DISCUSSION TOPIC 2 COMMONWEALTH CIVIL DISPUTE RESOLUTION Compiled by Pat Saraceni & Greg Nell SC

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1 THE MARITIME LAW ASSOCATION OF AUSTRALIA AND NEW ZEALAND A.C.N DISCUSSION TOPIC 2 COMMONWEALTH CIVIL DISPUTE RESOLUTION Compiled by Pat Saraceni & Greg Nell SC The Civil Dispute Resolution Bill, (Cth) (the Bill is attached) aims to encourage a cultural change in dispute resolution by encouraging parties to resolve their disputes without resort to legal proceedings. In the words of Attorney General The Honourable Robert McClelland, its intention is to promote a move away from the often stressful, expensive, adversarial culture of litigation : (see second reading speech - 16 June 2010.) The Bill implements the 2009 recommendations of the National Alternative Dispute Resolution Advisory Council in its report entitled The resolve to resolve. The Bill essentially: applies to parties who might otherwise institute proceedings in the Federal Court or Magistrates Court - whether states and territories will follow suit remains to be seen; mandates that before commencing proceedings in a relevant Court, prospective litigants take genuine steps to resolve their disputes. Genuine steps includes writing to the other side detailing the issues in dispute and suggesting means of resolution, exchanging relevant documents or information with the other side, agreeing to participate in the discussion or undertaking alternative dispute resolution process. However, the Bill is not prescriptive as to what constitutes genuine steps - it is necessarily a flexible concept, but its meaning is apt to create uncertainty and debate; requires proof of compliance be provided before instituting proceedings, in the form of a genuine steps statement outlining the steps taken to resolve the dispute. The statement must accompany the filing of court proceedings. If a party is unable to take genuine steps to resolve the dispute then an explanatory statement must provided; some matters are exempt from the operation of the Bill eg proceedings under the Native Title Act 1993 and the Family Law Act 1975, (where appropriate dispute resolution procedures are already in place), civil penalty proceedings, appeals, cases of urgency or where the personal safety or security of property is at risk; requires the respondent to file a responsive statement either adopting the applicant s genuine steps statement or disagreeing with it and outlining the steps that the respondent considers have been taken. This raises the question, as to how the court will resolve a conflict in the genuine steps statement and the responsive statement; has potential cost ramifications in the event of non-compliance, including against the lawyers. After proceedings are instituted, when exercising its case management powers, the Court must consider the adequacy, or otherwise, of the ABN Registered Office: Level 28 Waterfront Place 1 Eagle Street, Brisbane, Qld, 4000 Australia Website:

2 Maritime Law Association of Australia and New Zealand Page 2 genuine steps taken and can award costs against a party or its lawyer if it believes inadequate steps were taken to resolve the dispute before resorting to the courts. Parties and lawyers are made accountable for their pre-trial dispute resolution attempts, imposes an obligation on lawyers to advise their clients of the requirement to file the genuine steps statement and to ensure compliance with that obligation. The focus is both on litigants and on the lawyers. Is this a justified? The aim of the Bill is laudable. However, its success will be judged by the number of disputes that resolve without resort to litigation. If the number is high, the Bill may achieve its goal, with the added benefit of reducing strain on the judicial system by keeping cases capable of early resolution out of the judicial system. If the number of cases resolved at the pre-writ stage is low the Bill will be seen as yet another burden on litigants, lawyers and the courts. It creates a further process which must be implemented, monitored and judged, at least adding to the financial cost of litigation. Some (possibly unintended) consequences of the Bill may include: encouraging parties to consult lawyers at an earlier stage of the process - a step certain to incur costs at an earlier stage, creating an additional level of costs, by imposing an additional process to be followed (with unknown results), satellite disputes arising during the case management process concerning the adequacy or reasonableness of the pre-writ steps. While the Bill expressly states that such disputes will not be permitted, it is difficult to see how this will work in reality. Reality may differ particularly when a litigant or lawyer is faced with an adverse costs order for failing to take adequate steps, the steps taken will be scrutinised at case management level, which may have the effect of parties agitating the adequacy, or otherwise, of the genuine steps taken, encouraging litigation arising from failed settlements, lawyers will be obliged to provide legal advice concerning disputes potentially without being fully informed or without having all relevant information for them. Question whether this is truly consistent with the attainment of justice and access to justice. it possibly being open to abuse by parties effectively fishing for additional information or documentation under the guise of genuine steps rather than using it as a genuine vehicle for dispute resolution. a respondent must engage in the process of pre-writ genuine steps to resolve a dispute, even when a fanciful claim is made to satisfy the genuine steps requirement. Whether this will unmeritorious suspected claims remains to be seen, and whilst the process is certainly not complex, it imposes additional burdens on litigants, lawyers, and the courts, thereby increasing the time, costs and processes involved in litigation. Whether the Bill is truly necessary is open to debate. Sophisticated commercial litigants will invariably consider, and where appropriate, take steps to resolve their dispute before

