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When two parties run a Court case and the Court makes a decision, generally the Court awards costs to the winner of the case. So if a Defendant wins its case, the Court will order that the plaintiff pay the legal costs of the defendant.
In some cases, the Court will make an order for “security for costs” against a Plaintiff. It will only do this if the Plaintiff is a corporation, or if the Plaintiff is out of the jurisdiction. Security for costs is a protection for the Defendant in the event it wins its case but finds it cannot recover its legal costs from the Plaintiff because the Plaintiff has insufficient money.
A typical order for security for costs is that the Plaintiff must pay a set amount of money into a Court fund or supply a bank guarantee.
The Defendant makes the application and usually must persuade the Court that the Plaintiff has insufficient funds to pay the Defendant’s legal costs if it loses.
A Defendant who makes an Application for Security for Costs must also establish by way of appropriate evidence what is likely to be the Defendant’s costs of conducting its defence.
The earlier one makes an Application for Security for Costs the more likely it will be that the Court will grant the Application in the appropriate circumstances.
An Application for Security for Costs is an effective tool to protect the Defendant’s position when a case is brought against the Defendant which case is weak or alternatively when the Plaintiff is in a weak financial position.
The security for costs will not just be given for the asking.
If a Defendant is successful in obtaining an order for security for costs, the Court will stay the proceedings pending the provision of the security. This means that the Plaintiff cannot proceed with the case until it provides the security as ordered by the Court.
There is also an opportunity to bring a further Application for further security for costs if required for example, if there are unforeseen circumstances as to the processes adopted and the cost of the litigation.
If proceedings are brought against you and you are a Defendant it is critical that the position of the Plaintiff is properly considered and an Application be made for security for costs if appropriate.
At Watson & Watson we are experienced in all matters relating to commercial litigation including Application for Security for Costs and other related matters.
If you find yourself in the unfortunate situation of being involved in litigation, please contact Richard Watson or his Personal Assistant Shereen DaGloria to make an appointment so that you can discuss with us the important issues that arise or any concerns you may have regarding an Application for Security for Costs.
This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 02 9221 6011.
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