Security for Costs: Protecting Against Adversarial Litigation Tactics

Introduction

In the realm of civil litigation, parties often engage in strategic maneuvers to gain a tactical advantage. One such tactic is the application for security for costs. This post will delve into the concept of security for costs, exploring its purpose, when it is typically sought, and the factors courts consider when making such orders.

What is Security for Costs?

Security for costs is a court order requiring a party to provide financial security to the other party to cover the costs of the litigation should they lose the case. This is often sought when a claimant is considered to be a "foreign" or "unconventional" litigant, such as a company incorporated in a tax haven or an individual with limited assets within the jurisdiction.

Purpose of Security for Costs

The primary purpose of security for costs is to protect a defendant from incurring substantial legal costs if the claimant is ultimately unsuccessful. By requiring the claimant to provide financial security, the defendant is assured of some recompense if they prevail in the action.

When is Security for Costs Sought?

Courts will typically consider applications for security for costs where:

• The claimant is resident outside the jurisdiction: This is a common scenario, as it raises concerns about the defendant's ability to enforce a costs order against a foreign claimant.

• The claimant is of doubtful financial means: If the claimant is unable to pay the defendant's costs, the defendant may be left out of pocket.

• The claim appears to be vexatious or without merit: Where a claim is considered to be frivolous or has no reasonable prospect of success, security for costs may be ordered to deter such claims.

Factors Considered by Courts

When considering an application for security for costs, courts will typically weigh the following factors:

The claimant's financial position: Courts will assess the claimant's ability to pay the defendant's costs.

 The merits of the claim: If the claim has a low prospect of success, courts may be more inclined to grant security for costs.

 The conduct of the parties: The conduct of both parties, including any delay or abuse of process, may be relevant.

The convenience of the parties: Courts may consider the inconvenience or hardship that the order would cause to either party.

Conclusion

Security for costs is a valuable tool for defendants seeking to protect themselves from the risk of incurring substantial legal costs. While the availability and scope of security for costs orders vary between jurisdictions, the underlying principle remains the same: to ensure that defendants are not left out of pocket if a claimant's claim is unsuccessful.