Security for Costs Orders in Queensland

What is a Security for Costs Order?

In civil/commercial litigation, a security for costs order is a protective legal mechanism that allows a defendant to request that the plaintiff provide a financial guarantee, usually in the form of a court-held payment, to cover the defendant's potential legal costs if the plaintiff's case fails.

This ensures that the defendant is not left financially stranded after successfully defending a claim, particularly in cases where the plaintiff is insolvent, a shell corporation, or resides outside Australia.

In Queensland, the power to make such orders arises primarily under Rule 670 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) and, for corporate plaintiffs, also under Section 1335 of the Corporations Act 2001 (Cth).

The rules apply to claims in state courts and extend, with modifications, to counterclaims, third-party proceedings, and even to appeals. Importantly, while the court must first be satisfied that certain threshold conditions exist (such as a corporate plaintiff's likely inability to pay costs), the actual granting of the order remains discretionary.

Why Security for Costs Matters in Queensland Litigation

The rationale behind security for costs is grounded in fairness and practicality. Litigation can be costly and time-consuming. Defendants should not be forced to endure lengthy legal battles, sometimes initiated on dubious grounds, without protection against the risk of unrecoverable costs if the plaintiff is financially incapable of satisfying an adverse costs order.

This issue is particularly acute in Queensland due to the high number of commercial disputes involving corporate litigants, overseas parties, or plaintiffs backed by litigation funders.

With the expansion of litigation funding and more complex corporate structures, Queensland courts have taken a cautious but measured approach. The balance lies in protecting defendants from potential injustice, while preserving access to justice for those who genuinely cannot afford to litigate without external assistance.

Therefore, security for costs applications serve as a pivotal tool in civil procedure, not to stifle legitimate claims but to shield parties from undue financial prejudice and maintain the integrity of the litigation process.

Security for Costs Legal Framework in Queensland

Security for costs orders in Queensland operate within a defined legislative framework that combines state-based civil procedure rules with federal corporate regulation. The power to grant such orders primarily arises under three key legal instruments:

1. Uniform Civil Procedure Rules 1999 (Qld) – Rules 670 to 677
2. Corporations Act 2001 (Cth) - Section 1335
3. Civil Proceedings Act 2011 (Qld)

We will explain these in more detail below.

Uniform Civil Procedure Rules 1999 (Qld) - Rules 670 to 677

Rules 670 to 677 of the UCPR are the backbone of security for costs law in Queensland. These rules provide a detailed structure for when a security order may be made and how it should be implemented.

• Rule 670 establishes the court's general power to order a plaintiff to provide security for the defendant's costs.
• Rule 671 sets out the threshold conditions - such as corporate insolvency, foreign residency, or the justice of the case-that must be met before the court can consider exercising its discretion.
• Rule 672 lists discretionary factors the court may consider, including the plaintiff's financial position, litigation conduct, the presence of third-party funders, and the potential for injustice.
• Rules 673 to 677 outline practical matters like the form and amount of security, variation of orders, stay or dismissal for non-compliance, and applying these rules to counterclaims and third-party proceedings.

Notably, the UCPR framework allows a nuanced and context-sensitive application of the court's discretion. It emphasises that no single factor is determinative, and every case must be evaluated on its specific merits.

Corporations Act 2001 (Cth) - Section 1335

Where the plaintiff is a corporation, section 1335 of the Corporations Act provides an alternative and overlapping basis for seeking a security for costs order. This provision applies federally, giving courts discretion to make an order where it appears by credible testimony that the company will likely be unable to pay the defendant's legal costs if ordered.

This federal provision is often invoked in commercial and insolvency-related disputes, particularly where companies in liquidation or those with unclear asset positions are plaintiffs. Once this threshold is met, the discretion under s1335 closely mirrors that under UCPR r 672, guided primarily by fairness and the balance of prejudice between parties.

Civil Proceedings Act 2011 (Qld)

Though not as frequently cited in security for costs applications, the Civil Proceedings Act 2011 (Qld) which supports the court's power to impose a stay pending security.

The Act underpins broader procedural fairness goals and complements the UCPR by affirming the court's powers to manage proceedings justly and efficiently.

Jurisdictional Considerations: Courts vs QCAT

A notable point of divergence in Queensland lies in the application of security for costs between the courts and the Queensland Civil and Administrative Tribunal (QCAT).

While courts strictly follow the UCPR rules, QCAT is governed by its own statute - the Queensland Civil and Administrative Tribunal Act 2009 (Qld). Section 109 of this Act allows QCAT to order security, but such orders are rarely granted due to the tribunal's statutory mandate to be accessible, economical, informal, and expeditious.

For instance, in M Plus 2 Projects Pty Ltd v Silvetser [2022] QCAT 218, the Tribunal emphasised its reluctance to impose financial barriers that might hinder access to justice. This contrasts with the more flexible but cost-conscious discretion exercised by courts under the UCPR.

Queensland's legal framework for security for costs reflects a dual commitment: protecting defendants from unjust financial exposure, while ensuring plaintiffs are not unreasonably denied their right to litigate. Understanding the interplay between these statutory sources is essential for any party considering making - or resisting - an application for security for costs.

Who Can Apply for Security for Costs?

The most common scenario for a security for costs application is when a defendant seeks protection against the financial risk posed by the plaintiff's inability to satisfy a future costs order. This typically occurs in proceedings where the plaintiff is:

1. a corporation with questionable solvency,
2. resident outside Australia, or
3. involved in litigation backed by third parties or litigation funders.

In such cases, defendants are empowered under rule 670 of theUCPR and, where applicable, Section 1335 of the Corporations Act, to request that the plaintiff pay a sum of money into court as a safeguard.

The aim is to mitigate the risk that, should the defendant ultimately prevail, they will have no realistic avenue to recover the legal costs they have incurred.

As established in decisions like Earthtec Pty Ltd v Livingstone Shire Council [2023] QSC 22, courts take a structured approach to these applications by first assessing whether a threshold condition under rule 671 is met, before moving on to the discretionary factors listed in rule 672.

If the prerequisites are not satisfied, the application will very likely fail, regardless of any concerns about fairness or cost exposure.

