Claim No. CFI 073/2024

IN THE COURTS OF THE DUBAI INTERNATIONAL FINANCIAL CENTRE

IN THE COURT OF FIRST INSTANCE

BETWEEN

LXT REAL ESTATE BROKER L.L.C.

Claimant/Respondent

and

SIR REAL ESTATE L.L.C.

Defendant/Applicant

ORDER WITH REASONS OF H.E. CHIEF JUSTICE WAYNE MARTIN

UPON the Order with Reasons of H.E. Deputy Chief Justice Ali Al Madhani dated 19 March 2025 as amended on 26 March 2025 (the “Order”)

AND UPON the Order with Reasons of H.E. Deputy Chief Justice Ali Al Madhani dated 2 July 2025 rejecting the Defendant’s Appeal Notice dated 16 April 2025 seeking permission to appeal the Order

AND UPON the Defendant’s Renewed Application for Permission to Appeal dated 22 July 2025 (the “Renewed Application”)

AND UPON the Claimant’s submissions in opposition dated 12 August 2025

IT IS HEREBY ORDERED THAT:

1. The Renewed Application is allowed in part.

2. Permission to appeal is granted in respect of ground 1.

3. Permission to appeal is refused in respect of grounds 2 and 3.

4. The costs of the Renewed Application are reserved to the Court hearing the appeal.

Issued by:
Delvin Sumo
Assistant Registrar
Date of Issue: 25 August 2025
At: 2pm

Summary

1. The Defendant, SIR Real Estate L.L.C. (“SIR”) has made a Renewed Application to the Court of Appeal (the “Renewed Application”) for permission to appeal from the decision of the Judge at first instance (the “Judge”) in orders made and issued on 19 March 2025 as amended by orders issued on 26 March 2025, the Judge having refused an application by SIR for permission to appeal from those orders. Although SIR was successful in its application for security for the costs of the proceedings, it contends that the Judge erred by assessing the amount of security by reference to SIR’s likely costs up to a particular point in the proceedings – namely SIR’s application to strike out the claim - in terms which prevented SIR from applying for further security for the costs of the proceedings if its application to strike out the claim failed.

2. For the reasons which follow, SIR has established that it has a real prospect of success in relation to some but not all of the proposed grounds of appeal and permission to appeal will be granted in respect of those grounds.

The decision at first instance

3. As the issues raised by the Renewed Application are essentially procedural in nature, it is unnecessary to refer to the nature or particulars of the claim against SIR, and sufficient to go directly to the decision at first instance.

The orders of 19 March 2025

4. In his reasons for the order which he made, the Judge observed that SIR had brought an application for the provision of security for costs by the Claimant, LXT Real Estate Broker L.L.C. (“LXT”) in the amount of USD 1,750,000, on the ground that LXT was a company and there is reason to believe that it will be unable to pay SIR’s costs if ordered to do so. The Judge referred to the relevant provisions of the Rules of the Dubai International Financial Centre Courts (“RDC”) relating to the making of orders for security for costs, including the provision that one of the conditions upon which such an order might be made is that specified by RDC 25.102(2), to the effect that the Claimant is a company and there is reason to believe that it will be unable to pay the Defendant’s costs if ordered to do so.

5. After identifying the issues which arose from the relevant provisions of the Rules, the Judge summarised the contentions advanced by the parties at some length.¹ It is clear from the terms in which that portion of the reasons are expressed that they are nothing more than a summary of the arguments presented and do not reflect the Judge’s views in relation to those arguments.

6. Those views are to be found in the portion of the reasons which follow, commencing at [28] in which the Judge expressed his conclusion that SIR had established the condition specified in RDC 25.102(2) to the effect that there was reason to believe that LXT would be unable to pay SIR’s costs if ordered to do so.

7. As that conclusion is not contested, it is unnecessary to refer to the Judge’s reasons for arriving at that conclusion, other than to mention that they include reference to issues which arose in relation to an agreement for the provision of litigation funding to LXT by a third party (the “Funder”).

8. The Judge then addressed issues relating to the amount of the security which should be provided, again by setting out the competing contentions of the parties. In that context, the Judge noted that SIR sought an order in respect of an amount which was said to represent 67% of the estimated costs of defending the proceedings up to and including trial. The Judge also noted a submission by LXT to the effect that an order that it pay security for the entirety of the proceedings would prejudice its interests of fairly proceeding with the claim because the amount of security sought by SIR exceeded the amount of cover for adverse costs orders provided by the Funder, which was capped at USD 1m.

