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DIFC Courts’ Laws and Procedures
Session No. 9 – Costs
10 June 2013
Abeer G. Jarrar, SJD
Clifford Chance LLP
Dubai
Clifford Chance
1. Introduction
2. Power of the Court
3. Who awards costs?
4. What are legal costs in litigation?
5. Who is paying the costs?
6. Factors taken into account
7. Costs orders
8. Special situations – silent orders
9. Costs assessment
10. Costs-only proceedings
11. Fixed costs
12. Recovery from the party liable (paying party)
13. Liability of non-parties
14. Wasted costs orders
15. Other issues
2 DIFC Courts’ Laws and Procedures
Contents
Legal costs in litigation are often significant and
can be the cause of real concern
It is important to carry out a cost-benefit
analysis in relation to your client’s case. This
should compare the legal costs that are likely
to be incurred, the prospects of recovering
those costs from the other party and the likely
outcome of the case proceedings
100% recovery of costs in litigation is very rare
A winning party before the DIFC Courts could
potentially recover 60% - 75% of their legal
costs
Introduction
3 DIFC Courts’ Laws and Procedures
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The DIFC Courts has the power to award costs
orders and give directions as to the conduct of any
costs assessment proceedings in accordance with
the:
DIFC Court Law 2004 (DIFC Law No. 10 of 2004, mainly
Article 40 (recovery of monies), Article 45 (costs) and Article
46 (security of costs); and
Rules of the DIFC Courts (“RDC”) (For the purposes of this
presentation, RDC Part 38 (general rules about costs), RDC
Part 39 (fixed costs) and RDC Part 40 (procedure for detailed
assessment of costs))
4 DIFC Courts’ Laws and Procedures
Power of the Court
Clifford Chance
RDC 40.3 is an example of a Rule that provides “otherwise”. Under RDC 40.3 the Registrar or a
judicial officer of the Court appointed by the Chief Justice under the DIFC Court Law has all the powers
of the Court when making a detailed assessment i.e. decide the amount of costs and make a costs
order except the:
(a) power to make a wasted costs order; and
(b) power to make an order in relation to misconduct and sanctions for delay in commencing detailed
assessment process
Who awards costs?
Pursuant to Article 45(6) of the DIFC Courts
Law provides that:
Costs may be awarded as appropriate by a
Judge or Registrar in accordance with the
Rules of Court
5 DIFC Courts’ Laws and Procedures
RDC 3.1 provides that:
Where these Rules provide for the Court to
perform any act then, except where an
enactment, Rule or Practice Direction provides
otherwise, that act may be performed by any
Judge or the Registrar
Generally, when working out how much
it will cost to deal with a dispute, you
need to take into consideration:
Courts’ fees and service charges (annex 4 –
PD 3/2012 – DIFC Courts’ Fees)
legal fees for engaging a legal representative.
These are generally paid by reference to the
number of hours worked
disbursements including things like costs of
expert witnesses, photocopying, etc
What are legal costs in
litigation?
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This means that the Court has the power to decide:
whether costs are payable by one party to another
the amount of those costs when they are to be paid
Unless costs are defined by a specific Rule or Practice Direction, parties have agreed costs or no costs are payable, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party
An order of costs, however, is always in the discretion of the Court (Article 45(5) of the DIFC Court Law). The Court can (and regularly does) make a different order in its discretion save in very limited circumstances
Who is paying the costs?