Plaintiffs in Counterclaims and Third-Party Proceedings

While security for costs is generally viewed as a tool available to defendants, the rules also apply to parties who are plaintiffs in counterclaims or third-party proceedings.

Under rule 677 of the UCPR, the same legal principles apply with "any necessary changes," meaning that a defendant who asserts a counterclaim or brings in a third party may also be ordered to provide security if they are acting as a plaintiff.

This distinction is crucial in multiparty litigation, especially where roles and claims are fluid. For example, a party defending an original claim but pursuing an independent counterclaim becomes a "plaintiff" for the purposes of that counterclaim. In this context, another party could apply for security against them if the threshold and discretionary factors justify it.

Application Timing and Promptness

Regardless of who is applying, timing is critical in security for costs applications. Courts have consistently emphasised that these applications must be brought promptly, ideally in the early stages of litigation, before the plaintiff incurs substantial legal expenses.

This principle was reinforced in multiple cases, including Programmed Solutions Pty Ltd v Dectar Pty Ltd and Robson v Robson, where courts cautioned that delayed applications may be prejudicial to plaintiffs and weaken the credibility or fairness of the request.

In Kennedy v Nine Network Australia Pty Ltd [2008] QSC 134, the court explained that unexplained or strategic delay in seeking security may result in a reduction of the security amount, or outright dismissal of the application, even where a prima facie entitlement is shown.

This is because litigants should not be allowed to sit back, observe the unfolding of litigation, and then belatedly seek financial security when the plaintiff has already committed substantial resources to the case.

Promptness also ties into the overarching obligation of procedural fairness and efficient case management, which the courts aim to uphold under both the UCPR and the Civil Proceedings Act 2011 (Qld).

While defendants are the typical applicants, any party standing in the role of a plaintiff, including those making counterclaims or third-party claims, can be subject to, or entitled to seek, a security for costs order. Timing, clarity of role, and early action are critical to the success of any such application.

Threshold Requirements (Rule 671)

Before a Queensland court can consider whether to make an order for security for costs, the party applying, typically the defendant, must satisfy at least one of the threshold conditions listed under rule 671 of theUCPR.

These criteria are not concerned with whether an order should be made, but whether the court has the jurisdiction to consider making one in the first place. Once a threshold is met, the court then turns to discretionary factors under rule 672.

Rule 671 of the UCPR states:

Here's a breakdown of the key threshold requirements:

Corporate Plaintiff and Inability to Pay

One of the most frequently relied upon grounds is where the plaintiff is a corporation and there is reason to believe it will be unable to pay the defendant's costs if ordered. This requirement aligns with section 1335 of theCorporations Act, which applies in both state and federal proceedings.

Notably, the court does not require conclusive proof of insolvency. Instead, the defendant must present credible testimony that gives rise to a genuine belief, supported by evidence, that the plaintiff is impecunious or financially unstable. Mere suspicion is not enough, but balance-of-probabilities proof isn't required either.

In Mio Art Pty Ltd v Mango Boulevard Pty Ltd & Ors [2018] QSC 31, it was held that where a plaintiff is in liquidation, this is usually enough to satisfy the test. However, even if a company has assets, its accessibility or liquidity may still be questioned in assessing whether the company could realistically satisfy an adverse costs order.

Foreign Residency of Plaintiff

If the plaintiff is ordinarily resident outside Australia, this too may justify an application for security for costs. The reasoning is practical: enforcing that judgment abroad may be difficult or uncertain if the defendant ultimately obtains a costs order, particularly where no reciprocal enforcement treaties exist.

In Global Access Limited v Educationdynamics LLC [2009] QSC 373, the Queensland Supreme Court recognised that foreign residence without local assets is a factor of "great weight." The Court citing McHugh J in PS Chellaram & Co Ltd v China Ocean Shipping Co [1991] HCA 36:

However, residence alone is not determinative - the court must still consider how justice is best served, and whether the risk of non-enforcement materially jeopardises the defendant's position.

Address Issues in the Originating Process

Another less common but nonetheless significant threshold ground is when the plaintiff's address is misstated or omitted in the originating court documents. Rule 671(c) covers this situation, and the rationale is procedural integrity.

As noted in Robson v Robson [2008] QCA 36, it's not enough for the plaintiff to merely claim an innocent mistake. The onus falls on the defendant to prove the omission was intended to deceive, though plaintiffs are entitled to present innocent explanations.

If the court finds deception likely or intentional, it may justify requiring security for costs as a safeguard against evasion of liability.

Justice of the Case Requirement

Perhaps the broadest and most discretionary threshold is found in rule 671(h): where the justice of the case requires the making of the order. This ground allows the court to weigh whether unusual circumstances would make it unfair for the defendant to proceed without financial protection.

In Robson v Robson [2008] QCA 36, the Queensland Court of Appeal held that this threshold opens the door to a holistic assessment of case context, including matters already captured under rule 672's discretionary considerations.

For example, if a plaintiff deliberately disposes of assets or changes jurisdiction to avoid liability, an order may be justified, even if no other threshold is met.

Justice Keane (as he then was) made clear that this provision does not punish poverty but prevents manipulation of the litigation process.

Other Circumstances in Rule 671

Where the plaintiff has insufficient assets within the jurisdiction, or where their financial position is deliberately obscured, the court may consider this as a composite ground under either Rule 671(a) or 671(h). This is particularly relevant where enforcement in Queensland would be impractical due to a lack of fixed and permanent assets.

The court may require proof that assets will remain available throughout the proceeding, and may consider personal guarantees or third-party undertakings as alternatives to formal security.

In summary, rule 671 sets a gatekeeping standard that ensures the court only entertains security for costs applications where real and demonstrated risk exists. Once the threshold is crossed, the court shifts to a more flexible inquiry under rule 672 to determine whether an order is just in the circumstances.

Discretionary Factors (Rule 672)

Once a threshold requirement under rule 671 is met, the court considers whether to grant a security for costs order. This is where rule 672 of the UCPR comes into play, listing a range of discretionary factors that guide the exercise of judicial discretion.

