Security for Costs Applications: Defendant Strategies
TL;DR
Security for costs protects defendants from unrecoverable legal expenses and can create strategic pressure during litigation. Courts assess financial risk, proportionality, and fairness before granting an order. Strong evidence, early timing, and credible cost estimates give defendants the best chance of success when seeking this type of protection.
In civil litigation, defendants often face the challenge of defending claims brought by parties with limited financial means, particularly in complex commercial litigation disputes, where legal costs can escalate quickly.
Beyond its protective purpose, this tool can also serve a tactical function, allowing defendants to apply calculated pressure on claimants and encourage early settlement or realistic negotiations. Understanding how and when to deploy this tool is vital for any defendant who wants to manage risk while maintaining pressure throughout the proceedings.
What Is a Security for Costs Application
A security for costs application is a request made to the court, usually by a defendant, asking the claimant to put forward financial security to cover potential legal costs if the defendant succeeds. It acts as a safeguard for defendants who think the claimant may not be able to cover those costs at the end of the case. When the court approves the request, the claimant must provide the required security or risk having their claim paused or brought to an end.
Security for costs is particularly relevant where specific gateway conditions under CPR 25.13(2) are met. Important distinctions apply depending on whether the claimant is a company or an individual:
Against companies: Security may be ordered if there is reason to believe the company will be unable to pay the defendant’s costs if ordered to do so. This applies regardless of where the company is based.
Against individuals: Security cannot be ordered solely on grounds of impecuniosity if the individual is resident within England and Wales.
However, security may be ordered against individuals who are resident outside the jurisdiction (but not in a state bound by the 2005 Hague Convention), or where other specific gateway conditions are met, such as acting as a nominal claimant with insufficient means, changing address to evade enforcement, or taking steps to put assets beyond reach.
The application serves to protect the defendant from financial exposure and also encourages careful scrutiny of the claimant’s true financial position
Legal Basis and Court Discretion
The grant of security for costs is always a discretionary decision. The court does not apply a rigid rule. Instead, it examines the facts of the case, the financial position of the claimant, the likely costs of the proceedings, and whether enforcement difficulties may arise at the conclusion of the claim. Courts aim to strike a balance between protecting defendants and safeguarding the claimant’s access to justice.
Financial instability, residence outside the jurisdiction, evidence of asset dissipation, or a lack of reliable information can all weigh in favour of granting security. The court will also look at the proportionality of the amount being sought. Excessive or punitive figures are rarely approved. Another important factor is whether an order would unfairly hinder a genuine claim. Courts avoid any outcome that would prevent a claimant from pursuing their case unless the evidence clearly supports the need for protection.
Defendant Strategies for Success
Timing the Application
Timing is one of the strongest aspects of a successful security for costs strategy, particularly in high-value contract disputes where early procedural pressure can influence settlement dynamics. An early application also places pressure on the claimant at a point when procedural steps are still flexible. Delay, on the other hand, can weaken the application and may lead the court to question the defendant’s motives.
Demonstrating Risk of Non-Recovery
A defendant must show a real risk that the claimant will not be able to satisfy a costs order, particularly where attempts to recover legal costs may be ineffective or impossible. This may include proof of insolvency, a lack of assets within the jurisdiction, or steps taken by the claimant that suggest a deliberate attempt to avoid enforcement. The stronger the evidence, the more persuasive the application. Courts are alert to vague or speculative claims, so defendants must support their arguments with clear documentation and credible financial material.
Calculating a Reasonable Level of Security
This is especially important in professional negligence claims, where expert evidence and extended trial preparation can significantly increase projected legal costs. This requires detailed cost estimates that reflect the likely expenditure from the date of the application to trial. Overstating figures can harm the defendant’s credibility and may cause the court to reduce the requested amount. A well-prepared calculation strengthens the application and confirms that the defendant is acting responsibly.
Proposing Acceptable Forms of Security
While cash deposits remain common, courts accept various forms of security as long as they provide reliable protection. Bank guarantees, charges over property, and certain ATE insurance policies are examples of mechanisms that can satisfy the court’s requirements. Offering alternative forms of security can also make the application more palatable and demonstrate the defendant’s willingness to adopt a fair approach.
Using the Merits Carefully
Although the court avoids conducting a mini-trial during a security for costs application, it may consider the overall strength of the defence. A defendant who can point to a strong position may reinforce the argument that granting security is consistent with the interests of justice. However, defendants must exercise caution and avoid extensive submissions on the merits because courts are reluctant to delve into the substance of the dispute at this stage.
Recent Developments and Modern Challenges
Security for costs applications continue to evolve in response to changes in litigation funding, geopolitical uncertainty, and international enforcement issues. Courts now examine ATE insurance policies more closely. They often require anti-avoidance clauses and clear mechanisms that allow defendants to enforce the policy directly if needed. The increased use of overseas claimants, foreign assets, and complex funding structures has also heightened judicial focus on enforcement risks.
Sanctions regimes present an additional layer of difficulty where funds must be transferred across borders. Defendants can rely on these realities to strengthen their argument that enforcement obstacles are likely. These developments require defendants to prepare more detailed evidence and to anticipate practical challenges faced by claimants who may be relying on international fund transfers or third-party funding.
Strategic and Practical Insights
A well-timed and well-evidenced security for costs application can provide significant strategic value. Defendants can use the application to create pressure at key litigation stages. For example, applying shortly before expert evidence, disclosure, or trial preparation can prompt the claimant to reconsider the financial risks of continuing. The application may also encourage settlement discussions or alternative dispute resolution.
Defendants must prepare evidence that is clear and credible. The calculation of costs should be accurate and supported by documentation. They should also anticipate the claimant’s arguments, particularly claims that security will stifle the case. A thorough response that demonstrates the need for protection often strengthens the position.
Claimants, in contrast, must provide detailed financial disclosure if they wish to resist. Failure to do so can significantly undermine their opposition.
Let Our Team Help You
If you are dealing with a dispute where security for costs or enforcement risks may influence the outcome, our civil litigation team can provide clear, focused advice tailored to your situation.Â
We help clients assess financial exposure, prepare strong applications, and respond to complex procedural challenges with confidence. Early guidance can make a significant difference, particularly in cases involving international assets, funding issues, or enforcement uncertainty.
Contact us today to protect your position and move forward with a strategy that supports your objectives.
