Security for Costs Application, Australia 2026: Grounds, Tests (federal Court & UCPR), Evidence & Payment Forms

A security for costs application is one of the most effective procedural tools available to defendants in Australian civil litigation, and its strategic importance has only grown as cross-border commercial disputes and claims involving thinly capitalised plaintiffs continue to rise in 2026. The mechanism allows a defendant to ask the court to order a plaintiff to pay money into court, or provide an equivalent guarantee, as protection against the risk that the plaintiff will be unable to satisfy an adverse costs order if the defence succeeds. While the power to order security exists across both the Federal Court and every state and territory, the specific rules, evidentiary thresholds, and tactical considerations differ markedly between jurisdictions.

This guide maps those differences, explains what judges expect in supporting evidence, and provides a practitioner checklist that defendants and in-house counsel can use to prepare or resist a security for costs application in any major Australian court.

What Is Security for Costs?, Quick Answer

Security for costs is a court order requiring a plaintiff (or sometimes a cross-claimant) to provide financial assurance that the defendant’s legal costs will be recoverable if the defendant successfully defends the proceeding. As the Judicial Commission of NSW explains, the purpose of such an order is “to ensure justice between the parties, and in particular to ensure that unsuccessful proceedings do not disadvantage” a defendant who would otherwise be left with an unenforceable costs order.

Three key points practitioners should note at the outset:

• Grounds. Common triggers include a plaintiff ordinarily resident outside Australia, a corporate plaintiff with insufficient assets, or evidence that the plaintiff has changed address to avoid enforcement (UCPR reg 42.21).
• Common forms. Security is typically provided as a cash deposit into court, a bank guarantee, a solicitor’s undertaking, or, increasingly, after-the-event (ATE) insurance.
• Immediate effect. If the plaintiff fails to comply with the order within the specified time, the court may stay or strike out the proceedings entirely, terminating the claim.

Grounds and Timing: When Can You Apply for Security for Costs?

The power to order security for costs is discretionary across all Australian jurisdictions. However, the specific statutory or rule-based grounds, and the factors that guide judicial discretion, vary between the Federal Court and the state Supreme Courts. A defendant considering a security for costs application must first identify which rule governs the proceeding and then determine whether the facts engage a recognised ground.

Federal Court Test

In the Federal Court, the power to order security for costs arises under s 56 of the Federal Court of Australia Act 1976 (Cth), supplemented by Division 19.1 of the Federal Court Rules. The court exercises a broad discretion, and industry observers note that the Federal Court places particular emphasis on cross-border enforcement risk when the plaintiff is incorporated or domiciled overseas. The court will weigh the defendant’s legitimate concern about irrecoverable costs against the plaintiff’s right of access to justice, and it will consider whether the security for costs application has been brought promptly, delay is a significant factor that can undermine an otherwise meritorious application.

For corporate plaintiffs, s 1335 of the Corporations Act 2001 (Cth) provides an additional basis: a court may require security where there is reason to believe the company will be unable to pay the defendant’s costs if the defence succeeds. This provision is frequently relied upon in conjunction with the Federal Court Rules.

Security for Costs Under the UCPR (NSW, QLD & VIC)

In New South Wales, rule 42.21 of the Uniform Civil Procedure Rules 2005 (UCPR) sets out the grounds on which a court may order security for costs. Under that rule, the court may, but is not required to, order security if any of several listed circumstances apply. Those circumstances include that the plaintiff is ordinarily resident outside Australia, that there is reason to believe the plaintiff’s address was given for the purpose of avoiding enforcement, that the plaintiff has changed address with the aim of avoiding consequences, or that there is reason to believe a corporate plaintiff will be unable to pay the defendant’s costs.

In Queensland, rules 670 to 677 of the Uniform Civil Procedure Rules 1999 (Qld) provide a similar framework. Rule 671 lists the circumstances in which security may be ordered, and the procedural mechanics for the form and amount of security are set out in subsequent rules. Victorian practice broadly mirrors the NSW approach, with the Supreme Court exercising its inherent jurisdiction and following practice notes that draw on established case law principles.

The NSW Law Reform Commission, in Report 137, recommended that the UCPR be expanded to provide courts with the power to order security against persons who, though not designated as the plaintiff, are effectively driving the litigation. Early indications suggest this recommendation continues to inform judicial attitudes toward third-party-funded claims.

Who May Apply and Procedural Mechanics of a Security for Costs Application

Who Can Apply

The right to apply for security for costs ordinarily belongs to the defendant, including a cross-defendant facing a cross-claim. In certain circumstances, a third party, such as an insurer exercising its rights under the insurance contract, may also seek security. Where litigation funding is involved, courts have shown a growing willingness to consider whether the funder itself should be required to provide security, particularly where the funded plaintiff is a shell company or otherwise lacks assets.