Unlike the threshold conditions, which are jurisdictional gatekeepers, the discretionary factors are not exhaustive, and the court may weigh any consideration relevant to achieving justice between the parties.

Rule 672 of the UCPR states:

Below is an overview of the key discretionary factors recognised by Queensland courts.

Means of Those Behind the Litigation

Where a corporate plaintiff has limited or no means, the court will examine whether individuals or entities are standing behind the company, such as directors, shareholders, or funders, who could satisfy a future costs order or provide security.

In Specialised Explosives Blasting & Training Pty Ltd v Huddy's Plant Hire Pty Ltd [2009] QCA 254, the court observed that the existence of well-resourced backers who stand to benefit from the litigation may tip the balance in favour of ordering security. This aligns with the view that a party should not be allowed to shield financial exposure behind a corporate veil while still enjoying the benefits of the litigation.

Courts will also consider whether these individuals have offered a personal guarantee, and if so, the form and enforceability of that undertaking.

Merits and Bona Fides of the Case

While courts are reluctant to conduct a "mini trial ," they may still assess whether the plaintiff's claim is genuine and arguable. As outlined in Base 1 Projects Pty Ltd v Islamic College of Brisbane Ltd [2012] QCA 114, if the plaintiff's claim appears bona fide and discloses a viable cause of action, that will weigh against the making of a security order.

However, the court may be more inclined to grant security if the claim appears weak, speculative, or vexatious. That said, unless there is clear evidence of futility or abuse, Queensland courts generally assume that a plaintiff's case is not frivolous for the purposes of a security for costs application. In Suncare Constructions Australia Pty Ltd v Gainspace (Mackay) Pty Ltd [2016] QSC 67, Jackson J said at [11]:

Whether Plaintiff is a "De Facto Defendant"

Security for costs is typically ordered only against a party in the plaintiff's position. Courts are cautious not to penalise litigants who are, in substance, defending themselves.

Courts have confirmed that a party should not be ordered to provide security if their claim is primarily defensive in nature, such as resisting an earlier wrong or countering prior action initiated by the defendant.

The court focuses on substance over form, especially where litigation arises from an earlier legal entanglement initiated by the other side.

In Global Access Ltd v Educationdynamics, LCC [2009] QSC 373, Applegarth J (citing Willey v Synan [1935] HCA 76) said at [15]:

Plaintiff's Financial Condition and Impecuniosity

Firstly, for the non-lawyers, impecunious is defined as:

While impecuniosity alone is not a bar to litigation, it is a relevant discretionary factor. The courts are careful to avoid denying access to justice. Still, they also recognise that a plaintiff's inability to pay adverse costs increases the risk to the defendant, justifying the need for protective measures.

In Muir v McGowan [2010] QCA 154, the court noted that repeated litigation losses coupled with impecuniosity may warrant an order, particularly when the defendant would otherwise face an unfair burden in defending a legally unsatisfiable case, White JA citing Harpur v Ariadne Australia Ltd (No 2) [1984] 2 Qd R 523, said:

Impecuniosity Attributable to Defendant's Conduct

One of the strongest rebuttals a plaintiff can raise is that the defendant's actions caused their financial hardship, the subject of the dispute. If a causal link can be established, requiring the plaintiff to provide security may be unjust. This may be relevant in debt recovery proceedings, for example.

The plaintiff bears the burden of proving both its prior financial stability and that the defendant's conduct materially contributed to its decline. Courts look for a real causal connection, and although misconduct is not strictly required, mere correlation is insufficient.

In Base 1 Projects Pty Ltd v Islamic College of Brisbane Ltd [2012] QCA 114, Wilson AJA (with McMurdo P and Applegarth J agreeing), citing Jazabas Pty Ltd v Haddad [2007] NSWCA 291, said at [26]:

Potential Oppressiveness or Stultification of the Claim

A key equity consideration is whether the security order would be so burdensome that it would effectively stifle the litigation. This is known as "stultification."

Evidence of stultification must be cogent. Plaintiffs resisting an order on this ground must clearly demonstrate that they cannot provide security and that the case would be abandoned as a result.

That said, stultification is only one factor among many, and courts are not compelled to refuse an order simply because hardship is shown.

In Suncare Constructions Australia Pty Ltd v Gainspace (Mackay) Pty Ltd [2016] QSC 67, Jackson J said at [47]:

An important consideration in some cases is whether an order for security for costs would stultify the proceeding. In this context, the verb "stultify" is used to mean bring the proceedings to a halt and make them useless to the plaintiff, because the plaintiff cannot provide and will not be able to obtain the security ordered. The plaintiffs did not adduce any evidence to that effect. They did not submit that would be the effect of an order for security.

Public Interest or Access to Justice Considerations

In rare cases, a broader public interest may weigh against ordering security. For instance, where the litigation raises novel public law issues or impacts vulnerable parties, courts may allow the case to proceed without financial barriers.

Similarly, in the QCAT context, the Tribunal is directed by statute to handle cases in a manner that is accessible, informal, and cost-effective. Thus, it tends to avoid security orders altogether unless clearly justified (as above in M Plus 2 Projects Pty Ltd v Silvetser).

In conclusion, rule 672 invites the court to perform a delicate balancing act. While the factors guide judicial discretion, the goal remains clear: to protect defendants from injustice without unreasonably impeding plaintiffs' access to the courts.

Each application turns on its own facts, and the weight given to any factor may vary dramatically from case to case.

Practical Application and Evidentiary Burden

While the law surrounding security for costs is well established in Queensland, its practical application hinges on the strength and sufficiency of the evidence presented by both parties.

Courts do not make these orders lightly. Applicants must demonstrate a genuine basis for concern, while respondents must effectively counter claims of insolvency or unfairness.

This section outlines how the evidentiary burden operates in practice and the strategic tools litigants often deploy in response.

Proving the Threshold: Cogent and Credible Testimony

To succeed in a security for costs application, the applicant, typically the defendant, must first satisfy a threshold requirement under rule 671 UCPR. This is not merely a procedural formality. The applicant must produce credible testimony that gives rise to a rational belief that the plaintiff will be unable to satisfy an adverse costs order.

