Gardner Leader

Security for costs - Don’t let your legal defence leave you out of pocket

Under certain conditions the Civil Procedure Rules (CPR) allow a defendant to apply for an order which requires a claimant to deposit money into court or provide a guarantee or bond for the defendant's costs, or a proportion of them, before it may continue with a claim.  Used properly this can be a powerful weapon in a litigator’s armoury. If you find yourself defending court action, this will provide you with the comfort that there will definitely be funds from which you can recover your costs should you successfully defend the claim. Chris Felton, Partner in the Dispute Resolution Team at Gardner Leader Solicitors in Newbury explains in what circumstances the courts will grant such security:

·         There must be reason to believe that the claimant will be unable to pay the defendant's costs if ordered to do so.  Clear and contemporaneous evidence of this will be needed to substantiate this. You should request the claimant's up-to-date management accounts and any reluctance to disclose them can be used in evidence in support of an application for security.

·         There must a robust defence.  If it is weak or spurious, the court may well consider the application as an attempt to stifle a genuine claim.

·         The court has a wide discretion whether to order security. It will look at all the facts and circumstances and aim to deal with the case justly. If there is any criticism of the manner in which the claimant has conducted the litigation, it should be highlighted.

·         Ensure that the amount of security requested is reasonable and justified. You should be sensible and understand that the court will often only grant security up to a certain stage in the proceedings, leaving you to make a further application at a later date.

• Security may be granted if the claimant resides abroad (and is not a resident of the European Union), as it may be more difficult to enforce court judgements in other such countries. 

As the Defendant, you should be aware that a simple lack of funds is not grounds for obtaining an order against an individual (even if resident overseas) unless he/she is a nominal claimant, i.e. someone suing on behalf of another person.

If your failure to make payment to the claimant has in any way caused the claimant's current financial problems, then the court will usually be reluctant to order security.  Cost capping orders may be more appropriate in these circumstances. 

An application for security is sometimes used tactically by a defendant in order to encourage the claimant to negotiate and settle rather than parting with and tying up its money early in proceedings. However, the application will only be successful if it meets the above criteria for obtaining security.

Finally, the application should be made as soon as the financial circumstances of the claimant become a real concern.  If there is a delay in applying for security, the court may refuse to grant it whatever its other merits. 

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