Security for costs protects a defendant who fears that a costs order in its favour would be worthless. Order 14 Division 4 Subdivision A of the National Court Rules 1983 governs it.
Rule 24
In this Division —
(a) references to a plaintiff extend to any person who makes a claim for relief in any proceedings; and
(b) references to a defendant extend to any person against whom a claim for relief is made in any proceedings.
A cross-claimant, or a party seeking relief against a third party, is a plaintiff for this purpose — and may be ordered to give security. Correspondingly, a cross-defendant may apply.
Rule 25(1)
Where in any proceedings it appears to the Court on the application of a defendant —
(a) that a plaintiff is ordinarily resident outside Papua New Guinea; or
(b) that a plaintiff is suing, not for his own benefit, but for the benefit of some other person and there is reason to believe that that plaintiff will be unable to pay the costs of the defendant if ordered to do so; or
(c) subject to sub-rule (2), that the address of a plaintiff is not stated or is mis-stated in his originating process; or
(d) that a plaintiff has changed his address after the commencement of the proceedings with a view to avoiding the consequences of the proceedings,
the Court may order that plaintiff to give such security as the Court thinks fit for the costs of the defendant of and incidental to the proceedings and that the proceedings be stayed until the security is given.
There is no general ground of impecuniosity. Poverty alone does not attract an order. Paragraph (b) reaches inability to pay only where the plaintiff is suing, not for his own benefit, but for the benefit of some other person.
Nor is there a ground covering a company in liquidation or receivership — a notable gap, which section 10 of the Claims By and Against the State Act 1996 fills, but only where the State is a party. See security for costs where the State is a party.
The Court shall not order a plaintiff to give security by reason only of Sub-rule (1)(c) if it appears to the Court that the failure to state his address or the mis-statement of his address was made without intention to deceive.
So an honest error in an address is not by itself enough. Contrast paragraph (d), which requires a change of address with a view to avoiding the consequences of the proceedings — a deliberate act.
Rule 26
Where the Court orders a plaintiff to give security for costs, the security shall be given in such manner, at such time, and in such terms (if any) as the Court may by order direct.
Three things must be fixed: the manner — payment into Court, a bank guarantee, a charge over property; the time by which it must be given; and the terms, if any.
Order 14 Division 3 makes general provision for money paid into Court as security for costs, and Subdivision B of Division 4 deals with security for future conduct, and recognizances.
Rule 27
Where a plaintiff fails to comply with an order under this Division, the Court may, on terms, order that the proceedings on any claims by the plaintiff for relief in the proceedings be dismissed.
Two points. The consequence is discretionary — “may” — and it may be imposed on terms. And it reaches any claims by the plaintiff for relief, so a cross-claimant who fails to provide security loses the cross-claim, not the defence.
A plaintiff genuinely unable to raise the sum ordered should apply to vary the order rather than let the time pass. Note the stay: under Rule 25(1) the order may direct that the proceedings be stayed until the security is given, so the practical effect begins immediately.
Rule 28
This Division does not affect the provisions of any Act under which the Court may require security for costs to be given.
Claims By and Against the State Act 1996, section 10 — notwithstanding anything in the National Court Rules, where the State is a party and another party is resident outside the jurisdiction or is a company in receivership or liquidation, or in a Migration Act matter, or in any other case where it appears likely that costs awarded against another party in favour of the State may not be recovered, the court may order security to be paid into court.
Supreme Court Act (Chapter 37), section 18 — on appeal, the Court or a Judge may in special circumstances order just security for the costs of an appeal or application for leave, and if it is not given the appeal … shall be deemed to have been abandoned. See appealing to the Supreme Court.
Where an interlocutory injunction is sought, the Court may require the applicant’s undertaking as to damages to be backed by security under Order 14 Division 4. That is a different thing from security for costs, though it uses the same machinery.
On when an order will be made, see obtaining security for costs.
Sources
- National Court Rules 1983 — O 14 Div 3, Div 4 Subdivs A and B, rr 24–29
- Claims By and Against the State Act 1996 — s 10
- Supreme Court Act (Chapter 37) — s 18
Before relying on anything here, read the current text of the National Court Rules 1983 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.