3 Maritime Law Association of Australia and New Zealand Page 3 resorting to litigation (and possibly before consulting a lawyer). Prospective litigants who are well advised will explore possible resolution of their disputes before launching into proceedings - generally parties do not lightly invoke judicial processes. Further the existing dispute resolution mechanisms within the court system operate efficiently and cost effectively, such as there is no imperative to impose further to endeavour to resolve disputes. The Bill is said to aid access to justice. Precisely how that aim is achieved is not apparent as parties are encouraged to resolve disputes outside the court s system. In short the utility of the measures introduced by the Bill remains in issue. Particular issues for the maritime jurisdiction Should MLAANZ be asking the AG for the exclusion in section 16 to include either proceedings brought under the Admiralty Act or at least certain types of proceedings under that Act, such as in rem proceedings? For instance, in rem writs may need to be filed urgently before a ship leaves port eg in respect of a collision at the port and where proceedings are sought before the ship leaves the jurisdiction. As a practical matter there may not be an opportunity for genuine steps to be taken in an attempt to resolve the dispute before proceedings are commenced if those proceedings are to be commenced and served before the ship leaves the jurisdiction (and it may of course be too late once the ship has left to pursue the claim here). Whilst ultimately a failure to take such steps and / or to file a statement saying that steps have been taken may does not invalidate the proceedings and will not necessarily result in an adverse costs order under section 12 (assuming that there was the urgency etc claimed), if this Bill applies to in rem proceedings there is a possibility that arguments may arise about the costs consequences of not taking such steps or not filing a statement which says that such steps have been taken. If a statement is to be filed, it will almost certainly now be directed at the clause 6(2)(b) reasons for not taking those steps. Conceivably, the obligation and requirement of the Bill might also be indirectly factored into section 34 claims. Also solicitors will need to advise their clients who wish to commence in rem proceedings or arrest ships at short notice of the requirement to take such genuine steps and file a statement as to whether such steps have been taken or whether there is sufficient reason to include in the statement clause 6(2)(b) reasons as to why no steps were taken and the potential consequences of their failure either to take such steps or to file such a statement or to file a statement stating that no steps were taken (at least in relation to costs) if the lawyer is to avoid a potential costs order against them personally. Similarly, in rem proceedings may be commenced for purely protective reasons (in case the ship happens to come to this jurisdiction in the future or where proceedings are commenced in a number of jurisdictions to protect the plaintiff s interest). Proceedings may also be filed to protect a time bar. In both cases, this may be done before any discussions regarding the substantive claim have taken place. Again, the failure to take genuine steps or file a statement that states that such steps were taken or that has to state why those steps were not taken as per clause 6(2)(b) will not invalidate those proceedings. But it may again give rise to potential arguments and consequences re costs consequences and will require the lawyers to advise their clients of the obligations and possible consequences.

