LXT Real Estate Broker v SIR Real Estate [2026] DIFC CA 005 — Appellate intervention on security for costs (21 January 2026)

What is the nature of the underlying dispute and the financial stakes in LXT Real Estate Broker v SIR Real Estate?

The litigation arises from a 10-year Partnership and Services Agreement between LXT Real Estate Broker L.L.C (the Claimant) and SIR Real Estate LLC (the Defendant). The Claimant, which provided marketing and branding services, alleges that the Defendant breached the agreement by failing to provide accurate financial statements, underreporting gross revenue, and underpaying Partnership Fees between January 2021 and June 2023. Furthermore, the Claimant contends that the Defendant’s termination of the agreement on 28 September 2023 constituted a repudiatory breach.

The financial magnitude of the claim is substantial, reflecting the long-term nature of the partnership and the alleged revenue discrepancies. As noted in the court documents:

The Claimant claims debt or damages of AED 405,351,504, exclusive of interest, costs, and any further discretionary relief.

The dispute centers on the Claimant’s attempt to recover these significant sums, while the Defendant has sought to protect its position through aggressive procedural applications, including a strike-out motion and a substantial request for security for costs.

Which judges presided over the Court of Appeal hearing in CA 005/2025?

The appeal was heard by a distinguished panel of the DIFC Court of Appeal, comprising H.E. Chief Justice Wayne Martin, H.E. Justice Sir Peter Gross, and H.E. Justice Rene Le Miere. The hearing took place on 12 January 2026, with the final judgment and reasons issued on 21 January 2026.

What were the respective positions of LXT Real Estate Broker and SIR Real Estate regarding the security for costs application?

The Defendant, represented by its legal team, argued that the CFI judge had fundamentally erred in the exercise of his discretion when limiting the security for costs to the period ending at the strike-out application. The Defendant had originally sought security for the entire proceedings, estimating its costs at USD 1,750,000. In contrast, the CFI had restricted the security to USD 250,499.26, covering only the costs up to the Case Management Conference.

The Defendant contended that the CFI judge’s reasoning was flawed, particularly regarding the impact of litigation funding and the potential for the claim to be stifled. The Defendant argued that the judge failed to properly weigh the prejudice to the Defendant if it were left unsecured for the remainder of the litigation should the strike-out application fail. As summarized in the court's reasoning:

Against that framework, the Defendant submits that the Judge wrongly exercised his discretion and/or wrongly evaluated the evidence in limiting security to the costs up to the strike-out hearing and in fixing the amount at USD 250,499.26.

What was the precise legal question the Court of Appeal had to resolve regarding the CFI’s security for costs order?

The Court of Appeal was tasked with determining whether the CFI judge committed an error of principle in his discretionary assessment of security for costs. Specifically, the Court had to decide if the judge improperly treated the existence of litigation funding as a categorical basis for reducing the security amount, and whether he erred in law by failing to properly assess the risk of stifling the claim without sufficient evidence. The Court also examined whether the judge’s decision to limit the scope of security to the strike-out application, while ignoring the potential prejudice to the Defendant for the remainder of the proceedings, constituted a misapplication of RDC rules.

How did the Court of Appeal evaluate the CFI’s reasoning regarding litigation funding and claim-stifling?

The Court of Appeal found that the CFI judge’s approach to litigation funding was legally unsound. The judge had effectively treated the presence of a funder as a reason to automatically discount the security required, rather than conducting a fact-sensitive inquiry. The Court emphasized that the existence of funding does not grant a claimant a "categorical discount" on security obligations.

Furthermore, the Court criticized the judge’s reliance on speculative outcomes regarding the strike-out application to justify limiting security. The judge had reasoned that if the Claimant succeeded on the strike-out, it would be in a better position, and that the Defendant could simply "suspend payment" of costs if necessary. The Court of Appeal rejected this logic:

Secondly, the Judge reasoned that if the Claimant succeeded on strike-out, it would recover costs and be in a “better position”, and that the Defendant could “suspend payment” of any adverse costs award if further security were needed.

The Court concluded that the judge failed to weigh the prejudice to the Defendant, noting:

Having found reason to believe the Claimant would be unable to pay the Defendant’s costs, the Judge did not weigh the prejudice to the Defendant of being left entirely unsecured for costs beyond strike-out if that application failed.

Which RDC rules and statutory frameworks governed the Court of Appeal’s decision?

The Court of Appeal’s decision was grounded in the Rules of the DIFC Courts (RDC), specifically those governing security for costs and strike-out applications. The primary rules cited included RDC 4.16 (strike-out), RDC 24.1 (immediate judgment), and RDC 25.103 (security for costs). The Court also referenced RDC 44.117 and RDC 44.19 regarding the court’s powers on appeal and the management of costs orders. The jurisdictional basis for the security application was established under the RDC framework, which the Court of Appeal affirmed remained satisfied.

How did the Court of Appeal apply the precedents of B J Crabtree and Sans Souci in this matter?

The Court of Appeal utilized the B J Crabtree (Insulations) Ltd v GPT Communications Systems Ltd principle to address the potential "stifling" of the claim. While the Court set aside the CFI’s order, it explicitly preserved the Claimant’s right to invoke the Crabtree principle during the remitted hearing. This ensures that if the Claimant can provide evidence that an order for security would genuinely prevent the pursuit of a valid claim, the CFI must consider that evidence under the established test. Sans Souci Ltd v VRL Services Ltd was referenced in the context of the court's discretionary power to manage security and the requirement that such discretion be exercised based on evidence rather than assumption.

What was the final disposition and the specific relief ordered by the Court of Appeal?

The Court of Appeal allowed the appeal, set aside the CFI’s order, and remitted the application for security for costs back to the CFI for a fresh determination. The Court ordered that the CFI must proceed on the basis that the jurisdictional conditions for security are satisfied. Furthermore, the Court dismissed the Claimant’s application for permission to cross-appeal. Regarding costs, the Court ordered the Claimant to pay the Defendant’s costs of the appeal and the various applications for permission, fixed at AED 550,000.

What are the wider implications for DIFC practitioners regarding security for costs and litigation funding?

This judgment serves as a critical reminder that discretionary case-management decisions, such as security for costs, must be supported by evidence rather than judicial assumption. Practitioners should note that the presence of a litigation funder is not a "get out of jail free" card that entitles a claimant to reduced security. Litigants must be prepared to provide detailed evidence regarding the impact of security on the viability of their claim if they wish to rely on the Crabtree principle. Conversely, defendants should ensure that their cost estimates are robust and that they clearly articulate the prejudice they face if security is limited to early-stage proceedings.

Where can I read the full judgment in LXT Real Estate Broker L.L.C v SIR Real Estate LLC [2026] DIFC CA 005?

The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-appeal/ca-0052025-lxt-real-estate-broker-llc-v-sir-real-estate-llc-1

Cases referred to in this judgment:

Legislation referenced:

• Rules of the DIFC Courts (RDC): 4.16, 24.1, 25.103, 44.117, 44.19