Security for costs

Posted on 28 Nov 2017, by Ritsa Pekri

There are cases in which the Cyprus Courts in civil proceedings may order the plaintiff in an action to provide money for the security of the defendant's costs that may be incurred after the trial has ended.

The possibility of issuing a decree granting security for costs is regulated by Order 60 of the Civil Procedure Rules.

The issue of such an order is at the discretion of the Court, which must be satisfied that there is reasonable concern that, if the claim fails, the plaintiff will not pay the defendant's costs.

Accordingly, with Order 60 and case law, the following conditions must be met in order to obtain the security for costs.

The primary and necessary condition is that the plaintiff’s usual residence is outside Cyprus or of a Member State of the European Union. According to the Annual Practice of 1958, the burden is on the defendant to prove that the plaintiff resides in a country that is outside of the jurisdiction and not simply to show that he is not usually resident in the country where the court proceedings were conducted.

The next condition and factor to be taken into account by the Cypriot Courts in the exercise of its discretion is that the plaintiff does not own any property, in particular immovable property, in Cyprus. On the part of the plaintiff, any possible possession of immovable property located within the Republic of Cyprus may militate against the provision of security of expenses, provided that such property is available for execution.

Another important factor to be taken into consideration is the strength of the plaintiff's claim. The stronger the plaintiff’s claim the less likely it is that the defendant will secure an order for security of costs. The rationale behind this condition is that if the plaintiff has a good case and the defense appears not to have such a strong case, then it would be contrary to the spirit of justice to order the payment of security for costs.

Also, the timing of the application is an additional element that may be taken into consideration. The court may decide to reject the application for reasons of delay (The Union of Agricultural Cooperatives of Seeds & Cereals v. Apak Agro Industries Ltd (1992) 1 CLR 1170).

The plaintiff may challenge the defendant’s application for a security-for-costs order by filing an objection setting out the grounds of such objection. He may for example rely on the strength of his claim or provide evidence of his ability to pay any costs award that maybe issued against him The burden of proof lies on the plaintiff to show that he is able to cover any such costs award. The rationale behind this lies in the fact that the defendant is not in a position to know the details of the plaintiff’s financial situation.

An application for security of costs may also be filed at the appeal stage regarding the costs to be incurred by the appeal. The relevant procedure is governed by Order 35, Regulation 2 of the Civil Procedure Rules. The same principles apply as those described above concerning applications for security of costs before the Courts of first instance.

When a security for costs order is used the security is usually paid in Court or deposited in the form of a bank guarantee by any bank that carries out business in Cyprus, to the satisfaction of the Registrar. The amount of the security is at the discretion of the Court.

The content of this article is a general description of the subject. Specialized legal services and advice are provided in each case. For further information, please contact Mrs Ritsa Pekri, an associate at ritsa@kyprianou.com.cy