Monday 1 August 2011. The key object of the legislation is to ensure that parties take "genuine steps" to resolve their disputes before commencing proceedings in the Australian Federal Court or Federal Magistrates Court. The policy objective underpinning the introduction of the pre-action process is to encourage the early resolution of disputes without resort to the Courts.
The new rules will apply to all proceedings commenced after 1 August 2011 as well as to any new steps taken in existing proceedings (unless the Court determines otherwise).
Requirements of the Act
The object of the legislation is sought to be achieved by requiring both parties to file a "Genuine Steps Statement". For the Applicant, this must be done at the time of filing the originating application and must:
- specify the steps taken to resolve the issues in dispute; or
- the reasons why no such steps were taken. For example because of the urgency of the proceedings or because the safety or security of the person or property would have been compromised by taking the steps.
The Respondent's Genuine Steps Statement in reply must be filed and served before the first hearing date specified in the Application.
The Act does not prescribe the types of steps which must be taken but does state that the steps must 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 provides examples of what would constitute genuine steps such as the following:
- 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;
- responding appropriately to any such notification;
- providing relevant information and documents to the other person to enable the other person to understand the issues involved;
- 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, agree on a particular person to facilitate the process, and attend the process;
- if such a process is conducted but does not result in a resolution of the dispute, consider a different process;
- attempt to negotiate with the other person, with a view to resolving some or all the issues in dispute or authorise a representative to do so.
The Act does not apply to certain proceedings such as appeals, proceedings to enforce an enforceable undertakings, ex parte proceedings ie. injunctions where orders are sought in Court without the other party present, and administrative law proceedings (Excluded Proceedings).
Implications
The new Genuine Steps requirements will complement the existing provisions of the Franchising Code of Conduct under the Competition and Consumer Act 2010 (Code) which sets out the dispute resolution procedure which parties may start prior to commencing proceedings. The obligations under the Act will not differ in a material way from the obligations already available to franchisors or franchisees under the Code.
However, the Act will now make taking genuine pre-litigation steps mandatory for franchisors and franchisees in the Federal Court and Federal Magistrates Court (except in relation to the Excluded Proceedings). Therefore franchisors and franchisees will now effectively be required to utilise either the dispute resolution procedure under the Code (or a similar such process) before commencing proceedings in the Federal Court of Australia in order to comply with the Genuine Steps requirements under the Act.
The Act is also likely to discourage premature and hasty litigation.
That is because:
- although failure to file a Genuine Steps Statement will not invalidate the proceedings, the Court will take into account any failure when exercising its powers as to the future conduct of the matter, as well as its discretion to award costs; and
- lawyers will also now have a duty to advise clients of the Genuine Steps requirement. Failure to do so may result in a personal costs order being made against that lawyer.
These are obviously powerful incentives to ensure that appropriate and sincere steps are taken by parties and by the lawyers advising them before any litigation is commenced.
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