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Costs orders are not a penalty per se. The Court, however, has powers
to reduce the successful party’s costs if – amongst other factors –
their conduct has been unreasonable
In deciding what costs order (if any) to make, the Court must have regard to “all the
circumstance” of the case, including the conduct of the parties. Relevant aspects of the
conduct of the parties that the Court may take into account include:
Factors taken into account
8 DIFC Courts’ Laws and Procedures
conduct before, as well as during, the
proceedings
whether it was reasonable for a
party to raise, pursue or contest a particular
allegation or issue
the manner in which a party
has pursued or defended his
case or a particular
allegation or issue
whether a successful
party, in whole or in part, has
exaggerated his claim
attempts to settle
Costs orders which the Court may make
include an order that a party must pay:
a proportion of another party’s cost;
a stated amount in respect of another party’s
costs;
costs from or until a certain date only;
costs incurred before proceedings have begun;
costs relating to particular steps taken in the
proceedings; and
interest on cost from or until a certain date,
including a date before judgment (such as the
date on which the event that gave rise to the
entitlement to costs occurred)
Costs orders
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Special situations – silent orders
10 DIFC Courts’ Laws and Procedures
In the situation where the Court makes an order which does not
mention costs:
the general rule is that no party is entitled to costs in relation to that order
where the Court makes: (a) an order granting permission to appeal; (b) an order
granting permission to apply for judicial review; or (c) any other order or direction
sought by a party on an application without notice; and the Court’s order does
not mention costs, it will be considered to include an order for applicant's "costs
in the case" i.e. the party in whose favour the Court makes an order for costs at
the end of the proceedings is entitled to his costs of the part of the proceedings
to which the order relates (RDC 38.12)
RD
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The costs that are subject to assessment by the Court include (but not limited to):
costs of proceedings before an arbitrator or umpire;
costs of proceedings before a tribunal or other statutory body; and
costs which are payable by one party to another party under the terms of a contract (where the Court
makes an order for an assessment of those costs)
Costs assessment
Basis for assessment
There are two bases for assessment: standard basis and indemnity basis
in both cases, the Court will not allow costs which have been unreasonably incurred or which are in
reasonable in amount.
in the case where the Court makes an order about costs without indicating the basis of assessment
or makes the assessment on a basis other than the standard basis or indemnity basis, the costs will
be assessed on the standard basis
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Main issues:
The assessment of a party’s legal costs is made on the basis that the party may recover its
reasonable and proportionate costs
Any doubt as to whether costs were reasonably incurred or reasonable and proportionate in amount is
resolved in favour of the paying party
When considering whether costs are proportionate, RDC 38.24 provides that the Court must have
regard to:
the amount or value of any money or property involved, importance of the matter to all the parties;
particular complexity of the matter or the difficulty or novelty of questions raised;
skill, effort, specialised knowledge and responsibility involved;
time spent on the case; and
place where and the circumstances in which work or any part of it was done
In applying the test of proportionality
the relationship between the total of the costs incurred and the financial value of the claim may not be
a reliable guide; and
a fixed percentage cannot be applied in all cases to the value of the claim in order to ascertain
whether or not the costs are proportionate
Standard basis
12 DIFC Courts’ Laws and Procedures
Indemnity basis
13 DIFC Courts’ Laws and Procedures
Main issues:
The assessment of a party’s legal costs is made on the basis that the party may
recover its reasonable costs that were reasonably incurred and which are
reasonable in their amount.
Any doubt as to whether costs were reasonably incurred or reasonable in
amount is resolved in favour of the receiving party.
Proportionality?
There is no specific requirement under the Rules that costs recovered on such a
basis be proportionate to the amount or issues in dispute
However, by reason of RDC 1.5(3) (the overriding objective), the principle of
proportionality is expected to exert a degree of influence even over assessment
of costs upon the indemnity basis
Procedure for assessing
costs
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Generally, where the Court orders a party
to pay costs to another party (other than
fixed costs) it may:
make an immediate assessment of the costs; or
order detailed assessment of the costs
Immediate assessment
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The general rule is that the Court should make an immediate
assessment of the costs (unless there is good reason not to do):
at the conclusion of any hearing, which has lasted no more than one day, in
which case the order will deal with the costs of the application or matter to which
the hearing related. If this hearing disposes of the claim, the order may deal with
the costs of the whole claim
in hearings in the Court of Appeal to which Rule 44.166 applies
Statement of costs
each party who intends to claim costs must submit a signed written statement of
the costs he intends to claim in the form of a schedule (annex 5 – Form 38/1)
the statement of costs should be filed at Court and copies of it should be served
on any party against whom an order of payment of those costs is sought not less
than 24 hours before the date fixed for the hearing
The failure by a party (without reasonable excuse) to comply with the aforesaid
will be taken into consideration by the Court in deciding what order to make
about the costs
RD
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General rule is that the costs of any proceedings or any part of the
