Isle of Man: An Explanatory Note On Security For Costs Applications

Last Updated: 20 August 2013
Article by   Simcocks

Introduction

A defendant who is engaged in litigation, but feels the claimant may be unable to satisfy any costs order made against him may, in certain circumstances, apply to the court for an order for security for costs.

The rationale behind this is that a defendant will not usually have chosen to be embroiled in litigation (although his behaviour may have been such that the claimant had no other option but to commence proceedings). Defending a claim can cost a considerable amount of money. A defendant's armoury to protect him from the legal costs he may incur includes making an application for security for costs under rule 7.27 of the High Court Rules 2009.

Making An Application For Security For Costs

An application for security for costs is an interim application only a defendant can make in the conditions set out under Rule 7.28. Under Rule 7.28(1) the court has a wide discretion to grant a defendant security for costs. It may grant an order for security for costs if:

(a) it is satisfied, having regard to all the circumstances of the case that it is just to make such an order and

(b) either;

(i) one or more of the conditions in paragraph (2) of Rule 7.28 applies, or

(ii) an enactment permits the court to require Security for Costs.

The conditions are:

(a) the claimant is ordinarily resident out of the jurisdiction;

(b) the claimant is a company or other body (whether incorporated in or outside the Island) and there is reason to believe that it will be unable to pay the defendant's costs if ordered to do so;

(c) the claimant has changed his address since the claim was commenced with a view to evading the consequences of the litigation;

(d) the claimant failed to give his address in the claim form, or gave an incorrect address in that form;

(e) the claimant is acting as a nominal claimant, other than as a representative claimant under Chapter 6 of Part 3, and there is reason to believe that he will be unable to pay the defendant's costs if ordered to do so;

(f) the claimant has taken steps in relation to his assets that would make it difficult to enforce an order for costs against him.

Thus, a court can order security for costs if one or more of the conditions set out in rule 7. 28(2) apply to the case.

Flexton Limited v Breeze dealt with applications for security for costs under Rule 7.28. Deemster Corlett, at paragraph 31 of his extempore judgment stated that, "the purpose of granting security for costs is to give costs protection to a defendant who is forced into litigation at the election of someone else."

A successful application for security for costs will result in the claimant being ordered to pay a sum of money into court. The sum so held by the court can then be used to satisfy all or some of any costs which the claimant may be ordered to pay to the defendant should he/she successfully defend the matter. The overarching condition is that the court will only order security for costs if it is satisfied, having regard to all the circumstances of the case, that it is just to do so. It could be argued that it would therefore be unjust to make an order when to do so would stifle the claimant's claim: for example, by restricting his financial viability or flexibility such that he is no longer able to fund and pursue his claim. In these situations, the court will have to balance the interests of the claimant and the defendant in any order it makes.

Determining The Amount Of Security

The amount of security awarded is at the discretion of the court, which will fix such sum as it thinks just having regard to all the circumstances of the case. The cases of Dinky International SA, Ali v World Duty Free v Pattni,, Bockarie Kakay v. William Frearson, and in the matter of the petition of International Asset Recovery limited, all stated the following with regard to Security for Costs;

"In any cause or matter in which Security for Costs is required, the security shall be of such amount, and be given at such times, and in such manner and form, as the court shall direct".

In some cases the amount of security may be limited to the extra burden or risk involved in seeking to enforce costs orders subsequently obtained. In other cases the amount of security may relate to the total costs likely to be incurred in opposing the claim or appeal but it is seldom the practice to order security on a full indemnity basis.

If security for costs is sought at an early stage of the proceedings, as is often the case, then the court will fix an amount having regard to the costs already incurred by the parties and the costs likely to be incurred in the future. One of the factors for the court to consider is the possibility that the proceedings may soon settle. In such a case it may be a wise decision to make an arbitrary discount of the costs estimated as likely future costs, but there is no hard and fast rule. In essence, the court considers each case on its own circumstances.

In the English case of Procon (GB) Ltd v. Provincial Building Co. Ltd. and Another, which predates the UK's Civil Procedure Rules, it was reported that the security awarded should be such as the court in considering all circumstances of the case thought just, and that any purported practice of making an arbitrary deduction of one third of the estimated party costs was unsupported by either statutory provision or authority, accordingly, the Court of Appeal found that, given that the bulk of the plaintiffs' estimated costs had already been incurred, and that the judge at first instance had accepted the estimated costs as reasonable and had made an appropriate reduction to take into account the likelihood of the estimated figure being reduced on taxation, there were no grounds for interference with the judge's order.

Per curiam. The Court, in the exercise of its discretion as to the quantum of security to be ordered, is entitled to take into account the prospect of settlement, particularly where the security is sought at a very early stage of the proceedings: if the security claimed is based on the assumption that litigation will proceed to a final hearing it may be sensible to discount by as much as one-third.

Moreover, the amount of security allowed often takes into account costs incurred in complying with pre-action protocols. However, in the case of Lobster Group Ltd v Heidelberg Graphic Equipment Limited security for costs was not awarded for the pre-action period, including a lengthy period of mediation, as the costs of mediation were unlikely to be recoverable in the subsequent proceedings and the parties had agreed to bear their own costs of the mediation. Therefore, the court will frequently seek to estimate the likely costs up to a particular stage in the proceedings, e.g. the pre-trial checklist stage.

Determining The Amount Of Security

The court must consider the amount of security which the claimant is likely to be able to raise. The court should not normally make continuation of their claim dependant upon a condition which it is impossible for the claimant to fulfil. Thus, the amount has to be a reasonable figure. Any impairment of the claimant's right of access to the courts which is disproportionate to the need to protect other parties is likely to be in breach of Article 6(1) of the European Convention of Human Rights, the Right to a Fair Trial.

In contrast, where the claimant opposes the making of an order for security for costs or seeks to limit the amount of security by reason of impecuniosity, the onus is on the claimant to put forward sufficient evidence before the court, and in doing so, to make full and frank disclosure of his/her financial resources. If the claimant gives an incomplete or misleading account of his/her resources, the court may, in exercising its discretion, set an amount which represents the court's best estimate of what he/she can reasonably afford. The requirement that that the court should have regard to all the circumstances of the case may sometimes prevent the defendant from obtaining adequate security.

Footnotes

  1. Steele v. Paz Limited (in liquidation) and Others 1993 - 95 MLR 102 (CHD)
  2. (Unreported) Deemster Corlett's judgment January 29 2013 in Summary Court
  3. As stated at rule 7.28 (1) (a) Rules of the High Court of Justice 2009
  4. 2008 MLR 264 (CD)
  5. 2004 CLA 8
  6. 2009 MLR 123 (SGD)
  7. Order 48 Rules 2 and 3 of the Rules of the High Court of Justice of the Isle of Man
  8. CA [1984] 1 W.L.R. 557
  9. [2008] EWHC 413 (TCC)
  10. MVYorke Motors v Edwards [1982] 1 WLR 444
  11. Al-Koronky v Time-Life Entertainment Group Ltd [2006] EWCA Civ 1123; Kuenyehia v International Hospitals Group Ltd [2007] EWCA Civ274; Blue Sky One Ltd v Mahan Air [2011] EWCA Civ 544
  12. S. 7.28 (1) (a)of High Court Rules 2009; and rule 25.13(1)(a) English Civil Procedure Rules

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Simcocks
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Simcocks
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions