Costs in Litigation – Security for costs

It is common knowledge that legal proceedings can be costly. All parties in the proceedings generally incur costs whether they are the claimant/plaintiff or defendant. These costs in litigation include professional fees to be paid to your lawyer and/or barrister, filing fees and other disbursements.

Who pays what?

In most instances, the unsuccessful party is ordered to pay the costs of the successful party. It is sometimes the case that despite an order being made for the payment of costs by the unsuccessful party, the unsuccessful party does not have the financial capacity to pay. Essentially, you may end up with a hollow victory.

If it is deemed appropriate, an application can be made by the defendant to the court for security for costs. Such an application should be made promptly and as early as possible in the proceedings.

Security for Costs

The power to order security for costs is discretionary. When making a determination for security for costs, the Court will aim to achieve a balance between the competing interests of both parties, such as:

• avoiding injustice being caused to a Plaintiff by prejudicing it in its proceedings or preventing it from prosecuting its proceedings; and
• the adequate and fair protection of the Defendant against the risk of not recovering its costs if it is successful in the proceedings and costs are awarded in its favour.

Legal considerations of the Courts

Some of the factors which the Court may take into account are set out in the leading case of KP Cable Investments Pty Ltd v. Meltglow Pty Ltd. The factors considered were:

• Whether the application for security for costs has been brought promptly;
• That regard is to be had to the strength of the plaintiff’s case;
• Whether the plaintiff’s impecuniosity (lack of money) was caused by the respondent’s conduct, which is the subject of the claim;
• Whether the respondent’s application for security for costs is oppressive in the sense that it is being used merely to deny an applicant a right to litigate; and
• Whether there are any persons standing behind the applicant who are likely to benefit from the litigation and who are willing to provide the necessary security.

How much is enough?

If the defendant/respondent persuades the Court that an order for security for costs should be made, the amount to be provided will be determined as part of the exercise of the Court’s discretion. The Defendant will need to put on evidence an estimate of its likely recoverable costs. The form of security may include the payment of money into Court, charges, bank bonds or guarantees.

Conclusion

If the plaintiff fails to comply with the order to pay security, then the Court may order that the plaintiff’s proceedings be dismissed. If you find yourself looking to recover any of your costs in litigation and need legal assistance to do so, simply get in touch with LegalVision today at 1300 544 755. Our litigation lawyers are waiting to assist!