9. The Judge also noted a submission by LXT to the effect that SIR’s application was contradictory, because it sought security to cover all costs to be incurred up to and including trial, while at the same time contending that the claim was likely to be struck out at a relatively early stage in the proceedings.²

10. In this context the Judge observed:

11. The following propositions can be distilled from this passage in the Judge’s reasons:

12. The Judge then addressed the issues relating to the quantification of the amount of security that would be ordered, reiterating that security would only be ordered in respect of SIR’s costs up to and including the application to strike out the claim.⁴

13. In this context the Judge observed:

“It is also important to note that the fact that the Claimant does have a Funder, irrespective of whether the Funder itself is a reliable source, does automatically entitle it to a reduced Security figure.⁵”

14. The Judge then summarised the competing contentions of the parties with respect to the quantum of the security which should be ordered, followed by his reasoning, which was as follows:

15. In the portion of his reasons entitled “Conclusion” the Judge:

The orders made

16. The Judge made the following orders:

17. The orders made were inconsistent with the reasons given by the Judge in the following respects:

18. The day after the Judge’s orders with reasons were published, LXT sent an email to the Court and a copy to SIR, requesting clarification of the inconsistencies between the reasons and the orders identified above. SIR did not respond to that email.

The amended orders

19. On 26 March 2025, the Judge published amended orders with reasons, although no changes were made to the reasons appended to the amended orders. In the amended orders, order 1 was amended by deleting the words “case management conference” and inserting “strike out application”, order 2 was deleted entirely and order 5 was replaced with an order requiring the parties to serve submissions with respect to costs within seven days of the date of issue of the amended order.

20. The effect of the amendments to the orders was to bring them into line with the reasons published by the Judge by:

The initial application for permission to appeal

21. As a renewed application for permission to appeal made to the Court of Appeal requires that Court to review, de novo, the question of whether permission should be granted, reasons given by a Judge at first instance for refusing permission to appeal will be of limited or perhaps no significance, as the appeal lies from the reasons given by the Judge at first instance when making the decision, rather than from the reasons given when considering the initial application for permission to appeal.

22. However, in some circumstances, the reasons given by the Judge at first instance when rejecting an application for permission to appeal shed some light on portions of the reasons for decision which may be ambiguous or unclear. This is such a case.

23. With respect to the Judge, the reasons given at first instance in relation to the significance of the outcome of the application to strike out the claim are not entirely clear. In that respect, in his reasons for rejecting the application for permission to appeal, the Judge observed:

24. In relation to the significance of the existence of a third party funder, the Judge stated that the amount of the security:

“Was calculated with the consideration that the claimant does have a Funder, thus affording them a lower security obligation⁷.”

25. The Judge also confirmed that the amended orders were made pursuant to the powers conferred upon the Court by RDC 36.41 and RDC 36.45, which relevantly provide:

26. The Judge asserted that there was no substantive change and that the orders were amended to reflect the essence of the reasons correcting an “accidental slip” in order to “make the meaning and intention of the Court clear”.⁸

Permission to appeal – legal principles

27. RDC 44.117 provides:

28. RDC 44.5 requires that an appellant obtain permission to appeal to the Court of Appeal except where the appeal is against a committal order.

29. RDC 44.19 provides:

30. RDC 44.19 provides that permission to appeal may only be given where the appeal would have a real prospect of success or there is some other compelling reason why the appeal should be heard.

31. In the context of an assessment of the prospects of success “real” means realistic rather than fanciful and involves the same test as is applied in applications for immediate judgment.⁹

32. A real prospect of success does not mean a probability of success, but more than mere arguability.¹⁰

33. “Some other compelling reason why the appeal should be heard” may include the public interest in clarifying the meaning and scope of relevant practice and provisions of DIFC and wider UAE law.¹¹

34. In this case, SIR asserts that there is some other compelling reason for the grant of permission to appeal in that an appeal would clarify certain issues of law which are said to be contentious.

35. It is established that “real” in the context of an assessment of the prospects of success means realistic rather than fanciful, applying the same test as is applied in an application for immediate judgment.¹²

36. It is also established that a real prospect of success does not mean a probability of success, but more than mere arguability.¹³

37. Accordingly, in order to obtain the grant of permission a prospective appellant needs to establish more than the proposition that the proposed appeal is reasonably arguable – rather, it must be established that there is a real prospect of success.¹⁴

38. Particular principles apply to applications for permission to appeal against case management decisions and multifactorial or discretionary assessments undertaken by a Judge at first instance, given the hurdles which must be overcome to obtain appellate intervention in such cases. This case invokes those principles, as it is an application for permission to appeal against a case management decision which involves the exercise of a discretion based upon the assessment of a number of factors. Accordingly, an appeal would not succeed merely because the appellate court considers that it would have made a decision different to that made by the Judge at first instance. Rather, an appeal will only be allowed if:

39. When a renewed application made to the Court of Appeal is refused, it is appropriate for the Court to provide reasons which adequately explain the reasons why permission has been refused. The adequacy and extent of those reasons will be informed by the fact that the refusal of permission is final and conclusive and determines the issues the subject of the appeal.

