Litigation survival guide - part 15. Securing the costs of your litigation

Litigation can be costly. Having to defend an unmeritorious claim made by a financially unstable company is the worst case scenario for any defendant and, in a period of economic downturn, the risk of this happening is increased. In a number of circumstances, the Civil Procedure Rules (CPR) permit a defendant to apply for the provision of security by the claimant for the legal costs the defendant will incur in defending the claim. Any such order will require the claimant to deposit money into court or provide a guarantee or bond for the defendant's costs, or a proportion of them, before it can continue with the claim. This provides the defendant with some comfort that there will be money available from which to recover its costs should it successfully defend the claim and be awarded its costs.

Here we look at the most common situation where security for costs is sought - which is where a claimant company appears unable to pay the defendant's costs if ordered to do so. Such an application can only be made against a defendant company by a claimant if there is a free-standing counterclaim by the defendant.

Wragge & Co's experts provide a reminder of the issues to consider before applying for an order in this situation.