How did the DIFC Court determine the liability for costs in Union Bank of India v Velocity Industries [2023] DIFC CFI 025?
The dispute centered on a claim brought by the Union Bank of India (DIFC Branch) against a series of corporate entities and individuals, including Velocity Industries LLC, Velocity Venture Ltd., Umaku Trade Invest Limited, and several individual defendants (Vijey Kapoor, Ravi Kuchimanchi, Rajinder Makhijani, Parag Gupta, and Devika Swati). Following the trial, the Court found the Claimant unsuccessful in its primary claims against the Fifth through Eighth Defendants.
The Court was tasked with apportioning the legal costs incurred during the proceedings. While the general principle dictates that the unsuccessful party bears the costs of the successful party, the Court identified specific issues—namely the VCR issue and a conflict of interest issue—where the Claimant had achieved partial success. Consequently, the Court applied a reduction to the total costs payable by the Claimant to the Fifth through Eighth Defendants. As noted in the judgment:
But they were successful in respect of two matters which were raised at or just before the beginning of the trial.
The full order and reasoning can be found at: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0252020-union-bank-india-difc-branch-v-1-velocity-industries-llc-2-velocity-venture-ltd-3-umaku-trade-invest-limited-4-vijey-1
Which judge presided over the costs hearing in CFI 025/2020 and in which division of the DIFC Courts?
The order regarding costs was issued by Justice Lord Angus Glennie, sitting in the Court of First Instance. The decision was formally issued on 27 September 2023, following the conclusion of the trial which had taken place across two blocks in 2022.
What were the specific arguments regarding cross-claims between the Defendants in CFI 025/2020?
The Defendants had initiated claims against one another, which were contingent upon the Court finding them liable to the Claimant. Because the Court ultimately found in favor of the Fifth through Eighth Defendants regarding the primary claims, these contingent cross-claims did not require adjudication. Justice Lord Angus Glennie noted:
The Defendants brought claims amongst themselves. They were all contingent upon a finding of liability to the Claimant, so in the result I did not have to decide them.
The Court reasoned that it would be inequitable to force the Claimant to bear the costs of these internal disputes, nor would it be appropriate to order one defendant to pay the costs of another for claims that were never substantively determined. Consequently, the Court made no order regarding the costs incurred by the Defendants in relation to their internal claims.
What was the primary legal issue the Court had to address under RDC Part 38 regarding the Claimant's partial success?
The core legal issue was the application of RDC 38.8(1) and (2), which requires the Court to consider all circumstances—including the conduct of the parties and partial success—when departing from the general rule that the loser pays the winner's costs. The Court had to determine whether the Claimant’s success on the VCR and conflict of interest issues warranted a departure from the standard costs order, and if so, what percentage of the costs should be deducted to reflect that success.
How did Justice Lord Angus Glennie apply the test for issue-based costs reduction in this case?
Justice Lord Angus Glennie utilized the discretion afforded by RDC 38.8(1) to adjust the costs award. He recognized that the VCR issue, in particular, had consumed significant judicial and party time, including the procurement of expert evidence. By weighing the Claimant's success on these specific points against their overall failure in the litigation, the Court arrived at a 10% discount. The reasoning was articulated as follows:
I consider that in respect of their success on these two issues the Claimants should be entitled to a discount of 10%.
This approach demonstrates the Court's commitment to ensuring that a party who succeeds on specific, time-consuming issues is not entirely penalized by the general rule of costs, even if they are the overall unsuccessful party in the main action.
Which RDC rules were central to the Court’s determination of costs on the standard basis?
The Court relied heavily on RDC Part 38, specifically RDC 38.7(1), which establishes the general rule that the unsuccessful party pays the costs of the successful party. Furthermore, the Court invoked RDC 38.8(1) and (2) to justify the departure from this general rule based on the Claimant's partial success. Regarding the basis of assessment, the Court confirmed the standard basis, explicitly rejecting the application of an indemnity basis.
How did the Court distinguish between standard and indemnity basis costs in this litigation?
The Court addressed the standard of assessment by evaluating whether the conduct of the parties or the nature of the case warranted an indemnity basis. Justice Lord Angus Glennie concluded that the case did not meet the threshold for indemnity costs, stating:
I have ordered costs to be assessed on the standard basis. I do not think the case falls within the category of case justifying an order for costs on an indemnity basis.
This highlights the Court’s adherence to the principle that indemnity costs are an exceptional remedy, typically reserved for cases involving unreasonable conduct or specific contractual provisions, neither of which were found to be sufficient here to justify a departure from the standard basis.
What was the final disposition regarding the Defendants' applications for interim payments?
The Court refused the Defendants' applications for interim payments on account of costs in hoc statu. The decision was based on several factors: the lack of a uniform, quantified, and vouched claim across all Defendants, the absence of a proper opportunity for assessment, and the potential risk regarding the recoverability of such payments should the Claimant succeed on a future appeal. The Court left the door open for the Defendants to renew these applications if circumstances change.
What are the wider implications for DIFC practitioners regarding costs and interim payments?
Practitioners should note that the DIFC Court remains highly sensitive to the proportionality of costs, particularly in multi-party litigation where cross-claims are contingent. The refusal of interim payments in hoc statu serves as a reminder that the Court will not grant such relief without robust, vouched evidence of costs incurred. Furthermore, the 10% discount applied here underscores that parties should be prepared to argue for issue-based costs reductions under RDC 38.8, especially where specific issues—such as those requiring expert evidence—have significantly inflated the costs of the proceedings.
Where can I read the full judgment in Union Bank of India v Velocity Industries [2023] DIFC CFI 025?
The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0252020-union-bank-india-difc-branch-v-1-velocity-industries-llc-2-velocity-venture-ltd-3-umaku-trade-invest-limited-4-vijey-1
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | No external precedents cited in this order. |
Legislation referenced:
- Rules of the DIFC Courts (RDC) Part 38
- RDC 38.7(1)
- RDC 38.8(1)
- RDC 38.8(2)