This order addresses the financial safeguards required to protect the Defendant, Reem Emirates Aluminium, against the risk of non-recovery of legal costs in a protracted construction dispute with Five Real Estate Development.
What specific financial exposure did Reem Emirates Aluminium seek to mitigate in its application against Five Real Estate Development in TCD 009/2020?
The dispute between Five Real Estate Development and Reem Emirates Aluminium concerns a complex construction project, which has generated significant litigation within the DIFC Courts’ Technology and Construction Division. The current application, filed by the Defendant on 30 November 2021, sought to secure the Defendant’s position regarding legal costs. Given the history of the proceedings, the Defendant argued that it was necessary for the Claimant to provide security for costs to ensure that, should the Defendant prevail, there would be a fund available to satisfy a costs order.
The application was grounded in the practical reality of the ongoing litigation, where the Defendant had already incurred substantial legal expenses. By seeking security, the Defendant aimed to mitigate the risk of the Claimant being unable to meet its financial obligations at the conclusion of the trial. The court’s intervention was required to balance the Claimant’s right to pursue its claim against the Defendant’s right to protection against irrecoverable costs. As stipulated in the order:
The Claimant shall pay into Court within 14 days the amount of AED 1,210,000 on account of security for costs, pursuant to Section III of Pt. 25 of the RDC.
This case is part of a broader series of procedural battles between these parties, including earlier disputes regarding FIDIC-based claims and strike-out applications. See FIVE REAL ESTATE DEVELOPMENT v REEM EMIRATES ALUMINIUM [2021] DIFC TCD 009 — Leave to file counterclaim (02 February 2021), FIVE REAL ESTATE DEVELOPMENT v REEM EMIRATES ALUMINIUM [2021] DIFC TCD 009 — Immediate judgment on FIDIC-based claims (04 May 2021), FIVE REAL ESTATE DEVELOPMENT v REEM EMIRATES ALUMINIUM [2021] DIFC TCD 009 — Dismissal of strike-out application regarding FIDIC determination (31 May 2021), FIVE REAL ESTATE DEVELOPMENT v REEM EMIRATES ALUMINIUM [2021] DIFC TCD 009 — Dismissal of appeal against strike out and amendment nullification (08 June 2021), and FIVE REAL ESTATE DEVELOPMENT v REEM EMIRATES ALUMINIUM [2021] DIFC TCD 009 — Default Costs Certificate (28 July 2021).
Which judge presided over the TCD 009/2020 security for costs hearing on 13 April 2022?
The application was heard by Justice Lord Angus Glennie in the Technology and Construction Division of the DIFC Court of First Instance. The hearing took place on 13 April 2022, following the submission of evidence by both parties, including the witness statement of Athanasios Karvelis on behalf of the Defendant and the Claimant’s responsive evidence filed on 28 December 2021. The formal order was subsequently issued by the Registrar on 14 April 2022.
What were the primary arguments advanced by Five Real Estate Development and Reem Emirates Aluminium regarding the security for costs application?
The Defendant, Reem Emirates Aluminium, argued that the court should exercise its discretion under the Rules of the DIFC Courts (RDC) to order security for costs, citing the necessity of protecting its financial position given the ongoing nature of the construction litigation. The Defendant’s counsel relied on the witness statement of Athanasios Karvelis to demonstrate the potential for significant costs to be incurred and the risk that the Claimant might not be in a position to satisfy a future costs order.
The Claimant, Five Real Estate Development, contested the application, providing evidence in answer to the Defendant’s submissions on 28 December 2021. While the specific legal arguments of the Claimant are not detailed in the final order, the court’s decision to grant the application indicates that the Claimant failed to persuade the court that such security was unnecessary or that it would cause undue hardship that outweighed the Defendant’s right to protection. The court ultimately found in favor of the Defendant, ordering both the security for costs and a payment on account for costs already incurred.
What was the jurisdictional and doctrinal question Justice Lord Angus Glennie had to resolve regarding the application of RDC Part 25?
The court was tasked with determining whether the circumstances of the case satisfied the threshold requirements for an order for security for costs under Section III of Part 25 of the RDC. The doctrinal issue centered on whether the Defendant had demonstrated a sufficient risk to its ability to recover costs to justify the court’s intervention. This required the judge to weigh the Claimant’s right to access justice against the Defendant’s entitlement to be protected from the financial burden of defending a claim where recovery of costs might be problematic.
