KHALDOUN TABARI v TABARAK INVESTMENT [2020] DIFC CFI 061 — Costs order following JJC jurisdictional stay (30 April 2020)

What was the nature of the dispute between Khaldoun Tabari, Zeina Tabari, and Tabarak Investment LLC that led to the costs application?

The underlying litigation originated on 4 September 2018, when the Claimants, Khaldoun and Zeina Tabari, initiated proceedings in the DIFC Courts alleging a breach of an undertaking provided by the Defendant, Tabarak Investment LLC. The Defendant subsequently challenged the jurisdiction of the DIFC Courts, asserting that the matter lacked a sufficient nexus to the DIFC. While the parties prepared for a jurisdictional hearing scheduled for 5 March 2019, the Defendant engaged in parallel litigation in the Dubai Courts (the "Onshore Proceedings") and sought a ruling from the Joint Judicial Committee (JJC) to resolve the conflict of jurisdiction.

The dispute over costs arose because the Defendant failed to disclose the existence of the Onshore Proceedings or the JJC application until 3 March 2019—merely two days before the scheduled DIFC hearing. This late disclosure effectively rendered the DIFC hearing moot, as the JJC’s acceptance of the application triggered an automatic stay of the DIFC proceedings. The Claimants argued that this conduct was unreasonable and necessitated an order for costs. As noted in the court records:

On 11 March 2019, the Appellant filed its submissions on costs in which it argued that the Respondents’ application for costs was misconceived for the following reasons:
I.

The Claimants sought to recover the costs incurred in preparing for the now-vacated hearing, arguing that the Defendant’s tactical silence had wasted the Court’s and the parties' time.

Which judge presided over the application for permission to appeal in CFI 061/2018?

H.E. Justice Ali Al Madhani presided over the application for permission to appeal. The matter was heard within the DIFC Court of First Instance. Following the parties' agreement to have the application determined on the papers, Justice Al Madhani issued his reasoned order on 30 April 2020, denying the Appellant’s request to challenge the earlier costs order.

What were the specific legal arguments advanced by the parties regarding the costs of the jurisdictional challenge?

The Appellant (Tabarak Investment LLC) argued that the DIFC Court lacked the authority to award costs because the JJC had ultimately determined that the Dubai Courts held jurisdiction. The Appellant contended that if the DIFC Court lacked jurisdiction, it could not logically award costs to the "losing" party. Furthermore, the Appellant argued that it was within its rights to challenge an "unmeritorious claim" and that the stay of proceedings should have extended to the Court’s power to make any orders, including those for costs.

Conversely, the Respondents (the Tabaris) maintained that the Appellant’s conduct was unreasonable. They argued that the Appellant had allowed the Respondents to incur significant legal expenses in preparing for a hearing that the Appellant knew—or should have known—would be rendered pointless by the undisclosed JJC application. As documented in the court's summary:

On 17 March 2019, the Respondents filed their submissions on costs in which they maintained that they sought their costs on an indemnity basis on the basis that it had defended the Appellant’s application disputing the jurisdiction of the DIFC Courts, while the Appellant itself had rendered this application pointless.

What was the precise doctrinal issue the Court had to resolve regarding the application for permission to appeal?

The Court was tasked with determining whether the Appellant had established a "real prospect of success" in appealing the costs order, specifically whether the judge had erred in the exercise of his discretion under the Rules of the DIFC Courts (RDC). The core doctrinal issue was whether the Court’s decision to award costs against the Appellant—despite the Appellant’s ultimate success in moving the dispute to the Dubai Courts—constituted a misapplication of the principles governing costs, particularly the general rule that the successful party is entitled to costs. The Court had to decide if the Appellant’s late disclosure of the JJC application provided a sufficient basis to depart from the standard costs regime.

How did Justice Ali Al Madhani apply the test for departing from the general rule on costs?

Justice Al Madhani evaluated whether the Appellant’s conduct warranted a departure from the general rule that the successful party is entitled to costs. He emphasized that the Court retains the discretion to penalize a party for unreasonable conduct, even if that party is technically the "successful" party in the jurisdictional dispute. The judge reasoned that the Appellant’s failure to disclose the JJC application until two days before the hearing caused unnecessary expenditure for the Respondents, which justified the costs order.

In his reasoning, the judge addressed the Appellant's claim that the Court ignored the RDC provisions:

As for the first Ground of appeal – that the Court failed to recognise that the Appellant was the successful party in the case and then failed to consider, apply, or otherwise adequately take into account the material provisions of RDC 38.7(1), with the general principal being that the successful party is entitled to its cost – in my judgment, it is evident from the Order itself that neither of these assertions is correct.

The Court concluded that the Appellant’s reliance on the "successful party" rule was misplaced because the conduct leading up to the stay was independently sanctionable under the Court's case management powers.

Which specific RDC rules and statutory provisions were central to the Court’s analysis?

The Court’s analysis centered on Part 38 of the Rules of the DIFC Courts (RDC), which governs the Court’s discretion regarding costs. Specifically, the Appellant relied on RDC 38.7(1), which sets out the general principle that the unsuccessful party is usually ordered to pay the costs of the successful party. The Court also considered the broader implications of the Judicial Authority Law, which the Appellant had argued should have been interpreted by the JJC to preclude the DIFC Court from exercising its jurisdiction to award costs.

How did the Court distinguish or apply the precedents cited in the proceedings?

The Court referenced several key authorities to support its approach to costs. It relied on Barclays Bank PLC v Kapoor [2018] CFI 030 to illustrate the Court’s power to depart from the general rule regarding costs and even to award costs to the "losing" party on an indemnity basis when conduct is unreasonable. Additionally, the Court looked to Standard Chartered Bank v Investment Group Private Ltd [2014] DIFC CFI 026, which outlines the Court's approach when a hearing is lost due to late applications. These cases were used to demonstrate that the DIFC Courts prioritize the efficient administration of justice and will not allow a party to use jurisdictional challenges as a tool to waste the Court's resources without consequence.

What was the final disposition of the application and the specific orders made by the Court?

The Court denied the Appellant’s application for permission to appeal. Justice Al Madhani ordered that the Appellant pay the costs of the permission application itself on the standard basis, to be assessed if not agreed. This confirmed the original order made on 28 November 2019, which required the Appellant to pay the Respondents’ costs of the jurisdictional challenge.

What are the wider implications of this ruling for practitioners appearing before the DIFC Courts?

This decision serves as a stern warning to practitioners regarding the duty of candor and the timely disclosure of parallel proceedings. It reinforces that the DIFC Courts will not tolerate "tactical" silence where a party intends to use the JJC to render DIFC proceedings moot. Practitioners must anticipate that even if they are successful in shifting a case to the Dubai Courts, they may still be held liable for the costs of any DIFC hearings that were rendered unnecessary by their own failure to provide timely notice of their JJC applications. The ruling underscores that the Court’s discretion under RDC 38.7 is broad enough to penalize procedural gamesmanship.

Where can I read the full judgment in Khaldoun Tabari v Tabarak Investment [2020] DIFC CFI 061?

The full judgment is available on the official DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0612018-1-khaldoun-tabari-2-zeina-tabari-v-tabarak-investment-llc

Cases referred to in this judgment:

Legislation referenced:

• Rules of the DIFC Courts (RDC), Part 38
• RDC 38.7(1)
• Judicial Authority Law