Pre-Application Steps and Timing

A security for costs application should be brought as early as practicable in the proceedings. Delay is one of the most commonly cited grounds for refusing an order, if a defendant waits until a significant amount of discovery or interlocutory work has been completed, the court may infer acquiescence or conclude that granting the order would be oppressive. The typical pre-application sequence is as follows:

• Step 1, Initial assessment. Conduct ASIC company searches, review publicly available financial statements, and assess whether the plaintiff has assets within the jurisdiction sufficient to satisfy a costs order.
• Step 2, Demand letter. Write to the plaintiff (or its solicitors) requesting voluntary provision of security, specifying the estimated quantum and the proposed form. This step demonstrates good faith and is expected by the court.
• Step 3, Application. If voluntary security is refused, file the interlocutory application supported by an affidavit setting out the evidentiary basis. Serve in accordance with applicable court rules.
• Step 4, Hearing. The application is usually heard on the papers or in a short interlocutory hearing. Both parties may file and serve evidence, and the plaintiff will typically resist the application with evidence of its financial position or by arguing the claim has strong merits.

Required Documents

The application bundle should include:

• Interlocutory application. In the form prescribed by the relevant court’s rules.
• Supporting affidavit. Annexing corporate searches, financial statements, evidence of the plaintiff’s residency or registered office, and a costs estimate.
• Costs estimate. A solicitor’s affidavit or schedule estimating the defendant’s anticipated costs through to trial (and, where relevant, to appeal).
• Draft order. Setting out the amount and form of security sought, the deadline for compliance, and the consequences of non-compliance (typically a stay or strike out).

Evidence and the Court’s Evaluation: What Judges Expect in a Security for Costs Application

Evidence Checklist

The quality and specificity of the evidence in the supporting affidavit will often determine the outcome of the application. Judges expect defendants to go beyond bare assertions and provide concrete, documentary evidence that establishes reason to believe the plaintiff will be unable to meet a costs order. The following checklist reflects what experienced practitioners routinely include:

• ASIC company extracts. Current and historical searches showing share capital, registered office, and director details.
• Financial statements. The plaintiff’s most recent audited or management accounts, balance sheets, and profit-and-loss statements, or, if unavailable, evidence explaining why they could not be obtained.
• Insolvency indicators. Evidence of outstanding judgments, statutory demands, winding-up applications, or voluntary administration.
• Foreign residency evidence. Proof that the plaintiff is ordinarily resident outside Australia or that its assets are located in a jurisdiction where enforcement of an Australian costs order would be difficult.
• Costs estimate. A detailed breakdown of anticipated costs to trial, prepared by the defendant’s solicitor.
• Change-of-address evidence. Where relevant, proof that the plaintiff has changed its address or restructured its affairs to frustrate enforcement.
• Litigation funding arrangements. Any publicly available information about the plaintiff’s funding arrangements, particularly where the funder is itself thinly capitalised.

Probative Thresholds and Burden of Proof

The burden of establishing the grounds for a security for costs application rests on the defendant. The defendant must show “reason to believe” the plaintiff will be unable to pay costs, this is not a balance-of-probabilities test but rather a threshold of credible evidence supporting a genuine apprehension. Once the defendant discharges this threshold, the evidentiary burden shifts to the plaintiff to rebut it, typically by producing evidence of sufficient assets, insurance coverage, or a litigation funder’s undertaking.

Courts will also weigh discretionary factors, including the strength or weakness of the plaintiff’s claim, whether the plaintiff’s impecuniosity was caused by the defendant’s conduct, and whether the order would effectively shut the plaintiff out of court. These discretionary considerations are particularly important in cases involving natural persons, where orders for security for costs against individuals remain relatively uncommon.

Sample Affidavit Paragraphs

Drawing on published practitioners’ materials (including sample affidavits published by the Victorian Bar for its readers’ course), the following paragraph structures illustrate the level of specificity judges expect:

• Corporate search paragraph. “I annex hereto and marked ‘Exhibit A’ a current ASIC search of the Plaintiff conducted on [date]. The search reveals that the Plaintiff has a paid-up share capital of $2.00 and lists no charges or substantial assets.”
• Costs estimate paragraph. “Based on my experience in matters of comparable complexity and the current state of the pleadings, I estimate the Defendant’s costs from this date to the conclusion of the trial to be in the range of $[amount] to $[amount], calculated on a party-party basis.”
• Foreign residency paragraph. “I am informed by [source] and believe that the Plaintiff is ordinarily resident in [country]. There is no reciprocal enforcement agreement between Australia and [country] that would enable the Defendant to enforce an Australian costs order in that jurisdiction without commencing fresh proceedings.”

Forms of Security for Costs and Mechanics of Payment

Once an order is made, the security must be provided in the form and within the timeframe directed by the court. The form of security is itself a matter for judicial discretion, and parties frequently negotiate acceptable alternatives before or after the order is made.

Cash Deposits

The most straightforward form of security is a cash payment into court or into a solicitor’s trust account. Cash deposits are preferred by defendants because they provide immediate, unconditional protection. However, they can be burdensome for plaintiffs, particularly in large commercial litigation where the quantum of security may run to hundreds of thousands of dollars.

