SBM Bank v Renish Petrochem [2022] DIFC CA 011 — Registrar determines quantum of security for costs (22 December 2022)

What was the specific financial dispute regarding security for costs between SBM Bank and Renish Petrochem in CA 011/2022?

The dispute arose from an underlying banking litigation where SBM Bank (Mauritius) Ltd sought to recover funds from Renish Petrochem FZE and Mr. Hiteshkumar Chinubhai Mehta, alleging fraudulent payment representations. Following a trial where the judge found two of six alleged payments to be fraudulent, the Appellants sought to appeal the decision. Chief Justice Zaki Azmi granted permission to appeal, but conditioned it upon the Appellants providing security for the Respondent’s costs. The parties returned to the Court of Appeal to resolve the quantum of this security, as the Appellants proposed a figure of USD 65,000, while the Respondent sought a significantly higher amount.

The tension was exacerbated by existing unpaid costs orders. As noted in the Registrar’s reasons:

Of the Respondent’s costs which have already been incurred and billed (USD 251,700.13) is included a costs order in its favour of USD 174,798.42 which arose out of a consent order dated 9 August 2022, pursuant to which the Appellants agreed to pay the Respondent’s costs in this sum by 23 August 2022.

The dispute centered on whether the Appellants were truly impecunious and what level of security would be both protective of the Respondent and proportionate to the appeal’s scope.

Which judge presided over the security for costs hearing in the DIFC Court of Appeal?

The hearing to determine the quantum of security for costs was presided over by Registrar Ayesha Bin Kalban. The proceedings took place on 25 October 2022, with the formal Order and written reasons issued on 22 December 2022.

What legal arguments did Mr. James Weale and Mr. Rajesh Pillai KC advance regarding the quantum of security?

Mr. James Weale, representing the Respondent (SBM Bank), argued that the Court should focus on the prospective costs of the appeal. He contended that the Respondent had adopted a proportionate approach by filing a schedule of costs and noted that the Appellants had failed to provide their own counter-schedule, relying instead solely on the witness statement of Mr. Mehta. Mr. Weale maintained that the Respondent was entitled to security given the history of the litigation and the Appellants' failure to satisfy previous costs orders.

Conversely, Mr. Rajesh Pillai KC, representing the Appellants, challenged the form and substance of the Respondent’s cost schedule. He argued that the Respondent failed to comply with RDC requirements regarding the presentation of costs. Specifically, he contended that the schedule was improperly formatted and lacked the necessary signatures. Furthermore, Mr. Pillai relied on the tenth witness statement of Mr. Mehta to assert that the Appellants were impecunious and unable to provide the high level of security requested by the Respondent, suggesting that a figure of USD 65,000 was more appropriate.

What was the primary jurisdictional and doctrinal question the Registrar had to resolve regarding the RDC requirements?

The Court had to determine whether the Respondent’s failure to strictly adhere to the procedural requirements of RDC 25.99(3) and RDC 38.35—specifically regarding the signing and formatting of the schedule of prospective costs—precluded the Court from awarding security or necessitated a significant reduction in the quantum. The doctrinal issue was whether procedural non-compliance in the form of the application for security should override the substantive requirement to protect a respondent against the risk of non-recovery of costs in an appeal, particularly when the Appellants had already demonstrated a history of non-payment.

How did Registrar Ayesha Bin Kalban apply the "broad-brush" test to determine the final security amount?

Registrar Bin Kalban rejected the notion of conducting a line-by-line taxation of the costs, opting instead for a robust, discretionary assessment. She explicitly dismissed the Appellants' plea of impecuniosity and their proposed figure of USD 65,000, finding them insufficient given the nature of the appeal.

I also indicated that I did not accept the Appellants’ assertion that it was impecunious, nor did I accept that its proposal for security for costs in the sum of USD 65,000 to be appropriate.

The Registrar further noted that while the Respondent’s initial estimates were excessive, the Court’s role was to ensure proportionality. By requiring the Respondent to amend its schedule to reflect a virtual hearing format (rather than in-person travel costs), she arrived at a figure that balanced the Respondent’s protection with the need to avoid stifling the appeal.

In consideration of all the circumstances in the round, I have adopted a proportionality approach in determining the appropriate level of security to be awarded in this. Therefore, I consider USD 250,000 to be a reasonable and proportionate award for security for costs.

Which specific RDC rules and English authorities were applied to justify the Registrar's decision?

The Registrar relied on RDC 25.99(3) and RDC 38.35 regarding the requirements for schedules of costs. Procedurally, the Registrar invoked RDC 25.112, which grants the Court the power to stay proceedings in the event of default in providing security.

The legal framework for the "broad-brush" approach was anchored in English jurisprudence, specifically Pisante v Logothetis [2020] EWHC 3332 (Comm). The Registrar utilized this authority to justify avoiding a detailed, granular assessment of costs in favor of a more pragmatic, proportionate determination.

How did the cited English authorities influence the Registrar’s reasoning on security for costs?

The cited cases served as the bedrock for the Registrar’s methodology. Pisante v Logothetis was the primary authority used to justify the "robust and broad-brush" approach, allowing the Court to bypass the Appellants' granular objections to individual items in the schedule.

Additionally, the Court drew upon principles from Procon (Great Britain) Ltd v Provincial Building Co Ltd [1984] 1 WLR 557 and Royal Bank of Scotland Plc v Hicks [2012] EWCA Civ 1665 to frame the exercise of discretion. These cases supported the view that the Court should not be bogged down in the minutiae of cost drafting when the primary objective is to secure the respondent against the risk of an unsuccessful appeal by a party with questionable financial standing, as evidenced by the previous failure to pay the August 2022 costs order.

What was the final disposition and the specific order made by the Registrar?

The Registrar ordered the Appellants to provide security for the Respondent’s costs in the amount of USD 250,000. This sum was to be paid into the DIFC Courts’ Escrow account within 30 days of the Order. The Order included a clear enforcement mechanism:

In the event of default of payment and pursuant to Rule 25.112 of the Rules of the DIFC Courts (the “RDC”), the Respondent is granted permission to apply to the Court for the case to be stayed.

The Registrar also noted that the Respondent’s initial estimates were excessive, leading to a downward adjustment from the original request to the final awarded amount.

What are the wider implications for practitioners regarding security for costs in the DIFC?

This decision serves as a warning to appellants who attempt to use claims of impecuniosity to minimize security obligations. It confirms that the DIFC Courts will not accept such assertions without robust, transparent evidence. Furthermore, it clarifies that while procedural compliance with RDC 25.99(3) is expected, the Court will prioritize the substantive goal of securing costs over technical objections to the form of a cost schedule. Practitioners should anticipate that the Court will adopt a "broad-brush" approach, meaning that while they should challenge excessive estimates, they must be prepared for the Court to set a figure based on its own assessment of proportionality rather than a detailed taxation.

Where can I read the full judgment in SBM Bank (Mauritius) Ltd v (1) Renish Petrochem FZE (2) Mr Hiteshkumar Chinubhai Mehta [2022] DIFC CA 011?

The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-appeal/ca-0112022-sbm-bank-mauritius-ltd-v-1-renish-petrochem-fze-2-mr-hiteshkumar-chinubhai-mehta-2

Cases referred to in this judgment:

Legislation referenced:

• RDC 25.99 (3) (Requirements for schedule of costs)
• RDC 38.35 (Signing of documents)
• RDC 25.112 (Power to stay for failure to provide security)