Security For Costs Revisited

Introduction

Under Irish procedure, the general rule is that costs 'follow the event' or, more simply, the winning party is generally entitled to its costs from the losing party. In cases where a defendant believes that the case against it is unmeritorious and that the plaintiff would be unable to meet any award of costs made in its favour, it can ask the court to make an order requiring the plaintiff to give security for its costs in the event that the plaintiff does not succeed. If ordered, the need to give such security serves as a condition of being permitted to proceed with the litigation. In this way, security for costs can represent a tactical step by which a defendant can bring pressure to bear on a plaintiff by seeking security for the defendant's costs from the plaintiff before the litigation can proceed further. The case law regarding security for costs is not insubstantial and was recently reconsidered in Oltech (Systems) Limited v Olivetti UK Limited.1 Judge Charleton wryly observed that the fact that success in applications of this type will often bring litigation to an end explains "the lush profusion of authorities that has grown up", and counselled that such applications should be brief.

Background

The plaintiff was the Irish distributor for Olivetti office equipment, supplied by the defendant. It had placed an order for 707 printers, which according to the specification involved would require replacement toner after printing a certain number of pages. The plaintiff entered into a contract with a third party for the supply of printers and the replacement of toner cartridges, the pricing in respect of which was allegedly premised on the specifications provided. This, however, proved unprofitable and the plaintiff refused to pay for the products as ordered, running up a debt of some €2.3 million. While the defendant claimed recovery of that sum in its counterclaim, the plaintiff acted pre-emptively and issued its own claim first for extra costs that it claimed were occasioned by the breach of contract by the defendant. Since its distribution arrangement was terminated as a consequence, it also sought further damages arising from the alleged wrongful termination. In total, the plaintiff claimed some €3 million from the defendant. As part of the proceedings, which had been entered into the commercial list of the High Court, the defendant sought security for its costs, on the basis that the plaintiff would be unable to meet the defendant's costs should the defendant succeed at trial.

Legal principles - the basic test

The court noted at the outset that it is no...