Security for costs: when the court orders it and how much

Security for costs is governed by CPR Part 25. The grounds include that the claimant is resident outside the jurisdiction in a state where enforcement would be difficult; that the claimant is a company and there is reason to believe it will be unable to pay the defendant’s costs if ordered; that the claimant has changed address to evade the consequences of litigation; or that the claimant has taken steps in relation to assets that would make enforcement difficult.

Satisfying a ground is necessary but not sufficient. The court must also be satisfied that it is just to order security, having regard to all the circumstances. Factors include the strength of the claim, whether the application is being used oppressively to stifle a genuine claim, the timing of the application and any delay.

Applications should be made promptly, ideally once the defendant has the information needed to justify one. Late applications risk refusal or a reduced award, particularly for costs already incurred. A preliminary letter requesting voluntary security is generally expected before applying.

Evidence should address the ground relied on, for example accounts showing a company’s financial position, together with a reasoned estimate of costs. Claimants resisting security will often argue impecuniosity was caused by the defendant’s conduct, or that an ATE policy provides adequate protection.

The court does not conduct a detailed assessment at this stage, but it does expect a credible estimate, often in the form of a Precedent H style breakdown. It typically discounts estimated costs to reflect the likely reduction on assessment, and may order security in tranches tied to stages of the litigation.

Where budgets have been approved, they provide a useful reference point. Where they have not, a properly reasoned estimate prepared by a Costs Lawyer can carry significant weight and help avoid either over-asking, which undermines credibility, or under-asking, which leaves the defendant exposed.

Security is commonly provided by payment into court, a bank guarantee, a solicitor’s undertaking or, in some cases, an ATE policy with an appropriate deed of indemnity. The court will specify the amount, form and timing.

If security is not provided as ordered, the court will often stay the claim and may ultimately strike it out. Claimants should therefore budget for the possibility early, particularly in commercial claims brought through special purpose vehicles or by overseas parties.