This does not require definitive proof of insolvency. Instead, the evidence must rise above conjecture or suspicion. Courts look for financial statements, liquidation status, or reliable public records to demonstrate risk.

Incorporated plaintiffs, especially those in liquidation or receivership, face a lower evidentiary hurdle for applicants. Queensland courts often find that the threshold is automatically satisfied in such cases.

Plaintiff's Response: Proving Solvency or Injustice

Once a threshold condition is established, the evidentiary onus shifts to the plaintiff to demonstrate why the court should not make an order or should make a lesser order than what is sought.

A plaintiff may rebut the application by:

1. Providing financial statements or banking records to prove their capacity to pay.
2. Pointing to the existence of local assets of a fixed and accessible nature.
3. Arguing that security would be oppressive or stultifying, preventing them from pursuing a legitimate claim.

In Robson v Robson, the Queensland Court of Appeal reiterated that this shift in burden is critical. The plaintiff is not required to prove solvency on the balance of probabilities, but rather to satisfy the court that a fair exercise of discretion weighs against ordering security.

In Bellaluz Pty Ltd v Westpac Banking Corporation [2014] QSC 273, Alan Wilson J said at [13]:

Failure to respond with credible evidence or to explain financial standing may lead the court to assume the plaintiff is indeed impecunious. Inaction or silence on financial capacity can strongly support the granting of a security order.

Strategic Use of Financial Disclosure and Undertakings

In practice, both applicants and respondents have strategic tools at their disposal. One such tool is the voluntary disclosure of financial records or personal undertakings by those "standing behind" the litigation, such as directors, shareholders, or funders.

From the court's perspective, a director's undertaking to cover adverse costs may be viewed as a suitable alternative to formal security, provided it is clear, enforceable, and credible. A personal guarantee by a director may influence the court to decline a security order.

However, the court is not compelled to accept such undertakings at face value. Personal guarantees must be properly documented and enforceable to substitute for security. In Fimiston Investments Pty Ltd (in liq) v Pecker Maroo Pty Ltd [2011] QSC 356, McMeekin J said at [48]:

Another common strategy is to propose staged security, where payment is made incrementally as the case progresses. This can strike a compromise, protecting the defendant while reducing the upfront burden on the plaintiff.

Courts have accepted this approach in complex matters, especially when the projected trial costs are high but the claim appears reasonably arguable.

In summary, the success or failure of a security for costs application in Queensland often depends not on legal theory but on the depth, clarity, and credibility of the evidence presented. Both sides must engage tactically: the applicant must prove risk, and the plaintiff must rebut it with transparent financial disclosure or tailored solutions that mitigate injustice.

The Court's Discretion in Security for Costs Applications

Once a threshold condition for security for costs is established under rule 671 of theUCPR, the decision to make an order lies entirely within the court's discretion. This discretionary stage, governed by rule 672, requires judges to balance the interests of both parties carefully: the defendant's right to cost recovery and the plaintiff's right to pursue justice.

The discretionary power is broad but must be exercised judicially, fairly, transparently, and according to law. Queensland courts have clarified that this is not a mechanical or formulaic task; it is a balancing exercise that responds to each case's particular facts and equities.

How Judges Balance Competing Interests

Judges weighing a security for costs application must assess whether, in all circumstances, justice would best be served by making or refusing an order. Several factors influence this decision, including:

1. The plaintiff's financial position, including the role of litigation funders or backers.
2. Whether the defendant seeks to oppress or simply protect legitimate interests.
3. Whether the claim is being pursued in good faith, with at least an arguable cause of action.
4. The potential for a security order to stifle a genuine claim due to lack of resources.
5. Any delay in bringing the application.

Significantly, courts recognise that while litigation should not be a privilege of the wealthy, defendants also have the right not to be dragged into costly proceedings with no realistic chance of recovering costs if they succeed.

Notable Case Law

Queensland case law establishes that once a prima facie basis for security for costs is shown, such as where a plaintiff is impecunious or resides overseas, the burden shifts to the plaintiff to demonstrate why an order should not be made.

Importantly, insolvency alone does not compel the court to make an order; the central question is whether requiring security would unfairly stifle a genuine claim. Courts adopt a holistic approach, considering both threshold and discretionary factors in tandem, and will weigh all relevant circumstances, including procedural fairness, delay, and the presence of litigation funders who stand to benefit without personal risk.

Courts are also cautious not to turn security applications into mini-trials on the merits, but they will assess whether the claim is bona fide and arguable. Applicants must act transparently and support their claims with honest, proportionate cost estimates - exaggerated or speculative figures can fatally undermine an application.

Overall, the guiding principle remains fairness: protecting defendants from unrecoverable costs while preserving access to justice for plaintiffs with legitimate claims.

Base 1 Projects Pty Ltd v Islamic College of Brisbane Ltd [2012] QCA 114

Base 1 Projects Pty Ltd v Islamic College of Brisbane Ltd [2012] QCA 114 is a foundational Queensland Court of Appeal decision that brings together multiple key principles in one judgment. The court confirmed that:

• Once a prima facie case for security is shown, the burden shifts to the plaintiff to persuade the court not to make an order.
• The plaintiff's impecuniosity is relevant but not determinative - what matters is whether the order would stifle the litigation.
• There is no blanket immunity from security orders for insolvent plaintiffs; however, the court must still consider whether injustice would result.
• The judgment also reinforced that the presence of litigation funders, or individuals standing behind the company who may benefit from the litigation, can justify ordering security.

Robson v Robson [2008] QCA 36

In Robson v Robson [2008] QCA 36, the Queensland Court of Appeal examined the interplay between threshold conditions and discretionary factors, with detailed commentary on how the two are conceptually and practically linked.

Justice McMeekin observed that many of the factors listed in rule 672 may also inform whether a threshold is met, particularly the "justice of the case" ground under rule 671(h). The court clarified that the discretion is broad, but must be exercised by assessing all relevant facts, including the procedural fairness to both sides.

This case is frequently cited for its detailed exploration of onuses of proof, evidentiary expectations, and how delays or omissions in financial disclosure can shift the weight of the court's decision toward ordering security.

