Interim applications - Security for costs

1) What legal basis is required for a security for costs application CPR 25

1) Grounds for making an interim application Civil procedure rules (CPR) 25.13(2) The defendant must establish one of the six grounds. Main two are identified here:

1) The claimant is resident out of the jurisdiction (but is not resident in a Brussels, Lugano or Regulation state). CPR 25.13(2)(a)

"Resident"

Individual

*
Habitual or normal residence

*
It is a question of fact

*
Burden of proof is on defendant

Companies

*
Where the company's central management and control is exercise

*
Normally where it is incorporated

2) The claimant is a company or other body (whether incorporated inside or outside GB) and there is reason to believe that it will be unable to pay the defendant's costs if order to do so. CPR 25.13(2)(c)

"Out of the jurisdiction"

Corfu Navigation Co v Mobil Shipping

*
A foreign plaintiff should not be immune from enforcement of a costs order and should not be allowed to proceed without making funds available

*
However an order for security should not follow simply because a party is resident in a non-convention country

*
Court must be satisfied enforcement will be difficult or impossible

Excluding Brussels, Lugano or Regulation State

*

*

This ground is not available for European or Western States Is available for USA, South America, Africa, Far East etc

"Impecunious company"

*

*

Has to be a company, Cannot obtain security against an individual solely on the grounds of Impecuniosity Cannot obtain security against an unincorporated association

*

"Unable to pay costs"

Re Unisoft Group (No.2)

*
Defendant must show the claimant would not be able to pay the defendants costs if the claimant lost - As opposed to may not

*
The question is to be answered at the time of the application although the court can take into account what will be expected in the future

Jirehouse Capital v Beller

*
Recent case which interpreted Re Unisoft in a way which would make security for costs more available for defendants

*
The defendant does not have to show on the balance of probabilities that the company is unable to pay

*
The defendant has to show there is reason to believe the claimant company will not be able to pay even if the claimant company can adduce substantial evidence to the contrary

The total amount of the likely costs

*

The defendant has to show how much their costs have been in the case up until this point as well as likely future costs

2) Exercise of discretion CPR 25.13(1)(a) Even if a ground is established, the court must still exercise its discretion. "It must be just to make an order".

1) The ability of the respondent (claimant) to comply with any order for security for costs

Olatawura v Abiloye

*
The court must balance a) The injustice to the claimant in being prevented from carrying on with the claim if he cannot put up security; with b) The injustice to the defendant in being at risk of costs if no security is provided

2) Other considerations

Sir Lindsay Parkinson v Triplan

*
The court identified the main factors which should be considered in exercising its discretion:

1) Whether the claimant's claim is bona fide and not a sham

2) Whether the defendant is using the application oppressively e.g. to stifle a genuine claim

3) Whether there has been delay in making the application

*
This is because, as a general rule, delay defeats equity and security for costs is an equitable remedy

*
However this is not a hard and fast rule

4) Whether the claimant's want of means has been brought about by the defendant's conduct

2) Parties for a security for costs application

Who can a security for costs application be brought by?

1) By a defendant, against a person in the position of a claimant. This is the usual case.
- CPR 25.12(1)

2) By a claimant, against a defendant in respect of a counter-claim - Neck v Taylor

3) By a third party, against a defendant, in respect of a part 20 claim made by the defendant against the third party

3) Amount and type of security CPR 25.12(3)

1) Amount of security

General rule

The amount of security a court orders is entirely within the court's discretion and will fix a just sum.

Factors the court will take into account

1) The amount of the defendant's likely costs

2) Security can be given for the whole of the action or just up to a point in time e.g. up to disclosure

3) Can include incurred, pre-action and future costs

4) Deduction can be made for detailed assessment or the possibility of settling

5) Other factors such as delay

2) Type of security

1) Payment into court (common) 2) Payment to the applicant's solicitor 3) Bank guarantee 4) Undertaking to pay costs

3) Time within which security is given

1) Usual to be paid immediately or by a specified date

2) Can be paid in stages such as up to and including exchange of witness statements

Buy the full version of these notes or essay plans and more in our Civil Litigation Notes.