Security for Costs in NSW: Why Retaining a Costs Expert Can Make or Break Your Application

A security for costs application is a court request, typically made by a defendant, requiring the plaintiff to deposit funds into court to cover the defendant’s legal costs in the event the defendant is successful. This mechanism protects defendants against the risk of a plaintiff that lacks the financial capability to meet a costs order.

Courts grant these orders at their discretion, balancing the defendant's protection against the plaintiff's right to litigate, considering factors such as the plaintiff's financial status, the merits of the case, and whether the order would stifle the proceedings.

In NSW proceedings, applications for security for costs often turn both on legal entitlement and credible cost estimation. Courts are reluctant to accept inflated or speculative figures unsupported by proper analysis.

Under NSW practice, the Court is concerned with the likely recoverable costs, not the aspirational litigation budget. This distinction is frequently overlooked and often fatal to the application. Presenting inflated figures based on what might be spent, rather than what would realistically be recoverable, may undermine credibility.

Affidavits from solicitors estimating costs, without reference to assessment outcomes, are often met with judicial skepticism because not all incurred costs are ultimately recoverable under the statutory framework governing legal costs in New South Wales, under the Uniform Civil Procedure Rules (UCPR). Rule 42.21 UCPR provides circumstances in which a defendant may apply to the court to require a plaintiff to provide security for the defendant’s legal costs before the proceeding continues, including, but not limited to: (a) where the plaintiff is ordinarily resident outside Australia, (b) where the plaintiff, being a corporation, would be unable to pay the costs of the defendant if ordered to do so, or (c) where there is reason to believe that the plaintiff has divested assets with the intention of avoiding the consequences of the proceedings.

If the circumstances of the case are such that an order for security is warranted, retaining a costs expert can ensure that the amount of security awarded is sufficient to cover a reasonable portion of the expected costs.

A costs expert provides an independent estimate grounded in NSW assessment principles including likely reductions for proportionality, duplication, and over-servicing. This gives the Court confidence that the security sought is fair, realistic, and not oppressive.

Timing is critical. Engaging a costs expert early allows the estimate to reflect how the case is likely to unfold and anticipate interim steps.

Engaging specialist costs expertise ensures you maximise recovery, minimise risk, and make informed, strategic decisions throughout the litigation process.

Contact our team today to see how we can assist you in seeking Security for Costs. Charlotte Morson, our principal solicitor, regularly prepares expert reports for use in Security for Costs Applications and would be happy to assist you.