The DIFC Court of First Instance clarifies the application of the proportionality principle in costs assessments following the dismissal of unsuccessful interim injunctive relief applications in arbitration.
What was the specific monetary dispute regarding the First Defendant’s costs in Naidoo v Nofret [2025] DIFC ARB 011?
The dispute arose following the dismissal of the Claimant’s application for interim injunctive relief and supervisory intervention in DIAC Case No. 240031. Having successfully defended the application, the First Defendant, Nofret, sought recovery of its legal costs from the Claimant, Naidoo. The First Defendant submitted a Statement of Costs totaling USD 12,956.11, covering professional fees and associated disbursements.
The court was tasked with determining the recoverable amount under the standard basis of assessment. While the court acknowledged the complexity of the matter, it exercised its discretion to adjust the final figure to ensure the award remained proportionate to the nature of the proceedings.
The Applicant shall pay the First Defendant the amount of USD 10,364.89 (the “Costs Award”), being 80% of the total amount of costs claimed in the Statement of Costs (USD 12,956.11)
Which judge presided over the costs assessment in the DIFC Court of First Instance for ARB 011/2025?
H.E. Justice Shamlan Al Sawalehi presided over the matter in the Arbitration Division of the DIFC Court of First Instance. The order for costs was issued on 27 May 2025, following the court's earlier dismissal of the substantive application on 9 May 2025.
What were the parties' positions regarding the assessment of costs in Naidoo v Nofret?
The First Defendant, Nofret, argued that the costs incurred—totaling USD 12,956.11—were reasonable and necessary given the urgency and scope of the Claimant’s application for interim relief. The First Defendant maintained that the hourly rates charged by its legal representatives were consistent with market expectations for high-stakes arbitration-related litigation in the DIFC.
The Claimant, Naidoo, having failed in the underlying application for supervisory intervention, was the subject of the costs application. The court’s assessment focused on whether the claimed fees met the threshold of proportionality required under the Rules of the DIFC Courts (RDC), despite the Claimant’s unsuccessful attempt to challenge the arbitral tribunal’s procedural decisions.
This Application is brought by Nofret (the “First Defendant”) seeking a costs award against Naidoo (the “Claimant”) pursuant to my Order dated 9 May 2025, in which I dismissed the Claimant’s Application for interim injunctive relief and supervisory intervention under Articles 10, 11 and 41 of the DIFC Arbitration Law.
What legal question did Justice Al Sawalehi have to answer regarding the application of RDC 38.8 and 38.23?
The court was required to determine whether the First Defendant’s claimed costs of USD 12,956.11 were reasonable and proportionate under the standard basis of assessment. Specifically, the court had to decide if the hourly rates charged by counsel were justifiable and whether a reduction was necessary to satisfy the court’s mandate for judicial economy and proportionality, even where the underlying work was deemed necessary for the defense of the application.
How did Justice Al Sawalehi apply the proportionality test to the costs claimed by Nofret?
Justice Al Sawalehi conducted a two-stage analysis. First, he evaluated the hourly rates against market expectations, finding them to be at the higher end but ultimately within a reasonable range. Second, he applied the court’s discretionary power to ensure the final award was proportionate to the scope of the application.
However, in exercising my discretion under RDC 38.8 and RDC 38.23, and taking into account the standard basis of assessment, I find that a reduction is appropriate.
The judge concluded that while the work performed was necessary, a blanket award of the full amount was not appropriate. By applying a 20% reduction, the court sought to balance the First Defendant’s right to recover costs with the overarching principle of proportionality.
In the circumstances, I consider that an award of 80% of the First Defendant’s claimed costs reflects a fair and proportionate outcome, consistent with the principles of reasonableness and judicial economy.
Which DIFC Arbitration Law articles and RDC rules were central to the court's reasoning?
The court’s jurisdiction to award costs and conduct the assessment was grounded in the DIFC Arbitration Law, specifically Articles 10, 11, and 41, which govern the court’s supervisory role over arbitral proceedings. The procedural framework for the costs assessment was dictated by Part 38 of the RDC, with specific reliance on RDC 38.8 and RDC 38.23, which grant the court broad discretion to manage costs and ensure they are proportionate to the issues at stake.
How did the court utilize the standard basis of assessment in Naidoo v Nofret?
The court utilized the standard basis of assessment to verify that the costs were not only incurred but were also reasonable in amount. Justice Al Sawalehi noted that while the hourly rates were at the "higher end" of market expectations, they were not per se unreasonable.
I am satisfied that the hourly rates fall within the reasonable range of market expectations in arbitration-related matters, albeit at the higher end.
By citing this, the court signaled that even when hourly rates are accepted as reasonable, the court retains the authority to reduce the total bill to ensure that the overall cost of the litigation remains proportionate to the complexity of the issues presented.
What was the final disposition and the specific order for costs made by the court?
The court ordered the Claimant to pay the First Defendant 80% of the claimed costs. The order included a strict 14-day payment window and stipulated the consequences of non-compliance, including the accrual of interest.
Accordingly, the Applicant shall pay 80% of the First Defendant’s claimed costs, assessed in the amount of USD 10,364.89.
The Applicant shall pay the Costs Award within 14 days from the date of this Order pursuant to RDC 38.40.
In the event the Applicant fails to pay the Costs Award within 14 days of this Order, interest shall accrue at the rate of 9% per annum from the date of this Order until full payment is made, in accordance with Practice Direction No. 4 of 2017.
What are the wider implications of Naidoo v Nofret for practitioners in the DIFC?
This case serves as a reminder that the DIFC Courts will rigorously apply the principle of proportionality to costs assessments, even in arbitration-related matters where counsel rates are high. Practitioners should anticipate that the court will exercise its discretion under RDC 38.8 to trim costs that, while technically reasonable, may be viewed as disproportionate to the scope of the application. The deep editorial analysis of this case is at: Naidoo v Nofret [2025] DIFC ARB 011: The High Bar for Challenging Arbitral Case Management. Litigants should also note the sibling order in this case family: NAIDOO v NOFRET [2025] DIFC ARB 011 — The High Bar for Challenging Arbitral Case Management (9 May 2025).
Where can I read the full judgment in Naidoo v Nofret [2025] DIFC ARB 011?
The full order with reasons can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/arbitration/arb-0112025-naidoo-and-1-nofret-v-2-nandini-3-nurine-4-nadidah-1 or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/arbitration/DIFC_ARB-011-2025_20250527.txt
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | N/A |
Legislation referenced:
- DIFC Arbitration Law: Articles 10, 11, 41
- Rules of the DIFC Courts (RDC): Part 38, RDC 38.8, RDC 38.23, RDC 38.40
- Practice Direction No. 4 of 2017 (Interest on Judgments)