Security for Costs

Question 1

What is security for costs?

Answer 1

Security for costs is an order that the court has discretion to make, which requires a claimant to pay some money (usually to the court) as a form of security for the defendant’s costs in the event that the claimant loses.

Question 2

What is the procedure for claiming security of costs?

Answer 2

As with all interim applications, the defendant should first write to the claimant asking for security to be provided voluntarily.

If this fails, the defendant should submit a notice of application to the court with a witness statement in support.

Question 3

What must a court be satisfied of in order to make an order for security of costs?

Answer 3

The court has a discretionary power to make an order for security of costs if:

(a) it is satisfied, having regard to all the circumstances of the case, that it is JUST to make such an order; and

(b) One or more of the conditions in Part 25 applies.

Question 4

What are the relevant conditions in Part 25?

Answer 4

1. The claimant is resident outside a 2005 Hague Convention State.
2. The claimant is an impecunious company:
   Essentially, defendant must establish that there is a reason to believe the claimant will be unable to pay the defendant’s costs if ordered to do so).
3. The claimant has taken steps to make enforcement difficult:
   Here, the defendant must demonstrate that the claimant has taken steps in relation to their assets such that, if they lose the case and a costs order is made against them, the order will be difficult to enforce.

Question 5

What factors will be considered in determining justness of an order for security of costs?

Answer 5

In assessing justness, the following factors are important:

1. The strength of the claim and the defence:
   The less likely the defendant is to win at trial, the less justified they are in seeking security.
2. Claimant’s ability to provide security:
   Where the claimant has a reasonable prospect of success, the courts will be reluctant to make an order for security with which the claimant cannot comply as the effect will be to stifle the claim.
3. The causes of the claimant’s impecuniosity:
   The claimant may be able to persuade the court that their poor finances are caused by or contributed to by the defendant’s behaviour.
4. Property within the jurisdiction:
   Where the application is made against a claimant resident outside the EU, court is unlikely to grant security if they have sufficient assets within the jurisdiction that would be available to meet the defendant’s costs.
5. The timing of the application:
   The order should be made as soon as practicable.