Resisting Security for Costs: Tactical Evidence and Strategy 

In complex commercial disputes, resisting security for costs in Victoria often becomes a critical procedural battle before the merits of the case are even considered. Defendants frequently seek security orders to protect themselves from adverse costs risk, particularly where a plaintiff appears financially vulnerable. However, plaintiffs are not without powerful strategic tools. Through carefully prepared affidavit evidence, well-supported explanations of impecuniosity, and transparent structures around litigation funding, courts may refuse or limit security orders. 

For high-value commercial litigants, the ability to defeat or narrow a security for costs application can determine whether proceedings continue at all. Understanding the evidentiary and strategic pathways available to plaintiffs is therefore essential when navigating complex disputes in the Victorian courts. 

Understanding Security for Costs in Commercial Litigation 

Security for costs is a discretionary order requiring a plaintiff to provide financial security to cover a defendant’s potential legal costs if the claim fails. In Victoria, such applications frequently arise in corporate disputes, shareholder conflicts, insolvency proceedings, and cross-border fraud litigation. 

The underlying policy is simple: defendants should not face significant adverse costs risk from claimants who may be unable to satisfy a costs order. 

At the same time, courts must ensure that security orders do not unfairly prevent legitimate claims from proceeding. The Supreme Court of Victoria therefore retains broad discretion when determining whether security should be ordered and in what amount. 

For plaintiffs, the strategic goal is often not merely to oppose security entirely but to: 

• demonstrate that an order would be unjust or oppressive; or 

• narrow the amount or structure of the proposed security. 

This issue commonly arises in sophisticated disputes involving shareholder conflicts or corporate wrongdoing, where security strategy forms part of broader commercial litigation planning. Businesses engaged in complex disputes often address potential security applications early alongside cost management and case strategy. 

Relevant litigation insights can also be explored through Pentana Stanton Lawyers’ resources on shareholder disputes. 

The Court’s Discretion and Key Considerations 

Victorian courts consider a range of factors when determining whether security should be ordered. These typically include: 

• the plaintiff’s financial position 

• the legitimacy and strength of the claim 

• whether the defendant contributed to the plaintiff’s financial circumstances 

• the presence of litigation funding or indemnities 

• the proportionality of the requested security 

One of the most influential considerations is whether the plaintiff’s impecuniosity should prevent the claim from proceeding. 

Courts recognise that genuine claimants should not be denied access to justice solely because they lack financial resources. Where impecuniosity results from the very wrongdoing alleged in the proceedings, courts may view security applications with caution. 

This is particularly relevant in cases involving alleged fraud, asset misappropriation, or breaches of fiduciary duty — situations where the plaintiff’s financial position may have deteriorated due to the defendant’s conduct. 

Impecuniosity as a Strategic Response 

A plaintiff’s impecuniosity can play a central role in resisting security for costs. However, courts expect clear and credible evidence explaining the financial position of the claimant. 

Simply asserting an inability to pay is insufficient. Instead, plaintiffs must demonstrate: 

• the nature and extent of their financial position 

• how the position arose 

• whether it is linked to the alleged misconduct in the proceedings 

In complex commercial disputes, this analysis may involve financial statements, asset tracing material, and documentary evidence explaining the plaintiff’s liquidity constraints. 

Importantly, courts distinguish between genuine financial limitation and deliberate structuring designed to avoid costs exposure. If the court suspects that a claimant has arranged their affairs to minimise assets while pursuing litigation, security orders are far more likely. 

The Role of Affidavit Evidence 

When resisting security for costs in Victoria, affidavit evidence often determines the outcome. 

Effective affidavits should address several critical issues: 

1. Financial Position 

Detailed evidence of assets, liabilities, and available resources is essential. Courts expect transparency and specificity, particularly where a plaintiff relies on impecuniosity. 

2. Merits of the Claim 

While security applications are not mini-trials, courts may consider whether the claim appears arguable. Affidavits can outline the factual basis of the claim and provide context for why the litigation has strong prospects. 

