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Security For Costs

Where parties litigate disputes in Court, costs are generally incurred by both parties to pursue their respective claims. The term “costs” includes legal costs such as professional charges by a solicitor or barrister and disbursements such as Court filing fees, witness fees and process server fees.

It is generally accepted that costs follow the event – this means that the party who fails in the proceedings must pay the costs of the successful party. This rule is designed to compensate the successful party for the legal costs which have been expended to obtain justice. These costs are therefore assessed at the end of a hearing, after judgment has been delivered and the successful party is identified.

However, there are limited instances where the Defendant to a proceeding may make application to the Court seeking that the Plaintiff pays security for costs prior to establishing their case at Court. This situation may occur where the Plaintiff is an individual or corporation located overseas, or even if the Plaintiff is based in Australia, the Plaintiff can be shown to be impecunious. Therefore, the Defendant seeks for the Plaintiff to pay money from the outset as security in case the Plaintiff looses its case against the Defendant and the Plaintiff is ordered to pay the Defendant’s costs.

What is the process?

The application can be made at any stage of the proceedings. It is an interlocutory application and the parties are at liberty to make further applications as need be.

The onus is on the Defendant to show that the Plaintiff should provide security and if so, the amount of the appropriate security.

Notice must be given to the Plaintiff in respect of the Application.

Where a Plaintiff is self represented, security for costs can still be granted. If you are self represented and are served with an application for security for costs, you should seek legal advice as soon as possible.

If the Court grants an application for security for costs, the Plaintiff may be required to pay $10,000 to $70,000 depending on the circumstances. Payment must be made within 14 days, otherwise the proceeding may be stayed until such time that the security is provided.

When can a court use its power to order security for costs?

The power of the courts to order security for cost is discretionary. It is derived from the relevant rules of court. In the case of corporations, this power is also conferred by s1335 Corporation Act 2001(Cth).

When ordering security for costs, the court balances the following competing interests:

  • The Defendant must be protected against the possibility of not recovering its costs if costs are ordered in its favour.
  • The Plaintiff must not be shut out or prejudiced in its action.

The court considers the particular facts of the case. The main considerations are described as follows:-

  1. The impecuniosity of the Plaintiff;
  2. Whether the Plaintiff is a nominal applicant;
  3. The strength and bona fides of the claim;
  4. The residence of the Plaintiff;
  5. Whether an order for security will stifle or end the action;
  6. The stage of the proceedings in which security is sought;
  7. The public interest;
  8. The timing if the application for security

Why choose Berrigan Doube Lawyers?

In choosing Berrigan Doube Lawyers, you can be assured that a dedicated and skilled team of lawyers will be protecting your interests.

Our advice takes into account the commercial reality of dispute resolution such as the costs involved and your likelihood of success, both of which are key considerations in litigation. Our litigation team is also able to advise you on the legal mechanisms available for successful resolution of disputes. We have been involved with cases over the years where we have successfully opposed security for cost applications on behalf of Plaintiffs.

Please contact our office if you have a specific question in relation to security for costs or litigation in general.