This order addresses the threshold for challenging costs awards in the DIFC, affirming the court’s broad discretion to depart from the general rule of cost-shifting when neither party achieves dominant success in interlocutory applications.
What was the specific dispute regarding the Security for Costs application in LXT Real Estate Broker v SIR Real Estate that led to the contested Costs Order?
The underlying dispute arose from a Security for Costs application filed by the Defendant, SIR Real Estate L.L.C, against the Claimant, LXT Real Estate Broker L.L.C. The Defendant sought a significant amount of security, but the Court ultimately granted a quantum that was substantially lower than the Defendant's initial demand. Following this, the Court issued a Costs Order on 2 July 2025, determining that there should be no order as to costs, effectively requiring each party to bear their own legal expenses for that specific application.
The Defendant sought to challenge this, arguing that as the party who successfully obtained an order for security, it should have been treated as the "successful party" under the general rule. The Court, however, viewed the outcome differently, noting that the Defendant’s pursuit of excessive security had unnecessarily inflated the litigation.
This Appeal Notice is brought by the Defendant seeking permission to appeal the Costs Order dated 2 July 2025 following the Order granting the Security for Costs Application (the “Permission to Appeal Application”).
Which judge presided over the Permission to Appeal Application in CFI 073/2024 and in which division of the DIFC Courts was this heard?
The application was heard by H.E. Deputy Chief Justice Ali Al Madhani, sitting in the Court of First Instance. The order was issued on 15 January 2026.
What specific legal arguments did SIR Real Estate advance to challenge the Costs Order, and how did LXT Real Estate Broker respond?
The Defendant, SIR Real Estate, advanced three primary grounds for appeal. First, it argued that the Court erred in principle by failing to identify the Defendant as the "successful party" under RDC 38.7, asserting that the lower quantum awarded did not negate its overall success in the application. Second, it contended that the Court improperly placed weight on a non-Part 32 "without prejudice" offer of USD 700,000 made by the Claimant, arguing that such an offer should not be considered under RDC 38.8. Third, the Defendant alleged that the Court incorrectly factored in the timing of the Claimant’s payment of security, arguing this was irrelevant to the costs determination.
The Claimant, LXT Real Estate Broker, countered by emphasizing the Court’s "wide discretion" in costs matters. It argued that the Court’s decision was well within the "margin of appreciation" afforded to judges and that, per Melody v. Melance, permission to appeal costs assessments should be reserved for exceptional circumstances. The Claimant maintained that the Defendant was not "dominantly successful" and that the Court correctly applied the fairness principle articulated in Gulf Petrochem v Pterochina.
What was the precise doctrinal question regarding the application of RDC 38.7 and RDC 38.8 that the Court had to resolve?
The Court had to determine whether the "general rule" under RDC 38.7—that the unsuccessful party pays the costs of the successful party—was correctly bypassed in favor of a "no order as to costs" outcome. Specifically, the Court had to decide if it was an error in principle to treat a party as "not dominantly successful" when they obtained only a fraction of the security sought, and whether a non-Part 32 offer could be legally considered as part of the "all the circumstances" test under RDC 38.8.
How did H.E. Deputy Chief Justice Ali Al Madhani justify the departure from the general rule of costs under RDC 38.7?
The Court reasoned that the Defendant’s conduct in overestimating its security requirements led to unnecessary discourse, and that the final award of security was significantly lower than the amount requested. The judge emphasized that the parties were "materially balanced" in their success, meaning neither could claim the mantle of the "dominant" winner.
The decision to make no order as to costs reflected that the parties were materially balanced in the success of their submissions on the outcome of the Security for Costs application.
The Court further clarified that the timing of the security payment was merely a factual observation and not the primary driver of the costs decision, dismissing the Defendant's third ground of appeal as a misinterpretation of the original order's reasoning.
Which specific RDC rules and DIFC precedents were applied to determine the validity of the Costs Order?