40. On the other hand, when a renewed application for permission to appeal is granted, the reasons for the grant can and should be expressed more briefly, and any views expressed should be expressed and read as provisional, on the basis that a different view might well be formed following the consideration of the fuller argument which will be presented at the hearing of the appeal. Any views expressed in these reasons should be read and construed on that basis. Further, the reasons for granting permission in respect of grounds of appeal will be expressed economically, not only because the determination of the issue raised by the ground must await the hearing of the appeal but also to limit the prospect that a party might consider that a member of the Court of Appeal does not retain an open mind in relation to any of the issues in the appeal.

The grounds of appeal

41. There are three grounds of appeal, although each ground involves a number of sub- grounds.

Ground 1

42. The first ground asserts that the Judge erred by ordering security only up to the hearing of SIR’s application to strike out the claim and by awarding only USD250,499.26 as security for SIR’s costs. Sub-grounds of this ground include assertions that:

43. This ground has a real prospect of success. The Judge found that the conditions for the grant of security were satisfied. However, the application for security was made at a very early stage of the proceedings, before a defence had been filed and while an application to strike out the claim was pending. Established practice in such circumstances would offer the Judge the following alternatives:

44. The Judge didn’t take any of these options. Rather, he determined that security would only be provided in respect of SIR’s costs up to the determination of the application to strike out the claim, on the basis that if that application succeeded, no further costs would be incurred, and if it failed, either LXT would have their costs paid, thereby “levelling the financial playing field” and reaching a “financial balance”, or payment of LXT’s costs by SIR would be suspended until the end of the trial which would provide SIR with a form of security. Accordingly, no other form of security, other than deferral of payment of LXT’s costs of the application to strike out the claim would be allowed.

45. It is arguable that this approach was wrong in principle. First, it is arguable that payment by SIR of LXT’s costs of an unsuccessful application to strike out LXT’s claim has no relevance to the question that was before the Court, which concerned the provision of security for SIR’s costs of defending the claim. In the decision at first instance the Judge referred to the consequence of such payment of costs as conferring a benefit upon LXT which would mean that “they will be in a better position financially and on the balance of convenience too” and as achieving a “financial balance”. In the reasons for dismissing the initial application for permission to appeal the Judge referred to payment of LXT’s costs as “levelling the financial playing field”.

46. It is arguable the conferral of a benefit on LXT or the “levelling of the financial playing field” or achieving a “financial balance” had no relevance to the issues which the Judge was required to determine, unless it resulted in the conclusion that there was no longer any reason to believe that LXT would be unable to pay costs ordered against it. However, the Judge did not suggest that conclusion. Arguably, it is not a conclusion which was open in any event, given that an order for costs in LXT’s favour would simply defray its expenditure on the defence of the application to strike out the claim and would not enhance its financial position generally, so as to better enable it to pay SIR’s costs if ordered to do so.

47. It is also arguable that the Judge erred in principle by refusing to allow the grant of further security on the basis that suspension of the payment of an order for costs in LXT’s favour would provide a form of security for SIR’s costs up until trial. At the time, the Judge placed reliance on that proposition:

48. It is arguable that the Judge’s assertion that:

“the Defendant could suspend payment of the Claimant’s costs of the Strike Out Application and reserve payment to costs in the case if applicable”¹⁶ is wrong in principle because:

49. It is arguable that in these circumstances it was an error in principle to conclude that SIR’s claim for security for costs between the failure of the application to strike out the claim and trial could be satisfied by the possible suspension of payment of an order for costs in favour of LXT.

50. It is also arguable that the Judge’s conclusion that an order for provision of security beyond the determination of the application to strike out the claim would likely stifle the prosecution of the proceedings was not open on the evidence before him, nor was it contended by LXT. The evidence, such as it was, was to the effect that the Funder had agreed to indemnify LXT up to an amount of USD 1m in respect of adverse costs orders. Accordingly, on the basis of that evidence, security up to that amount could have been ordered without having any impact upon LXT’s capacity to prosecute its claim. Further, there was no evidence to the effect that LXT lacked the resources to prosecute its claim, other than the fact that it had engaged a third party funder, but that fact suggested that it was highly unlikely that the grant of security up to USD 1m would have any impact upon the prosecution of LXT’s claim.

51. It is also arguable that the Judge’s conclusion that it “is important to find a natural barrier in proceedings when granting security” and that in this case the application to strike out the claim constituted a natural barrier at which to limit security is not sustained by any authority and is contrary to principle. In the context of the Judge’s reasons, it is clear that he was using the expression “natural barrier” to indicate a point in the proceedings beyond which no provision would be made for security for the Defendant’s costs. Neither the Judge nor the parties have identified any authorities which sustain this approach to the grant of security for costs.

