How to respond to a Security for Costs Order?

9-March-2021 Commercial Disputes By Jamal Bakalian

Are you the Plaintiff in an intensely litigated matter? Has the Defendant filed a Security for Costs order against you? Not sure how to respond? Senior Solicitor Jamal Bakalian shares some insights on this topic. Read on to find out more…

In a nutshell, here’s what you need to know about Security for Costs applications:

1. They are commenced by the Defendant

  • An application for Security for Costs will be commenced by a Defendant if they have doubts about the Plaintiff’s ability to pay costs incurred by the Defendant if ordered (generally in the event that the Plaintiff is unsuccessful in the proceedings).
  • A Security for Costs application could also be used purely as a tactical strategy against the Plaintiff to waste their time and money – and therefore your response to the Application must be considered and very carefully thought out.

2. The Court has the power to order Security for Costs at their discretion

The Court has to be satisfied of the following before it will grant the Defendant the orders it is seeking:

  1. That the whole proceedings were been brought quickly and without delay by you, the Plaintiff;
  2. The Court will consider the strength and merit of the Plaintiff’s whole case;
  3. Whether the Plaintiff’s impecuniosity (or lack of financial viability) was caused by the Defendant’s conduct the subject of the claim;
  4. Whether the Defendant’s application for Security for Costs is oppressive, that is, whether it is being used to deny a Plaintiff their right to litigate;
  5. Whether there are any persons supporting the Plaintiff who are likely to benefit from the litigation and who may be willing and able to provide the necessary security;
  6. Whether those supporting the Plaintiff have offered a personal undertaking to be liable for the costs if ordered against the Plaintiff; and,
  7. Whether the Plaintiff is merely defending themselves and thus is forced to litigate.

3. The onus of proof lies with the Defendant

  • The Defendant has to establish that you, the Plaintiff, do not have sufficient financial means to support any costs order made against you in the event you are unsuccessful in your case against the Defendant.
  • Therefore, the Defendant will likely argue that you should provide security by transferring an amount of funds to be held by the Court.
  • The amount of funds to be transferred will usually be calculated by reference to the likely costs of defending the proceedings, having regard to the issues between the parties at that point in time.

4. The Court will generally lean towards granting a Security for Costs application

  • It is true that the Court will generally lean towards making orders in favour of a Security for Costs application, however this will depend upon whether clear evidence can be established that rebuts the allegation that the Plaintiff is not financially viable.
  • Therefore, you, as the Plaintiff, will need to be prepared to show that either you personally or your company, has assets or cash flow that is substantial enough to support a costs order being made against you if you lose the proceedings.

5. Sometimes this can be solved outside of Court

  • One of the recommended approaches in these circumstances is to try to solve the issue without the need for a separate Court Hearing on the Security for Costs Application.
  • This may involve sending clear documentary evidence of financial viability to the Defendant or if this is not possible, then agreeing to a set of terms between the parties about a sum of money to be held as security may be the best option.
  • We will work closely with you to find the most suitable solution.

What is the bottom line?

If you have been served with a Security for Costs Application it is very important that you DON’T PANIC! Your trusted legal team at Streeterlaw will help you break down the situation which usually involves taking the following immediate steps:

  1. Assessment of your or your company’s assets.
  2. Liaising with your or your company’s accountant and/ or financial advisors to obtain documentary evidence of your financial viability.
  3. Preparing a detailed response to the Defendant evidencing your financial status or that of your company to ward off the Application.

Our goal is to ensure that you do not need to be dragged into more costly and lengthy court processes than what is absolutely necessary. Therefore, your commercial litigation team at Streeterlaw will approach the situation with a sharp, strategic mindset to help you find a way to deal with this application as efficiently as possible.

Speak to one of Streeterlaw’s specialist commercial litigation Solicitors today by calling 02 8197 0105 to alleviate your concerns and take the first steps towards navigating your way through this issue.

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Written by Jamal Bakalian

Jamal Bakalian

After studying a double degree in Law and International & Global Studies at Sydney University, Jamal completed her GDLP at the College of Law. She is currently undertaking her Masters of Law (majoring in Commercial Litigation). Jamal has been practicing Law for 5 years. With a passion for resolving disputes, Jamal is a valuable member of the Commercial Litigation team at Streeterlaw.

Call us on 02 8197 0105 to book an appointment with Jamal Bakalian!

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