Lawpath Blog
Security for Costs: An Explainer

Security for Costs: An Explainer

Are you worried that you will not recover the costs from a party that is trying to sue you? Why not apply for security for costs? Find out all about them here.

29th April 2019
Reading Time: 2 minutes

It is no secret that going to court can be expensive. Between legal, court and administrative fees, the costs of going to court can pile up. This can be challenging when encountering claims with a low possibilities of success. You may know that the losing party will pay the winner party’s costs. But what if they are unable to pay, can your costs still be recovered? A ‘security for costs’ order is a potential solution, providing you peace of mind. Keep reading to find out what you need to know.

What Is Security for Costs?

‘Security for costs’ is a Court order for one party to provide security in case they lose the court proceedings. These orders are made when the defendant believes that the plaintiff, the party that is suing, may not be able to pay costs if they lose the case. Its purpose is to provide protection to defendants from losing money from unsuccessful claims. However, a security for costs is always an option for the court, and not an intrinsic right that you have as a defendant. Furthermore, the security is given to the court and not the opposing party.

What Factors Are Relevant for a Security for Costs Order?

While you have a legitimate interest in making sure you recover costs, a court will not always grant you a security for costs order. When making its determination, the court will weigh up your interests with the need to not disadvantage poorer plaintiffs. In weighing up these considerations the court will consider the following factors:

  • The likelihood of success by the plaintiff. In cases where there is a low probability of success, the court is more likely to make an order for security for costs.
  • The Court will also consider why the proceedings are occurring. If the case is ‘genuine’, the court is unlikely to make an order.
  • The wealth of the plaintiff. Typically, poorer plaintiffs will have to provide security in court proceedings. Furthermore, companies are more likely to be required to pay security than individual plaintiffs.
  • Other factors that the Court deems relevant to their analysis.

How Do I Apply for an Order?

Typically, you will apply to the court, to make an order for security for costs. The court will take into account an estimate of your likely courts for the amount of security that it demands from the plaintiff. Keep in mind, that if you are bringing the proceedings, through lodging a statement of claim, you will generally not be entitled to ask the court to make an order. Furthermore, if the plaintiff fails to comply with the order, the proceedings may be dismissed by the court.

Conclusion

Therefore, if you are concerned about being able to recover your costs, consider applying for a security for costs order. Given the complexities of making an application and the general court process itself, it is wise to get into contact with a lawyer for relevant legal advice to your circumstances.

Unsure where to start? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace

Author
Lachlan Ward

Lachlan is an intern at Lawpath as part of the content team. He is currently studying a Juris Doctor at the University of Sydney. Lachlan has a keen interest in corporate law and commercial litigation.