Furthermore, the court had to determine the appropriate quantum for both the security for costs and the payment on account. This involved an assessment of the costs already incurred by the Defendant arising from previous orders made by Justice Sir Richard Field and Chief Justice Zaki Azmi. The court had to ensure that the payment on account—set at 50% of the costs the Defendant intended to claim—was proportionate and consistent with the principles of the RDC regarding cost management and assessment.
How did Justice Lord Angus Glennie apply the RDC framework to justify the order for security for costs?
Justice Lord Angus Glennie’s reasoning followed the standard procedural framework for security for costs applications within the DIFC Courts. By reviewing the witness statement of Athanasios Karvelis and the Claimant’s response, the court assessed the merits of the application against the requirements of Section III of Part 25 of the RDC. The judge concluded that the Defendant had established a valid basis for the order, necessitating the payment of a substantial sum into court.
The court also addressed the Defendant’s request for a payment on account of costs already incurred. This was based on the specific procedural history of the case, including previous orders from 2021. By ordering a payment of 50% of the anticipated costs, the court applied a conservative but protective approach to ensure the Defendant was not left out of pocket for costs already ordered in its favor. The court’s decision was finalized as follows:
The Claimant shall pay into Court within 14 days the amount of AED 1,210,000 on account of security for costs, pursuant to Section III of Pt. 25 of the RDC.
The court further reinforced this by ordering the Claimant to pay the costs of the application itself, assessed at AED 196,241.00, signaling that the application was both necessary and appropriately brought by the Defendant.
Which specific RDC rules and statutory provisions were central to the court’s decision in TCD 009/2020?
The court’s decision was primarily governed by Section III of Part 25 of the Rules of the DIFC Courts (RDC), which provides the procedural mechanism for security for costs. This section empowers the court to order a claimant to provide security for the defendant's costs if it is satisfied that such an order is just, having regard to all the circumstances of the case. The court also exercised its inherent jurisdiction to order payments on account of costs, ensuring that the Defendant could recover a portion of the costs awarded in previous interlocutory orders made by Justice Sir Richard Field and Chief Justice Zaki Azmi.
How did the court utilize previous orders in TCD 009/2020 to determine the quantum of the payment on account?
The court utilized the orders of Justice Sir Richard Field (dated 4 May 2021 and 22 August 2021) and Chief Justice Zaki Azmi (dated 29 July 2021) as the foundation for the payment on account. By identifying these specific orders, the court established that the Defendant had already been successful in previous procedural stages and was entitled to recover costs associated with those successes. The court determined that 50% of the costs the Defendant intended to claim during the detailed cost assessment procedure was a reasonable amount to be paid on account, thereby preventing the Defendant from having to wait until the final conclusion of the proceedings to receive any reimbursement for those specific costs.
What was the final disposition and the total monetary relief ordered by Justice Lord Angus Glennie?
The court granted the Defendant’s application in full. The order required the Claimant to pay AED 1,210,000 into court as security for costs within 14 days. Additionally, the Claimant was ordered to pay the Defendant AED 96,617.25 as a payment on account for 50% of the costs arising from the specified previous orders. Finally, the Claimant was ordered to pay the Defendant’s costs of the application itself, which were assessed at AED 196,241.00. All payments were mandated to be made within 14 days of the order date of 14 April 2022.
What are the practical implications for litigants in the DIFC Technology and Construction Division regarding security for costs applications?
This case serves as a reminder that the DIFC Courts will actively utilize RDC Part 25 to protect defendants from the financial risks associated with protracted construction litigation. Litigants should anticipate that where a defendant can demonstrate a clear history of costs orders in their favor, the court is likely to grant payments on account to ensure that the litigation process does not become a financial burden on the successful party. Furthermore, the court’s willingness to order significant sums as security for costs—in this instance, over AED 1.2 million—highlights the importance of maintaining adequate financial resources when pursuing claims in the TCD. Practitioners must be prepared to provide detailed evidence regarding their client's financial position and the potential costs of the proceedings to avoid or mitigate such orders.
Where can I read the full judgment in Five Real Estate Development v Reem Emirates Aluminium [2022] DIFC TCD 009?
The full order can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/technology-and-construction-division/tcd-009-2020-five-real-estate-development-llc-v-reem-emirates-aluminium-llc-13 or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/technology-and-construction-division/DIFC_TCD-009-2020_20220414.txt.
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | N/A |
Legislation referenced:
- Rules of the DIFC Courts (RDC), Section III of Part 25