Suncare Constructions Australia Pty Ltd v Gainspace (Mackay) Pty Ltd [2016] QSC 67

Justice Jackson's decision in Suncare Constructions Australia Pty Ltd v Gainspace (Mackay) Pty Ltd [2016] QSC 67 emphasises that security for costs should not devolve into a merits hearing.

He clarified that while courts may look at the strength and bona fides of the plaintiff's case, they should refrain from making provisional rulings or engaging in a "mini trial" during a security application.

However, the court did recognise that commercial litigation funders who stand to gain from a favourable outcome, without exposure to adverse costs, can tilt the scale toward a security order, particularly if their involvement increases the defendant's risk profile.

This case underscores the delicate equilibrium courts strive to maintain: discouraging speculative claims while preserving access to justice for litigants in genuine financial difficulty.

Hung v Aquamore Credit Equity Pty Ltd [2022] NSWCA 123

Although a New South Wales decision, Hung v Aquamore Credit Equity Pty Ltd [2022] NSWCA 123 has been referenced in Queensland legal commentary for its stern warning against inflated cost estimates.

In this case, the respondent claimed over $434,461.50 in costs for a two-day appeal, a figure that counsel later admitted was grossly exaggerated. Justice Leeming refused the security application outright, stating that the unjustifiable inflation of cost estimates undermined the credibility of the application.

The case is a powerful cautionary tale: if an applicant seeks a discretionary remedy, they must do so honestly, transparently, and with reasonable evidence. Courts will not entertain inflated or speculative estimates, particularly where the objective appears to be pressuring or intimidating the opposing party.

In summary, the court's discretion under rule 672 is not about ticking boxes, it's about striking a fair balance. Judges apply layered reasoning, informed by case law and context, to ensure that justice is not only done, but seen to be done. Whether granting or refusing an order, the guiding principle remains the same: procedural fairness and equitable treatment for both sides.

Common Grounds for Refusal of Security for Costs

While courts in Queensland are empowered to grant security for costs orders where appropriate, several established grounds for refusing such applications exist. Plaintiffs often raise these grounds in opposition to the order, and courts take them seriously, particularly where an order would create procedural injustice or be used to strategically obstruct litigation.

Below are four common reasons Queensland courts have refused to grant security for costs orders, with direct reference to legal commentary and recent decisions discussed in the resources you shared.

Delay in Bringing the Application

One of the most persuasive reasons for refusing an application is undue delay. Security for costs applications should be brought promptly, ideally in the early stages of proceedings. If a defendant waits too long, especially after the plaintiff has already incurred substantial costs, courts may conclude that the application is oppressive or unfair.

Delays can prejudice the plaintiff, who may have already invested significantly in litigation, on the assumption that no security would be required.

Failing to act early may be interpreted as a tactical decision rather than a genuine concern about cost recovery. As such, strategic or reactive applications are often rejected.

Overinflated or Unjustified Estimates of Costs

Another ground for refusal, particularly egregious, is the submission of grossly exaggerated cost estimates. Courts expect cost estimates provided in support of a security application to be reasonable, justifiable, and proportionate.

The case of Hung v Aquamore Credit Equity Pty Ltd [2022] NSWCA 123 is a clear cautionary tale. The respondent in that matter claimed over $434,461.50 for a two-day appeal. Justice Leeming found this figure absurd and unsupportable, ultimately refusing the application entirely, stating that courts will not reward applicants who seek to manipulate the process with inflated numbers.

This case stands as a reminder that an applicant's credibility is critical, and any suggestion that the application is being used as a tactic to intimidate or financially burden the other side will weigh heavily against the order being made.

Identical Interests Between Corporate and Natural Plaintiffs

Where both a corporate plaintiff and a natural person plaintiff are involved in the same claim, and their interests are completely aligned, courts are often reluctant to order security against just one of them, particularly the corporate party.

Where a natural person is fully invested in the case and stands to bear liability for adverse costs, the existence of the corporate plaintiff should not become a basis for ordering security. The logic is that the defendant will have a realistic prospect of cost recovery through the individual plaintiff, making a security order redundant or unjustified.

In Molony v ACN 009 697 367 Pty Ltd (In Liq) [2003] QCA 120, White J said at [29]:

Genuine Risk of Stultification

Perhaps the most well-known argument against a security order is the risk that it will stultify the proceedings and render the plaintiff unable to pursue their claim due to lack of resources. This is not merely an emotional appeal but a recognised legal ground for resisting security.

To successfully argue stultification, the plaintiff must demonstrate with credible evidence that they cannot afford to provide security, and that being forced to do so would terminate or significantly impair their case.

The plaintiff has the burden of proof, and assertions of hardship must be backed up with clear financial records or supporting documentation. Courts will not accept vague or unsubstantiated claims of poverty.

However, even if stultification is not definitively proven, the court may still refuse to make an order if the surrounding circumstances indicate that it would be unjust, especially where there is no evidence of litigation abuse, or risk-shielding.

Security for costs orders are powerful tools-but not blunt instruments. Queensland courts are attuned to their potential for misuse and will refuse to make such orders where the application is untimely, excessive, unnecessary, or unjust. For both applicants and respondents, understanding these refusal grounds is essential in framing a persuasive argument and navigating the strategic landscape of litigation.

Amount and Form of Security (Rule 673)

Once a court decides to order security for costs, the next critical step is determining the amount and form of that security, governed by rule 673 of the UCPR. The rule grants the court broad discretion to decide what kind of security should be provided and how much is appropriate, regarding the case's specific context.

This phase is less about strict accounting and more about ensuring fairness, balancing the defendant's right to cost protection with the plaintiff's access to justice.

Determining the Quantum: Broad Brush Approach

Queensland courts routinely adopt a "broad brush" approach when assessing the appropriate quantum of security. The court is not required to conduct a precise cost assessment like a post-trial costs order. Instead, it will estimate a reasonable approximation of the legal costs the defendant is likely to incur, guided by experience and proportionality.

This approach allows the court to account for:

1. The stage of the proceedings.
2. The anticipated complexity and duration of the matter.
3. Whether the security should cover all or only part of the costs.

