January 26, 2026
In a rare example of an appellate court reversing the exercise of a discretion by a first instance judge, the DIFC Court of Appeal last week handed down judgment in LXT Real Estate Broker LLC v SIR Real Estate LLC [2025] CA 005, setting aside an order of the CFI in which security for costs had been granted, but only up to the hearing of an upcoming strike out application (with no right to seek further security).
The Court of Appeal held that the CFI had erred in principle in various respects, and emphasised the following points:
- The Court cannot treat an alleged stifling argument as determinative where there is no evidence of stifling.
- If the Defendant has issued an application to strike out the claim, the fact that the application might fail with an order for costs against the Defendant does not give rise to a right to ‘suspend payment’ as a substitute for further security. That is an irrelevant consideration to the exercise of the CFI’s discretion.
- The existence of a litigation funder and funding agreement does not automatically justify a reduction in the amount of security. The correct approach is not to treat funding as a categorical discount but to undertake a fact-sensitive, discretionary assessment of the evidence before the court. That assessment requires evaluating the substance of the funding arrangement and, critically, the funder’s financial capacity and the extent of its commitment to meet any adverse costs order.
- The Court must consider the prejudice to a Defendant in being left unsecured if further security cannot be obtained.
- The determination of the quantum of security must be subject to a principled analysis. The CFI’s approach of halving the Defendant’s total estimate of costs, and then halving it again, was an error of principle.
- The Crabtree principle will not be engaged where there is no pleaded defence or counterclaim at the time of the hearing of the application for security for costs and the alleged overlap between any potential counterclaim and the claim is speculative and unparticularised.
Importantly, the Court also emphasised that there is no default position in the DIFC that security will be ordered either in one lump sum or in stages. That question can only be answered having regard to the circumstances of the particular case.
The Court therefore allowed the appeal and remitted the question of granting further security to the CFI.
Karl Anderson, led by Alex Potts KC and instructed by Al Tamimi & Co, acted for the successful Defendant / Appellant.
Read the judgment.
