Litigation is expensive for both parties but there may be circumstances where a defendant has real concerns about a plaintiff’s ability to satisfy an adverse costs order which may be made against it if it loses at trial.  Jurisdiction must be enlivened as a necessary condition to be satisfied before security will be ordered.  Provided the relevant discretionary factors can be satisfied by a defendant seeking to obtain orders for security against a plaintiff (which may include a Liquidator in certain circumstances), and issues concerning the quantum of security which is sought to be paid, the Court will make an order for security for costs.  This may include orders for certain amounts to be paid in several tranches and at certain stages throughout the litigation (as occurred in one of our Supreme Court matters).  FCW Lawyers have acted for plaintiffs (in opposing applications for security) and for defendants (in making the applications for security).  When acting for the party who is making the application for security, it is important to set out, in significant detail, all of the tasks that will be undertaken, whether by solicitor or Counsel, the hourly rates and time which will be spent undertaking each task (it is not sufficient to provide round amounts for 5-10 categories of tasks up to and including the trial) – this will enable the other party to determine whether the estimates for a range of tasks are excessive or reasonable amounts and to what extent the application will be opposed or whether it is simply an issue of quantum.

There have been two recent Supreme Court decisions on the issue of security for costs:

a. Beijing Daxin Shengyu Engineering Technology Co Ltd v Fortune New City & Ors [2026] VSC 95 (Justice Osborne) (Daxin). In this case, the plaintiff was a foreign party incorporated in the Peoples Republic of China and it does not own any real property in Australia not any significant assets in Victoria. It did not oppose an order for security but the quantum which was sought was disputed; and

b. Victorian Crane Hire Pty Ltd v No Stress Group Pty Ltd (Security for Costs) [2026] VSV 166 (Associate Justice Gobbo) (Victorian Crane Hire). Importantly, the aplication for security was refused as jurisdiction to order security was not enlivened but even if it was, the application would have been refused as a result of the delay of at least 13 months and the fact that the application was made just before trial which is due to commence on 27 April for 15 days.

The relevant issues which arose in these two cases can be highlighted as follows:

1. In the Daxin case, the third defendant had obtained evidence from its costs consultant which determined that the costs which it would likely recover on a standard basis would be $459,483.85.  In support of its dispute on the quantum, the plaintiff obtained evidence from a cost consultant as to the likely costs that may be recovered by the third defendant on a standard basis and this estimate was $224,050.00;
2. As to the relevant principles for determining the amount of sufficient security, Justice Osborne referred to Trailer Trash Franchise Systems Pty Ltd v GM Fascia & Gutter Pty Ltd:

a. The Court has a broad discretion to order an amount which it considers “just and reasonable” having regard to the circumstances of the case;

b. The purpose of security is not intended to provide a full indemnity for the estimated costs of the defendant;

c. The amount must not be so low that it fails to provide any real protection to the defendant; however, it must not be so high that it is oppressive to the party required to provide it;

d. The Court adopts a “broad brush” approach in determining the appropriate amount of security – by assessing the evidence of an experienced litigation lawyer or an expert report by a costs consultant. The Court is not expected to conduct a taxation and determining item by item and the relevant amounts sought for every task.

1. Each cost consultant provided a thorough and detailed report on the estimated costs with the third defendant’s cost consultant determining the costs based on a 3 day trial and those for a 4 day trial. Justice Osborne conducted a comparison of the estimates of each costs consultant and for a range of tasks up to and including trial – there were some adjustments which were made to certain categories of tasks where one estimate was considered low and the other cost consultant’s estimate was high so Justice Osborne adopted a middle ground between the two estimates.  Even though the trial was only likely to be 3 days, an allowance was given in respect of interpreters which might also slow the conduct of the trial;
2. There was also an issue as to whether the costs should be GST exclusive or GST inclusive – as the third defendant was not registered for GST, Justice Osborne determined that the costs should be on a GST inclusive basis – this meant that the estimated costs of the plaintiff’s cost consultant differed slightly as she had based the estimated costs on a GST exclusive basis;
3. Consideration was also given to the entitlement for a party to claim past costs – certain factors depend on whether an allowance will be granted for past costs already incurred. Ordinarily, past costs will not be granted where a party has conducted the litigation without being put on notice of the requirement to provide security and the costs may be wasted if it is unable to provide the security and the proceeding is stayed as a result of security not being given.  This is one of the principle reasons that a party seeking security for costs should move promptly and not delay in making the application.  In this case, there was evidence that Daxin had been put on notice at an early stage of the proceeding and there had been significant steps undertaken by the parties to agree on the amount of security.  As a result of the evidence as to past costs, Justice Osborne reduced them by 50% and ordered that $95,000 be provided for the past costs;
4. Justice Osborne also ordered security to be paid by a staged approach so that the full amount of security was not required to be paid within a short period of time, particularly given that the amount of security he ordered to be paid up to and including the trial was $384,625.00. This may correspond to certain stages of the proceeding such as stage 1 being pleadings, discovery, subpoenas and stage 2 preparation and conduct of the trial.  There might be various stages for the itemised schedule of the tasks and quantification of the costs – in one of our matters, we compiled the schedule of costs by past costs, stage 1 pleadings, discovery, directions hearings, mediation and other interlocutory steps; stage 2 pre-trial preparation such as subpoenas, court books, witness statements and expert evidence; and stage 3 trial costs.
5. In Victorian Crane Hire, the defendants sought security in the sum of $568,229.25 and which did not comprise past costs and was 75% of the reasonable estimate of standard costs which may be recovered.  The jurisdiction to make an order for security for costs will only be enlivened upon sufficient evidence being put before the Court that the plaintiff will not be able to pay the defendant’s costs if the defendant is successful.  Various evidence was put before the Court by the defendants as to a range of factors supporting the position that the plaintiff would not be able to satisfy a costs order;
6. Associate Justice Gobbo indicated that the jurisdiction to order security was not enlivened and it is a low threshold which is sufficient to identify a risk – a common-sense approach to the examination of the plaintiff’s financial affairs does not lead to a conclusion that there is a “reason to believe” that the plaintiff will not be able to pay the defendants’ costs if ordered to do so. Specifically:

