What is Security for Costs?

Security for Costs is a legal remedy regulated by Part II of the Civil Procedure Rules 1998.  It is sought by defendants who feel they are being pursued by someone with “nothing to lose”.  The Claimant may be required to pay money into Court to protect the Defendant’s legal costs.

An application for Security for Costs is only available to a Defendant to a litigated claim.  A Claimant cannot make this application to try and indirectly strike out a defence, although there remains the power to strike out the defence itself.

Security for Costs is the payment of a sum of money into Court, to be held by the Court against the Defendant’s exposure to legal costs arising.  Even where a funding arrangement exists, such an application can be made as the Defendant will have a costs liability upon conclusion of the proceedings either with his/her solicitor or a financier, or both.

A Security for Costs application is an application made to the Court within the existing claim proceedings and is normally sought very early on.  There are certain conditions which the Court usually requires as part of granting such an Order, the most important of which is where there is evidence to believe that the Claimant, if unsuccessful, will not be able to pay the Defendant’s legal costs.

If an Order for Security for Costs is made in the Defendant’s favour, the claim will not proceed until the stated amount of security has been paid into Court by the Claimant.

Can anyone other than the Claimant be required to provide Security?

The financier, or Third party funder, can be required to pay Security for Costs where they share in the proceeds of the claim via a Damages Based Agreement or have taken assignment of the claim.

This balances the interests of both parties, as the Claimant is funded by reason of its lack  of resources and simultaneously the Defendant is at risk that it will incur legal costs that the Claimant (unless the Claimant has After The Event Insurance ) will be unable to pay if unsuccessful.

However, if a financier is subject to an order for Security for Costs, this may influence its ability to continue funding the proceedings and accordingly these circumstances need to be discussed with the funder at the outset.

Benefits of Applying for Security for Costs

The benefit of applying for Security for Costs is that the Claimant now faces a very real risk of loss, such that monies have to be paid into Court and will be lost if the claim is unsuccessful.  Accordingly, this mitigates any risk that litigation funding could become an abuse of process.

The costs will sit with the Court and will comfort both a conventional litigation or a financier (where litigation funding is taken) that the risk of recovering their costs is minimised and means that proper focus can be paid to defending the proceedings.

At Francis Wilks & Jones we are experienced in both issuing and defending applications for Security for Costs, either on behalf of funded or unfunded individuals or companies, and we are willing to discuss such arrangements with you on an initial no obligation basis.

Please call any member of our commercial litigation team for your consultation now on 020 7841 0390.  Alternatively e mail us with your enquiry and we will call you back at a time convenient to you.

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