In Hung v Aquamore Credit Equity Pty Ltd, the risk of inflating the estimate was made abundantly clear.

Past and Future Costs

Courts also distinguish between past and future costs when ordering security, although they are not obliged to do so. Generally:

• Past costs may only be included if they are not the subject of a previous costs order and are directly related to the current proceedings.
• Future costs- those anticipated from the present to the end of the trial are more commonly included and are the primary focus of most security orders.

Courts may exclude or heavily discount past costs in cases of significant delay in bringing the application, especially where the plaintiff has already expended considerable resources in good faith. Plaintiffs faced with a belated application may successfully argue that inclusion of past costs would be prejudicial and unfair.

Queensland courts typically award security up to the first day of trial, with further security considered only if justified by subsequent applications.

Instalments and Other Forms of Security

Under rule 673, the court is not limited to requiring a lump-sum cash payment. Security can be provided in various forms, including:

1. Cash paid into court.
2. Bank guarantees or bonds.
3. Personal undertakings from directors or third parties.
4. Staggered payments in instalments tied to litigation milestones.

These alternative forms are particularly important where a lump sum would stultify the plaintiff's ability to continue the proceedings. In such cases, the court may fashion a more flexible security arrangement. For instance, instalment-based security may reduce procedural delay and avoid unnecessary costs for both parties.

Courts also consider whether financial undertakings from those behind the litigation, such as company directors or litigation funders, are sufficient to replace formal security.

Ultimately, the form of security is at the court's discretion, guided by the principle that it should be just and reasonable in the circumstances, not punitive or obstructive.

Rule 673 provides the court with wide latitude to craft a security order that aligns with the case's real-world dynamics. The process focuses not only on quantifying cost risk but also on ensuring that litigation remains fair, accessible, and proportionate.

Whether ordered as a lump sum, in instalments, or via enforceable undertakings, the form and amount of security must always reflect the unique realities of the dispute.

Personal Guarantees as an Alternative to Security for Costs

In circumstances where a plaintiff (often a corporation) faces a security for costs application but lacks the liquidity to pay a cash sum into court, a common alternative offered is a personal guarantee.

These guarantees are typically provided by individuals "standing behind" the litigation, such as company directors, shareholders, or related third parties who would benefit if the litigation is successful.

What is a Personal Guarantee in this Context?

A personal guarantee is a formal undertaking made by an individual to pay the defendant's legal costs if the plaintiff is ultimately ordered to do so but cannot satisfy the judgment themselves. It is proposed as a substitute for traditional forms of security, such as cash or a bank bond.

This mechanism attempts to strike a balance: the defendant receives some reassurance that costs will be covered if successful, while the plaintiff avoids being locked out of court due to an inability to provide upfront security.

Judicial Approach to Personal Guarantees

Queensland courts have taken a cautious but pragmatic approach to personal guarantees in security for costs matters. Courts do not automatically accept a personal guarantee as a sufficient form of security.

The factors the courts will consider include:

• The financial capacity of the guarantor: Courts will scrutinise whether the individual offering the guarantee has sufficient assets or income to meet an adverse costs order if called upon. Unsupported assertions of wealth are rarely persuasive.
• Formality and enforceability: The guarantee must be documented properly, often in the form of a deed, and should be enforceable without ambiguity. Vague or informal promises, or undertakings that do not specify the scope or conditions of liability, are unlikely to satisfy the court.
• Connection to the litigation: The individual must have a direct interest or involvement in the litigation, either as a financial backer, a company director, or someone who stands to benefit materially from a successful outcome. Courts are wary of accepting undertakings from unrelated parties with no skin in the game.

Best Practices When Offering a Guarantee

To maximise the chance that a personal guarantee will be accepted in place of a security for costs order, litigants should:

1. Provide detailed evidence of the guarantor's financial position, such as property ownership, bank statements, or income sources.
2. Ensure the guarantee is in formal legal form (e.g., a deed) and reviewed by counsel.
3. Clearly define the amount, scope, and triggering conditions of the liability.
4. Disclose any conflicts of interest or past financial entanglements of the guarantor to maintain credibility.

Enforcement and Consequences of Non-Compliance

Security for costs orders are not merely procedural directions; they are binding court orders with real consequences for non-compliance. Once a security order is made under the UCPR, particularly rules 673 to 677, it triggers a range of enforcement mechanisms designed to uphold the integrity of the litigation process and protect the defendant's financial interests.

This section outlines what happens when a plaintiff fails to comply, how orders can be modified or discharged, and how these rules apply to more complex litigation scenarios involving counterclaims or third-party proceedings.

Stay or Dismissal of Proceedings (Rule 674)

Under rule 674, the consequences can be severe if a plaintiff fails to comply with a security for costs order. The rule provides that the proceeding is automatically stayed in relation to any step the plaintiff might take until security is given. Essentially, the plaintiff is barred from progressing their case until they meet the court's requirements.

More seriously, the defendant may apply for dismissal of the proceeding entirely. This makes compliance critical; failure to pay the required security isn't just a procedural misstep; it can terminate the claim altogether.

Courts treat non-compliance as a serious procedural default. The rule's design ensures that a defendant is not exposed to ongoing litigation risk without the financial safeguard the court has deemed necessary.

Importantly, the court retains discretion on dismissing the case; it is not an automatic outcome. Courts will consider factors such as whether the default was deliberate, prolonged, or prejudicial.

Varying or Setting Aside Orders (Rule 675)

Security for costs orders are not set in stone. Under rule 675, either party may apply to vary or set aside a security order if circumstances change. This ensures flexibility and fairness as the litigation progresses.

Common reasons for variation include:

1. A change in the plaintiff's financial position, such as securing new funding or entering insolvency.
2. Adding new claims or parties to proceedings alters the scope of potential costs.
3. Fresh evidence about the plaintiff's ability to pay or the reasonableness of the security previously ordered.

Rule 675 allows the court to respond dynamically to the evolving nature of litigation, ensuring that orders remain proportionate and just. It also provides a safety valve for plaintiffs who may face unforeseen hardship after an order is made.

Discharging Security (Rule 676)

Once the proceedings are resolved or reach a point where security is no longer required, the plaintiff can apply under rule 676 to have the security discharged.

