Security for costs
A party to a trade mark proceeding who believes the other side may default on any award of costs may request that the Commissioner make an order for security for costs.
Under section 167(1) of the Trade Marks 2002 the Commissioner may require a party to a proceeding to give security for costs if the Commissioner is satisfied that:
- the party does not reside in New Zealand; or
- does not carry out business in New Zealand.
The Commissioner may also require a party to give security for costs if there is sufficient reason to believe that they will be unable to pay costs if unsuccessful in the proceeding.
The purpose of requiring security for costs is to ensure a party to a proceeding will comply with any award of costs that the Commissioner may order. The rationale for this requirement is that it can be difficult to enforce costs awards against a party that does not reside or carry on business in New Zealand. The expense of seeking to recover costs from an overseas party can sometimes exceed the amount recovered.
If the Commissioner orders security of costs, and the party against whom the order is made does not comply, the Commissioner may treat the proceeding as abandoned and determine the matter accordingly under section 167(2).
Requests for security for costs
Requests to the Commissioner for security for costs must be made through the IPONZ online case management facility on the proceeding case.
Process once a request for security is received
On receiving a request for security for costs, the Commissioner will write to the parties and provide the party from whom security is sought with an opportunity to confirm whether they reside or carry on business in New Zealand. The requestor may be given an opportunity to respond if the matter is in dispute. Once the Commissioner has considered both the request and the other side’s response the Commissioner may order security for costs.
The amount of security ordered will usually be the total for all the steps the requestor may do under the scale of costs. That is, the maximum that the requestor would be entitled to under the scale should the proceeding progress all the way to a hearing.
See scale of costs for more information.
How security is to be paid
The Commissioner’s order will require the deposit of a sum of money (the security) to be held in trust for the requestor pending issue of an order for costs at the conclusion of the substantive proceeding.
If both parties are represented by professional counsel, the Commissioner’s normal practice is to direct that the security be deposited into the trust account of legal counsel representing the party from whom security is required. Once the proceeding is determined, the legal counsel holding the security will be expected to distribute the security to give effect to the Commissioner’s costs award. Any failure to do so in a timely manner will be deemed a breach of a Commissioner’s direction; it may also give rise to a complaint to the law society.