What was the nature of the jurisdictional dispute and the AED 6 million claim between Lakhan and Lamia?
The litigation arose from a building sub-contract dispute where the Defendant, Lakhan, initiated proceedings in the Dubai Courts seeking payment for works performed. An independent engineering expert appointed by the Dubai Courts reported that an amount exceeding AED 6 million was due to Lakhan. While those proceedings were ongoing, the Claimant, Lamia, initiated separate proceedings in the DIFC Courts, seeking a declaration that a binding arbitration agreement governed the dispute, effectively attempting to shift the forum.
The procedural history was marked by a lack of transparency regarding jurisdictional challenges. Lamia petitioned the Joint Judicial Committee (JJC) to stay both the Dubai and DIFC proceedings, claiming a conflict of jurisdiction. However, Lamia failed to notify Lakhan of this petition. As the Court noted:
However, the Claimant gave no notice to the Defendant of the presentation of its position to the JJC, and on 19 August 2020 the Defendant filed an acknowledgement of service in the DIFC proceedings, indicating its intention to contest the jurisdiction of the DIFC Courts and to dispute the existence of a binding Arbitration Agreement.
The DIFC Court of First Instance initially granted a stay of proceedings pending the JJC’s decision, a move that Lakhan successfully appealed. The Court of Appeal ultimately determined that the stay was premature because the DIFC Courts had not yet asserted jurisdiction over the dispute.
Which judges presided over the Court of Appeal hearing for Lakhan v Lamia [2021] DIFC CA 001?
The matter was heard by a panel of the DIFC Court of Appeal comprising Justice Roger Giles, Justice Wayne Martin, and H.E. Justice Ali Al Madhani. The judgment, issued on 24 June 2021, addressed the Claimant's application to vary the costs order originally handed down on 8 April 2021.
What were the respective legal arguments advanced by Lamia and Lakhan regarding the variation of the appeal costs order?
Lamia, the Claimant, sought to vary the original order—which required it to pay Lakhan’s appeal costs—to a "no order as to costs" arrangement. Lamia argued that the Court should exercise its discretion under RDC 4.2(1) to extend the time for filing the application, as it had missed the 14-day deadline stipulated in the 8 April 2021 order. Lamia further contended that the Court had the inherent power to revisit costs orders made provisionally.
Lakhan, the Defendant, opposed the application on both procedural and substantive grounds. Procedurally, Lakhan argued that the application was out of time and that the Claimant had failed to provide a valid justification for the delay. Substantively, Lakhan maintained that the "costs follow the event" principle should apply, as the appeal was successful and the stay of proceedings had been set aside. Lakhan also invited the Court to determine the matter without a hearing, citing RDC 23.69.
What was the precise doctrinal issue the Court had to resolve regarding the application of RDC 4.2(1) and the nature of the costs order?
The Court was tasked with determining whether it possessed the jurisdictional authority to extend a time limit for a "liberty to apply" provision contained within a final judgment. Specifically, the Court had to decide if the Claimant’s request to vary the costs order constituted an "appeal" against its own judgment or a permissible procedural application. Furthermore, the Court had to address whether a party’s failure to exercise a liberty to apply within a specified timeframe triggered the relief-from-sanction requirements under RDC 4.49, or if it fell under the broader discretionary powers of RDC 4.2(1).
How did the Court of Appeal apply the test for extending time under RDC 4.2(1) and distinguish the applicability of RDC 4.49?
The Court held that RDC 4.2(1) grants the Court broad power to extend time for compliance with its own orders. It clarified that since the original costs order was made "provisionally" with liberty to apply, the subsequent application was not an appeal but a procedural step within the Court’s ongoing jurisdiction. Regarding RDC 4.49, the Court reasoned that because no sanction had been imposed for the failure to meet the deadline, the relief-from-sanction test was inapplicable.
The Court weighed the delay—which was only four days—against the lack of prejudice to the Defendant. Despite the Claimant’s failure to provide a "valid justification" for the delay, the Court granted the extension of time, noting:
Weighing these various considerations, although no valid justification for the delay has been provided by the Claimant, as the period of delay was very short and no prejudice flowing from the delay ha...
However, the Court ultimately dismissed the substantive request to vary the costs order, finding that the "costs follow the event" rule remained the appropriate starting point.
Which specific statutes and RDC rules were central to the Court’s reasoning in this costs judgment?
The Court’s decision turned on the interpretation of RDC 4.2(1), which provides the Court with the power to extend or shorten the time for compliance with any Rule, Practice Direction, or Court order. The Court also considered RDC 23.69, which allows the Court to determine applications without a hearing. The judgment was framed by the Court’s previous decision in CA 001/2021, which established the context for the costs dispute.
How did the Court utilize the cited precedents of Standard Chartered Bank v Investment Group Private Ltd and Essar Projects Ltd v McConnell Dowell South East Asia Pte Ltd?
The Court relied on Standard Chartered Bank v Investment Group Private Ltd and Essar Projects Ltd v McConnell Dowell South East Asia Pte Ltd to reinforce the consistency of its decision. These cases were used to demonstrate that the Court’s approach to costs in jurisdictional challenges—where the DIFC Court of Appeal overturns a stay based on unreasoned prior practice—aligns with established DIFC jurisprudence. The Court emphasized that previous unreasoned court practices do not override the fundamental principle that costs should follow the event when a party successfully appeals an erroneous stay of proceedings.
What was the final disposition of the application and the Court’s order regarding costs?
The Court dismissed the Claimant’s application to vary the costs order, meaning the original order for the Claimant to pay the Defendant’s appeal costs remained in effect. While the Court granted the Claimant’s request for an extension of time to file the application, it found no merit in the substantive argument to change the costs allocation. Regarding the costs of the application itself, the Court made no order, noting that the Defendant’s submissions had failed to adequately address the substantive issues raised.
How does this judgment influence future practice regarding "liberty to apply" and the "costs follow the event" principle?
This judgment serves as a warning to practitioners that "liberty to apply" clauses are not an invitation to re-litigate costs without strong substantive grounds. It clarifies that while the Court is lenient regarding short, non-prejudicial delays under RDC 4.2(1), it will not depart from the "costs follow the event" principle simply because a lower court previously followed an unreasoned practice. Litigants must ensure that their submissions on costs directly address the merits of the appeal outcome rather than relying on procedural technicalities or historical court habits.
Where can I read the full judgment in Lakhan v Lamia [2021] DIFC CA 001?
The full judgment is available on the official DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-appeal/lakhan-v-lamia-2021-difc-ca-001-1
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| Standard Chartered Bank v Investment Group Private Ltd | [2016] DIFC CA 002 | Consistent with the decision of this Court. |
| Essar Projects Ltd v McConnell Dowell South East Asia Pte Ltd | [2015] DIFC CA 001 | Entirely consistent with the decision of this Court. |
Legislation referenced:
- RDC 4.2(1) (Power to extend or shorten time)
- RDC 4.49 (Relief from sanction)
- RDC 23.69 (Determination without a hearing)