What is a security for costs order?
A security for costs order is a court order requiring a plaintiff to provide security — typically cash into court or a bank guarantee — to cover the defendant's estimated legal costs if the defendant wins. Applications are commonly made against impecunious corporate plaintiffs under section 1335 of the Corporations Act 2001 (Cth) or against non-resident individual plaintiffs. The court balances the plaintiff's right to access the courts against the defendant's need for protection.
When security can be ordered
Under section 1335 of the Corporations Act 2001 (Cth), the court can order security where there is credible evidence the plaintiff corporation will be unable to pay the defendant's costs if ordered to. Under court rules (UCPR rule 42.21 in NSW, equivalents in other states), security can be ordered against a non-resident plaintiff or where the plaintiff is suing for another's benefit. Individual natural person plaintiffs in Australia generally cannot be ordered to give security on impecuniosity grounds alone.
Factors the court weighs
The court considers: the plaintiff's prospects of success; whether the claim is bona fide or oppressive; the plaintiff's ability to fund litigation; whether refusing security would stifle a genuine claim; the stage of proceedings; the defendant's delay in seeking security; and the public interest in the claim proceeding. The test is discretionary — Bryan E Fencott v Eretta Pty Ltd (1987) 16 FCR 497 is a leading authority.
Form and amount
Security typically takes the form of cash paid into court, bank guarantee, or third-party undertaking. The amount is usually set at an estimate of party-party costs on success — typically 50-70% of actual costs. Security can be ordered in tranches (staged security increases as proceedings progress). Failure to provide ordered security usually results in a stay or dismissal.
How I help litigation lawyers
I draft security for costs applications and responses, research the case law in each state, and prepare costs estimates for security applications. This is a routine procedural workflow I accelerate meaningfully for defendant-side lawyers.
Common issues
- Delay in seeking security can defeat the application — move early
- Insured plaintiffs with litigation funding usually do not need to give security
- The cost of obtaining security (bank guarantee fees) should be factored into settlement negotiations
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