In Cyprus, as in most jurisdictions, a defendant in litigation which fears that the claimant may be unable to satisfy costs orders made against it can apply to the court for a security for costs order. In civil proceedings, the courts – in certain circumstances – can order the claimant to provide security for the defendant's costs after the trial has ended. However, specific requirements must be fulfilled, and the courts are strict in applying the rules.
Security for costs orders are regulated by Order 60 of the Civil Procedure Rules. The issuance of such an order is at the discretion of the courts, which must be satisfied that there is a reasonable concern that, if the claim fails, the claimant will not pay the defendant's costs. However, specific conditions must be met for the court to make a security for costs order:
- The claimant's usual residence must be outside Cyprus or an EU member state. According to the Annual Practice 1958, the burden is on the defendant to prove that the claimant resides in a country outside Cyprus and not simply show that he or she is not usually resident in the country where the court proceedings were conducted.
- The claimant must not own any property in Cyprus, particularly immovable property.
Order 35(2) of the Civil Procedure Rules allows the security of costs arrangements of any appeal to be decided by the Court of Appeal under special circumstances. Notwithstanding this proviso, and although the court's discretion is not limited, the appeal court has, in practice, tended to apply the same principles as those set out in Order 60.
A recent Supreme Court case in which security was being sought for the costs of first-instance proceedings, which had already been concluded, and the prospective costs of the appeal against a resident of Cyprus, provides guidance on the interpretation of Orders 35 and 60 and the distinction between them.(1)
The Supreme Court noted that Order 60 expressly refers to the provision of security for costs "at any stage of the action". Therefore, Orders 35 and 60 concern the provision of security for costs at two different stages of the procedure which should not be confused. It appears that confusion has sometimes arisen in the past because the appeal court has extended the principles governing security for costs at the first-instance stage to appeal cases, in effect incorporating Order 60(1) into Order 35(2).
The Supreme Court noted that while Order 60(1) explicitly provides that a security for costs order cannot be made against a party that is a resident of Cyprus or another EU member state, Order 35(2) does not limit the court's discretion. In cases where a security for costs order is requested on appeal, both for first-instance and appeal costs, it is more appropriate for the application to be based on both Orders 60 and 35.
In its February 13 2018 judgment, the Supreme Court declined to approve security for costs of the first-instance proceedings. The court based its decision on the express provision in Order 60, which states that it is impossible to issue an order for security for costs against permanent residents of Cyprus or EU member states. Further, there are already adequate provisions to safeguard payment of a sum already awarded. However, since the application was also based on Order 35(2), the court found that its discretion was not limited in the same way as when considering the appeal costs. It ordered that security should be provided for the costs of the appeal, stating that:
"we judge, based on the material before us, that due to the special circumstances we find to exist, it is appropriate to exercise our discretion in favour of the applicants. Therefore, based on the case law regarding the interpretation of Order 35 Regulation 2, the matter is limited to the costs of the appeal."
For further information on this topic please contact Maria Hadjisavva at Elias Neocleous & Co LLC by telephone (+357 25 110 110) or email (firstname.lastname@example.org). The Elias Neocleous & Co LLC website can be accessed at www.neo.law.
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