May 26, 2025 court of first instance - Orders
Claim No. CFI 041/2024
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
BETWEEN
ANASTASIIA DENISOVA
Claimant
and
(1) ALEKSEI GALTCEV
(2) REALISTE HOLDING LTD
Defendants
ORDER WITH REASONS OF H.E. JUSTICE SAPNA JHANGIANI
UPON the Order with Reasons dated 15 May 2025 of H.E. Justice Sapna Jhangiani ordering the Defendants to pay the Claimant’s costs in relation to the preliminary issue on a standard basis, and adopting herein the same definitions as in that Order
AND UPON reviewing the Claimant’s costs schedule dated 13 May 2025 and the Claimant’s submissions dated 21 May 2025 and the Defendants’ submissions dated 22 May 2025
AND UPON reviewing the Rules of the DIFC Courts (“RDC”)
AND UPON the Court immediately assessing the Claimant’s costs relating to the preliminary issue
IT IS HEREBY ORDERED THAT:
1. The Claimant’s costs in relation to the preliminary issue are immediately assessed in the sum of USD 50,000. The Defendants shall pay that sum to the Claimant within 14 days.
2. Judgment interest runs on the sum of USD 50,000 at a rate of 9 percent per annum from 26 May 2025 until payment.
Issued by:
Delvin Sumo
Assistant Registrar
Date of issue: 26 May 2025
Time: 12pm
SCHEDULE OF REASONS
A. The Parties’ Submissions on Costs
1. The Claimant has submitted a schedule of costs in relation to the preliminary issue which sets out costs totalling USD 76,591.50, including disbursements of USD 1,200. The hourly rates set out in the schedule are USD 1,020 for the Partner on the case, and USD 651 for another lawyer who is described as a trainee or lawyer with “5yrs+” of legal experience. The latter is likely a typographical error meant to denote a trainee/lawyer of less than 5 years experience, as a trainee would not have over 5 years of legal experience.
2. The schedule includes a brief description of the work carried out as follows:
“(1) Default Judgment Application
(2) Document Production Application
(3) Application to Exclude Defendants’ Witness Evidence
(4)Claimant Second Application to exclude Defendants’ Witness Evidence”
3. The Claimant submits that her costs were properly and reasonably incurred in connection with the preliminary issue, and should be awarded in full. Her arguments may be summarised as follows:
(1) The Defendants’ procedural non-compliance necessitated multiple applications and corrective work that materially increased the Claimant’s legal costs.
(2) The unclear witness statements required extensive and disproportionate preparation, including for witnesses who could not be examined.
(3) The Claimant made good faith efforts to resolve the matter or limit its scope, all of which were disregarded by the Defendants.
(4) The facts and legal framework required careful and time-consuming case analysis, all of which were necessary.
(5) The costs claimed are commensurate with the value of the proceedings and reflect standard DIFC market rates.
4. The Defendants submit that, pursuant to RDC 38.7, the Court must ensure that awarded costs are reasonable, proportionate, and necessarily incurred in the context of the matter. Costs should align with the complexity, duration and the value of the dispute at issue. Their arguments may be summarised as follows:
(1) The preliminary issue was straightforward; it required a determination of whether USD 1,000 was paid by the Claimant. The Claimant’s cost claim is grossly disproportionate, amounting to over 76 times the disputed amount.
(2) The Claimant’s legal representatives charged hourly rates significantly exceeding typical DIFC market rates for matters of comparable simplicity.
(3) The Claimant’s first and second applications to exclude the Defendants’ witness evidence were dismissed by the Court as lacking merit, unnecessarily inflating costs.
(4) The cross-examination preparation by the Claimant was unwarranted and excessive, particularly given that the evidence of Mr Maksim Kuchin was struck from the record and had minimal relevance to the preliminary issue.
(5) The Defendants incurred unnecessary investigative expenses due to the Claimant’s repeatedly shifting assertions concerning the date on which she paid for the Claimed Shares.
5. By way of conclusion, the Defendants propose that the Court excludes all costs related to the Claimant’s failed procedural applications; significantly reduces the costs attributable to cross-examination preparation; and adjusts the Claimant’s hourly rates to align with reasonable market norms for straightforward disputes. The Defendants submit that a reduction of at least 50% of the Claimant’s total costs is both reasonable and justified.