52. It is further arguable that the Judge’s assertion that the fact that LXT had a Funder, automatically entitled it to reduction in the amount of security it should provide, irrespective of whether the Funder was a reliable source, was wrong in principle. Neither the Judge nor the parties identified any authority in support of this proposition.

53. It is arguable that on its face the proposition is illogical. The existence of a third party funder increases the capacity of the funded party to provide security for the costs of a Defendant. It is also arguable that unless and until the third-party funder either provides an undertaking to satisfy costs ordered in favour of the Defendant, or posts security against the making of such an order, the existence of a third-party funder is irrelevant to the question of whether security should be ordered, because a defendant has no right to claim costs as against a third-party funder, and can only obtain an order for costs against the Claimant. It is also arguable that a third party funder’s financial stake in the outcome of the proceedings justifies an order that it should bear at least some of the risks associated with the proceedings, including the risk of an adverse order of costs, by providing security for those costs.

54. It is also arguable that the approach taken by the Judge is contrary to the evidence in this case, which was to the effect that the term of the funding agreement by which the Funder indemnified LXT against an adverse costs order supported an increase in the amount of costs to be ordered, rather than a reduction.

55. Each of these arguments has a real prospect of success. If one or more of these arguments succeed, the errors established would be of a kind which would arguably justify appellate intervention, notwithstanding that the appeal is from a case management decision involving the discretionary assessment of multiple factors. It is also arguable that appellate intervention is justified by a substantial risk of injustice, in that, if the decision is allowed to stand, SIR is deprived of a prima facie entitlement to the grant of security for its costs up to and including trial, and has been restricted to security limited to an amount calculated by reference to its costs up to the determination of the application to strike out the claim.

56. For these reasons, permission to appeal should be granted in respect of ground 1.

Ground 2

57. Ground 2 challenges the Judge’s amendment of his orders to remove SIR’s right to seek further security after the case management conference and/or by concluding in the Amended reasons that the level and quantum of security would “not be subject to change or extension”.

58. The second limb of this ground proceeds on a misconception. The reasons given by the Judge were not amended. His conclusion that the quantum of security would “not be subject to change or extension” was expressed in the reasons issued on 19 March 2025. There is no substance in this aspect of ground 2.

59. The amendment to the orders did remove the suggestion contained in Order 2 of the orders made on 19 March 2025 to the effect that SIR had the capacity to seek further security after the case management conference. However, as already noted, that order was directly contrary to the reasons expressed by the Judge. It follows that the Judge was correct to conclude that amendment of the orders in order to remove that inconsistency was authorised by either the slip rule (RDC 36.41) or RDC 36.45.

60. Ground 2 has no prospect of success. Permission to appeal in respect of this ground must be refused.

Ground 3

61. Ground 3 is also concerned with the amendment of the Judge’s orders. It is contended that there was a serious procedural irregularity because the Judge amended the orders on the basis of an email received from LXT without inviting SIR to make any submissions on the issue.

62. This ground appears to take no account of RDC 36.45, which provides that the Court has an inherent power to vary its own orders to make the meaning and intention of the Court clear. As already observed, the inconsistencies between the orders pronounced and the reasons given in support of those orders amply justified the exercise of that power in the circumstances of this case.

63. An invitation to SIR to make submissions would have served no point or purpose once the Judge realised that the orders which he had pronounced did not reflect the conclusions he had reached. Put another way, the Judge was not changing his decision, but was changing the manner in which his decision had been enunciated in order to bring it into line with the reasons he had published.

64. It is difficult to envisage any circumstance in which a Court of Appeal would countenance this ground. The effect of the amendment was to bring the orders into line with the reasons published by the Judge, which were not amended. The question before the Court of Appeal on ground 1 will be whether the reasons given by the Judge reveal error of a kind which would justify appellate intervention. If they do, the appeal will be allowed, and if they do not, the appeal will be dismissed. It is inconceivable that a Court of Appeal, having concluded that the reasons do not reveal error of a kind justifying appellate intervention would allow the appeal simply because the Judge did not invite SIR to make submissions before he amended the orders to bring them into line with reasons which did not involve appellable error.

65. For these reasons, ground 3 has no prospect of success and permission to appeal in respect of ground 3 must be refused.

Other compelling reason

66. SIR has also contended that there are other compelling reasons why permission to appeal should be granted in this case. It is unnecessary to consider the basis for those contentions because:

Conclusion

67. For these reasons, the Renewed Application must be allowed in part. Permission to appeal will be granted in respect of ground 1. Permission to appeal will be refused in respect of grounds 2 and 3.

68. The costs of the Renewed Application should be reserved to the Court of Appeal.