In a court proceeding, the general rule is that the court will order the unsuccessful party to pay the legal costs of the successful party. But what happens when the unsuccessful party doesn’t have enough money to pay? If you are successful, this concern can be particularly relevant when the other party is an overseas resident and it’s unclear whether the court can force them pay your legal costs. However, if you are concerned that the other party will not be able to pay your costs if you succeed, you can apply to the court to make them pay a certain amount of money to the court as security. This article will explain what you should consider when deciding whether to apply for a security for costs order.

Applications for Security for Costs Against Overseas Parties

There are a number of circumstances that may justify an application to make the other party pay money as security for your potential costs.

What Are the Relevant Considerations?

The considerations include:

  • the prospects of success of the proceedings;
  • how much money the other party has;
  • whether an order for security for costs would hinder the proceedings;
  • the cost of the proceedings;
  • the timing of your application;
  • whether an order for costs made against the other party would be enforceable within Australia; and
  • how difficult it would be to enforce an order for costs in the other party’s country.

The last two factors often form the basis for applications made against overseas parties.

When is it Difficult to Enforce a Costs Order Against an Overseas Party?

If the other party lives overseas and has no assets in Australia, the court will be more likely to order security for costs. However, this might be outweighed by other considerations such as whether:

  • the other party has assets in a foreign country where the costs order can be enforced;
  • how complex and costly it may be to enforce the costs order in that country; and
  • whether the assets can be easily moved.

For example, in a case involving the musician Flo Rida, he did not reveal what assets he had and he appeared to have an unpaid tax debt. With these factors in mind, the court decided to grant an order for security for costs.

Deciding Whether to Make an Application for Security for Costs

To work out whether or not you should make an application for security for costs, you should identify:

  • any property the party owns (whether an individual or a company);
  • where the party is living and where they hold citizenship;
  • whether the party is a director or shareholder of an Australian company;
  • whether the party is currently enrolled to vote with the Australian Electoral Commission; and
  • whether the party has filed any tax returns in recent years.

Any evidence that establishes whether they have a link to Australia is relevant. If you can establish that the other party does not usually live in Australia and does not have any assets within Australia, it is then the other party’s responsibility to argue why they should not have to pay security for costs. If they are unable to make a good argument, they will have to pay this security.

What if the Other Party Has Assets Overseas?

Even when the other party has assets overseas, the court will consider whether or not those assets can be easily accessed to enforce a costs order. Furthermore, the court will consider whether there are any reciprocal laws in place between Australia and the country where the other party lives that would make enforcing the Australian judgment easier.

However, a reciprocal arrangement may not help in every case. Although a foreign country may have a reciprocal enforcement arrangement in place with Australia, it will likely only apply to specific types of judgments from certain courts. Furthermore, the relevant foreign court may also review the Australian judgment before it decides whether they will enforce it. It is important to be aware of these potential hurdles.

Key Takeaways

When you begin a court case, you may have legitimate concerns about whether the other party will be able to pay your legal costs if you win. This may be due to a number of factors, including that the other party does not usually live in Australia. If the other party appears to be overseas and doesn’t have any legitimate ties to Australia, you should consider making an application for security for costs. 

If you would like to know more about security for costs or need assistance making an application, you can contact LegalVision’s litigation lawyers on 1300 544 755 or fill out the form on this page.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

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