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It seems odd that a corporate plaintiff should have to tender money to the court before the matter has even concluded. The general rule is that costs follow the event. A litigant is (normally) only required to make payment after the issue of a judgment or costs order against them. However, there are limited circumstances in which a corporate plaintiff will be asked to provide security for costs at the outset of a matter.

A security for costs order may be imposed on a corporate plaintiff where there is a reason to believe that they will not be able to meet the defendant’s claim should they lose. The court will not usually impose the order of its own volition but will wait till the defendant requests it.

Factors that a court will take into account in issuing an order

The courts will not order that security for costs be provided merely because the corporate plaintiff is impoverished, although this is a relevant factor. In deciding whether to impose such an order the Courts will take into account a myriad of factors, including, but not limited to:

  • the means of persons who stand behind the company;
  • the prospects of success or the merits of the litigations;
  • whether the defendant’s conduct in some way contributed to the
    corporate plaintiff’s financial circumstances;
  • whether the corporate plaintiff is the party attached and is in essence occupying the position of a defendant;
  • whether an order for security for costs would be oppressive to the corporate plaintiff;
  • whether an order would hamper the litigation;
  • any pre-existing special relationships between the parties to the proceedings;
  • whether the litigation involves a matter of public interest which should be tried;
  • whether there has been an admission;
  • whether there has been a delay in bringing proceedings;
  • the relative cost of enforcement procedures; and
  • the risk of dissipation of assets

Limitations upon the court’s power to issue a costs order

The courts will be reluctant to issue an order for the security for costs if it would result in the corporate plaintiff not being able to put forth a complete case. Another reason the courts might shy away from issuing such an order is if it would otherwise amount to oppressive conduct, i.e. by shutting down a small company from making a genuine claim against a much larger company because of its small resource base.

In any event, before an order for the security for costs will be issued, the court must satisfy itself that credible evidence has been presented which substantiates and warrants the issuing of such an order.

Failure to comply with a security for costs order

A corporate plaintiff that fails to adhere to the terms of a security for costs order is liable to have their matter dismissed.

Conclusion

Would you like to know more about security for costs? Our team of experienced LegalVision lawyers would be happy to assist you with any queries that you may have. Contact us today to see how we can help.

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