Strategies for success in dispute resolution: Security for costs

A common concern that can arise at any stage before or during a legal proceeding is what happens if the other party doesn’t have enough money to pay your legal costs? 

As a plaintiff, this is a risk you need to weigh up before commencing legal action: is it worth pursuing a claim against a party you suspect will not be able to pay your legal costs even if you won? As a defendant, if you decide to defend yourself in court, you can apply to the court for an order for security for costs.

Applications for security for costs must be brought promptly, either at the start of a legal proceeding or (if during a proceeding) when new factors come to light putting the plaintiff’s ability to pay into question.

If a Court is satisfied that a Plaintiff may not have adequate funds to cover a Defendant’s legal costs in the event the Defendant were to succeed at trial, the Court can make an order that the Plaintiff pre-pay a sum into Court or give a bank or other form of guarantee. This is an order given by way of “security” in the Defendant’s favour.

These kinds of orders are typically made where plaintiffs reside outside the jurisdiction, where the plaintiff is not suing for their own benefit but for the benefit of another person, or where the plaintiff is a corporation and there is evidence to suggest the plaintiff doesn’t have funds to satisfy a costs order.

The Court will consider a range of factors when deciding whether to grant security, including the strength of the plaintiff’s case, whether the plaintiff’s impecuniosity was caused by the defendant’s conduct (usually argued in response to an application for security), and where there are persons standing behind the Plaintiff who are willing to provide the necessary security.

Matters to consider if defending a legal proceeding:

• Consider conducting litigation and other searches to determine what assets plaintiffs have in the jurisdiction, and seek advice from your lawyer on whether an application for security should be made; and
• Ensure any application for security for costs is brought promptly and think outside-the-square for forms of security that might be acceptable to you.

If you need assistance please do not hesitate to reach out to the author at aaron@pragma.law or direct: (08) 6188 3341.