proceedings are not to be assessed by the detailed procedure until the
conclusion of the proceedings (unless the Court order them to be
assessed immediately)
Detailed assessment is not stayed pending an appeal unless the Court
so orders
RDC Part 40
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Commencement
•The receiving party serves on the paying party a notice of commencement (Form P40/1); and a copy of the bill of costs. The receiving party must also serve a copy of the notice of commencement and the bill on any other relevant person (RDC 40.6 to 40.9)
•The detailed assessment proceedings must be commenced within 3 months after the source of right to detailed assessment proceedings has arisen (see table under RDC 40.10)
•The paying party may apply for an order requiring the receiving party to commence detailed assessment within such time as the Court specifies
•Where the receiving party fails to commence detailed assessment proceedings within the period specified above or by any Practice Direction, the Court may disallow all or part of the costs to which the receiving party would otherwise be entitled to receive
•If the paying party has not made an application or the receiving party commenced the proceeding later than the period specified, the Court may disallow all or part of the interest otherwise payable to the receiving party
Points of dispute
•The paying party (and any relevant person) may dispute any item in the bill of costs by serving points of disputes on the receiving party (and every other party to the proceedings) within 21 days after the date of service of the notice of commencement
•If the paying party serves point of dispute after 21 days, he may not be heard further in the detailed assessment proceeding unless the Court gives permission
•If the paying party does not serve points of dispute on the receiving party within 21 days, the receiving party may file a request for a default costs certificate
•A default cost certificate will include an order to pay the costs to which it relates
•If a paying party (and any relevant person) serves points of disputes after 21 days but before the issue of a default costs certificate, the Court may not issue the default costs certificate
Main steps in detailed assessment proceedings
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Detailed assessment
hearing
•Where points of dispute are served, the receiving party may serve a reply on the other party within 21 days after service on him of the points of dispute, but he must file a request for detailed assessment hearing within 3 months of the expiry of the period for commencing detailed assessment hearing or by any Practice Direction.
•If the receiving party fails to file the request for a detailed assessment hearing, the Court may disallow all or part of the costs to which the receiving party would otherwise be entitled to receive.
•If the receiving party files the request for a detailed assessment hearing later than the period specified by the Rules or the Court, the Court may disallow all or part of the interest otherwise payable to the receiving party.
•One point worth noting, only items specified in the points of dispute may be raised at the detailed assessment hearing unless the Court gives permission.
•The Court issues a final cost certificate and serves it on the parties after the end of the detailed assessment proceedings and following the filing of a completed bill as directed by the Court to show the amount due following the detailed assessment of the costs.
•The period for filing the completed bill is 14 days after the end of the detailed assessment hearing.
Appeal
• An appeal against a decision of an authorised Court officer in detailed assessment proceedings is made to a Judge of the Court of First Instance
Main steps in detailed assessment proceedings (continued)
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Costs of the detailed assessment
proceedings
19 DIFC Courts’ Laws and Procedures
The receiving party is entitled to his costs of the detailed assessment
proceedings unless the Court decides otherwise. In deciding whether to make
some other order, the Court must have regard to “all relevant circumstances”
including inter alia the conduct of the parties
If either party (whether the paying party or the receiving party) makes a written
offer to settle the disputed costs of the proceedings that gave rise to the detailed
assessment proceedings and the offer is expressed to exclude the costs of the
detailed assessment proceedings, the Court will take the offer to settle into
consideration in deciding who should pay the costs of the detailed assessment
proceedings
Where a receiving party obtains a default costs certificate (in case there is no
assessment hearing due to failure to serve points of dispute), the costs payable
to him for the "commencement" of detailed assessment proceedings is US$160
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Costs-only proceedings are in essence a way of obtaining an order for detailed assessment before
court proceedings are commenced (a detailed assessment procedure cannot be commenced without
an order for costs following the conclusion of case proceedings)
Costs-only proceedings may be followed when the parties to a dispute have reached an agreement in
writing on all issues, including which party is to pay costs, but are unable to agree the amount of those
costs (i.e. pre-action settlement).
If a dispute has been settled for a specific amount, but there has been no mention of the payment of
costs, the costs-only procedure cannot be used.
Costs-only proceedings proposes two simple steps:
any party to the agreement may start proceedings by issuing a claim form under RDC Part 8
(alternative procedures for claims) seeking an order for costs; and
detailed assessment of those costs which is conducted in the usual way.
The Court [Registrar] must dismiss a costs claim in costs-only proceedings if it is opposed. The claim
is treated as opposed if the defendant files an acknowledgement of service stating that he intends to
contest the making of an order for costs or to seek a different remedy.
If the time for filing an acknowledgment of service expires (14 days under RDC Part 11), the claimant
may by letter request the court to make an order in the terms of the claim.
