Security for costs in civil litigation

Defining security for costs 

The nature of civil litigation is such that it is not always predictable which party will win the dispute. Consequently, the defendant may feel that he has a strong chance to defend the claim alleged against him due to for example a particular defence. However, problem arises because of a concern that if the claimant loses his claim, he would be unable to meet any order of costs made at trial.

In order to protect the defendant of such possibility, there is a provision to make an application that the claimant provides security for costs. If such is granted it requests for the claimant to pay a specific amount of money into court within a period specified in the order.

As can be seen, ordinarily those orders are made by defendants against the claimants. However, such could exceptionally be made by claimants against the defendants in respect of a counterclaim. It is important to note that if the counterclaim is a set-off it is unlikely for security to be ordered.

Conditions for granting security for costs 

Security for costs is available to be ordered only in specific circumstances provided for by the Civil Procedure Rules, rule 25.13(2). Those conditions are:

  • The claimant is resident out of the jurisdiction but not in Brussels Contracting State, a Lugano Contracting State or a Jurisdiction Regulation State, as defined by the CJJA 1982, s1(3);
  • The claimant is a company or other body and there is a reason to believe that it will be unable to pay the defendant’s costs if such action was ordered;
  • The claimant has changed his or her address since the claim was commences with the view to evading the consequences of the litigation;
  • The claimant fails to give his address in the claim form, or provided an incorrect address;
  • The claimant is acting as a nominal claimant, other than as a representative claimant under Part 19, and there is reason to believe that he or she will be unable to pay the defendant’s costs if ordered;
  • The claimant has taken steps in relation to his assets that would make it difficult to enforce an order for costs against him. 

Procedure on application 

The application is made on notice and has to be supported by certain information. This includes written evidence establishing the condition on which the application is based and further providing details dealing with the relevant factors considered by the courts as detailed below.  

On successful application the court will set the amount and specify the time period within which to be paid in court. The practice is to give the claimant reasonable time to comply with the order. The amount is also generally within the court’s discretion. However, that figure should not be illusory or oppressive. In addition, the order can be made in respect of both current and future costs. Further, the amount of security may be increased by a later application to the court.

In practice, it is always helpful for the parties to provide the court with estimate of costs of the proceedings as guidance, however, such is not mandatory. 

Decision of the courts 

Provided that one of the conditions is satisfied, the courts can consider an application for security for costs. Whether such order would then be granted is matter for the court’s discretion. In the course of exercising such, the court will have regard to all the circumstances of the case, and consider whether it would be just to make the order. 

A number of factors have been specified by the courts as important to be considered. Those include overall consideration of the merits of the case. However, the courts need to be cautious not to effectively conduct a mini-trial. Further consideration is whether the defendant would be able to recover costs from someone other than the claimant. In addition, the impact on the claimant if such an order is made is considered as well as any delay in making the application. Of further importance is the risk of not being able to enforce a cost order, and/or difficulty or expense of being able to enforce a costs order, if the defendant is awarded costs. 

When considering those factors, the courts should have regard to the overriding objective of the civil proceedings to deal with cases justly. 

After the trial 

If the defendant has been successful at trial, the money held as a security can be used to pay all or part of the costs accumulated in the proceedings. If there is any surplus after such payment, it must be returned to the claimant. However, situations where a surplus exists are extremely rare. 

On the other hand, if the claimant is the successful party at trial, the money given as security will be returned