Security for costs – CPR 25

CPR 25 governs a list of interim remedies available to parties in court proceedings. Amongst others, an application for security for costs, is often made by parties and used as a ‘tactic’ during the litigation process as it may potentially discourage a claim or counterclaim.

Further to our previous articles on litigation tactics in court proceedings, in which we explored CPR 18 – requests for further information relating to pleadings; CPR 31 – applications for specific disclosure and inspection of documents; and part 36 offers for settlement under CPR 36. In this article, an overview of the application for security for costs under CPR 25, will be provided.

What is an order for security for costs?

A security for costs application is often made early on in the proceedings, by a defendant who has concerns over a claimant not being able to pay the costs ordered against them, should the defendant successfully defend the claim and win at the end. When a security for costs order is made by the court, the claimant will be required to ‘deposit’ an amount of money (to be determined by the court) into the court within a specified period of time, as ‘security’ for the defendant to (incur the costs to) defend its claim. Other types of security could be ordered / agreed (e.g. an ATE policy). Usually, failure to meet an order for security after a reasonable time would mean that the claimant would not be permitted to continue with its claim.

An application for security for costs can also be made by a claimant, should the defendant bring a counterclaim; or against an appellant / respondent in an appeal. Therefore, such application does not only serve as a tactic, it also serves as a useful tool to safeguard a party.

What is required for a security for costs application?

Under CPR 25.27, the court may make an order for security for costs if:

• Having regard to all the circumstances of the case, it is satisfied that it is just to make such an order
• The claimant resides outside of England and Wales
• The claimant is a company and there is reason to believe that it will be unable to pay the defendant’s costs if required to do so (regardless it is incorporated inside or outside of England and Wales)
• The claimant has changed its address since the claim was issued with a view to evade the consequences of the litigation
• The claimant failed to provide its address in the claim form, or gave an incorrect address
• The claimant is acting as a nominal claimant (meaning it is claiming for the benefit of another party) and there is reason to believe that it will be unable to pay the defendant’s costs when ordered to do so
• The claimant has taken steps in relation to their assets that would make it difficult to enforce an order for costs against them

An application for security for costs must be supported by written evidence, which will need to demonstrate any of the above (i.e. company accounts suggesting uncertainties in its finances).

The court will consider whether an order for security for costs would stifle a genuine claim.

Should you require advice as to applying for or opposing a security for costs application, please do not hesitate to contact our commercial litigation team here.