Will I be Successful in a Security of Costs Application Against my Opponent in WA?

Applying for Security for Costs in WA: Thresholds, Discretion and Key Cases

Applications for security for costs in Western Australia aim to reduce the risk that a successful defendant will be unable to recover its legal costs from an impecunious plaintiff. The framework is primarily found in s 1335(1) of the Corporations Act 2001 (Cth) and Order 25 of the Rules of the Supreme Court 1971 (WA), which allow the Court to require a plaintiff, typically a corporation, to provide security before the matter progresses further.

As with other jurisdictions, WA courts must balance the defendant’s legitimate need for protection against the risk that a security order may unjustly prevent a plaintiff from pursuing a genuine claim.

 

The Legal Framework

Section 1335(1) Corporations Act 2001 (Cth)

This provision allows the Court to order a corporate plaintiff to give security for the defendant’s costs where there is credible testimony giving reason to believe the corporation will be unable to meet an adverse costs order. This is a threshold jurisdictional requirement.

The threshold is described as modest. The applicant must show a real chance that the plaintiff will not be able to satisfy a costs order if unsuccessful.

Order 25: Rules of the Supreme Court 1971 (WA)

Once the jurisdiction is enlivened, Order 25 governs the form of security, the procedure for obtaining it, and the consequences if security is not provided.

Threshold Test: Is the Plaintiff Unable to Pay Costs?

To satisfy the mandatory threshold under s 1335(1), the defendant must produce credible evidence showing that:

• the plaintiff corporation is likely unable to pay an adverse costs order in reasonably foreseeable events; and
• the concern is grounded in financial reality, not speculation.

Evidence often includes company searches, financial statements, insolvency indicators, or a lack of assets in the jurisdiction.

In Nicolaou v Air Liquide WA Pty Ltd [2024] WASC 309, the Court emphasised that this threshold is not demanding but must be established with cogent financial evidence.

Discretionary Considerations

Once the threshold is met, the Court exercises a broad discretion. Common factors include:

• Merits of the plaintiff’s claim – weak or speculative claims weigh in favour of ordering security.
• Impecuniosity caused by defendant’s conduct – if the alleged wrongdoing caused the plaintiff’s financial difficulty, the Court may decline security.
• Whether an order would stifle the proceeding – security should not prevent a legitimate claim from being heard.
• Oppression – using a security application tactically to pressure or shut down litigation is discouraged.
• Persons standing behind the proceeding – directors, shareholders or funders may be relevant, especially if they stand to benefit.
• Promptness of the application – delay weighs against ordering security.
• Estimated costs and proportionality – the amount must reflect the real litigation risk.
• Enforceability of a costs order against assets available in the jurisdiction.

These factors were central in Trafford Nominees Pty Ltd v Everstone Group Pty Ltd [2025] WASC 282, where the Court analysed both the plaintiff’s financial position and the practical consequences of ordering security.

Evidentiary Requirements

A defendant seeking security must file material demonstrating:

• the plaintiff’s financial position and inability to meet a costs order;
• the approximate costs of the proceeding (often supported by a costs consultant);
• details of any persons behind the plaintiff who may contribute to funding;
• any relevant delay in making the application;
• the absence or insufficiency of assets within Western Australia.

Failure to provide proper evidentiary support may result in the application being dismissed, even where impecuniosity is suspected.

Key Cases Relating to an Application for Security of Costs 

Nicolaou v Air Liquide WA Pty Ltd [2024] WASC 309

The Court reaffirmed that the s 1335 threshold requires only credible testimony showing a real chance of non-payment. Once satisfied, the discretionary evaluation is wide-ranging and must account for justice between the parties.

Trafford Nominees Pty Ltd v Everstone Group Pty Ltd [2025] WASC 282

The Court considered several discretionary factors, including merits, stultification, persons behind the plaintiff, and enforceability, and stressed that even when the threshold is met, security will not automatically follow.

Lawless v Mackendrick [2014] WASCA 105

In the appellate context, the Court explained that security protects a respondent from having to defend an appeal with no realistic prospect of recovering costs. The Court must balance protection against unfairly foreclosing an appeal.

A Balancing Exercise Focused on Justice

Ultimately, whether a security for costs order will be made in Western Australia depends on:

1. Threshold – credible evidence of likely inability to pay costs; and
2. Discretion – a holistic assessment of fairness, commercial reality, and the merits of the litigation.

WA courts consistently emphasise that the discretion is broad but must be exercised judicially, ensuring that defendants are protected from unrecoverable costs without preventing plaintiffs from litigating genuine disputes.