Following the retirement of the trial judge, this order resolves the final outstanding issue of costs in a long-running construction dispute, determining that where both parties achieve partial success, the court will depart from the general rule that costs follow the event.
What was the nature of the construction dispute between Panther Development Real Estate and Modern Executive Systems Contracting in TCD 003/2019?
The litigation concerned a construction contract dispute between Panther Development Real Estate LLC (the Claimant) and Modern Executive Systems Contracting LLC (the Defendant). The core of the dispute involved the termination of the contract and the subsequent financial reconciliation between the parties. The Claimant sought damages for the additional costs incurred to complete the project following the termination, while the Defendant sought payment for the value of work performed up to the date of termination.
The complexity of the case was compounded by the need for expert evidence to assess the final account. As noted in the court's reasoning:
It is clear from the reasons that the two main issues in the case were the issue of whether Panther was entitled to terminate the Contract when it did, and responsibility for the delay in the performance of the works and the consequences of that allocation of responsibility.
The financial stakes were significant, culminating in a final balance of account where Panther was found to owe MESC AED 3,431,507.36. For further context on the procedural history, see PANTHER REAL ESTATE DEVELOPMENT v MODERN EXECUTIVE SYSTEMS CONTRACTING [2020] DIFC TCD 003 — Transfer to Technology and Construction Division (27 January 2020).
How did Justice Wayne Martin assume jurisdiction over the costs determination in TCD 003/2019 following the retirement of Justice Sir Richard Field?
Justice Wayne Martin presided over the costs determination in the Technology and Construction Division of the DIFC Courts on 27 November 2023. The matter was referred to him following the retirement of the original trial judge, Justice Sir Richard Field, who had issued the primary judgment on 26 September 2022. The referral was formalized through a Consent Order dated 6 September 2023, which directed the parties to exchange submissions regarding the costs of the proceedings at first instance, allowing Justice Martin to resolve the impasse after the parties failed to reach an agreement on the allocation of legal expenses.
What were the respective arguments of Panther Development Real Estate and Modern Executive Systems Contracting regarding the allocation of costs?
Modern Executive Systems Contracting (MESC) argued that the court should adhere to the general rule that costs follow the event, asserting that it was the successful party because it was ultimately awarded a net sum of AED 3,431,507.36. MESC further criticized the Claimant’s procedural conduct, noting that:
MESC contends that “it is evident that the Claimant is not serious about pursuing a claim for costs”.
Conversely, Panther Development Real Estate argued that the court should exercise its discretion to account for the overall conduct of the parties and the fact that it had succeeded on the majority of its claims, despite the final monetary balance favoring the Defendant. The court noted the ambiguity in Panther's position:
The precise order sought by Panther is unclear from its submissions, which conclude with the proposition that the Court should exercise its discretion taking into account the conduct of the parties and the fact that the Claimant succeeded on the majority of its claims. The effect of that general proposition is not stated.
What was the doctrinal issue Justice Wayne Martin had to resolve regarding the application of RDC 38.7 and 38.8 in mixed-outcome construction litigation?
The court had to determine whether the general rule that the "loser pays" (RDC 38.7) should apply, or whether the court should exercise its discretion under RDC 38.8 to make a different order due to the mixed nature of the outcome. The doctrinal challenge lay in balancing the fact that both parties had achieved partial success on their respective claims and counterclaims. Justice Martin had to decide if the "success" of the Defendant in obtaining a net payment was sufficient to trigger the general rule, or if the court should look behind the final figure to the underlying successes and failures of each party's arguments regarding termination and delay.
How did Justice Wayne Martin apply the "costs lie where they fall" doctrine to the final order in TCD 003/2019?
Justice Martin conducted a granular review of the trial judge's findings, noting that the litigation involved complex, competing claims regarding contract termination and delay. He concluded that neither party could be characterized as the clear victor. His reasoning focused on the proportionality of the outcomes:
Analysed in this way, it is clear that each party has had successes and failures in roughly equal measure.
Consequently, he determined that the most equitable approach was to depart from the general rule. He held that because the parties were effectively in a position of mutual partial success, the costs incurred by each party should remain their own responsibility. This approach ensured that the court did not unfairly penalize a party that had successfully defended significant portions of the opposing party's claims, even if they were ultimately liable for a net balance.
Which specific statutes and RDC rules did the court rely upon to determine the costs order?
The court primarily relied upon the Rules of the DIFC Courts (RDC), specifically:
* RDC 38.7: The general rule that the court will usually make an order for costs against the unsuccessful party.
* RDC 38.8: The provision granting the court discretion to make a different order, taking into account the conduct of the parties and the extent to which each party succeeded.
The court also referenced the Consent Order dated 6 September 2023, which established the procedural framework for the costs submissions, and the amended order of 17 July 2023, which recorded the final agreed balance of AED 3,431,507.36.
How did the court utilize the previous orders and expert witness reports in its final costs determination?
The court utilized the trial judge's previous directions to distinguish between general costs and specific expert costs. While the court ordered that general costs lie where they fall, it maintained a specific carve-out for expert witness costs. As noted in the judgment:
That agreement was reflected in an amended order made by the trial Judge on 17 July 2023 which records the parties’ agreement that the amount of AED 3,431,507.36 was owed by Panther to MESC.
The court preserved the trial judge's earlier order requiring MESC to pay the costs of Mr. Allan’s reports on delay, recognizing that this specific expenditure was distinct from the broader, mixed-outcome litigation costs. This ensured that the specific success of the Claimant regarding the expert evidence was preserved despite the overall "no order as to costs" ruling.
What was the final disposition and the specific orders made by Justice Wayne Martin regarding the costs of the proceedings?
The court ordered that there be no order as to the costs of the proceedings at first instance, meaning each party must bear its own legal fees. The only exception to this was the previously ordered costs regarding Mr. Allan’s expert reports on delay, which the Defendant remained liable to pay. The court rejected the Defendant's request for interest on costs, as no costs were awarded to the Defendant. The court also noted the procedural history regarding the exchange of submissions:
In relation to the costs of the proceedings at first instance, directions for the exchange of submissions with respect to those costs were made in the Consent Order.
What are the wider implications of this ruling for DIFC construction practitioners?
This case reinforces the DIFC Court’s willingness to depart from the "costs follow the event" rule in complex construction disputes where the final judgment reflects a "split" outcome. Practitioners must anticipate that in cases involving multiple claims and counterclaims—particularly those involving delay and termination—the court will perform a qualitative assessment of success rather than a purely quantitative one based on the final monetary award. Litigants should be prepared to provide detailed breakdowns of their successes and failures to assist the court in exercising its discretion under RDC 38.8, as the court is increasingly likely to order that costs "lie where they fall" when both parties have achieved partial success.
Where can I read the full judgment in Panther Development Real Estate v Modern Executive Systems Contracting [2023] DIFC TCD 003?
The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/technology-and-construction-division/tcd-0032019-panther-development-real-estate-llc-v-modern-executive-systems-contracting-llc or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/technology-and-construction-division/DIFC_TCD-003-2019_20231127.txt.
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| Panther Development Real Estate v Modern Executive Systems Contracting | [2022] DIFC TCD 003 | Primary judgment on merits |
Legislation referenced:
- Rules of the DIFC Courts (RDC) 38.7
- Rules of the DIFC Courts (RDC) 38.8