a. the absence of any ownership of real property and the paid up capital is irrelevant to an assesment of an ability to pay an adverse costs order;

b. the defendant’ submissions that the plaintiff was winding down its business were rejected as the evidence was based on vague and uncompelling observations;

c. the plaintiff was able to explain its deregistration of 21 vehicles and this was put to the defendants in comprehensive detail;

d. the defendants’ assertions that the plaintiff repeatedly failed to provide documentation regarding its revenue, profit and asset position was rejected as evidence was given of numerous occasions when such information was provided by plaintiff;

e. the evidence disclosed cash at bank in excess of $1million and its net assets were over $3.8million

f. extensive evidence was provided by the plaintiff of its financial position and voluminous material was provided to the defendants before the application was issued;

1. Even if there was jurisdiction to order security, Associate Justice Grobbo indicated that there was one critical factor which was important: the delay in the defendants making the application for security. It is well established that applications should be made promptly and before considerable expense is incurred and in this case, it was not appropriate that the application was deferred until mediation has occurred;
2. In the event that the jurisdiction had been enlivened, Her Honour indicated that the delay was so significant that the application would have been dismissed on that factor alone (and without consideration of the other discretionary factors). Substantial costs had been incurred by both parties including notices to admit and notices of dispute; affidavit evidence; witness statements and expert reports. The evidence regarding the quantum of security was grossly overstated and the tasks required to undertake the necessary tasks to prepare the matter for trial. As a result of the jurisdiction not being enlivened, the application for security was refused.

Accordingly, there are several principles which are relevant for consideration in these applications:

• It is for the defendant to satisfy the court that the party against whom security is sought lacks the financial capacity to meet a costs order;
• The Court’s discretion to order security for costs must be exercised judicially having regard to the circumstances of each case and having regard to the interests of justice;
• The quantum of security for costs should be sufficient to provide a measure of security to the defendant for the costs it will incur in defending the action. The Court should have regard to the probable costs which the defendant may be put to so far as they can be ascertained. The security ordered should not be illusory on the one hand or oppressive on the other. In other words, the Court will consider the quantum of security which has been sought and the plaintiff’s ability to pay such amount if ordered to do so.  The Court will also exercise its discretion to ensure that the plaintiff’s ability to continue to pursue claims in proceedings is not impacted by an order for security;
• The Court should take a “broad brush” approach to the quantum of an order for security for costs as the Court is not required to conduct a taxation in ascertaining the amount of security which should be ordered.  Therefore, it will not examine every line item in consideration of the defendant’s estimate of costs.
• There may be grounds for the plaintiff to demonstrate that even if security for costs may be ordered, the estimate of the defendant’s costs may be excessive – there may be duplication between solicitors, certain tasks for preparation for trial may be unreasonable (for example, they may have estimated costs for a three day trial when it may only likely go for one day) and preparation will be reduced if evidence-in-chief will be by affidavit evidence.

Catherine Pulverman and her team have considerable experience in this area by acting for (a) plaintiffs (including Liquidators and the company) in responding to letters seeking security for costs and then (where necessary) opposing applications seeking orders to pay security for costs; and (b) defendants as the party pursuing orders for security where the plaintiff clearly has no financial capacity to satisfy an adverse costs order (including a matter where orders for further security were being sought due to the trial estimate significantly increasing by 5 extra days, further expert evidence being called and delay by the plaintiff in obtaining expert evidence).