Costs-only proceedings
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Fixed costs are specific amounts that are recoverable by one party from another
in certain circumstances set out in RDC Part 39 unless the Court orders
otherwise
They are essentially for small claims (USD 50 – USD 50,000) and
straightforward uncontested cases or enforcement proceedings where there are
no unusual factors and no real dispute
RDC Part 39 contains the following tables detailing fixed costs amounts:
Table 1: Commencement of a claim for the recovery of money or goods
Table 2: Entry of judgment in a claim for the recovery of money claims or goods
Table 3: Miscellaneous fixed costs for exceptional forms of service. This applies when
personal service has been effected by the claimant’s solicitor, where defendants have
been served by alternative methods and where defendants have been served outside the
jurisdiction
Table 4: Enforcement costs
Where more than one of these applies, the costs are incremental
A party awarded fixed costs is also entitled to recover the relevant court fee e.g.
application fee
When fixed costs are recoverable, they should be inserted, as appropriate, in
the claim form, application form or request for the enforcement process
Fixed costs
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Time for complying with an order for costs
RDC 38.41 provides that a party must comply with an order for the payment of costs within 14 days
of:
the date of the judgment or order if it states the amount of those costs;
if the amount of those costs (or part of them) is decided later in accordance with Part 40, the date of
the certificate which states the amount; or
in either case, such later date as the Court may specify
It is worth nothing that even if the party is successful in the litigation and obtain a costs order from the
Court, there is no guarantee that the paying party will be able, or willing, to pay the costs. In this case,
the costs order can be treated like any other monetary judgment and enforced
In certain cases, however, where the Court has ordered a party to pay costs in proceedings before
trial, it may order an amount to be paid on account before the costs are assessed at the end of the
proceedings (RDC 38.13)
Recovery from the paying party
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A party during the Court’s proceedings may consider applying for an order for:
security for costs
Section III of RDC Part 25 deals with the application for security for costs. Security for costs is particularly
important for a defendant in a case. In principle, the Court may make an order for security for costs if (a) it is
satisfied, having regard to all circumstances of the case, that it is just to make such an order; and (b) one or more
of the conditions in RDC 25.102 applies or an enactment permits the Court to require security for costs
conditional costs orders
The Court has general case management powers (RDC Part 4) to make an order subject to conditions, including a
condition to pay a sum of money into Court and specifying the consequences of any failure to comply with the
order or a condition. That said, an order of costs of an interim liquidated nature during proceedings could be
difficult to obtain as costs are commonly dealt with at the end of proceedings subject to defined costs incurred for
specified applications
set-off of costs
The application of set-off is entirely discretionary and falls within the Court's discretionary powers as to the award
of costs. RDC 38.14 sets out the circumstances to be taken into account when exercising the Court’s discretion as
to the application of set off of costs and state that:
Where a party entitled to costs is also liable to pay costs the Court may assess the costs which that party is liable
to pay and either:
set off the amount assessed against the amount the party is entitled to be paid and direct him to pay any
balance; or
delay the issue of a certificate for the costs to which the party is entitled until he has paid the amount which he is
liable to pay
Recovery from the paying party (continued)
23 DIFC Courts’ Laws and Procedures
Liability of non-parties
DIFC Courts’ Laws and Procedures 24
Costs orders can be made against non-parties
to the proceedings
This is relevant to both parties of the
proceedings. For instance, if the receiving party
finds that the paying party is unable to pay,
there may be circumstances justifying an order
of costs against a non-party
Where the Court is considering whether to
exercise its discretionary power to make a
costs order in favour of or against a person
who is not a party to proceedings;
i. that person must be added as a party to
the proceedings for the purposes of costs
only; and
ii. he must be given a reasonable opportunity
to attend a hearing at which the Court will
consider the matter further (RDC 38.68)
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Wasted costs order
Wasted costs orders are given as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such a representative; or which, in light of such act or omission occurring after they were incurred the court considers it unreasonable to expect that party to pay. This includes, for instance, incurring wasted costs as a result of the re-amended particulars of claim, re-interviewing witnesses or even for unnecessary production of documents
The Court has the power to disallow or order the legal or other representative concerned to pay those costs in whole or in part
When the Court makes a wasted costs order it must give the legal representative an opportunity to explain why the Court should not make such order
The Rules provide that the Court must specify in the wasted costs order the amount to be disallowed (refused) or paid, or alternatively direct the Registrar to decide such amounts
25 DIFC Courts’ Laws and Procedures
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Costs order in favour of a party represented pro bono
Group litigation orders
Costs where money is payable by or to a child or patient
Self representation
Interest
Other issues
26 DIFC Courts’ Laws and Procedures
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