The DIFC Court of First Instance clarifies the court’s residual power to award costs for interlocutory applications, even when the underlying proceedings are stayed by the Joint Judicial Committee (JJC).
What was the specific dispute between Khaldoun Tabari, Zeina Tabari, and Tabarak Investment regarding the costs of the jurisdiction application?
The dispute arose from a jurisdictional challenge filed by Tabarak Investment LLC (the Defendant) in the DIFC Court of First Instance. The Claimants, Khaldoun Tabari and Zeina Tabari, initiated proceedings in September 2018, to which the Defendant responded by filing a jurisdiction application on 19 October 2018. While this application was pending, the Defendant simultaneously initiated proceedings in the Dubai Courts and petitioned the Joint Judicial Committee (JJC) to determine the conflict of jurisdiction, ultimately resulting in a stay of the DIFC proceedings.
The Claimants argued that the Defendant’s conduct was designed to maximize their legal costs by failing to disclose the parallel Dubai proceedings and the JJC petition until two days before the scheduled DIFC hearing. Consequently, the Claimants sought their costs for the jurisdiction application on an indemnity basis, asserting that the Defendant’s lack of transparency was unreasonable and led to the waste of judicial and party resources.
The Defendant filed the Application on 19 October 2018, and it was listed to be heard on 5 March 2019.
The Defendant had not disclosed to them that it had begun proceedings in the Dubai Courts at the time it decided to embark on that course of action, and so the Claimants continued to incur costs preparing for the Application.
Which judge presided over the costs application in CFI 061/2018 and when was the order issued?
H.E. Justice Ali Al Madhani presided over the costs application in the Court of First Instance. The order, which addressed the Claimants' request for costs following the stay of proceedings, was issued on 28 November 2019.
What were the competing arguments regarding the DIFC Court’s authority to award costs after a JJC stay?
The Claimants argued that the Court retained the inherent power to regulate its own procedures and award costs, regardless of the stay imposed by the JJC. They contended that the Defendant’s failure to disclose its parallel actions in the Dubai Courts prevented the DIFC Court from making an earlier costs order, and that the stay should not be used as a shield to reward the Defendant’s unreasonable conduct.
Conversely, the Defendant challenged the Court’s jurisdiction to make any costs orders once the JJC had intervened and stayed the proceedings. The Claimants countered this by citing established DIFC precedent, maintaining that the Court’s authority to manage costs for interlocutory applications remains intact even when the Court is subsequently divested of jurisdiction over the merits of the claim.
In response to the Defendant’s argument that the Court lacks jurisdiction to make costs orders, the Claimants contended that this was simply wrong.
What was the precise doctrinal issue the Court had to resolve regarding the basis of the costs award?
The Court had to determine whether the Defendant’s conduct—specifically the late disclosure of the JJC petition and the resulting frustration of the DIFC hearing—warranted an award of costs on an indemnity basis, or if the standard basis was appropriate. The doctrinal issue centered on whether the Defendant’s success before the JJC, which effectively validated its jurisdictional challenge, mitigated the "unreasonableness" of its procedural conduct during the DIFC proceedings.
How did Justice Ali Al Madhani apply the test for indemnity versus standard costs in light of the Defendant’s conduct?
Justice Ali Al Madhani acknowledged that the Defendant’s conduct was unreasonable, particularly the failure to inform the Court and the Claimants of the JJC petition until the eve of the hearing. However, the Court applied a balancing test, weighing the procedural unfairness against the ultimate outcome of the jurisdictional dispute. The judge concluded that while the Claimants were entitled to costs, the fact that the Defendant ultimately succeeded in its jurisdictional challenge before the JJC precluded an award on an indemnity basis.
With regards to the Claimants’ request for costs on an indemnity basis for the Application of 19 October 2018, this Court’s view is that the Defendant’s conduct was not reasonable since it submitted an application for a jurisdictional challenge and allowed the Claimants to continue incur costs for its reply and preparation for that application, before bringing proceedings to the JJC on the same grounds, moreover, without alerting the Court or the Claimants.
However, the question of whether or not the costs should be awarded on an indemnity basis remains.
In my judgment, the fact that the Defendant has been successful in its petition to the JJC, with the jurisdiction dispute being decided in its favour, is a determining factor that the costs of the Claimants shall not be awarded on an indemnity basis but rather on a standard basis, to be assessed by a Registrar if not agreed by parties.
Which specific statutes and rules did the Court consider regarding its jurisdiction to award costs?
The Court considered Article 5(A)(1)(b) of the Judicial Authority Law (JAL), which governs the jurisdiction of the DIFC Courts. The Claimants relied on this provision to argue that the Defendant’s initial challenge to the DIFC’s jurisdiction was "hopeless" based on the interpretation established in Khorafi. Furthermore, the Court referenced the principles established in Gaetan Inc v Geneva Investment Group LLC [2015] ARB 010 regarding the Court’s power to award costs even when jurisdiction is ultimately found to be lacking.
How did the Court utilize the cited precedents to justify its authority to award costs?
The Court utilized Gaetan Inc v Geneva Investment Group LLC [2015] ARB 010 to confirm that the DIFC Courts possess the power to make costs orders for interlocutory applications even when the Court lacks jurisdiction over the substantive claim. Additionally, the Court referenced Liu v Waterfront Properties [2016] DIFC ARB 004 to support the argument that the Court can regulate its own procedures and reinstate or issue orders to address costs incurred during the life of a case, even if the proceedings are subsequently stayed.
The Court regularly makes such orders, again, even where it finds that it has no jurisdiction, awarding costs to the applicant.
What was the final disposition of the costs application and the specific orders made by the Court?
The Court ordered the Defendant to pay the Claimants' costs of the jurisdiction application. Crucially, the Court rejected the request for indemnity costs, ordering instead that costs be assessed on a standard basis. The order stipulated that if the parties could not agree on the quantum, the costs would be assessed by a Registrar.
Had the Defendant revealed its actions in the Dubai Courts and at the JJC, the DIFC Courts could have made costs orders before the stay was imposed.
What are the wider implications for practitioners regarding costs applications in the DIFC?
This ruling confirms that the DIFC Courts will not be deterred by a JJC stay from awarding costs for interlocutory applications that were frustrated by a party’s lack of transparency. Practitioners must note that while the Court will penalize unreasonable procedural conduct, the ultimate success of a party in the JJC remains a significant factor that may prevent the escalation of costs to an indemnity basis. Litigants are effectively warned that failing to disclose parallel proceedings or JJC petitions in a timely manner will likely result in an adverse costs order, even if the party is ultimately successful in moving the case out of the DIFC.
Where can I read the full judgment in Khaldoun Tabari v Tabarak Investment [2019] DIFC CFI 061?
The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0612018-1-khaldoun-tabrari-2-zeina-tabari-v-tabarak-investment-llc-4
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| Khorafi | N/A | Interpretation of JAL Article 5(A)(1)(b) |
| Investment Group Private Limited v Standard Chartered Bank | [2018] DIFC CA 002 | Parties' choice of 'Dubai courts' included DIFC |
| Gaetan Inc v Geneva Investment Group LLC | [2015] ARB 010 | Power to award costs despite lack of jurisdiction |
| Liu v Waterfront Properties | [2016] DIFC ARB 004 | Authority to regulate procedures and costs |
Legislation referenced:
- Judicial Authority Law (JAL) Article 5(A)(1)(b)