NANCY v NARCISSA [2024] DIFC CFI 098 — Proportionality in interlocutory costs assessments (19 July 2024)

This order clarifies the application of RDC 38.10 in the DIFC Courts, establishing that where a party achieves significant success in narrowing claims through a strike-out application but fails to dispose of the entire action, the Court will favor a proportional costs award over a binary "winner-takes-all" approach.

What were the specific heads of claim in Nancy v Narcissa that the Defendant sought to strike out in CFI 098/2023?

The dispute centers on a complex employment relationship involving allegations of contract continuation, breach of duty, and indemnity claims. The Claimant, Nancy, initiated proceedings against the Defendant, Narcissa, asserting nine distinct heads of claim, ranging from the existence of an express or implied employment contract post-termination to claims regarding visa cancellation and carry agreement payments. The Defendant moved to strike out these claims, arguing that the statement of case disclosed no reasonable grounds for the action.

The scope of the dispute was substantial, with the Claimant initially seeking to establish that employment continued after an August 2022 termination date. The Court’s intervention was required to parse these claims, as the Defendant sought a total dismissal of the action. As noted in the Court's reasoning:

I struck out the claim that the Claimant had the benefit of an express indemnity relating to the period after 11 August 2022 (Claim 3(6) above).

The litigation highlights the high stakes of employment disputes in the DIFC, where the characterization of contract termination dates and indemnity obligations can significantly alter the financial exposure of the parties. The Claimant’s attempt to secure judgment in default of defence further complicated the procedural landscape, necessitating a rigorous judicial review of the underlying employment documentation.

Which judge presided over the strike-out application and subsequent costs order in Nancy v Narcissa?

The matter was heard by Justice Michael Black KC in the DIFC Court of First Instance. Following the initial judgment on the strike-out application delivered on 8 July 2024, Justice Black KC presided over the subsequent costs assessment, issuing the final order on 19 July 2024.

What were the competing arguments regarding costs advanced by the parties in Nancy v Narcissa?

The parties presented divergent views on how the Court should exercise its discretion under RDC 38.6. The Defendant, having successfully struck out several major heads of claim, argued for a significant recovery of its costs, citing the necessity of narrowing the litigation. The Defendant relied on the principles of "issues-based" costs orders, suggesting that the Court should account for the specific success achieved on individual claims.

Conversely, the Claimant sought to minimize the costs liability by emphasizing that several claims—specifically those regarding an implied contract, implied indemnity, and the Carry Agreement—were permitted to proceed to trial. The Claimant argued against a full award of costs to the Defendant, pointing to the fact that the litigation remained active. The Defendant’s position was that it had not merely achieved a "Pyrrhic victory" but had fundamentally altered the trajectory of the case by removing the most tenuous claims, thereby justifying a recovery exceeding 50% of its total costs.

What was the precise doctrinal question Justice Michael Black KC had to resolve regarding the application of RDC 38.10?

The Court was tasked with determining the appropriate methodology for awarding costs in an interlocutory application where neither party could be described as the "wholly successful" party. The doctrinal issue was whether the Court should apply a "dominantly successful" test, an "issue-based" approach, or a proportional assessment. The Court had to decide how to balance the general rule under RDC 38.7—that the unsuccessful party pays the costs—against the reality of partial success in complex employment litigation.

How did Justice Michael Black KC apply the test for proportional costs in the absence of a clear winner?

Justice Black KC rejected the binary "dominantly successful" approach, noting that in complex litigation, it is often impossible to declare a single winner on an interlocutory application. Instead, he opted for a proportional assessment that reflected the overall justice of the case. The Court determined that while the Defendant had not succeeded on every point, it had achieved a substantial reduction in the scope of the trial.

The reasoning emphasized that the Court must maintain flexibility to ensure that costs orders are fair. As the Court stated:

In my judgment it is neither appropriate to adopt the dominantly successful approach nor possible to adopt an issue-based approach. The Court should adopt the approach in RDC 38.10 of ordering payment

By awarding 65% of the Defendant's costs, the Court effectively balanced the Defendant’s success in striking out the express indemnity and visa claims against the Claimant’s success in keeping the implied contract and Carry Agreement claims alive.

Which specific DIFC statutes and RDC rules governed the Court’s discretion in this costs assessment?

The Court’s discretion was primarily governed by the Rules of the DIFC Courts (RDC). Specifically, RDC 38.6 provides the Court with broad discretion regarding whether costs are payable, the amount, and the timing of payment. RDC 38.7 establishes the general rule that the unsuccessful party pays the costs, while RDC 38.8 mandates that the Court consider all circumstances, including party conduct and partial success. RDC 38.10 was the primary vehicle used by Justice Black KC to justify the proportional costs order, allowing the Court to depart from a binary outcome when the circumstances of the application warrant a more nuanced distribution of financial liability.

How did the Court utilize the precedents of IGPL General Trading LLC v Hortin Holdings and Sharp & Ors v Blank & Ors?

The Court utilized these precedents to navigate the tension between "costs in the case" and "costs in the issue." The Defendant cited IGPL General Trading LLC v (1) Hortin Holdings Limited (2) Lodge Hill Limited (3) Westdene Investment Limited [2021] DIFC CFI 023 to support the argument for an issues-based approach. Furthermore, the Defendant invoked Sharp & Ors v Blank & Ors [2016] EWHC 776 (Ch) to argue that the costs of remaining issues should be categorized as either "costs in the case" or "costs in the issue." Justice Black KC acknowledged these authorities but ultimately determined that a proportional percentage award was the most equitable way to reflect the "overall justice of the case," effectively synthesizing these precedents into a practical, proportional outcome.

What was the final disposition and monetary relief ordered by the Court in Nancy v Narcissa?

The Court ordered the Claimant to pay the Defendant’s costs of the application. The total amount was assessed at USD 41,069.86. This figure represented a significant portion of the Defendant's total claimed costs of USD 68,855.27, reflecting the 65% proportional award determined by the Court. The order was issued on 19 July 2024, with the costs to be paid as "costs in the case."

What are the wider implications for DIFC practitioners regarding interlocutory costs applications?

This decision serves as a critical reminder that the DIFC Courts will not reflexively apply a "winner-takes-all" approach to interlocutory costs. Practitioners must anticipate that the Court will conduct a granular analysis of which claims were successfully struck out versus those that survived. For litigants, this means that even if a strike-out application is only partially successful, the Court is likely to award a percentage of costs that reflects the degree of success achieved. Practitioners should prepare detailed costs submissions that clearly delineate the time and resources spent on specific issues, as the Court is increasingly willing to use proportional awards to ensure that the financial burden of litigation is distributed in accordance with the actual outcomes of interlocutory motions.

Where can I read the full judgment in Nancy v Narcissa [2024] DIFC CFI 098?

The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0982023-nancy-v-narcissa-1 or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/court-first-instance/DIFC_CFI-098-2023_20240719.txt.

Cases referred to in this judgment:

Legislation referenced:

• RDC 38.6 (Discretion as to costs)
• RDC 38.7 (General rule for costs)
• RDC 38.8 (Factors for costs orders)
• RDC 38.10 (Proportionality/Issues-based orders)
• RDC 38.30 (Assessment of costs)