The Civil Dispute Resolution Act 2011 (Cth) (CDR Act) obliges parties who commence proceedings in the Federal Court of Australia or the Federal Magistrates Court to file a ‘genuine steps’ statement setting out what steps, if any, each party has taken to resolve the dispute, or explaining why no steps have been taken.

The decision of Justice Reeves in Superior IP International Pty Ltd v Ahearn Fox Patent and Trade Mark Attorneys (No 2) [2012] FCA 977 gives some guidance on the manner in which the CDR Act applies to proceedings commenced to set aside a statutory demand.

Justice Reeves noted that although the formal commencement of proceedings occurs upon the filing of an application with the Court to have a statutory demand set aside, in ‘real terms’, proceedings are commenced upon service of the statutory demand.

He also noted that it is unrealistic to expect a company which has been served with a statutory demand to take genuine steps to resolve the dispute, given that the company only has 21 days after service of a statutory demand to commence proceedings to have the statutory demand set aside. In this regard Justice Reeves concluded that:

“[i]t would seem to follow that, if the stated object of the Civil Dispute Act is to be achieved, in the peculiar context of statutory demand proceedings under the [Corporations] Act, any genuine steps to resolve the dispute relating to such proceedings should occur before the statutory demand is served under s 459E of the Act.”

Legislation equivalent to the CDR Act has not been enacted in New South Wales so no genuine steps obligations will apply to the parties if a company elects to commence proceedings to set aside a statutory demand in the Supreme Court of New South Wales.

However, as the party serving the statutory demand has no choice in the jurisdiction (i.e., Federal or State) in which the served company elects to commence proceedings to have the demand set aside, in light of Justice Reeves’s comments, the prudent course for a party serving a statutory demand is to take genuine steps to resolve the dispute before serving the demand, to ensure compliance with the CDR Act.

Pigott Stinson can assist you with issues related to statutory demands and dispute resolution.

For information contact Daniel Fleming on d.fleming@pigott.com.au

This article is intended to provide general information in summary form on a legal topic, current at the time of publication.  The contents do not constitute legal advice and should not be relied on as such. Formal legal advice should be sought in specific circumstances.