B. The Court’s Decision
Applicable Principles
6. Pursuant to RDC 38.2, when assessing costs on a standard basis the Court must be satisfied, having regard to all the circumstances, that the costs were proportionately and reasonably incurred, and were proportionate and reasonable in amount. The receiving party carries the burden of proof in satisfying the Court of these factors.
7. The Court must also have regard to the following factors set out at RDC 38.23:
“(1) the conduct of all the parties, including in particular:
(a) conduct before, as well as during, the proceedings; and
(b) the efforts made, if any, before and during the proceedings in order to try to resolve the dispute;
(2) the amount or value of any money or property involved;
(3) the importance of the matter to all the parties;
(4) the particular complexity of the matter or the difficulty or novelty of the questions raised;
(5) the skill, effort, specialised knowledge and responsibility involved;
(6) the time spent on the case; and
(7) the place where and the circumstances in which work or any part of it was done.”
8. RDC 38.24 provides that in applying the test of proportionality, the Court will have regard to RDC 1.6(3), which forms part of this Court’s overriding objective at RDC 1. Further, that the relationship between the total costs incurred and the financial value of the claim may not be a reliable guide; 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.
9. RDC 38.25 and 38.26 are also relevant:
“RDC 38.25: In any proceedings there will be costs which will inevitably be incurred and which are necessary for the successful conduct of the case. Legal representatives are not required to conduct litigation at rates which are uneconomic. Thus in a modest claim the proportion of costs is likely to be higher than in a large claim, and may even equal or possibly exceed the amount in dispute.
RDC 38.26: Where a trial takes place, the time taken by the Court in dealing with a particular issue may not be an accurate guide to the amount of time properly spent by the legal or other representatives in preparation for the trial of that issue.”
10. Under Article 9(C) of DIFC Law No. 2 of 2025, judgment interest runs on judgment debts. The rate of interest is simple interest at 9% per annum pursuant to Practice Direction 4 of 2017. Under RDC 36.31, interest shall begin to run from the date that judgment is given.
Analysis
11. Practice Direction No. 1 of 2023 sets out the average hourly rates of law firms in Dubai, by level of experience, and provides guidance as to what rates are likely to be acceptable to the Courts when assessing costs. The hourly rates of the Claimant’s instructed lawyers do not exceed the benchmark rates set out in that Practice Direction (even assuming the typographical error referred to at paragraph 1 above), and I do not accept the Defendants’ argument that I should apply a reduction to the hourly rates of the Claimant’s lawyers.
12. In relation to the Claimant’s first and second applications to exclude the Defendants’ witness evidence, I find that the first application was warranted by the Defendants’ failure to comply with the deadline for the filing of witness evidence, even though the Court exercised its discretion to allow the evidence, and ultimately dismissed the application. The bulk of the second application was the same as the first application. Given that the first application was dismissed, I find that the second application was unnecessary.
13. I do not consider that the Claimant’s cross-examination preparation was unwarranted and excessive, as argued by the Defendants. I accept the Claimant’s argument that the Defendants’ witness evidence was in certain parts unclear and fragmented, warranting additional work.
14. I do not consider that the Defendants’ costs of investigation relating to the preliminary issue are relevant to my determination of the Claimant’s costs of the preliminary issue.
15. As to proportionality, I do not accept the Defendants’ argument that the Claimant’s costs exceed the sum in dispute by over 76 times. Whilst the preliminary issue related to whether the Claimant paid the sum of USD 1,000 to the First Defendant for the Claimed Shares, it does not follow that the Claimed Shares are only worth this nominal amount, or that the amount in dispute between the parties is limited to USD 1,000. My impression is that the consequences of this case are important for all the parties.
16. In addition to the arguments raised by the Defendants, I note that the Claimant’s costs schedule includes costs for the Claimant’s application for judgment in default. That application by the Claimant was issued before my Case Management Order dated 29 January 2025 ordering that the Claimant’s Claim would proceed by way of the determination of a preliminary issue. The costs of that application are therefore not recoverable as part of the Claimant’s costs relating to the preliminary issue.
17. Taking into account all the matters set out above, and bearing in mind that the Claimant’s costs schedule does not set out the Claimant’s costs relating to each application or discrete task, I apply a broadbrush approach in assessing the Claimant’s costs, and in applying an appropriate discount to the full costs claimed such that the costs recovered are both reasonable and proportionate in accordance with RDC 38.2. I immediately assess the Claimant’s costs at the sum of USD 50,000.
18. Pursuant to RDC 36.31, simple interest at 9% per annum shall run on the sum awarded from 26 May 2025.
