Security for Costs in Civil Litigation: A Practical Guide

Security for costs is one of the most strategically important interim applications in civil litigation. It is not only a protective mechanism for defendants but also a powerful tactical tool.

If the court orders security and the claimant fails to provide it within the time specified, the proceedings are usually stayed and then struck out automatically. This means that security for costs can effectively bring a claim to an end if the claimant is unable – or unwilling – to comply.

For defendants worried about the claimant’s ability to pay costs, or concerned that a claimant may be taking steps to avoid eventual enforcement, security for costs can be critical.

1. What Is Security for Costs?

Security for costs is a court order requiring the claimant (or sometimes an appellant) to provide financial security—often a payment into court or another approved form of guarantee—to protect the defendant’s ability to recover legal costs if the claim fails.

It does not determine the merits of the case. Its purpose is to prevent a defendant from facing the risk of irrecoverable costs.

Security is primarily governed by CPR 25.12–25.15.

2. Who Can Apply for Security for Costs?

Security for costs is usually sought by defendants, but it may also be sought by:

– a Part 20 defendant

– a respondent to an appeal

3. The Statutory Grounds: CPR 25.13

The court may order security for costs only if:

1. A) A statutory ground exists

Common grounds include:

– the claimant is resident outside the jurisdiction (CPR 25.13(2)(a))

– the claimant is a company or LLP and there is reason to believe it will be unable to pay the defendant’s costs (CPR 25.13(2)(c))

– the claimant has failed to provide a correct address

– the claimant has changed address to evade enforcement

– the claimant has taken steps to put assets beyond reach

1. B) The court considers it just to make the order

The court weighs:

– the claimant’s right to pursue a claim

– the defendant’s right not to incur irrecoverable costs

– the likelihood of enforcement difficulties

– whether the order would stifle the claim

– proportionality

4. Key Principles the Court Applies
5. The court does not decide the merits

There is no mini-trial. Merits are relevant only if the claim is “fanciful”.

2. Fairness to both parties

Security should protect the defendant while allowing genuine claims to continue.

3. Proportionality

Security must reflect realistic expected costs and cannot be oppressive.

4. Risk of stifling the claim

If the claimant can show the order will prevent them from proceeding, the court may refuse security—but this requires detailed evidence.

5. Enforcement difficulties

Where enforcing a costs order abroad is uncertain or expensive, security becomes more likely.

5. Security for Costs Against Corporate Claimants

Under CPR 25.13(2)(c), security may be ordered if there is reason to believe a company will be unable to pay a defendant’s costs.

Indicators include:

– insolvency or near insolvency

– lack of reliable financial disclosure

– use of asset-light or offshore structures

– shell or dormant companies

Third-party funding does not avoid security unless the funder provides a costs undertaking.

6. Security for Costs Against Individuals

Although uncommon, security for costs may also be ordered against individuals. The statutory grounds are identical but applied cautiously because of the greater risk of stifling a claim.

Security may be ordered where the individual:

– resides outside the jurisdiction

– has failed to give a correct address

– has changed address to evade enforcement

– has taken steps to put assets beyond reach

– presents a real enforcement concern

Key principles:

1. Impecuniosity alone is not a ground

There is no equivalent to CPR 25.13(2)(c) for individuals.

2. Residence abroad is often the strongest factor

Security is likely where enforcement of a UK costs order would be difficult.

3. Evidence of evasion or dissipation is persuasive.
4. The court will avoid stifling a legitimate claim

Claimants must provide detailed evidence if they argue the order would prevent the case proceeding.

7. How Security May Be Provided

Common forms include:

– payment into court

– bank guarantee

– bond

– solicitor’s undertaking

– deed of indemnity

– ATE insurance (in limited situations)

The method must be reliable and proportionate.

8. Security for Costs in Appeals

Security is more readily granted on appeal because:

– the appellant has already lost once

– appeal costs are substantial

– the respondent should not face double enforcement risk

9. Practical Considerations for Claimants

Claimants resisting security should:

– provide financial evidence

– demonstrate real prospects of success

– show (with documents) that security would stifle the claim

– offer partial or alternative security if appropriate

10. Practical Considerations for Defendants

Defendants should:

– apply promptly

– present evidence of enforcement risk

– produce realistic and proportionate costs budgets

– explain why normal enforcement procedures are inadequate

– consider staged security

Conclusion

Security for costs serves an essential protective function in civil litigation. It allows defendants to defend claims without fear of irrecoverable costs, while ensuring claimants with legitimate cases can still proceed.

Its tactical value is significant: if a claimant fails to provide ordered security, their case will usually be stayed and then struck out.

Understanding the legal framework, strategic considerations, and evidential requirements is essential whether applying for or resisting security.

DISCLAIMER: The information provided on this blog is for general guidance only and does not constitute legal advice. If you require tailored legal advice, please contact us to discuss your specific circumstances.

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