The Court relied heavily on RDC 38.7, which establishes the general rule for costs but grants the Court discretion to make a different order. It also applied RDC 38.8, which allows the Court to consider "all the circumstances," including non-Part 32 offers, when determining costs.
The Court cited Adil v Frontline Development Partners Limited [2014] DIFC CFI 015 to establish that the monetary value of an outcome is not the sole guide to costs disposal. It referenced Al Khorafi v. Bank Sarasin-Alpen (ME) Ltd [2015] DIFC CA 003 regarding the "wide discretion" of the Court, and Melody v. Melance [2020] DIFC CA 010 to highlight that appeals on costs are only warranted in exceptional circumstances. Finally, it cited Gulf Petrochem v Pterochina [2023] CFI 048 to support the policy that costs should be allocated fairly based on each party's responsibility for the costs incurred.
How did the Court distinguish the role of non-Part 32 offers in costs assessments compared to formal Part 32 offers?
The Court clarified that while Part 32 offers have specific procedural consequences, RDC 38.8 provides a broader gateway for the Court to consider settlement attempts that do not strictly comply with Part 32. The Court held that as long as an offer is "sufficiently definite," it falls within the scope of "all the circumstances" that the Court is entitled to weigh.
RDC 38.8 clearly states that “all the circumstances” include non-Part 32 offers, and, in my view, the Offer is sufficiently definite to be included under RDC 38.8.
This reasoning aligns with MAG Financial Services LLC v Theron Entertainment LLC [2017] DIFC CA 006, which requires that an offer to settle must be sufficiently definite to engage the Court's consideration.
What was the final disposition of the Permission to Appeal Application and the associated costs order?
The Court rejected the Defendant's application for permission to appeal in its entirety. The Court found that the Defendant had misinterpreted the application of RDC 38 and the Court’s discretion. Consequently, the Court made no order as to costs for the appeal application itself, maintaining the status quo.
By the Costs Order, no order was made for costs on the basis that the Defendant was not successful in all matters, the security quantum granted was far less than sought, and that the Claimant had paid the relevant security by the date of issue of the Costs Order.
What are the wider implications of this ruling for DIFC practitioners regarding costs applications and settlement offers?
This decision serves as a reminder that the DIFC Courts will not mechanically apply the "winner takes all" rule in costs assessments, particularly in interlocutory applications where the outcome is nuanced. Practitioners should anticipate that the Court will scrutinize the reasonableness of the quantum sought in security applications. Furthermore, the ruling confirms that non-Part 32 offers are not irrelevant; they can be used as a shield against costs if they are sufficiently definite, even if they do not meet the formal requirements of Part 32. Litigants should be cautious about pursuing excessive security, as doing so may result in a "no order as to costs" outcome, regardless of whether they technically "won" the application.
Where can I read the full judgment in LXT Real Estate Broker L.L.C v SIR Real Estate L.L.C [2026] DIFC CFI 073?
https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0732024-lxt-real-estate-broker-llc-v-sir-real-estate-llc-4
https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/court-first-instance/DIFC_CFI-073-2024_20260115.txt
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| Adil v Frontline Development Partners Limited | [2014] DIFC CFI 015 | Money value of outcome is not a sound guide to disposal of costs |
| Al Khorafi v. Bank Sarasin-Alpen (ME) Ltd | [2015] DIFC CA 003 | Court retains wide discretion not to be disturbed without departure from margin of appreciation |
| Melody v. Melance | [2020] DIFC CA 010 | Permission to appeal costs assessments warranted only in exceptional circumstances |
| Gulf Petrochem v Pterochina | [2023] CFI 048 | Costs should be paid in a way that is fair, having regard to responsibility for incurring costs |
| MAG Financial Services LLC v Theron Entertainment LLC | [2017] DIFC CA 006 | Offer to settle must be sufficiently definite to engage RDC 38.8(3) |
Legislation referenced:
- RDC 38.7
- RDC 38.7(2)
- RDC 32
- RDC 38.8
- RDC 38.8(3)