Discharge may be appropriate where:

1. The defendant no longer has exposure to adverse costs, such as after a discontinuance or settlement.
2. The plaintiff has successfully defended a costs application, or a judgment has been entered in their favour.
3. The litigation has narrowed such that the initial cost estimate is no longer applicable.
4. The form of the discharge, whether a refund of funds paid into court or release of a bank guarantee, will depend on the original terms of the security order and the court's directions.

This step reinforces that security for costs is not punitive-it is a temporary protective measure. Once that need evaporates, the court should return any unused or unclaimed funds to the plaintiff or releasing party.

Counterclaims and Third Party Proceedings (Rule 677)

The application of security for costs is not confined to primary claims by plaintiffs. Rule 677 extends the regime to counterclaims and third-party proceedings, with any necessary modifications.

This rule recognises that in modern litigation, a defendant may act in a dual role; responding to a claim while also bringing their own against another party. In such cases, the party initiating the counterclaim or third-party notice is treated, for security purposes, as a plaintiff.

Rule 677 ensures that cost risk follows the claim, regardless of formal party labels. If a party asserts an independent right or claim that may impose cost exposure on another, it may be ordered to provide security, particularly if it is corporate, foreign, or impecunious.

This is especially relevant in commercial or construction disputes, where multiple layers of claims and cross claims are common. Rule 677 ensures that all parties are protected equally from unrecoverable legal costs.

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Strategic Considerations for Litigants

Security for costs is more than a procedural tool, it is a strategic instrument that can shape the course of litigation. Whether you are a defendant considering making an application or a plaintiff responding to one, understanding the tactical implications can help you make better legal and commercial decisions.

Should You Apply? Key Questions for Defendants

Before launching a security for costs application, defendants should assess whether it is worth pursuing. Courts do not grant these orders automatically. Consider the following strategic questions:

1. Is the plaintiff a corporation with unclear or limited assets? If yes, and there is a genuine concern about their ability to pay costs if they lose, a strong basis for an application exists.
2. Is the plaintiff based overseas or does not have permanent assets in Australia? This raises enforcement concerns and may justify seeking security early.
3. Is the claim weak, speculative, or being pursued in bad faith? If so, a security application can serve as a filter to challenge the seriousness of the litigation.
4. Is there evidence that the plaintiff is backed by a funder or individual with means? If so, security may be sought directly from those benefiting behind the scenes.
5. Can you act promptly? As highlighted in MST Lawyers and Kennedy v Nine Network, delay can fatally undermine a valid application, especially if the plaintiff has already incurred significant legal costs.

Security for costs can be a shield, but it should not be used as a sword. Courts are alert to applications made purely for tactical obstruction and may penalise such conduct with cost orders.

Responding to an Application as Plaintiff: Strategic Options

For plaintiffs, the receipt of a security for costs application demands a swift and strategic response. Options include:

1. Paying the full amount sought
2. If the plaintiff is financially capable, paying security into court quickly can avoid delay and legal expense.
3. Negotiating a lesser amount or an alternate form of security
4. Proposing instalments, bank guarantees, or personal undertakings can lead to a practical compromise.

Opposing the application

Grounds for opposition include:

1. No threshold condition is met (e.g., no evidence of insolvency).
2. The defendant delayed making the application.
3. The security would stultify the proceedings.
4. The plaintiff has provided credible financial evidence showing they can satisfy a future costs order.

Offering a personal guarantee

If a director or shareholder stands to benefit, their guarantee, if formal, enforceable, and backed by real financial standing, may be accepted instead of cash security.

Litigants must avoid conflicting positions (e.g., claiming both solvency and inability to pay security) and ensure all evidence, including financials, is timely and credible.

Cost-Benefit Analysis of Paying vs Opposing Security

The decision to pay or contest security comes down to a calculated risk assessment. Plaintiffs should weigh:

1. Legal costs of opposing the application, which could be substantial if a hearing is required.
2. Potential delay in proceedings while the application is resolved.
3. The likelihood of success in resisting the application, especially if financial hardship is not convincingly proven.
4. The commercial urgency of the underlying claim (e.g., a plaintiff needing to secure damages or enforce contractual rights).

Sometimes, paying security is the cheapest, fastest, and most efficient solution, even if the plaintiff believes the application is unjustified.

Security for Costs - Key Takeaways

Security for costs is fundamentally about balance. Courts must weigh defendants' legitimate interest in recovering costs against plaintiffs' right to access justice, especially impecunious or foreign ones.

The legal framework under rules 670-677 of the UCPR and principles from case law provides structure and flexibility. It ensures that security for costs is neither a barrier to the courtroom nor a weapon to stifle legitimate claims.

Final Tips for Legal Practitioners

Some legal tips when considering security for costs include:

1. Act promptly. Delays are a common reason why courts refuse applications.
2. Be realistic in cost estimates. As Hung made clear, overinflated claims can sink an otherwise meritorious application.
3. Support all arguments with evidence. Vulgar assertions won't suffice, especially in proving impecuniosity or stultification.
4. Tailor the security. Instalments, guarantees, or hybrid arrangements may win the court's favour over rigid cash demands.
5. Consider optics and motive. Security applications perceived as tactical or oppressive can backfire, resulting in costs against the applicant.

Ultimately, the successful use of security for costs hinges on understanding the rules and the judicial mindset governing their application.

A well-reasoned, fair, and evidence-based approach is far more persuasive than one grounded in strategy alone.

Security for Costs FAQ with Answers

Below are answers to some of the most frequently asked questions about security for costs in Queensland.

This section is designed to provide clear, concise guidance based on current legal principles and recent case law.

What is a security for costs order in Queensland?

A security for costs order is a court direction requiring a plaintiff to pay money into court or provide another form of security to cover the defendant's legal costs. It protects defendants from the risk of unrecoverable costs if the plaintiff loses and cannot pay. These orders are commonly made when the plaintiff is a company, lives overseas, or appears to lack financial resources. They are governed by rules 670-677 of the Uniform Civil Procedure Rules 1999 (Qld).

Who can apply for security for costs in Queensland?

