Sedl Earthmoving Pty Ltd v Nortask Pty Ltd [2026] QDC 98

Sarah Ferrett | Stephanie Murphy | Joseph Ryan

Key takeouts

• An order for security for costs against a corporate plaintiff under rule 671(a) of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) involves a two-stage inquiry. A defendant must first satisfy the ‘undemanding’ threshold that there is ‘reason to believe’ the plaintiff will be unable to pay an adverse costs order, before the Court considers the discretion under rule 672.
• The threshold is not concerned with the plaintiff’s cash position on a particular day, but with whether the plaintiff will have (or have access to) funds to meet a future costs order. A contractor operating a genuine cash-flow business model with contracted work, working capital facilities and demonstrated turnover is not, without more, exposed to an order for security.
• A defendant seeking security must positively demonstrate inability to pay. Suspicion about risk, or gaps in the plaintiff’s disclosure, will not meet the ‘reason to believe’ threshold.

Facts

Nortask Pty Ltd (Nortask) engaged Sedl Earthmoving Pty Ltd (Sedl) under a written contract dated 7 August 2024 to carry out civil works for a lump sum of $2,915,000 including GST.

Nortask refused to pay progress claim 6 for $479,742. It disputed Sedl’s entitlement under the contract, alleged the work was defective, and claimed a set-off for the cost of rectification. Sedl sued in the District Court for the unpaid amount, damages, or alternatively a reasonable sum for the value of the work it had performed.

After the pleadings closed, Nortask applied for security for costs of $150,000 under rule 671(a) of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR). It relied on searches showing that Sedl owned no land, had more than 30 registered security interests over its personal property, had paid-up share capital of $20, and had related companies that had previously been wound up or placed in administration. It attacked a management balance sheet showing $55,000 in cash, a $700,000 overdraft and a $1.2 million related party loan. Nortask asked the Court to draw an adverse inference from Sedl’s refusal to produce tax returns, bank statements and financial records.

Sedl resisted the application on the basis that it was solvent, was an established contractor with substantial contracted work in hand, and that there was no rational basis for the belief said to enliven the Court’s power under rule 671(a) of the UCPR.

Determining whether security for costs should be ordered involves a two-stage process:

only if that threshold is met does the Court proceed to consider whether to exercise its discretion under rule 672.

at the first stage, the applicant must satisfy the threshold in rule 671, relevantly, that there is ‘reason to believe’ the plaintiff will not be able to pay the defendant’s costs if ordered to pay them; and

Decision

Grigg DCJ dismissed the application and ordered Nortask to pay Sedl’s costs of the application.

Her Honour noted that the threshold test in r 671 is undemanding but future focused. It asks whether the company will have, or have access to, funds when a costs order falls due – not what sits in its bank account on a given day. Applying Southern Cross Interiors Pty Ltd v Deputy Commissioner of Taxation (2001) 53 NSWLR 213, her Honour assessed Sedl’s position as a whole and against commercial realities, including resources it could realise by sale or by borrowing on security. Sedl had net assets of about $667,000, trade debtors of $2.83 million, work in progress of $1.03 million, roughly $14 million of contracted and committed work for 2026, and an expected net profit of about $1.4 million – nearly ten times the security sought. It also had a bank overdraft facility and access to inter-company funding.

The onus to establish that Sedl would be unable to pay an adverse costs order remained on Nortask. The non-production of financial records may, but need not, support an adverse inference, and the principles in Blatch v Archer and Jones v Dunkel go to the weight of the evidence rather than the onus of proof. They cannot turn suspicion into a reason to believe.

Nortask’s identification of risk was not enough. The suggestion that Sedl’s trade debtors might not pay was speculation, unsupported by evidence and inconsistent with 20 years of trading. There was no sign of insolvency of any kind: no liquidation, administration or receivership; no winding-up application, unsatisfied statutory demand or judgment debt; no ATO enforcement; and no default under finance facilities. The unchallenged evidence of Sedl’s managing director and its external accountant, the people best placed to speak to its finances, was accepted.

Nortask failed to make out the threshold precondition. The decision confirmed that a defendant seeking security against a corporate plaintiff, particularly a cash-flow contractor, must engage with the plaintiff’s actual sources of funding (contracted work, work in progress, overdraft and other facilities, and related-party support) and put on positive evidence of future incapacity. Pointing to the absence of assets, historical corporate events or gaps in disclosure, without more, will not be sufficient.