How Annecto Legal assisted with a Security for Costs Application

Security for costs is a legal concept that allows a defendant in a civil case to request that the claimant provides a financial guarantee to pay the defendant’s costs in the event that the claimant loses the case. This is typically done to ensure that if the defendant prevails, they will be able to recover their legal expenses from the claimant.

However, for those confronted with such applications, it is essential to recognise that they are not insurmountable obstacles. Instead, they represent legal manoeuvres that can be challenged and contested through strategic preparation.

When dealing with security for costs, it is vital to be well-informed about the options available to you in order to respond in an effective manner. At Annecto Legal, we recently assisted a client by demonstrating the avenues available to them when faced with an application for security for costs.

How Annecto Legal assisted in a security for costs application

The arguments in the Premier Motorauctions v PWC LLP (Court of Appeal) are often thrown around as though ATE insurance is no longer useful in dealing with security for costs. The reality is more nuanced and ATE can indeed still be a useful and cost-effective tool for satisfying the courts.

When it is not the solution on its own, then Deeds of Indemnity, Letters of Undertaking or Bonds in conjunction with ATE are still alternatives to lodging cash with court, which is unlikely to ever be a preferred solution for claimants.

Annecto Legal was recently involved in a case where it was helpful to show the client the costs of fighting the security for costs application, versus the costs of the different ATE and associated solutions. The client was then able to make an informed decision that would be fully justifiable to creditors.

As a broker for the whole range of funding and insurance solutions, Annecto Legal’s role is not about getting your case ‘out to market’ in isolation, but about understanding the problem, suggesting innovative and cost-effective solutions; assisting in preparing the case for underwriting; securing offers from funders/insurers; explaining the offers and also giving insight into the funder/insurer; negotiating terms and ensuring that the whole process is managed in a co-ordinated and effective fashion.

As a broker, we are paid a fee by funders/insurers upon successful conclusion of the case so there is no additional cost to the client. In fact, Annecto Legal can secure terms that are far more attractive than would be secured by approaching any one funder directly. In addition, we can provide this whilst documenting a clear process for securing the best terms for creditors.

Alternative Funding Security for Costs

When a court orders a claimant to provide security for costs, it means that the claimant must deposit a specified amount of money into a court account or provide a suitable form of financial guarantee to cover potential legal costs to cover adverse costs orders. Listed below are common funding options a claimant may use to fund security for costs:

• Cash deposit: The claimant may be required to deposit a specified amount of money directly into a court account. This cash deposit serves as a guarantee to cover potential costs if the claimant loses the case, although this method is not typically preferred.
• Bank guarantee or bond: Instead of a cash deposit, a claimant may obtain a bank guarantee or bond. This is essentially a financial instrument issued by a bank that guarantees payment to the defendant in case the claimant loses the case.
• Legal expenses insurance: In some cases, a claimant may obtain a legal expenses insurance policy specifically designed to cover potential legal costs in the event of an adverse judgment. An after the event (ATE) insurance policy may serve as adequate security for costs.
• Third-Party Funding: The claimant may seek financial support from a third-party litigation funder. These funders provide the necessary funds in exchange for a share of the potential proceeds if the case is successful.

How Annecto Legal can assist

At Annecto Legal, our professional advisors assist solicitors and their clients in finding the right legal guidance and funding for security for costs applications. Having specialists at your side and being fully funded can help to ensure that you are in the best position possible.

If you wish to speak to an advisor about a security for costs application, please contact David Law, Senior Associate (m) 07540 303035 or (e) david.law@annectolegal.co.uk