In a recent decision of the Western Australia Supreme Court, Cheng v Lam [2023] WASCA 65, the Court provided a useful summary of the factors to consider when deciding whether to order security for costs in an appeal.
This blog post will discuss these principles and examine how they were applied in the Cheng v Lam case.
The Principles
According to the Court in Cheng v Lam, the power to order security for costs is exercised to serve the interests of justice.
While the discretion to order security is unfettered, it must be exercised judicially, and 'special circumstances' do not need to be shown before an order for security for costs is made against an appellant [29].
An appellant's inability to satisfy a costs order should the appeal fail is generally a significant factor in favor of an order for security for costs. However, if the respondent has caused the appellant's impecuniosity, that may be a relevant countervailing factor [30].
Impecuniosity alone is not generally the sole ground for making an order for security. Even where the appellant is impecunious, the interests of justice may properly be served by not making such an order. Where security is ordered against an impecunious appellant, the amount ordered should not be greater than necessary [30].
Other relevant factors generally include the appellant's prospects of success, whether the appellant would be shut out of the appeal if security for costs were ordered, and whether there has been any delay in the respondent filing the application for security for costs [31].
Additionally, an appellant's non-compliance with earlier costs orders in favor of the respondent, at least to the extent that the non-compliance is not adequately explained, is also a relevant consideration [32].
Cheng v Lam
In Cheng v Lam, the Court found that it was in the interests of justice to grant the application for security for costs, considering several factors.
Some of these factors included the appeal's preliminary prospects of success, the fact that ordering security would not shut out the appellant from the appeal, and the appellant's consistent failure to pay costs orders against her in related litigation [32-35].
Furthermore, the Court considered the appellant's lack of material assets apart from her share in partnership assets, the disputed entitlement to certain funds, and the late filing of the application for security for costs [36-38].
Finally, the Court found that the amount sought for security was reasonable in the circumstances, although they rounded it down to $13,000 and did not provide a liberty to apply to increase the amount of security during the appeal [39].
Key take-aways
The principles outlined in Cheng v Lam provide a useful starting point for lawyers to understand when security for costs may be ordered in an appeal.
It is crucial to keep in mind that the interests of justice must always be the guiding principle when exercising discretion to order security for costs.