Bank Guarantees

A bank guarantee issued by an Australian authorised deposit-taking institution is widely accepted by courts as a satisfactory alternative to cash. The guarantee must be irrevocable, unconditional, and payable on demand. Its duration should extend beyond the anticipated conclusion of the proceedings, including any appeal period.

Solicitor’s Undertaking

In some circumstances, courts will accept a solicitor’s personal undertaking to pay costs if ordered. This form of security is less common and typically arises where the solicitor is acting on a speculative or “no win, no fee” basis and is willing to stand behind the plaintiff’s costs exposure. Courts may scrutinise the solicitor’s capacity to honour the undertaking.

ATE Insurance and Third-Party Guarantees

After-the-event (ATE) insurance policies are increasingly offered as a form of security. Industry observers expect courts to continue accepting ATE insurance where the policy meets certain criteria: the insurer must be sufficiently rated, the policy must cover the specific costs exposure, and it must be non-cancellable without leave of the court. Third-party guarantees from litigation funders may also be accepted, subject to similar scrutiny.

Security for Costs in the Federal Court: Practice and Tactical Notes

Federal Court Rules and Practice Directions

The Federal Court’s approach to a security for costs application is governed by Division 19.1 of the Federal Court Rules 2011, read together with the court’s Central Practice Note (CPN-1). Practitioners should note that the Federal Court expects applications for security to be raised at the earliest case management event, typically the first case management hearing or at the time directions are first sought. Failure to raise the issue promptly may result in the application being refused or the quantum being reduced.

Cross-border plaintiffs attract particular scrutiny in the Federal Court, where the court regularly considers whether an Australian costs order would be practically enforceable in the plaintiff’s home jurisdiction. Where the plaintiff is domiciled in a country with no reciprocal enforcement arrangements, the likely practical effect is that the court will be more inclined to order security and to set the quantum at a level that reflects the full anticipated costs exposure.

Strategic Considerations

Defendants bringing a security for costs application in the Federal Court should consider several tactical matters. Offering to accept partial security (covering costs only to a particular interlocutory milestone) can demonstrate reasonableness and increase the prospect of a favourable order. Conversely, plaintiffs resisting the application may offer to provide limited voluntary security or to consent to a staged order, which may persuade the court that a blanket stay is disproportionate.

Variation, Setting Aside and Enforcement of Security for Costs Orders

Seeking Variation or Release

A party may apply to vary or discharge a security for costs order if circumstances change materially, for example, if the plaintiff’s financial position improves, if the scope of the proceedings narrows significantly, or if the quantum originally ordered is shown to be excessive. The application is made by interlocutory process, supported by fresh evidence demonstrating the changed circumstances. Courts will require a genuine change rather than a mere recasting of arguments already considered.

Setting Aside Orders

An order for security for costs may be set aside if it was obtained on the basis of incomplete or misleading evidence, or if the court is satisfied that enforcing the order would amount to an unjust denial of access to justice. Where the plaintiff is a company and the order was made under s 1335 of the Corporations Act 2001 (Cth), the plaintiff may apply to set aside the order by demonstrating that it now has sufficient assets or that the defendant’s costs estimate was materially overstated.

Consequences of Non-Compliance

If the plaintiff fails to provide the ordered security within the time directed, the defendant may apply for the proceedings to be stayed or the plaintiff’s claim to be struck out. This is commonly achieved through an “unless” order, an order that provides that if the plaintiff does not comply by a specified date, the proceedings will be stayed or dismissed without further order. Courts enforce unless orders strictly, and a plaintiff who allows the deadline to pass will face significant difficulty in having the proceedings reinstated.

Practitioner Checklist: Security for Costs Application

The following 10-point checklist distils the practical steps that defendants should follow when preparing or considering a security for costs application in any Australian court:

1. Identify the applicable rule (Federal Court Rules, UCPR reg 42.21, or state equivalent) and confirm that the proceedings engage a recognised ground.
2. Conduct ASIC and corporate searches on the plaintiff entity as early as possible.
3. Obtain and review the plaintiff’s most recent financial statements or, if unavailable, note their absence in the affidavit.
4. Prepare a detailed costs estimate covering anticipated costs to trial (and appeal, if relevant).
5. Write a demand letter requesting voluntary security, specifying the amount and proposed form.
6. If voluntary security is refused, file the interlocutory application without delay, timing is critical.
7. Prepare a supporting affidavit exhibiting corporate searches, financial evidence, costs estimate, and any foreign-residency or enforcement-risk evidence.
8. Include a draft order specifying the amount, form, deadline, and consequences of non-compliance.
9. Consider whether partial or staged security would be an acceptable alternative that the court may prefer.
10. Monitor compliance with the order and, if the plaintiff defaults, promptly apply to stay or strike out the proceedings.

Sources

1. Judicial Commission of NSW, Civil Trial Bench Book: Security for Costs
2. AustLII, Uniform Civil Procedure Rules 2005 (NSW), reg 42.21
3. Federal Court of Australia, Federal Court Rules & Practice Directions
4. NSW Law Reform Commission, Report 137: Security for Costs and Associated Orders
5. Corporations Act 2001 (Cth)