The court set out the principles to be applied by the court upon an application for security for costs.
1. The court has a complete discretion whether to order security, and accordingly it will act in the light of all the relevant circumstances.
2. The possibility or probability that the plaintiff company will be deterred from pursuing its claim by an order for security is not without more a sufficient reason for not ordering security. It is implicit that a company may have difficulty meeting an order.
3. The court must balance the injustice to the plaintiff prevented from pursuing a proper claim against the injustice to the defendant if no security is ordered and at the trial the plaintiff’s claim fails and the defendant finds himself unable to recover his costs. The power must neither be used for oppression by stifling a claim particularly when the failure to meet that claim might in itself have been a material cause of the plaintiff’s impecuniosity, nor as a weapon for the impecunious company to put pressure on a more prosperous company.
4. The court will look to the prospects of success, but not go into the merits in detail.
5. In setting the amount it can order any amount up to the full amount claimed by way of security, provided that it is more than a simply nominal amount; it is not bound to make an order of a substantial amount.
6. Before refusing security the court must be satisfied that, in all the circumstances, the claim would be stifled. This might be inferred without direct evidence, but the court should also allow that external resources might be available.
7. The lateness of the application can properly be taken into account.
Peter Gibson LJ: ‘The court will properly be concerned not to allow the power to order security to be used as an instrument of oppression such as by stifling a genuine claim by an indigent company against a more prosperous company. But it will also be concerned not to be so reluctant to order security that it becomes a weapon whereby the impecunious company can use its inability to pay costs as a means of putting unfair pressure on the more prosperous company’.
And ”Before the court refuses to order security on the ground that it would unfairly stifle a valid claim, the court must be satisfied that, in all the circumstances, it is probable that a claim would be stifled . . the court should consider not only whether the plaintiff company can provide security either from its own resources to continue the litigation, but also whether it can raise the money needed from its directors, shareholders or other backers or interested investors. As this is likely to be peculiarly within the knowledge of the plaintiff company, it is for the plaintiff to satisfy the court that it would be prevented by an order for security from continuing the litigation.’
Peter Gibson LJ
[1995] 3 All ER 534
England and Wales
Citing:
Cited – Farrer v Lacy, Hartland and Co 1885
The court will seek not to allow the power to order security for costs to be used as an instrument of oppression, by stifling a genuine claim by an indigent company against a more prosperous company, particularly when the failure to meet that claim . .
Cited – Okotcha v Voest Alpine Intertrading GmbH CA 1993
When deciding whether to order security for costs, the possibility or probability that the plaintiff company will be deterred from pursuing its claim is not the sole deciding factor. . .
Cited – Roburn Construction Ltd v William Irwin (South) and Co Ltd 1991
When making an order for security for costs, the court will normally order a substantial sum, but need not. . .
Cited – Sir Lindsay Parkinson and Co Ltd v Triplan Ltd CA 1973
The court exercises a full discretion when ordering security for costs.
Where a plaintiff who is ordinarily resident out of jurisdiction has no assets within it, he or she may still yet convince the court against ordering security for costs if . .
Cited – Trident International Freight Services Ltd v Manchester Ship Canal Co 1990
There was evidence that the plaintiff was no longer trading, and that it had previously received support from another company which was a creditor of the plaintiff company and therefore had an interest in the plaintiff’s claim continuing. The court . .
Cited – Porzelack KG v Porzelack (UK) Ltd 1987
When considering an application for security for costs against a litigant resident in the EU, the courts must allow for the new additional scope for enforcement of any judgment under the 1982 Act. In this case, an order for security for costs . .
Cited – Pearson v Naydler 1977
That the statute required it to be likely that a company might find it difficult to pay costs before allowing a requirement for security for costs, indicated that an order may be expected to cause difficulty. However the court will not allow an . .
Cited by:
Applied – Danemark Limited v BAA Plc CA 16-Oct-1995
The defendant had obtained an order or additional security for costs against the defendant company (registered with andpound;100 share capital) under the section. It appealed. There was evidence to suggest some fraud by the plaintiff, but also that . .
Cited – Al-Koronky and Another v Time Life Entertainment Group Ltd and Another QBD 29-Jul-2005
The defendant to the defamation claim sought security for costs. There had been allegations of dishonesty on either side.
Held: The court should not, upon such an application, enter into the merits of the case in any detail, save in the . .
Cited – Al-Koronky and Another v Time-Life Entertainment Group Ltd and Another CA 28-Jul-2006
The claimants sought damages after publication of articles alleging severe mistreatment of a servant. One defendant had settled and apologised, but the defendant publisher and author had persisted with the allegation. The claimants who lived in . .
Cited – Spy Academy Ltd v Sakar International Inc CA 23-Jul-2009
Claimant’s appeal against order for security for costs. An order had been returned having been sent to the correct address, but to the wrong person, it was returned. On the claimant appearing by its director the judge made the order.
Held: The . .
Cited – MG v AR FD 16-Nov-2021
Family Case: Costs Security depends on Case Merits
Application for security for costs in family cases.
Held: In contrast to civil cases generally, in a family case the merits of the application and the strength of the defence necessarily have to be carefully considered. It is only by . .
Lists of cited by and citing cases may be incomplete.
Costs, Litigation Practice
Updated: 22 November 2021; Ref: scu.183481