Responding to an application for security for costs
Security for costs applications seek an order that the plaintiff lodge money into court (or give guarantee) to cover the defendant's costs if unsuccessful. The discretion turns on plaintiff impecuniosity, merits, delay, stifling, and public interest.
This is an 8-step workflow for responding to an application for security for costs brought against a corporate plaintiff under s 1335 of the Corporations Act or FCR r 19.01.
Before you start
- Security for costs application served
- Plaintiff's financial statements and cash flow information
- Litigation funder agreement (if any)
- Prospects assessment of the underlying claim
The workflow
Assess the s 1335 / r 19.01 threshold
Confirm the applicable threshold is met — "credit reason to believe" the plaintiff cannot pay costs if unsuccessful (s 1335) or the broader FCR discretion.
Map the discretionary factors
Map the KP Cable Investments v Meltglow factors — prospects, delay, stifling, impecuniosity caused by the defendant, public interest, and availability of funding.
Gather financial evidence
Prepare evidence of the plaintiff's financial position — audited accounts, management accounts, asset lists, and cashflow forecasts. Be candid: incomplete disclosure damages credibility.
Address stifling argument
If security would stifle a genuine claim, lead evidence of inability to raise the sum — from directors, shareholders, and potential funders. Stifling is a powerful discretionary factor.
Prepare prospects material
Where merits are strong, tender counsel's prospects advice (possibly redacted) or lead evidence that the claim has real prospects. This counterweights impecuniosity.
Negotiate the quantum and form
If security is likely to be ordered, negotiate the quantum and form — cash into court, bank guarantee, solicitors' undertaking, or insurance bond. Form affects cashflow impact.
Run the hearing
At the hearing, lead the discretionary evidence and submissions. Applications are often heard on affidavit without cross-examination unless credit is live.
Implement the order and case-manage
If security is ordered, arrange the required form by the deadline. Non-compliance stays the proceedings. Case-manage subsequent steps to keep costs proportionate to security.
What you will have at the end
Either the application dismissed, or security ordered in a form and quantum that preserves the viability of the proceeding.
Common issues
- Underestimating the impact of delay by the defendant in bringing the application
- Insufficient stifling evidence, reducing to assertion rather than proof
- Disclosure gaps in the plaintiff's financial position
- Accepting a cash order when a bank guarantee would preserve cashflow
- Missing the opportunity to negotiate staged security (tranche by tranche)
Run this workflow on a real matter
Quillio drafts security for costs responses with the KP Cable factors mapped to the plaintiff's evidence, and generates quantum counter-proposals. See /practice-areas/litigation-lawyers.
This workflow is a general guide. Security for costs thresholds differ between state courts — UCPR (NSW) r 42.21 and Supreme Court (General Civil Procedure) Rules (VIC) have distinct tests.
Try this workflow with Quillio.
Quillio can run this workflow on a real matter, with citations to current AU authority on every step. The free trial requires no credit card.
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