difc courts’ laws and procedures - reutersacceluscdn.thomsonreuters.com/accelus-pdf/21. session 9...

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


Clifford Chance

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))


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


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?


Clifford Chance

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?


Clifford Chance

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


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


Special situations – silent orders


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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Clifford Chance

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


Clifford Chance

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


Indemnity basis


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

DIFC Courts’ Laws and Procedures 14

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


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


Clifford Chance

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


Clifford Chance

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)


Costs of the detailed assessment

proceedings


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

Clifford Chance

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


Clifford Chance

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


Clifford Chance

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


Clifford Chance

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)


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)

Clifford Chance

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


Clifford Chance

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


Clifford Chance Clifford Chance

Questions?

27

Thank you

The information provided in this paper does not necessarily deal with every important topic or cover every aspect of the topics with which it deals. It is not designed

to provide legal or other professional advice. advice.

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