COVID as a Factor in Securities for Costs

An order for securities for costs is meant to ensure that defendants can receive remuneration from an unsuccessful plaintiff. Monies are verified or set aside until the case is completed. If a securities for costs order is not met, a case may be dismissed. For the courts, deciding whether this is necessary can be a balancing act that weighs the hardship of a defendant who cannot recover costs, versus the financial burden to the plaintiff.

LCM details one case that illustrates the precarious nature of this balancing exercise. The case is Grocon Group Holdings Pty Limited v Infrastructure NSW (2020) NSWSC 1194, which involves accusations of deceptive and misleading conduct during the bidding for the Central Barangaroo Development. INSW requested that Grocon be ordered to put up security for costs.

The law says that to ask for securities for costs, the defendant is responsible for demonstrating that the plaintiffs may not be able to pay the costs if necessary. INSW used Grocon’s own financial reports that demonstrated more liabilities than assets. Grocon declined to provide evidence to the contrary.

Interestingly, the judge did say that the impact of COVID might have influenced his order for securities for costs if Grocon had submitted evidence to that effect. Another recent case referenced by the judge held that if a business is significantly disrupted due to COVID, a securities for costs order could hurt the business even further—and is therefore not in the interests of justice.

Security for costs orders are largely left to the judge’s discretion. A judge does have the discretion to decline to order securities for costs if there is a legitimate financial reason. But in this instance, the judge wanted evidence that Grocon was in financial peril—and not merely unwilling to put up securities for costs.

Ultimately, the judge ordered Grocon to pay security for costs.