KHALDOUN TABARI v TABARAK INVESTMENT [2020] DIFC CFI 061 — Denial of permission to appeal costs order (17 May 2020)

The Court of First Instance denied the Appellant’s application for permission to appeal a costs order, affirming that late-stage applications to the Joint Judicial Committee (JJC) that render DIFC hearings moot do not shield a party from liability for wasted costs.

What was the specific dispute between Khaldoun Tabari, Zeina Tabari, and Tabarak Investment LLC that led to the costs application in CFI 061/2018?

The litigation originated from a claim filed on 4 September 2018 by Khaldoun and Zeina Tabari against Tabarak Investment LLC regarding an alleged breach of an undertaking. Tabarak Investment LLC challenged the jurisdiction of the DIFC Courts, asserting that the dispute lacked a substantive nexus to the DIFC. This jurisdictional challenge prompted a series of procedural steps, including the scheduling of a hearing for 5 March 2019.

However, just two days before the scheduled hearing, Tabarak Investment LLC disclosed that it had initiated parallel proceedings in the Dubai Courts and had successfully applied to the Joint Judicial Committee (JJC) for a stay of the DIFC proceedings. This tactical move effectively rendered the upcoming DIFC hearing pointless, leading the Respondents to seek costs for the wasted preparation time. The Appellant’s resistance to these costs formed the basis of the subsequent dispute:

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 Court ultimately rejected the Appellant's arguments, finding that the timing of the disclosure regarding the JJC application was a significant factor in the assessment of costs. The full details of the dispute can be found at CFI 061/2018.

Which judge presided over the permission to appeal application in CFI 061/2018 and when was the final order issued?

H.E. Justice Ali Al Madhani presided over the Court of First Instance for this matter. Following the initial costs order issued on 28 November 2019, the Appellant filed an application for permission to appeal on 19 December 2019. Justice Al Madhani issued the final Amended Order with Reasons on 17 May 2020, denying the permission to appeal.

What were the primary legal arguments advanced by the Claimants and the Defendant regarding the costs of the jurisdictional challenge?

The Respondents (Khaldoun and Zeina Tabari) argued that they were entitled to their costs on an indemnity basis because they had been forced to prepare for a jurisdictional hearing that the Appellant had unilaterally rendered moot by failing to disclose the JJC application until the eleventh hour. They maintained that the Appellant’s conduct was the sole cause of the wasted expenditure.

Conversely, the Appellant (Tabarak Investment LLC) argued that the costs application was premature and misconceived. They contended that if the DIFC Courts were ultimately found to lack jurisdiction, the Respondents would have no standing to recover costs. Furthermore, they argued that the stay imposed by the JJC should extend to the Court’s power to award costs, and that the costs should only be determined once the final jurisdictional outcome was known. The Respondents' position was summarized as follows:

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 question the Court had to answer regarding the Appellant’s request for permission to appeal?

The Court had to determine whether the Appellant had a "real prospect of success" in arguing that the Court erred in its application of RDC 38.7(1) when it ordered the Appellant to pay the Respondents' costs. Specifically, the Court had to decide if the Appellant’s status as a party who had successfully stayed the proceedings via the JJC entitled it to avoid the costs of the abandoned jurisdictional hearing, or if the Court’s discretion to depart from the general rule was correctly exercised due to the Appellant's procedural conduct.

How did Justice Ali Al Madhani apply the test for departing from the general rule on costs under RDC 38.7?

Justice Al Madhani evaluated whether the Court had correctly exercised its discretion to depart from the general rule that the unsuccessful party pays the costs. The Appellant argued that the Court failed to recognize them as the "successful" party because the proceedings were stayed. The Court rejected this, noting that the costs order was specifically tied to the jurisdictional application that the Appellant had abandoned.

The Court emphasized that the timing of the disclosure regarding the JJC application was critical. By waiting until 3 March 2019 to inform the Court and the Respondents of the JJC stay, the Appellant caused the Respondents to incur significant, unnecessary costs. The reasoning for the denial of the appeal was clear:

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.

Which specific RDC rules and statutory provisions were cited in the Court’s assessment of the costs order?

The primary rule cited was RDC 38.7, which governs the Court’s discretion regarding costs. The Appellant specifically challenged the Court’s adherence to this rule:

The Court erred by failing to consider, apply, or otherwise adequately take into account the material provisions of Part 38 of the Rules of the DIFC Courts (the “
RDC
”), and in particular Rule 38.7(1).

The Court also referenced the Judicial Authority Law, specifically regarding the interpretation of jurisdictional conflicts, which the Appellant had attempted to use as a basis for its JJC application.

How did the Court utilize previous DIFC case law to justify its decision on costs?

The Court relied on established precedents to support its discretion to depart from the general costs rule. It cited Standard Chartered Bank v Investment Group Private Ltd [2014] DIFC CFI 026 to affirm that the Court may award costs to a party even if they are not the "successful" party in the final outcome, particularly when a hearing is rendered moot by the other party's conduct. Additionally, the Court drew upon Barclays Bank PLC v Kapoor [2018] CFI 030, which established that the Court may depart from the general rule in disapproval of conduct involving late applications or procedural delays. These cases collectively reinforced the principle that the Court will not allow procedural maneuvering to shield a party from the financial consequences of wasted litigation costs.

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

The Court denied the Appellant’s application for permission to appeal. Consequently, the Court ordered the Appellant to pay USD 50,000 to the Respondents as a payment on account of costs, pending the final determination of the quantum. Furthermore, the Appellant was ordered to pay the costs of the permission application itself on a standard basis, to be assessed if not agreed between the parties.

What are the practical implications of this decision for practitioners managing jurisdictional challenges in the DIFC?

This decision serves as a stern warning to practitioners that the DIFC Courts will not tolerate the use of the JJC as a "tactical" tool to avoid costs after significant preparation has been undertaken by the opposing party. Practitioners must ensure that if they intend to challenge jurisdiction or seek a stay via the JJC, they do so with full transparency and at the earliest possible opportunity. Failure to disclose such applications until the eve of a hearing will likely result in the Court exercising its discretion under RDC 38.7 to award costs against the applicant, regardless of the ultimate outcome of the jurisdictional dispute.

Where can I read the full judgment in Khaldoun Tabari v Tabarak Investment [2020] 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-tabari-2-zeina-tabari-v-tabarak-investment-llc-1 or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/court-first-instance/DIFC_CFI-061-2018_20200517.txt.

Cases referred to in this judgment:

Legislation referenced:

• RDC 38.7
• RDC 38.7(1)
• Judicial Authority Law