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Security for Costs

Can Security for Costs orders be made against Defendants?

Rule 42.21 of the Uniform Civil Procedure Rules 2005 refers to the power of the Court to order a “Plaintiff” to give security for costs. It is not readily apparent from the rule that the Court may order security against a Defendant.

However, Section 3 of the Civil Procedure Act 2005 (NSW) provides that:

Plaintiff means a person by whom proceedings are commenced, or on whose
behalf proceedings are commenced by a tutor, and includes a person by whom a cross-claim is made or on whose behalf a cross-claim is made by a tutor.

Classic Ceramic Importers Pty Lid v Ceramica Antiga SA (1994) 12 ACLC 334 and Motakov Ltd v Commercial Hardware Suppliers Pty Ltd (1952) 70 WN (NSW) 64 are two cases which demonstrate that the usual principles on security for costs apply to Defendants who are pursuing cross-claimsin which substantive causes of action are raised.

Further, in Victoria, Supreme Court (General Civil Procedure) Rules 2005 (Vic) r 62.01 provide that, for the purposes of security for costs orders, the term “Plaintiff” is defined as “any person who makes a claim in a proceeding”. Similar provisions can be found in South Australia’s, Queensland’s and Western Australia’s Court rules.

The NSW Law Reform Commission had requested submissions on whether UCPR r 42.21 should be amended to provide that Courts have the power to order security for costs against “a person who,although not designated as Plaintiff, is making a claim and, if so, how should such provision be formulated”.[1] The Commission eventually concluded in 2012 that there is no need to amend UCPR r 42.21 as “the provision of s 3 of the Civil Procedure Act 2005 deals with any apparent limitation of UCPR 42.21”[2], indicating that Courts may order security for cost against Defendants who are making cross-claims.

Importance

The importance of an order for security for costs is apparent by the prescribed punishment for contravening such an order. Rule 42.21 (3) prescribes that if the “Plaintiff” fails to comply with an order to give security for costs under rule 42.21, the Court may order that the proceeding on the “Plaintiff’s claim for relief in the proceedings be dismissed”.  In the recent case of Liu v Fairfax Media Publications Pty Ltd [2013] NSWSC 1256 proceedings were dismissed pursuant to rule 42.21 (3) because the Plaintiff, Mr Liu, failed to comply with an order to give security for costs in the amount of $300,000.00. The Plaintiff had not sought leave to appeal from the order for security, nor had he sought an extension of time for compliance or taken steps to remedy his default. A significant period of time had elapsed in the context of the case since the order for security was made. Further, the conduct of the Plaintiff since making of the order  was consistent with a decision to simply ignore the order. This permitted the Court to infer that Mr Liu was unable to fund proceedings and had no intention to comply with the order for security for costs.  Mr Liu was given notice and was aware of application for dismissal of proceedings, yet he did not respond nor did he appear at the hearing personally or by a legal representative. The Court considered that this was an appropriate case to order dismissal of proceedings and costs against Plaintiff.

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[1] NSW Law Reform Commission, Security for costs and associated costs orders, Consultation

Paper 13 (2011) Question 2.12.

[2]Security for Costs and Associated Costs Orders [2012] NSWLRC 137.