The Three-stages of Security for Costs

June 11, 2024
|In LITIGATION
|By admin

 

What is Security for Costs

Security for costs is an application that a party (Defendant during the proceedings) can make where they believe the other party (the Claimant) does not have the financial means to pay any legal costs awarded to the Defendant should the Claimant’s claim be unsuccessful at trial.

Who can apply for Security for Costs

Usually, an application for security for costs is made by a Defendant, however there are some circumstances where an application can be made by the Claimant (i.e. if the Defendant has made a counterclaim).

 

The 3-stage process that the Court consider

When the Court considers a security for costs application, there are three stages which are as follows:

  1. Grounds for Security for Costs
  2. Whether the Court should exercise its discretion
  3. Quantum

Grounds for Security for Costs

There are a number of grounds that the Applicant (the person making the application) must satisfy in their application (but not limited to) such as:

  • Whether the Respondent resides outside of the UK (or is not a resident in a State bound by the 2005 Hague Convention)
  • The Respondent’s address is incorrectly stated on the claim form
  • The Respondent’s address is omitted from the claim form
  • The Respondent has changed their address during the proceedings with the intention to avoid the cost consequences of the court proceedings.

What the Court’s take in to account

Applications for security for costs are usually dealt with at a hearing.  The Court will consider all the relevant factors but not limited to the following points to decide whether the Court should exercise its discretion:

  • Whether the grounds for Security for Costs have been satisfied
  • How long the Applicant took to make the application
  • The financial position of the Respondent
  • The implications on the Respondent if an order for Security for Costs is made
  • All circumstances of the case
  • Whether the Respondent has After The Event insurance

Quantum

Once the court has decided that the grounds have been satisfied and that they should exercise their discretion to grant an order for security, the Court will then consider the amount of security and what form the security should be given.

Usually, the Applicant would request 100% of all their anticipated legal fees set out in their application (cost budget) however the court would review the Applicant’s anticipated costs and exercise their powers to assess the Applicants costs (like detailed assessment).

 

Conclusion

A party can make an application for security for costs at any stage during the court proceedings however, the earlier the application is made the better.

An Order for Security for costs is discretionary and the court would take in to account the time it has taken for the party to make such application which of course can have a detrimental effect on the court’s decision.

 

This article is provided  for general information only. It is not intended to be and cannot be relied upon as legal advice or otherwise. If you would like to discuss any of the matters covered in this article, please contact us using the contact form or email us on reception@cnsolicitors.com