Without going into elaborate discussion on construction of the above provisions, which is not necessary in view of the controversy involved in this case and it will suffice to refer to some fundamental principles embodied in the aforementioned provisions. Section 35 of the Code essentially deals with the actual costs of the suit while under section 35-A of the Code, the costs are compensatory. Actual costs are awarded by a court in order to secure the expense incurred by a successful litigant in the assertion of his right before a court. Section 35-A of the Code visualizes compensatory costs against an unsuccessful party, which can be taken into account while awarding damages1. Whether or not to make an order for costs under Section 35-A of the Code is a discretion of the court. Generally, the question, who has to pay for the costs of claim, is not determined until the claim is finally decided, whether by consent, interim process or trial. As a general rule, costs follow the event2, meaning thereby that the successful party recovers costs from the loser and outcome on the claim, on merits, is known only when the final judgment is announced. No order as to costs is an exception to the aforementioned general rule to be exercised by the court only after recording reasons3. Incidents of exceptions include where the successful party is guilty of misconduct or negligence, often changed its contention, made untrue statements or raised dishonest pleas4or the case is of first impression and where new law is being laid down.
Turning now to the security for costs under rule 1 of Order XXV of the Code.
The cases in hand do not relate to sub rule (2) & (3) but sub rule (1) of Rule 1 of Order XXV of the Code. On plain reading of rule 1 of Order XXV of the Code, it is manifest that an order of security for costs can only be made against plaintiff(s) and in favour of defendant(s). It applies in cases where plaintiff(s) are residing out of Pakistan and is subject to the condition that such a plaintiff or none of the plaintiffs possesses any sufficient immovable property within Pakistan other than the suit property. The court may make an order for security of costs at any stage of the suit. Such order may be made either on an application of the defendant or of its own motion by the court and the same may cover all costs incurred and likely to be incurred by any defendant but not the amount of any claim or decree. No amount is to be paid to the defendant and all that Order XXV of the Code does at this stage is to secure the costs incurred and likely to be incurred by a defendant in defending a claim filed by a foreign plaintiff who does not possess any sufficient immovable property within Pakistan. Sub rule (1) of Rule (1) of Order XXV of the Code applies to all kinds of suits and not just a suit for the payment of money, which restriction has been imposed by the legislature under sub rule (3) in relation to the suits where the plaintiff is a woman.
Whether or not to make an order for security of costs under rule 1 of Order XXV of the Code is a discretion of the trial court. This Court is of the view that in every case where a defendant has to defend with no real prospect of being able to recover costs in the event of success, an order of security for costs ought to be passed as a general rule and an exception with reasons to be recorded. This is for a number of reasons: firstly, since costs follow the event as a general rule, it is unjust to expose any defendant to incur costs without providing him reasonable assurance for recovery of the same in the event of success; secondly, conferring of suo moto powers on the court in this regard highlights significance that legislature attaches to the security for costs; thirdly, the effect of failure to furnish security for costs within the time fixed by the court i.e. dismissal of the suit reveals how seriously the legislature takes any violation of an order for security of costs; and lastly, making of an order for security of costs by the trial court has been allowed by the legislature subject to satisfaction of statutory preconditions that the plaintiff is residing out of Pakistan and that it does not possesses sufficient immovable property within Pakistan other than the suit property for securing costs of the defendant.
How much amount of security for costs should be given by the plaintiff in a case is again a matter of discretion of the court, however, the only legislative guideline provided in this regard is that the security for the payment should cover all costs incurred and likely to be incurred by any defendant. This invariably involves a claim by the defendant of all costs incurred by as on the date of the order and the costs likely to be incurred in proceedings in the suit, as well as an assessment thereon for the purpose of security, keeping in view particular circumstances of the each case in accordance with well established principle that the same is just and reasonable and not arbitrary, fanciful or capricious. Needless to observe that in Commonwealth countries, it is usual to exhibit a summary statement of costs incurred and likely to be incurred by any defendant in support of an application such as the one under Order XXV of the Code. Inasmuch as an order of security for costs can be passed by the court not only on application of a defendant but also on its own motion, therefore, for proper exercise of judicial discretion qua determination of the amount of security for costs, an application under Rule 1(1) of Order XXV of the Code should either contain within it or be supported by a summary of costs incurred and to be incurred and in any case, in exercise of inherent powers under Section 151 of the Code, the court can direct an applicant or defendant to file such a summary before passing an order under the said provision. Be that as it may, the summary of costs does not control or curtail the discretion of the court in the determination of amount of security for costs but is only meant to provide particulars of defendant’s claim of costs incurred and likely to be incurred in defending the suit, which may be accepted or rejected wholly or partially by the court in exercise of its discretion.
Civil Revision No. 589 of 2013
Merck Sharp & Dhome Corp Vs. Hilton Pharma (Private) Limited and another
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