Star Entertainment Security for Costs: Victoria Court Rejects Bid Against Slater and Gordon

• The Supreme Court of Victoria rejected Star Entertainment's application for $6.5 million in security for costs against Slater and Gordon.
• The court found no real or material risk that Slater and Gordon would be unable to pay adverse costs, despite operating under a group costs order.
• Star's expert evidence was criticized for failing to account for a significant settlement payment to Slater and Gordon and for making unsubstantiated assumptions.
• Slater and Gordon's strong financial position, including $341 million in net assets and $29.1 million cash at bank, weighed against the security order.
• The court indicated that future contested security for costs applications should be resolved within half a day, emphasizing efficiency.

The court expressed a lack of confidence that those instructing the expert had kept her independence 'front of mind,' noting the rapid production of her third report.

The Supreme Court of Victoria has dismissed an application by casino operator Star Entertainment, which sought to compel law firm Slater and Gordon to provide $6.5 million in security for costs. In a significant ruling handed down on September 23, 2026, in the case of DA Lynch Pty Limited v The Star Entertainment Group Ltd (No 2) [2026] VSC 621, the court concluded that Star Entertainment's evidence failed to demonstrate a real or material risk that Slater and Gordon would be unable to pay Star's costs if such an order were made.

This application arose within the context of an ongoing shareholder class action against Star Entertainment. The underlying litigation alleges that the casino operator breached its continuous disclosure obligations and engaged in misleading conduct, prompting the legal challenge that led to the security for costs dispute. The court's decision underscores the high evidentiary bar required for such orders, particularly against law firms involved in class action proceedings.

A key element in the court's consideration was a group costs order (GCO) issued in 2023 under section 33ZDA of the Supreme Court Act 1986 (Vic). This order stipulated that Slater and Gordon would be entitled to 14 percent of any award or settlement from the class action, inclusive of GST. Crucially, the GCO also made the firm directly liable for any security for Star's costs that the court might subsequently order.

While the court acknowledged Star's argument that a law firm operating under a group costs order stood to profit in a manner similar to a litigation funder, it maintained a clear standard. The court affirmed that an order for security would generally be appropriate only where compelling evidence established a genuine risk that the firm might be unable to meet its financial obligations for adverse costs. This principle guided its assessment of the evidence presented by Star Entertainment in its bid for security for costs against Slater and Gordon.

Star Entertainment's initial case for security for costs heavily relied on Slater and Gordon's potential liability in a separate class action against Beach Energy. However, that proceeding reached an in-principle settlement in July 2026 for $43.5 million, with no order for costs. The court noted that Slater and Gordon was expected to receive approximately $10,657,500 from this settlement, pending court approval, which significantly altered the firm's financial outlook.

Days before the hearing, Star recast its application, introducing twelve new scenarios from its insolvency expert. The court found these models deficient, noting they failed to account for the more than $10.5 million in revenue from the Beach settlement. Furthermore, four of the scenarios made unsubstantiated assumptions of a 5 percent revenue fall below forecast for three years. The court concluded that none of these revised scenarios provided sufficient grounds for a security order.

Conversely, the court considered Slater and Gordon's robust financial position. It highlighted the firm's personal injuries practice, which has consistently comprised approximately 90 percent of its work in progress since FY2020, describing it as the business's 'engine room.' The firm's balance sheet, showing net assets of $341 million as of June 30, 2025, and cash at bank of approximately $29.1 million in June 2026, were deemed strong indicators weighing against the need for security. The court also expressed reservations about the independence of Star's expert, noting that her third report was produced on the same day she received her letter of instruction, without adequate explanation, leading to a lack of confidence that those instructing her kept her independence 'front of mind'.

The court's decision reinforces the stringent evidentiary requirements for obtaining security for costs, particularly when targeting law firms acting under group costs orders in Victoria class actions. The ruling emphasizes that applicants must present concrete evidence demonstrating a 'real or material risk' of a firm's inability to pay, rather than relying on speculative or inadequately supported financial projections.

In a broader directive, the court stated that future hearings for contested applications for security for costs should ordinarily not exceed half a day. The parties in this case have been given until October 5, 2026, to reach an agreement regarding the costs associated with the application.

This ruling clarifies the high evidentiary bar for obtaining security for costs against law firms, particularly those acting under group costs orders in Victoria. Lawyers advising clients on class actions should note the court's emphasis on demonstrating a 'real or material risk' of inability to pay and the scrutiny applied to expert evidence, even when the firm stands to profit from the litigation.

Source: Original reporting via Australasian Lawyer