IMS Law

Generally, the question of who pays for the costs of a claim is not determined until the claim is finally disposed of, whether by consent, interim process or trial. This is because the usual rule is that the successful party recovers costs from the loser and the outcome on the merits is only known when judgment is obtained. It is for this reason that the parties are not generally allowed to anticipate the eventual costs order by asking for interim orders that their opponents provide funds as security to pay for the costs of the action. Despite this, it is accepted that there have to be exceptions for cases where there is a significant risk of defendants suffering the injustice of having to defend proceedings with no real prospect of being able to recover costs if they are ultimately successful.

An order for security for costs can only be made: (a) before judgment, or (b) for the costs of an appellant, or of a respondent to an appeal who also appeals. Once security is given it may be retained, subject to the court’s discretion, pending an appeal. An order for security for costs usually requires the claimant to pay money into court as security for the payment of any costs order that may eventually be made in favour of the defendant, and staying the claim until the security is provided. On the application three matters arise:

(a) whether there are grounds for ordering security for costs;

(b) if so, whether the court's discretion should be exercised in favour of making the order; and

(c) if so, how much security should be provided.

Each of these three matters will be considered after first looking at the procedure for making the application and the capacity of the respondent to the application.