Justice Sir Peter Gross has issued a definitive ruling on the allocation of costs following a standalone Trial of Preliminary Issues in the ongoing dispute between Lals Holdings Limited, Emirates Insurance Company (EIC), and Siaci Insurance Brokers LLC. The decision clarifies the Court’s approach to cost shifting when preliminary trials are held in advance of a full trial on the merits.
Why did Justice Sir Peter Gross reject EIC’s argument that it was premature to award costs in Lals Holdings v Emirates Insurance Company?
EIC contended that the Court should reserve the costs of the Preliminary Issues (PI) Trial until the conclusion of the full trial, or alternatively, order that costs be "costs in the case." Justice Sir Peter Gross dismissed this, emphasizing that the PI Trial functioned as a distinct procedural segment. He noted that the Court possesses broad discretion under the Rules of the DIFC Courts (RDC) to manage costs in a manner that reflects the immediate outcome of specific proceedings.
(I) Approach: I am not attracted by EIC’s argument that it is premature to deal with the costs of the Trial of the Preliminary Issues (the “PI Trial”, “PI”, “PIs”, as appropriate).
The Court underscored that justice is better served by finalizing the costs position for the PI Trial immediately, rather than leaving the parties in a state of uncertainty. By addressing the costs now, the Court avoids the administrative burden of revisiting the issue at the end of the full trial, which could involve complex retrospective calculations.
Which judge presided over the costs ruling in CFI 073/2022 and in which division was the matter heard?
The ruling was delivered by Justice Sir Peter Gross, sitting in the DIFC Court of First Instance. The order was issued on 14 May 2024, following the Court's consideration of the parties' submissions regarding the costs of the Preliminary Issues Trial.
What were the respective positions of Lals Holdings, EIC, and Siaci Insurance Brokers regarding the allocation of costs?
Lals Holdings (the Claimant) sought a favorable costs order based on its success in the PI Trial, arguing that the issues resolved were central to the dispute. Conversely, EIC argued that the outcome of the PI Trial was a "score draw," suggesting that costs should be reserved or treated as costs in the case. EIC specifically pointed to its success on PI 1.1.3 (the definition of "Customer") and PI 1.2.3 (the "radius" point) to mitigate its liability.
Siaci Insurance Brokers (the Second Defendant) argued that they were only brought into the proceedings due to EIC’s stance on the Closure Clause (PI 1.2.2). The Brokers maintained that since they were successful on that primary issue, they should be entitled to their full costs. They further requested a payment on account, which the Court ultimately declined to grant.
What was the primary doctrinal issue the Court had to resolve regarding the timing of costs awards in preliminary trials?
The Court had to determine whether the costs of a standalone Trial of Preliminary Issues should be reserved for the final judgment or adjudicated immediately. The doctrinal tension lay between the principle of "costs in the case"—which waits for the final outcome—and the Court’s inherent power to manage its own process by resolving costs for discrete segments of litigation. Justice Sir Peter Gross had to decide if the existence of an extant appeal to the DIFC Court of Appeal regarding PI 1.3.1 necessitated a stay on the costs order.
How did Justice Sir Peter Gross apply the "standalone trial" test to justify an immediate costs order?
The Court applied a pragmatic test, evaluating whether the PI Trial was, for all practical purposes, a self-contained proceeding. Justice Sir Peter Gross concluded that the PI Trial was sufficiently distinct to warrant an immediate order, noting that any potential adjustments required by a future Court of Appeal decision would be straightforward to implement.
This was, for practical purposes, a standalone Trial and justice is better served by dealing with costs now.
The Court further reasoned that ordering "costs in the case" would be inappropriate because the success achieved by the Claimants was substantial and identifiable, regardless of the ultimate outcome of the full trial.
Which specific RDC rules and legal principles did the Court rely upon to exercise its discretion in CFI 073/2022?
Justice Sir Peter Gross relied explicitly on the wide discretionary powers granted to the Court under Parts 38 and 40 of the Rules of the DIFC Courts (RDC). These rules provide the framework for the Court to determine by whom and to what extent costs are to be paid.
The wide discretion conferred by Parts 38 and 40 of the Rules of the DIFC Courts (the “RDC”) amply permit such a course.
The Court also utilized the principle of "substantial reality" to determine the liability of EIC for the Brokers' costs, bypassing the need for a complex split-order arrangement that would have unnecessarily increased the costs of the litigation.
How did the Court distinguish the treatment of the Brokers' costs from the Claimants' costs?
The Court recognized that the Brokers were joined to the proceedings primarily due to EIC’s position on the Closure Clause (PI 1.2.2). While the Brokers were successful on PI 1.2.2, they were aligned with EIC on PI 1.2.3. However, the Court determined that PI 1.2.2 was significantly more time-consuming.
I am satisfied that the Brokers are entitled to their costs. Those costs can either be awarded against the Claimants, leaving the Claimants to recover them from EIC, or they can be recovered directly from EIC – recognising the substantial reality of the matter.
Rather than creating a complex apportionment between the two issues, the Court ordered EIC to pay the Brokers' costs directly, viewing this as the most efficient and just solution.
What was the final disposition regarding the monetary relief and costs awarded in this ruling?
The Court ordered EIC to pay the Claimants 80% of their costs relating to the PI Trial on the standard basis. Regarding the Brokers, the Court ordered EIC to pay their full costs of the PI Trial, also on the standard basis. The Court declined the Brokers' request for a payment on account, directing that costs be subject to detailed assessment by the Registry if not agreed within 28 days.
(II) The position as between the Claimants and EIC: Whether approached PI by PI, or via a consideration of the PI Trial overall, it is clear to me that as between the Claimants and EIC, the Claimants were largely successful.
How does this ruling change the practice for litigants in the DIFC regarding preliminary issues?
This decision reinforces the Court’s preference for finality in costs orders, even when a full trial is pending. Practitioners must anticipate that the DIFC Court will not reflexively reserve costs for preliminary trials. Instead, parties should be prepared to argue the merits of their success on specific preliminary issues immediately. The ruling also serves as a warning that the Court will avoid "unnecessary complexity" in cost orders, preferring direct liability paths that reflect the "substantial reality" of the parties' roles in the dispute.
Introducing such unnecessary complexity would itself add to costs and not benefit any party, especially as the costs properly attributable to PI 1.2.3 are unlikely to be unduly significant.
Where can I read the full judgment in Lals Holdings v Emirates Insurance Company [2024] DIFC CFI 073?
The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0732022-lals-holdings-limited-v-1-emirates-insurance-company-psc-eic-2-siaci-insurance-brokers-llc-1 or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/court-first-instance/DIFC_CFI-073-2022_20240514.txt
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | N/A |
Legislation referenced:
- Rules of the DIFC Courts (RDC), Part 38
- Rules of the DIFC Courts (RDC), Part 40