This order addresses the threshold requirements for challenging a Registrar’s costs assessment in the DIFC, specifically focusing on the proportionality and scope of bills of costs in arbitration-related litigation.
What was the specific dispute regarding the Bill of Costs in Murif v Mipy [2023] DIFC ARB 003?
The litigation concerns a challenge to a costs assessment following the dismissal of several applications in the underlying arbitration claim. The Defendants (MIPY and MADLI) sought to appeal an order issued by Assistant Registrar Delvin Sumo on 14 September 2023, which had assessed the costs payable to the Claimants (MURIF and MIJUL). The core of the dispute lies in the Defendants' contention that the Claimants’ Bill of Costs was fundamentally flawed because it failed to reflect the actual work performed in relation to the specific applications for which costs were awarded.
The Defendants argued that the Bill of Costs provided by the Claimants focused on work related to an injunction that was not the subject of the costs order, while omitting any entries regarding the "Challenge Application" and "Relief Application" that were actually dismissed by the Court. As noted in the Court’s schedule of reasons:
The Defendants submit that the bill of costs filed by the Claimants (the “Bill of Costs”) only highlighted the purported work undertaken for the preparation of the injunction which are not the matter in issue.
The dispute centers on whether the costs awarded were proportionate and whether they accurately reflected the scope of the Court’s prior order dated 29 July 2021, which had directed that costs for the Relief and Challenge Applications be paid on a standard basis.
Which judge presided over the Permission Application in Murif v Mipy [2023] DIFC ARB 003?
The Permission Application was heard and determined by H.E. Justice Nassir Al Nasser in the Arbitration Division of the DIFC Courts. The order was issued on 21 November 2023, following a review of the Defendants’ Appeal Notice filed on 16 October 2023 and the subsequent responses provided by the Respondents.
What were the primary arguments advanced by the Defendants in their application for permission to appeal?
The Defendants (MIPY and MADLI) submitted six distinct grounds for their appeal against the Assistant Registrar’s order. Their primary argument, which the Court found sufficient to grant the application, was that the costs awarded did not relate to the matters in issue and exceeded the scope of the original set-aside order. Specifically, the Defendants contended that the Claimants’ Bill of Costs was deficient because it lacked any entries regarding work performed on the Challenge Application and the Relief Application, which were the only matters for which costs were recoverable.
The Defendants argued that the Claimants had improperly included costs for work related to an injunction that was not part of the relevant costs order. As the Court summarized:
Ground 1 is that the costs granted do not relate to the matters in issue and are beyond the scope of the set aside order.
By highlighting this discrepancy, the Defendants sought to demonstrate that the assessment conducted by the Assistant Registrar failed to adhere to the principle of proportionality required under the Rules of the DIFC Courts (RDC).
What legal test did the Court apply to determine whether to grant permission to appeal in Murif v Mipy [2023] DIFC ARB 003?
The Court was required to determine whether the Defendants met the threshold for permission to appeal as set out in Rule 44.19 of the Rules of the DIFC Courts (RDC). The doctrinal issue was whether the appeal had a "real prospect of success" or if there existed "another compelling reason" why the appeal should be heard.
Justice Nassir Al Nasser had to evaluate whether the Assistant Registrar’s assessment of the Bill of Costs was legally sound in light of the specific instructions provided in the order of 29 July 2021. The Court focused on whether the Bill of Costs provided sufficient detail to justify the costs claimed for the Relief and Challenge Applications, or if the assessment had erroneously allowed costs for unrelated matters, thereby failing the proportionality test mandated by RDC 38.18.
How did H.E. Justice Nassir Al Nasser justify the decision to grant the Permission Application?
Justice Nassir Al Nasser concluded that the Defendants had successfully demonstrated that the appeal had a real prospect of success. The Court’s reasoning was anchored in the failure of the Bill of Costs to provide the necessary transparency regarding the work performed for the specific applications covered by the costs order. The Court noted:
I have reviewed the Bill of Costs, in my view, it does not provide details of what is the work done in relation to the Relief Application and the Challenge Application.
The Court reasoned that because the Bill of Costs failed to link the claimed work to the relevant applications, the assessment was potentially flawed. Consequently, the Court found that the first ground of appeal was sufficient to satisfy the requirements for granting permission. The Court’s decision was finalized as follows:
Therefore, in light of the Defendants’ submission, I am of the view that the appeal does have a prospect of success and I also find a compelling reason for the appeal to be heard, and therefore the Permission Application does satisfy the requirements of RDC 44.19.
Which specific RDC rules and prior orders were central to the Court’s analysis?
The Court’s analysis was primarily governed by RDC 44.19, which dictates the criteria for granting permission to appeal, and RDC 38.18, which governs the assessment of costs on a standard basis. RDC 38.18(1) is particularly significant, as it requires the Court to allow only those costs that are "proportionate to the matter in issue" and mandates that any doubt regarding the reasonableness of costs be resolved in favor of the paying party.
Furthermore, the Court relied heavily on the order dated 29 July 2021, which had dismissed the Set Aside, Relief, and Challenge Applications. The Court referenced this order to establish the scope of the costs award:
I have reviewed the order dated 29 July 2021 where the Set Aside Application, Relief Application and Challenge Application were dismissed, and the costs thereto were decided as follows: (1) The Costs of the relief Application and the Challenge Application were payable by the Appellant to the Respondent on a Standard basis to be assessed by the Registrar if not agreed.
How did the Court use the principle of proportionality in its assessment of the appeal grounds?
The Court utilized the principle of proportionality as a diagnostic tool to evaluate the validity of the Bill of Costs. By citing RDC 38.18, the Court emphasized that the burden is on the receiving party to demonstrate that the costs claimed are proportionate to the specific matters in issue.
Because the Claimants’ Bill of Costs appeared to highlight work related to an injunction rather than the Relief or Challenge Applications, the Court found that the proportionality requirement had been bypassed. The Court accepted the Defendants' argument that the assessment was not properly aligned with the scope of the original order, thereby necessitating a full appeal to ensure that the costs awarded were not only reasonable but also strictly proportionate to the matters actually adjudicated.
What was the final disposition of the Permission Application?
The Court granted the Defendants' application for permission to appeal against the order of Assistant Registrar Delvin Sumo dated 14 September 2023. The Court ordered that the costs of the Permission Application itself shall be "costs in the case," meaning the ultimate liability for these costs will be determined at the conclusion of the appeal proceedings.
What are the wider implications of this decision for practitioners handling costs assessments in the DIFC?
This decision serves as a reminder to practitioners that Bills of Costs must be meticulously drafted to align with the specific scope of the underlying court orders. Practitioners must ensure that every entry in a Bill of Costs is clearly linked to the specific applications for which costs were awarded. Failure to provide granular detail—particularly when multiple applications are dismissed with varying costs orders—will likely result in a successful challenge to the assessment.
The deep editorial analysis of this case is at: Murif v Mipy [2023] DIFC ARB 003: The Limits of Proportionality in Arbitral Costs Assessments
Where can I read the full judgment in Murif v Mipy [2023] DIFC ARB 003?
The full order can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/arbitration/arb-0032021-1-murif-2-mijul-v-1-mipy-2-madli
Legislation referenced:
- Rules of the DIFC Courts (RDC) 44.19
- Rules of the DIFC Courts (RDC) 38.18