In most cases, security for costs applications are made by defendants seeking protection from financially risky plaintiffs. However, plaintiffs pursuing counterclaims or third-party proceedings may also be required to provide security, as they are treated as claimants. The rules apply equally to all parties in the position of a plaintiff, regardless of formal titles. Courts consider who is substantively advancing the claim.

When should a security for costs application be made?

Security for costs applications should be made as early as possible in the proceedings. Courts are critical of delays, particularly if the plaintiff has already incurred substantial legal costs. A delayed application may be refused if it appears strategic or prejudicial to the plaintiff. Promptness shows good faith and enhances the chances of success.

What are the threshold requirements under Rule 671 CPR?

To consider making a security for costs order, the court must first be satisfied that at least one condition in rule 671 applies. These include situations where the plaintiff is a corporation unlikely to pay costs, is located outside Australia, or has misstated their address. A catch-all ground also allows orders where "the justice of the case" requires it. These prerequisites establish jurisdiction but do not guarantee that an order will be made.

What factors influence the court's discretion under Rule 672?

Once a threshold is met, the court considers discretionary factors under rule 672 to decide whether to make an order. These include the plaintiff's financial condition, the merits of the case, potential stultification, and whether third parties are backing the claim. The court balances fairness to both sides, focusing on proportionality. The process is flexible and case-specific.

Can a personal guarantee replace a security for costs payment?

Yes, in some cases, a personal guarantee by a director or shareholder may be accepted in lieu of cash or a bank guarantee. The guarantee must be formal, enforceable, and supported by evidence of the guarantor's financial capacity. Courts are cautious and will not accept vague or unsupported promises. If accepted, a personal guarantee can prevent proceedings from being stayed or dismissed.

What happens if a plaintiff does not comply with a security for costs order?

If a plaintiff fails to comply, the proceedings are automatically stayed under rule 674 of the UCPR. This means the plaintiff cannot take further steps in the case until security is provided. The defendant may also apply to have the proceeding dismissed entirely. Courts treat non-compliance as a serious procedural breach.

Can security for costs orders be changed after they are made?

Yes, rule 675 allows the court to vary or set aside a security order if circumstances change. This may include changes in the plaintiff's financial position or the scope of the proceedings. A party can apply for variation with supporting evidence. The court ensures the order remains just and appropriate over time.

Can a security for costs order be discharged?

Yes, under rule 676, security may be discharged if it is no longer necessary, such as after settlement or judgment. The court may return funds or release guarantees provided earlier in the case. A party must apply for discharge and explain why the security is no longer required. The court ensures that defendants are no longer exposed to unnecessary risk.

Does security for costs apply to counterclaims and third-party claims?

Yes, rule 677 of the UCPR confirms that the rules on security for costs apply equally to counterclaims and third-party proceedings. A party who initiates such claims is treated as a plaintiff for this purpose. This ensures fairness and consistent risk management across complex litigation. It prevents claimants from bypassing cost recovery safeguards.

How do courts calculate the amount of security for costs?

Courts use a "broad brush" approach, estimating a reasonable figure based on anticipated legal costs. They may consider the stage of proceedings, case complexity, and potential duration. Overinflated estimates can undermine the application, as seen in Hung v Aquamore. The goal is to provide adequate protection without unjustly burdening the plaintiff.

Can security for costs cover past legal costs?

Yes, but only in limited circumstances. Past costs must be clearly identifiable, relevant, and not already subject to a costs order. Courts are reluctant to include past costs if the application was delayed or prejudices the plaintiff. Most security orders focus on prospective costs moving forward.

Can security be paid in instalments?

Yes, courts may allow security to be paid in instalments to ease the plaintiff's financial burden. This is particularly helpful when lump-sum payments would stultify proceedings. The court will usually set payment milestones tied to litigation stages. This approach ensures fairness while still protecting the defendant.

What is stultification in the context of security for costs?

Stultification occurs when an order for security would effectively prevent the plaintiff from pursuing their case ( debt recovery, for example). Courts require plaintiffs to provide credible evidence that they genuinely cannot afford to comply. Mere assertions of poverty are not enough; detailed financial records are expected. If proven, the court may refuse or reduce the order.

Can plaintiffs argue that their financial hardship was caused by the defendant?

Yes, if the plaintiff's impecuniosity is linked to the defendant's alleged misconduct, this may weigh against granting security. The plaintiff must show a clear causal link and provide supporting evidence. This argument is strongest in claims for financial loss directly caused by the defendant. Courts carefully assess these claims before accepting them.

Does QCAT handle security for costs the same way as courts?

No, the Queensland Civil and Administrative Tribunal (QCAT) has a different approach due to its statutory mandate. QCAT is focused on informal, accessible, and cost-effective dispute resolution. Security for costs orders are rare and only made in exceptional cases. Section 109 of the QCAT Act governs these decisions, not the UCPR.

What if the plaintiff has misstated their address in court documents?

If the plaintiff's address is misstated or omitted, and the court finds this was done to mislead or avoid liability, it may order security under Rule 671(c). The court considers whether the omission was intentional and prejudicial. Innocent mistakes may be excused if promptly corrected. Deliberate avoidance may strengthen a security application.

What if both a company and its director are plaintiffs?

If the corporate and individual plaintiffs have identical interests and must succeed or fail together, courts are cautious about ordering security. In such cases, a personal plaintiff with means may effectively guarantee cost recovery. Courts may decline to order security solely against the company. This prevents duplication and ensures fairness.

Can inflated cost estimates lead to refusal of a security for costs application?

Yes, courts have refused applications where cost estimates were grossly exaggerated or unsupported. In Hung v Aquamore, the court rejected a $430,000 estimate for a two-day appeal as "absurd". Overstating costs undermines the credibility of the application and may result in adverse cost orders. Accurate, defensible estimates are essential.

Is it ever better to pay security rather than contest it?

Yes, in many cases, paying security promptly can be more cost-effective than opposing the application. Contesting security may delay proceedings and increase legal costs. If the amount sought is reasonable and the plaintiff can afford it, early compliance may be strategic. This avoids further litigation and procedural risks.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.