SA16B Order for Security for Costs

Question 1

What is an order for security of costs?

Answer 1

An order for C to prove financial security that will be available to pay D’s costs if D wins.

Question 2

At what time is a security for costs often made?

Answer 2

At the time the defence is filed/at the first case management conference.

Can be made at any time between acknowledgement of service and the trial, but should be made ‘as soon as it becomes apparent it is necessary or desirable’.

Question 3

Upon whom can an order for security of costs be made?

Answer 3

Only against C (or party in position of C in counterclaims).

Question 4

What is the two-staged test the court adopts when responding to an application for an order for security of costs?

Answer 4

1) D must show that C is one of those kinds of Cs against whom an order for security of costs is possible.
2) Court must be satisfied that having regard to ‘all the circumstances’, it is ‘just’ to do so (matter of discretion).

Question 5

What written evidence must accompany an order for security of costs?

When must it be served?

Answer 5

• An application notice (N244).
• WS.
• Exhibit a draft bill of costs or other evidence of the costs of defending the whole claim.

3 clear days before the return day.

Question 6

Which types of claimants can a security for costs order be made against? (6)

Answer 6

1) C is a resident outside the jurisdiction, not in a State bound by the 2005 Hague Convention (most EU states fall within this).
2) C is a company or other body and there is reason to believe it WILL be unable to pay D’s costs if ordered to do so (‘impecunious company’). A single joint expert may be appointed where there is a dispute over C’s solvency.
3) C has taken steps in relation to his assets that would make it difficult to enforce an order for costs against him e.g. transferring them overseas. Not required to show that C did this to defeat enforcement/has taken steps that are reprehensible/dishonest.
a. That said, the proof of a specific intent to stultify future orders for costs will generally increase the likelihood that an order for security will be made.
4) C changed address to evade paying costs.
5) C failed to give an address/correct address on the CF.
6) Nominal Claimant and reason to believe unable to pay costs.

Question 7

Where the court has made an order for the security for costs, what are the typical methods which it will direct C gives the security?

Answer 7

a) Payment into court.
b) Payment into joint account in the names of both solicitors.
c) Other means e.g. bonds, guarantees.

Question 8

If an order for security of costs has been made, what will happen pending the provision of the security?

Answer 8

The claim will be stayed.

Question 9

If an order for security of costs has been made, what will happen if C doesn’t pay?

Answer 9

No further steps can be taken by C.

In the commercial court, C will usually be asked to provide security by a stated date. If C doesn’t do it, they will be in breach of an order and  subject to sanctions.

Question 10

In an application for an order for security for costs, under which conditions will the merits of a claim be considered?

Answer 10

Only when obvious (binary).

Question 11

What happens in circumstances where an order for security of costs would prevent C from continuing its claim?

Answer 11

It is necessary for the Cs to demonstrate the probability that their claim would be stifled. Not something that can be assumed in their favour. Turns on evidence.

To discharge that burden, C will need to show that it cannot provide security and cannot obtain appropriate assistance to do. The court will expect C to be full and frank in relation to these matters.

In cases of impecuniosity – security should not be ordered where the court is satisfied that, in all the circumstances, this would probably have the effect of stifling a genuine claim.

Question 12

Does the court have the power to order an interim payment is made by instalments?

Answer 12

Yes.

Question 13

Where there is more than on D, must a C elect against which D it wishes to make an application for interim payment?

Answer 13

No – an application can be made against any number of Ds.

Question 14

Can a C in a possession action obtain interim payment?

Answer 14

Yes.

Question 15

Must an applicant include in his evidence what he wishes to spend the interim payment on?

Answer 15

Yes.

This is not the same as having to establish a ‘need’ for an interim payment.

Question 16

When determining whether C is a company and there is reason to believe that it would be unable to pay D’s costs if ordered, what must be proven?

Answer 16

A matter of evaluation, not a question of meeting the balance of probabilities standard of proof. It is not enough that the applicant has a reasonable belief to this effect – the court will look at the question objectively by reference to the evidence on both sides.

Question 17

If the court decides to make an order for security for costs, what amount will it order?

Answer 17

Such amount as the court sees just. The rules set no limit on how much can be ordered.

Question 18

In which circumstances will the merits of C’s case be a matter of concern for the court when D makes an application for security for costs?

Answer 18

Only if it can be clearly demonstrated that there is a high degree of probability that the case will fail.

Question 19

In the context of an application for security of costs, will the court consider an argument that C’s want of means has been brought about by the conduct of D?

Answer 19

Yes.