Security for Costs in Victoria
Introduction
It is well known that lawyers and court proceedings are expensive. In a court proceeding, if one party is successful, the court may order that the other party, whether that be the plaintiff or defendant, pay the legal costs of the successful party. This serves as a deterrent for people who may bring an unwinnable case to court, as they will not only be paying their own legal fees, but the fees of the other party as well.
In some cases, though, defendants have no choice but to go to court, and if they are successful, the court will order the plaintiff to reimburse the defendant for their legal costs. This order, however, is useless if the plaintiff does not have the assets to satisfy those orders.
Order for security for costs
Regulation 62.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic), the County Court Civil Procedure Rules 2018 (Vic) and the Magistrates’ Court General Civil Procedure Rules 2010 (Vic) all provide their respective Victorian state courts a discretion to grant a defendant an order for security of costs, in certain circumstances.
In these circumstances, where the plaintiff may be in a precarious position financially, it is up to the defendant to persuade the court that an order for security for costs be made.
Considerations
When deciding whether to make an order for security of costs, the court considers a number of factors.
The decision of US Realty Investments LLC #1 & Ors v Need [2013] VSC 590 (“US Realty”) serves as a strong precedent for courts to follow when deciding whether or not to grand the order for security for costs, under regulation 62.02 specifically. But can be applied to all Victorian courts and their decision-making process.
The court will consider:
The Plaintiff’s prospects of success, the more likely their case is to succeed, the less likely they are to make the order against them
Potential for stultification. The principle of stultification suggests that the court will not order security for costs if doing so would preclude the plaintiff from properly pursuing their legitimate case
Whilst stultification will not in and of itself prevent the court from granting the defendant security for costs, it can act as a powerful factor in favour of the plaintiff in the court’s consideration
The key consideration though, is an overall consideration of fairness to the proceedings and to whether an order for security of costs should be made to the plaintiff.
Decision in US Realty
Associate Justice Derham concluded in US Realty that the court must determine whether it is fair that a defendant be in the position of having to incur substantial costs and being at risk of liability for the plaintiffs’ costs, and yet have no real chance of recovering costs even if the plaintiffs’ proceeding is unsuccessful, when they are in a position who would benefit from the proceeding if they are successful.
In this case, the plaintiff was ordered to provide security for costs.
Conclusion
In the pursuit of fairness, courts will, after considering all relevant factors, decide whether to grant an order for security for costs to protect defendants in the event they win their case, but could still suffer the extensive costs of litigation.
To learn more about any of the matters discussed here, or if you require legal assistance, please contact Chris Moshidis, Director and Principal Lawyer on +61 3 9521 7956 or chris@urbanlawyers.com.au.