A director’s guarantee is a useful option where a security for costs application is likely to be rejected, says George Woods
Applications for security for costs are usually made early in the proceedings and applicants are encouraged not to leave them until the trial approaches.
In Inventors Friend v Leathes Prior [unreported] an application was made two weeks before the anticipated trial date for the substantive claim and was heard less than one week before that date. The claimant argued that such an application was late and would stifle the claim. The defendant agreed to accept a personal guarantee from a director of the claimant rather than require the sums actually be raised.
The court felt such an order would not stifle the claim, and gave the defendant some comfort as to payment of its costs. Any risk as to the value of such a guarantee fell on the defendant who was happy to accept such a risk as a price of obtaining the order.