4 Maritime Law Association of Australia and New Zealand Page 4 A party may wish to commence in rem proceedings early before the other side can dispose of a ship. Equally a party may wish to commence in rem proceedings to preserve their potential claim against the ship before the other side once aware of a claim or the potential magnitude of a claim etc seeks to dispose of the ship. In so far as the assumption underlying the objective that such proceedings should not be commenced until there has been genuine steps to resolve the dispute may result in a delay in the commencement of the proceedings if the obligations imposed by the Bill are to be honoured and such steps are to be taken - during which period the owner of the ship may be able to dispose of its ship then the application of the Bill is both potentially adverse to the plaintiff (who may find that they have lost their ability to pursue an in rem claim) and therefore arguably inappropriate. Further, in rem proceedings may be commenced simply to obtain security for a claim to be litigated elsewhere a prime example would be by salvors to obtain security for a salvage claim, before the ship the subject of that claim leaves. Another would be an arrest to obtain security for a claim (such as under a charterparty) that is to be arbitrated somewhere else. Why should the ability to secure that potential claim which is to be litigated elsewhere (in particular pursuant to an agreed resolution clause) be dependent upon the plaintiff having first taken genuine steps to resolve that claim? And why should the plaintiff / claimant be at a potential risk re costs if it has not taken those steps or files a statement acknowledging that it has not taken those steps? This is especially if the clause 6(2)(b) reasons may not be so readily applicable to this situation. It may be that the reference to an ex parte proceeding in clause 15(h) of the Bill may catch in rem proceedings although I doubt that this was what was intended (as when the in rem proceedings are commenced, like ordinary in personam proceedings, they are not intended to be pursued ex parte (other than possibly for the purposes of an arrest) but are intended to be served and then pursued against a defendant if one appears). Even if the arrest of the ship is ex parte initially, that does not bring the whole proceeding to an end it is simply a step in the proceeding it is usually expected that there will be an appearance and the substantive claim will be defended afterwards in the usual way either while the ship remains under arrest or once security has been put up to obtain the release of the ship from arrest. But even if the reference to ex parte proceedings in section 15 could be construed as applying to in rem proceedings when first filed, I still think that if admiralty or in rem proceedings are to be excluded it would be preferable for there to be an express exclusion (for instance by adding a reference within section 16 of the Bill either to the Admiralty Act or to in rem proceedings brought under sections 14 to 19 of the Admiralty Act) rather than leaving it for someone to make out this argument in the future. I note that in relation to the content of the statement that is to be filed, clause 6(2)(b) appears to contemplate that a good reason for not taking such steps can include the extent to which the safety or security of any person or property may be compromised. Quaere whether this reference to the security of property being compromised could be construed as referring to an in rem plaintiff s security interest in the res once proceedings are commenced? Again, it may be arguable that this would capture some of the situations identified above and would provide a good reason even within the Bill for not taking genuine steps. But again even if that is so, it may still be preferable for an express exclusion to be included in the Act to put the issue beyond doubt and avoid future debate / decisions. Similarly, I note that the reasons in clause 6(2)(b) of the Bill are not exhaustive and are inclusive and therefore arguably indicative they might therefore be construed as extending to reasons associated with the potential loss of security over the res faced by the in rem claimant if proceedings were not commenced until after genuine steps were

5 Maritime Law Association of Australia and New Zealand Page 5 taken, even if it is not strictly speaking within the language of clause 6(2)(b). But again, even if that is arguable, why not make the exclusion express and put the issue (or potential issue) beyond doubt. Despite my comments above, I can also understand why the requirements of the Bill could perhaps still be applied to in personam actions under the Admiralty Act, many of which are more in the nature of conventional civil disputes and proceedings. Although there is still the protective proceeding commenced to preserve the one year time bar that is just about to expire and even before any real negotiations have been able to take place because the parties are not in a position to advance their claim or deal with it in the relatively short 12 month time bar provided by the Rules. Although that said, the view might also be taken that it would be a good thing for the obligations imposed in the Bill to apply even in that situation as it may encourage parties to look at cargo claims sooner than just before the 12 month time bar is about to expire as is often the case. But even if the above position were taken, the obligations imposed by this Bill are still not appropriate for all in personam actions that may be brought under the Admiralty Act. In particular, on its face, this Bill may apply to a limitation proceeding commenced under section 25 of the Admiralty Act. Yet the objective underlying the Bill (namely that genuine steps to resolve a dispute should be taken before proceedings are commenced) would not seem to be appropriate to a limitation proceeding (it may be appropriate to the underlying claims sought to be limited but that is a different matter). Admittedly, this might mean that as a practical matter there is not likely to be any adverse costs consequences flowing from a failure to take such genuine steps before commencing proceedings or from filing a statement that indicates that no such steps were taken before proceedings were commenced (although I am not sure that a limitation proceeding falls within clause 6(2)(b)). But if the assumption and objective are not appropriate to a limitation proceeding in the first place, why not just expressly exclude that proceeding altogether.