The DIFC Court of First Instance clarifies the evidentiary threshold for recovering out-of-pocket expenses and reinforces the application of Registrar’s Direction No. 1 of 2023 in assessing the reasonableness of legal fees.
What was the specific monetary dispute regarding costs in Krystal Financial Consultants v Asas Capital following the successful jurisdictional challenge?
The litigation arose from a Part 7 Claim filed by Krystal Financial Consultants LLC against Asas Capital Ltd, which was subsequently dismissed after the Defendant successfully challenged the jurisdiction of the DIFC Courts. Following the substantive order dated 6 February 2025, which granted the Defendant its costs, the parties submitted competing schedules for the assessment of those costs. The Defendant sought a total of AED 95,200, comprising AED 7,500 in court fees, AED 82,700 in legal fees, and AED 5,000 in additional out-of-pocket expenses.
The Claimant, Krystal Financial Consultants, contested the recovery of these amounts, requesting a waiver of the Defendant's legal fees and expenses, citing the "Claimant capacity" at the hearing. However, the Court found these submissions insufficient to justify a reduction in the primary legal fees. As noted in the judgment:
Deputy Chief Justice Ali Al Madhani dated 6 February 2025, it was determined that Application No. CFI-072-2024/1 dated 14 November 2024 filed by the Defendant contesting the jurisdiction of the DIFC Courts (the “Jurisdiction Application”) was accepted, and costs of the Jurisdiction Application were awarded in favour of the Defendant.
Which judge presided over the costs assessment in CFI 072/2024 and in which division of the DIFC Courts was the matter heard?
The matter was presided over by H.E. Deputy Chief Justice Ali Al Madhani. The proceedings were conducted within the Court of First Instance, with the final order regarding the assessment of costs issued on 17 July 2025.
How did the parties’ respective legal teams justify their billing hours in Krystal Financial Consultants v Asas Capital?
The Defendant’s legal team, represented by Avichal Prasad and Sarthak Sharma, submitted a detailed breakdown of 30 hours of work. The Claimant, conversely, had billed 48 hours for a "materially similar" scope of work. The Court noted the efficiency of the Defendant’s counsel, observing that despite the complexity of the jurisdictional challenge, the Defendant’s representatives achieved their objective in significantly fewer hours than the Claimant.
The Court highlighted the specific tasks performed by the Defendant’s counsel:
As pleaded, Avichal Prasad spent one hour on preliminary examination of the Claim, conference calls with the Defendant, drafting and filing the acknowledgment of service.
The Claimant attempted to argue for a waiver of costs based on its own financial capacity, but failed to provide any substantive legal argument or evidence to challenge the reasonableness of the Defendant's hourly rates or the necessity of the hours billed.
What was the precise doctrinal issue the Court had to resolve regarding the recovery of "additional expenses" without supporting documentation?
The Court was tasked with determining whether a party can recover out-of-pocket expenses—such as translation, printing, and PDF bookmarking—when no receipts, invoices, or specific evidence of expenditure are provided to the Court. The legal question centered on whether the Court should exercise its discretion to disallow such costs entirely due to a lack of proof, or whether it could apply a "reasonableness" test to award a portion of the claimed amount.
How did Justice Ali Al Madhani apply the test of reasonableness to the Defendant's claimed costs?
Justice Ali Al Madhani employed a two-fold test: first, verifying that hourly rates complied with the Registrar’s Direction No. 1 of 2023, and second, assessing whether the hours billed were proportionate to the work performed. Regarding the legal fees, the Court found no reason to intervene, noting that the rates were standard for the level of experience of the counsel involved.
However, regarding the additional expenses, the Court adopted a more critical approach. While the Claimant failed to specifically contest the AED 5,000 figure, the Court held that it could not blindly award the full amount without evidence. The reasoning was as follows:
On the matter of the additional costs amounting to AED 5,000, while no legitimate submissions were made by the Claimant contesting these costs, I concede that it would be unreasonable to permit the Defendant to recover all of the additional costs claimed as no evidence has been provided to prove that AED 5,000 was spent in pursuit of building the defence only.
Which specific DIFC Court Rules and Registrar’s Directions were applied in the assessment of costs?
The Court relied heavily on Rule 38.40(1) of the DIFC Court Rules, which governs the payment of costs following an order. Furthermore, the Court utilized Registrar’s Direction No. 1 of 2023 as the primary benchmark for determining whether the hourly rates charged by the Defendant’s counsel (AED 3,200 for a Managing Partner and AED 2,500 for an associate with 7 years of experience) were reasonable.
How did the Court distinguish between the recovery of legal fees and the recovery of out-of-pocket expenses in this case?
The Court treated legal fees and out-of-pocket expenses as distinct categories. For legal fees, the Court deferred to the market rates established by the Registrar’s Direction, noting that the Claimant had failed to provide a "legitimate submission" to oppose the hours or rates. For out-of-pocket expenses, the Court applied a stricter evidentiary standard. Even in the absence of a vigorous challenge from the Claimant, the Court refused to award the full amount, instead awarding 50% of the claimed AED 5,000, deeming it a "reasonable figure" by comparison to the Claimant’s own significantly higher expenses for similar tasks.
What was the final disposition and the total monetary relief awarded to the Defendant?
The Court ordered the Claimant to pay the Defendant a total of AED 92,700 within 14 days. This total was calculated by combining the full court fees, the full legal fees, and 50% of the claimed additional expenses.
In total, I award the Defendant AED 7,500 for its court fees, AED 82,700 in legal fees and AED 2,500 for additional costs, amounting to AED 92,700 collectively.
How does this ruling change the practice for litigants seeking to recover costs in the DIFC?
This case serves as a warning to practitioners that the DIFC Court will not rubber-stamp "additional expenses" or "out-of-pocket costs" simply because the opposing party fails to contest them. Litigants must be prepared to provide receipts or specific evidence for all disbursements. Furthermore, the case confirms that the Court will actively compare the efficiency of the parties' legal teams; where one side bills significantly more hours for a similar scope of work, the Court may view the lower-billing party’s costs as inherently more reasonable.
Where can I read the full judgment in Krystal Financial Consultants LLC v Asas Capital Ltd [2025] DIFC CFI 072?
The full order can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0722024-krystal-financial-consultants-llc-v-asas-capital-ltd or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/court-first-instance/DIFC_CFI-072-2024_20250717.txt
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | No external case law cited in the costs order. |
Legislation referenced:
- DIFC Court Rules (RDC): Rule 38.40(1)
- Registrar’s Direction No. 1 of 2023