Pub­li­ca­tions

Secu­ri­ty for costs and non-res­i­­dent plaintiffs

What is secu­ri­ty for costs?

It is a fact of life that plain­tiffs and defen­dants in legal pro­ceed­ings rep­re­sent­ed by lawyers will incur costs, which in some cas­es can be substantial.

Gen­er­al­ly, the unsuc­cess­ful par­ty in those pro­ceed­ings is ordered to pay the costs of the suc­cess­ful par­ty. Those costs are usu­al­ly either agreed between the par­ties to the pro­ceed­ings or assessed by a Court appoint­ed costs assessor. 

If you have been sued by some­one (the plain­tiff), and you are con­cerned that the plain­tiff will not be able to pay your costs if you are suc­cess­ful in the pro­ceed­ings, you can in some cir­cum­stances ask the court to order the plain­tiff to pro­vide secu­ri­ty for your costs of the proceedings. 

The type of secu­ri­ty that is usu­al­ly ordered by the court typ­i­cal­ly com­pris­es an uncon­di­tion­al bank guar­an­tee from an Aus­tralian Bank in a form accept­able to the defen­dant, pay­ment of suf­fi­cient funds into a con­trolled monies account or pay­ment into court. 

If the plain­tiff does not com­ply with an order for secu­ri­ty for costs the pro­ceed­ings may either be stayed or dismissed.

Obtain­ing secu­ri­ty against non-res­i­dent plaintiffs 

One of the cir­cum­stances in which a court may order secu­ri­ty for costs is where the plain­tiff is ordi­nar­i­ly res­i­dent out­side Australia.

In that case, an appli­ca­tion for secu­ri­ty for costs should be con­sid­ered at the out­set of proceedings.

A defen­dant is gen­er­al­ly not expect­ed to bear the uncer­tain­ty of enforce­ment of a costs order in a for­eign country.

As Ward CJ in Eq recent­ly said in Ander­son v Pater­son Secu­ri­ties Ltd [2019] NSWSC 852 at [101]:

dif­fi­cul­ty in enforc­ing an order for costs over­seas against a non-res­i­dent plain­tiff will usu­al­ly be suf­fi­cient to ground an order [for secu­ri­ty for costs], espe­cial­ly where there is no rec­i­p­ro­cal right of enforce­ment in the rel­e­vant for­eign juris­dic­tion or leg­is­la­tion which may make recov­ery dif­fi­cult (see Dense Medi­um Sep­a­ra­tion Pow­ders Pty Ltd v Gond­wana Chem­i­cals Pty Ltd [2011] NSW­CA 84 at [32]-[39] per Young JA)’

A list of for­eign juris­dic­tions where there is a rec­i­p­ro­cal right of enforce­ment with respect to Aus­tralia is set out in the For­eign Judg­ments Act 1991 (Cth); Sch 2 to the For­eign Judg­ments Reg­u­la­tions 1992 (Cth).

In rela­tion to non-res­i­dent plain­tiffs, it is worth not­ing the deci­sion of McHugh J in the High Court of Aus­tralia in PS Chel­laram & Co Lim­it­ed v Chi­na Ocean Ship­ping Co (1991) 102 ALR 321; [1991] HCA 36 where it was accept­ed that a plain­tiff res­i­dent out­side the juris­dic­tion, with no assets with­in the juris­dic­tion, is like­ly to face great dif­fi­cul­ty in avoid­ing an order for secu­ri­ty for costs. 

Secu­ri­ty for costs was ordered where the appel­lant resided in Papua New Guinea in Bat­ter­ham v Makeig (No 2) [2009] NSW­CA 314 at [8] and in Moth­er­ship Music v Flo Rida (aka Tra­mar Dillard) [2012] NSW­CA 344, where the appel­lant resided in the Unit­ed States.

More recent­ly, in Pun v Poon [2019] NSWSC 918 the Supreme Court of New South Wales was required to deter­mine an appli­ca­tion for secu­ri­ty for costs in respect of pro­ceed­ings in which the plain­tiff (who lived in Macau) claimed an inter­est in a res­i­den­tial apart­ment in Ulti­mo, Syd­ney of which the defen­dant was the reg­is­tered pro­pri­etor. In order­ing that secu­ri­ty be ordered against the plain­tiff in Pun v Poon, the Court observed that the plain­tiff’s lack of finan­cial resources in Aus­tralia, togeth­er with the fact that her ordi­nary res­i­dence is out of the juris­dic­tion, were mat­ters of great weight in favour of an order for secu­ri­ty for costs.

Take­away

Being a defen­dant in any pro­ceed­ings is dif­fi­cult. You often have no real choice oth­er to incur the costs of par­tic­i­pat­ing. If:

  • you are sued by a non-res­i­dent plain­tiff, i.e. some­one who does not ordi­nar­i­ly reside in Australia;
  • there is no rec­i­p­ro­cal right of enforce­ment in respect of the coun­try that the plain­tiff ordi­nary resides in (e.g. Indone­sia) or leg­is­la­tion which may make enforc­ing an order for costs against the plain­tiff in that juris­dic­tion dif­fi­cult for you; and
  • it appears the plain­tiff does not have suf­fi­cient assets in Aus­tralia from which you may be able to read­i­ly sat­is­fy a costs order, 

you may be enti­tled to an order for secu­ri­ty for costs against the plaintiff. 

Seek­ing advice at a very ear­ly stage in the pro­ceed­ings is one of the key steps to take if you think you may be enti­tled to an order for secu­ri­ty for your costs.