3. Causation of Financial Hardship 

If the plaintiff alleges that the defendant’s conduct contributed to their financial difficulty, this link should be clearly explained through documentary material. 

4. Funding Arrangements 

Where litigation funding is involved, the structure of that funding may become highly relevant. Courts may examine whether the funder should contribute to security or whether funding arrangements mitigate the defendant’s adverse costs risk. 

Well-structured affidavit evidence can therefore shift the balance significantly in favour of the plaintiff. 

Litigation Funding and Security Applications 

The rise of litigation funding has transformed the dynamics of security for costs applications. 

In many commercial disputes, external funders support plaintiffs who would otherwise be unable to pursue complex litigation. While funding may strengthen the viability of a claim, it can also influence the court’s analysis of adverse costs risk. 

Courts typically examine: 

• the identity of the funder 

• the terms of the funding agreement 

• whether the funder indemnifies the plaintiff for adverse costs 

• whether the funder should provide security directly 

Where funding arrangements demonstrate that costs exposure is effectively covered, defendants may struggle to justify substantial security orders. 

Conversely, if the funding structure limits the funder’s liability or provides no indemnity for adverse costs, courts may view security applications more favourably. 

Strategic disclosure of funding terms through affidavit evidence can therefore help plaintiffs narrow the scope of security sought. 

Tactical Strategies for Narrowing Security Orders 

Even where security cannot be defeated entirely, plaintiffs can deploy several strategies to reduce its impact. 

Stage-Based Security 

Courts may order security in stages rather than requiring a large upfront payment. This allows litigation to proceed while limiting immediate financial barriers. 

Reduced Quantum 

Where defendants seek substantial security amounts, plaintiffs may challenge the proportionality of those estimates. Courts often scrutinise cost projections closely. 

Alternative Forms of Security 

Security does not always require cash deposits. Courts may accept: 

• bank guarantees 

• insurance bonds 

• undertakings supported by funding arrangements 

These alternatives can significantly ease the burden on plaintiffs. 

Targeted Security for Specific Claims 

In complex proceedings involving multiple causes of action, courts may confine security orders to certain claims rather than the entire proceeding. 

Each of these approaches relies heavily on persuasive affidavit evidence and strategic case management. 

Security Applications in Shareholder and Corporate Disputes 

Security for costs frequently arises in corporate litigation, particularly where special purpose entities bring claims against directors, shareholders, or corporate counterparties. 

In shareholder disputes, defendants may argue that the plaintiff entity lacks substantial assets and therefore poses an adverse costs risk. 

However, plaintiffs often counter these arguments by demonstrating: 

• the legitimacy of the corporate claim 

• the commercial rationale for the litigation 

• backing from shareholders or funding arrangements 

For businesses engaged in complex corporate disputes, early planning is critical. Effective costs strategy can significantly influence how security applications are approached and resolved. 

Why Early Strategy Matters 

Security for costs applications are often brought at an early stage of litigation. As a result, plaintiffs who anticipate these applications gain a significant advantage. 

Early preparation typically includes: 

• assembling detailed affidavit evidence 

• analysing potential adverse costs risk arguments 

• structuring litigation funding arrangements 

• documenting the causes of impecuniosity 

By addressing these issues proactively, plaintiffs strengthen their ability to resist or limit security applications. 

For high-value commercial claims, this early strategy can be decisive in ensuring proceedings move forward. 

Frequently Asked Questions 

Turning the Security for Costs Challenge into Strategic Advantage 

Resisting security for costs in Victoria requires more than procedural opposition. It demands a clear strategy supported by strong affidavit evidence, credible explanations of impecuniosity, and transparent litigation funding arrangements that address the court’s concerns about adverse costs risk. 

If you are facing or anticipating a security for costs application, speak with the commercial litigation team at Pentana Stanton Lawyers to develop a targeted strategy that allows your claim to proceed with confidence.