Security For Costs – Recent Developments

The last 18 months has seen several important developments in the case law relating to applications for security for costs. This article seeks to summarise those developments and the circumstances in which an order for security for costs may be available.

INTRODUCTION

An order for security for costs typically protects a party defending a claim (or an appeal), the policy consideration being that a defendant should not be exposed to the risk that it will win at trial and be awarded its costs, but be unable to enforce a costs order against the claimant because, for example, of the claimant's impecuniosity. An order for security for costs requires a claimant (although sometimes a third party) to provide an acceptable form of security (whether by way of a payment of money into court or bond or guarantee) to meet, if required, the defendant's litigation costs.

An order for security for costs is typically available if one or more grounds exist which point to a risk that it will not be possible to enforce a costs order against the party bringing a claim. The primary grounds are contained in CPR 25.13(2):

The claimant is resident out of the jurisdiction and outside the states covered by the Recast Brussels Regulation, the Brussels Convention, the 2007 Lugano Convention, or the 2005 Hague Convention (CPR 25.13(2)(a)). The claimant is a company or other body (whether incorporated inside or outside Great Britain), and there is reason to believe that it will be unable to pay the defendant's costs if ordered to do so (CPR 25.13(2)(c)). The claimant has changed its address since the claim was commenced with a view to evading the consequences of the litigation (CPR 25.13(2)(d)). The claimant has failed to provide its address in the claim form or has given an incorrect address (CPR 25.13(2)(e)). The claimant is acting as a nominal claimant, other than as a representative claimant under CPR 19, and there is reason to believe that it will be unable to pay the defendant's costs if ordered to do so (CPR 25.13(2)(f)). The claimant has taken steps in relation to its assets that would make it difficult to enforce an order for costs against it (for example, dissipation of assets or transfer of assets abroad) (CPR 25.13(2)(g)). However, establishing one of the grounds in CPR 25.13(2) is not enough by itself. The court must also be satisfied "having considered all the circumstances of the case that it is just to make such an order" (CPR 25.13(1)).

RECENT DEVELOPMENTS

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