This order addresses the contentious issue of costs following a successful, yet partially contested, application for security for costs in a high-value real estate dispute.
How did the dispute between LXT Real Estate Broker and SIR Real Estate over a USD 1,750,000 security for costs application lead to a "no order as to costs" outcome?
The litigation concerns a substantial real estate claim valued at over AED 405 million. The Defendant, SIR Real Estate LLC, initiated a Security for Costs Application seeking USD 1,750,000 to protect its position. The Claimant, LXT Real Estate Broker L.L.C, resisted the quantum and the necessity of the security, leading to a contested hearing. Ultimately, the Court granted security but for a significantly lower amount than the Defendant initially demanded, limiting the scope of the security to the period ending at the Strike Out Application.
The Claimant argued that its proactive settlement attempts should shield it from the usual cost-shifting rules. Specifically, the Claimant highlighted a "without prejudice" offer made shortly before the hearing. As noted in the court records:
The Claimant asserts that a without-prejudice offer had been made on 13 February 2025 to the value of USD 700,000 (the “Offer”), which was filed with the court.
Because the Defendant failed to engage with this offer and ultimately secured a lower amount than requested, the Court determined that neither party was the clear "prevailing" party for the purposes of costs. Consequently, the Court exercised its discretion to depart from the general rule that costs follow the event, resulting in no order as to costs. Source: CFI 073/2024
Which judge presided over the costs determination in LXT Real Estate Broker v SIR Real Estate in the DIFC Court of First Instance?
The matter was heard and determined by H.E. Deputy Chief Justice Ali Al Madhani. The order regarding costs was issued on 2 July 2025, following a series of submissions filed by the parties in February and June 2025 regarding the impact of the Claimant’s settlement offers on the final cost allocation.
What were the competing legal arguments regarding the impact of the 13 February 2025 "without prejudice" offer on the cost award?
The Claimant argued that the Defendant’s refusal to engage with the USD 700,000 offer was unreasonable, particularly given that the final security ordered was less than the Defendant's initial demand. The Claimant contended that:
The Defendant’s conduct in failing to engage with the Offer (nor the prior offer on 24 November 2024) which caused additional costs to the Defendant and a failure to achieve security at a quantum exceeding the Offer, ought to result in the Defendant being ordered to pay the Claimant’s costs in the Security Application.
Conversely, the Defendant maintained that the offer was procedurally defective and irrelevant. The Defendant argued that the offer failed to comply with the strict requirements of RDC Part 32, rendering it incapable of acceptance. The Defendant further emphasized the proportionality of its costs, noting:
The Defendant submits that this is reasonable and proportionate considering the matters of the issue in the Security Application and the Claim generally, which is worth over AED 405 million.
What was the precise doctrinal question the Court had to resolve regarding the application of RDC 38.7(1) in the context of interlocutory security applications?
The Court was tasked with determining whether the general rule under RDC 38.7(1)—that the unsuccessful party pays the costs of the successful party—should be strictly applied when the "successful" party (the Defendant) obtains security, but at a quantum significantly lower than sought and after rejecting a settlement offer. The doctrinal issue was whether an offer that does not strictly comply with RDC Part 32 can still be considered by the Court as a relevant factor in exercising its discretion under RDC 38.7(1) to depart from the default cost-shifting rule.
How did H.E. Deputy Chief Justice Ali Al Madhani apply the principles of judicial discretion to the costs of the Security Application?
The Judge evaluated the conduct of both parties throughout the interlocutory phase. While the Defendant was technically successful in obtaining security, the Court noted that the Claimant’s offer was a reasonable starting point for negotiations that could have avoided the costs of the hearing. The Court reasoned that because the security granted was limited to the period up to the Strike Out Application, the Defendant’s "win" was qualified. The Court concluded:
Given that the Security has already been paid up until the Strike Out Application, which includes a consideration of the costs listed in the Defendant’s Submission on Costs, the most reasonable conclusion here is that no costs should be ordered.
Which specific RDC rules and procedural authorities were central to the Court’s decision on costs?
The Court primarily relied on RDC 38.7(1), which establishes the general rule that the court will make an order for costs against the unsuccessful party, but grants the court wide discretion to depart from this rule. Additionally, the Court considered the requirements of RDC Part 32 regarding offers to settle. The Defendant specifically argued that the Claimant’s offer was invalid because:
In a submission filed in anticipation of the Claimant’s position on costs, the Defendant explains that the “without prejudice save as to costs” letter sent by the Claimant dated 13 February 2025 (the “Letter”), which was filed in evidence, did not contain the Offer that the Claimant relies on to undermine the Defendant’s position as the ‘offer’ was not made in compliance with RDC 32.
How did the Court treat the Defendant’s reliance on the general rule of costs following the event?
The Defendant sought to enforce the general rule by pointing to its success in the Security Application, requesting AED 440,792.82. The Defendant attempted to minimize the Claimant’s costs by comparing them to its own, noting:
Additionally, as per the Claimant’s statement of costs, its won costs were almost the same amount at AED 439,887.39.
The Court, however, rejected the Defendant’s invitation to ignore the Claimant’s settlement efforts. The Defendant had argued:
In conclusion, the Defendant invites the Court to disregard any notion of the Offer that would affect payment or quantum of costs, and reaffirms its entitlement to costs as per the general rule set in RDC 38.7(1) to the amount of AED 439,887.39.
The Court ultimately found that the Defendant’s failure to engage with the Claimant’s offer, combined with the reduced quantum of security awarded, outweighed the Defendant’s technical success, justifying a departure from the general rule.
What was the final disposition of the Court regarding the monetary relief and costs in CFI 073/2024?
The Court ordered that there shall be no order as to costs. This decision effectively left both parties to bear their own legal expenses incurred during the Security Application. The Court’s reasoning was anchored in the fact that the Defendant’s success was partial and that the Claimant had provided a reasonable basis for settlement that the Defendant had failed to adequately address, thereby complicating the cost-shifting analysis.
What are the wider implications for DIFC practitioners regarding "without prejudice" offers in interlocutory applications?
This case serves as a reminder that the DIFC Courts will scrutinize the conduct of parties during interlocutory applications, including their willingness to engage in settlement negotiations. Even if an offer does not strictly adhere to the formal requirements of RDC Part 32, the Court may still view it as a "solid starting point for negotiations." Practitioners should anticipate that failure to engage with such offers—even in the context of security for costs—may result in the Court exercising its discretion to deny costs to a successful applicant, particularly where the quantum of the security awarded is significantly lower than the amount initially sought.
Where can I read the full judgment in LXT Real Estate Broker L.L.C v SIR Real Estate LLC [2025] DIFC CFI 073?
The full order can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0732024-lxt-real-estate-broker-llc-v-sir-real-estate-llc-2 or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/court-first-instance/DIFC_CFI-073-2024_20250702.txt
Cases referred to in this judgment:
(No external case law precedents were cited in the provided source text for this specific order.)
Legislation referenced:
- Rules of the DIFC Courts (RDC)
- RDC 38.7(1)
- RDC Part 32