Casino operator fails to show real risk law firm couldn't pay adverse costs order
The Supreme Court of Victoria has rejected Star Entertainment's bid to compel Slater and Gordon to provide $6.5 million in security for costs.
In DA Lynch Pty Limited v The Star Entertainment Group Ltd (No 2) [2026] VSC 621, handed down 23 September 2026, the court found that the evidence did not establish a real or material risk that the law firm may be unable to pay Star's costs if ordered to. The underlying shareholder class action alleged that Star breached its continuous disclosure obligations and engaged in misleading conduct.
In 2023, the court made a group costs order under s. 33ZDA of the Supreme Court Act 1986 (Vic). The order entitled Slater and Gordon to 14 percent (inclusive of GST) of any award or settlement and made the firm liable to give any security for Star's costs that the court might order.
The court agreed with Star that a firm with a group costs order stood to profit much like a litigation funder. It said that where the evidence showed a real risk that the firm might be unable to pay, it would generally be appropriate to order security.
Star's original case relied heavily on the firm's possible liability for costs in another class action against Beach Energy. That proceeding reached an in-principle settlement in July 2026 for $43.5 million with no order as to costs. The court noted that the firm expected to receive approximately $10,657,500 from the settlement, subject to court approval.
Days before the hearing, Star recast its application with 12 new scenarios from its insolvency expert. The court found that the modelling did not account for more than $10.5 million in revenue from the Beach settlement. It also found that four of the scenarios assumed, without evidence, that revenue would fall 5 percent below forecast for three years. It held that none of the scenarios supported an order.
The court pointed to the firm's personal injuries practice, which has made up approximately 90 percent of its current work in progress since FY2020, and called it "the engine room" of the business. It agreed with the firm that the strength of its balance sheet, which recorded net assets of $341 million at 30 June 2025, and its cash at bank of approximately $29.1 million in June 2026 weighed against security.
The court noted that the expert produced her third report on the same day she received the letter of instruction and that the evidence did not explain how this occurred. It said that it did not have confidence that those instructing the expert kept her independence "front of mind."
The court dismissed the application and said that, in future, hearings of contested applications for security for costs "should ordinarily occupy no more than half a day." It gave the parties until 5 October 2026 to agree on the costs of the application.
