You Started a DIFC Claim and Now Face a Security for Costs Demand

A defendant's demand for security does not establish that your DIFC claim is wrong or that the amount requested is justified. It asks the Court to protect a possible future costs award. You still need to address the stated ground, the evidence and the proposed sum, because a security order can create a funding problem before the claim is decided.

Security for costs addresses a different risk from the merits of your claim. The defendant is asking for protection against difficulty recovering a future costs award if it succeeds. Whether protection should be ordered, how much is justified and how it should be provided are separate questions.

The appeal in Kapova v Makovini and Pharm Trade Holding Ltd [2023] DIFC CA 004, decided in January 2024, explains how those questions interact. The Court upheld the basis for security but reduced the amount from USD 270,000 to USD 200,000. That distinction offers a useful starting point for a claimant facing a similar demand.

Identify the basis for the demand before answering it

Ask the defendant to identify the ground relied on and read the application itself if one has been filed. A general concern that litigation is expensive is not a complete explanation. The court needs an applicable basis for ordering security and must assess whether an order is just in the circumstances.

RDC 25.101 links the discretion to a condition in Rule 25.102 or an enactment permitting security. The listed conditions include residence outside the UAE, specified concerns about a corporate claimant's ability to pay and steps concerning assets that would make enforcement difficult. The details of the particular condition matter.

Kapova concerned the asset-steps condition, not a rule that every claimant must prove wealth before suing. The applicant alleged that the claimant had taken steps affecting assets against which a future costs order might be enforced. The Court examined that allegation and the surrounding evidence.

Question	What the defendant should explain	Your preparation
Ground	The condition or enactment relied on	Identify the disputed facts and legal basis
Discretion	Why security would be just	Explain relevant practical effects with evidence
Amount	Incurred and anticipated costs	Check stages, assumptions and duplication
Form and timing	What protection is requested and when	Propose a workable documented arrangement

Keep those four questions visible in the response. You may dispute the ground while also saying that the amount is excessive or the proposed form unnecessarily restrictive. An alternative response is not the same as conceding every part of the application. Have the positions expressed clearly through the proper procedure.

What the Kapova appeal did and did not decide

The underlying dispute involved two shareholders and a DIFC company. The claimant advanced allegations concerning professional advice, company transactions and her position in the business. Those allegations formed the background to the litigation. The security appeal did not determine that the alleged wrongdoing had occurred.

The first-instance court ordered USD 270,000 in security. On appeal, the claimant challenged the evidential basis, asset-transfer analysis, amount and other aspects of the order. The Court of Appeal rejected the attempt to remove the security requirement altogether but found deficiencies in the costs estimate supporting the amount.

It substituted USD 200,000. The money was to be paid into court within 14 days unless, within that period, the parties agreed an escrow arrangement with a first-class UAE bank and submitted it for court approval. The order also required the claimant to pay 85% of the respondents' appeal costs, subject to assessment if not agreed.

These were directions for that case, not a standard security tariff or a universal 14-day period. Their significance is analytical: a claimant can fail on the need for security but establish that the requested amount should be reduced. Conversely, an excessive estimate does not necessarily defeat the application entirely.

Key takeaway. Challenge the ground, amount and proposed mechanism separately. Showing a defect in one does not automatically answer the others.

The litigation later reached a different settlement dispute. In July 2026, permission to appeal a settlement-enforcement decision was granted and a stay continued. That later procedural order is not a reversal of the January 2024 security analysis, nor a basis for presenting the underlying commercial allegations as finally adjudicated facts.

The defendant still has to establish its case

In Kapova, the Court confirmed that the legal burden remained on the applicant for security. It did not impose a general legal obligation on the claimant to answer every private request for financial information. But it also rejected the argument that deliberate silence could never matter because the defendant carried that burden.

The correspondence had repeatedly raised the claimant's UAE assets in a way calling for an answer. She had opportunities to provide meaningful information and did not do so. The Court held that this could support an adverse inference as part of the overall evidence. It was not a rule that any unanswered letter conclusively proves inability to pay.

That distinction should guide the response to a demand. Ask whether the request is relevant, sufficiently identified and proportionate to the issue. If you have an answer that materially addresses the alleged enforcement risk, discuss how to present it with your lawyer. A tactical refusal may leave an avoidable evidential gap.

At the same time, do not send unfiltered bank records to the opponent merely because it asks. Consider what is necessary to demonstrate the relevant point, what confidential information can properly be protected and whether a court direction is appropriate. The objective is a useful evidential response, not indiscriminate disclosure.

Keep the distinction between an opponent's request and a court order. If the Court has directed evidence or disclosure, the terms and deadline require separate compliance. Advice about the strategic value of answering a letter should not be mistaken for permission to ignore an operative direction.

Asset transfers can matter even without an intention to evade costs

The condition examined in Kapova concerns steps affecting assets that make enforcement of a costs order difficult. The Court treated the test as objective. It was not necessary to establish that the claimant intended the enforcement difficulty. Explaining that a transaction had a commercial purpose therefore did not automatically dispose of the condition.

The disputed transactions included transfers made by a company in which the claimant held shares. The claimant argued that the company was a separate legal person and the assets transferred were not hers personally. The Court held that causing those transfers could still amount to relevant steps affecting her shares and their enforcement value.

This was not a finding that shareholders personally own all company property. The inquiry was whether steps the claimant caused affected the assets available for satisfying an order against her. The Court treated the connection between the transactions, her shareholding and enforcement difficulty as a fact-sensitive issue.

If transactions are being relied on against you, prepare a chronology supported by the documents. Identify who authorised each transfer, what moved, who received it, the consideration and the effect on the relevant holding. An explanation that addresses only motive may leave the objective consequences unanswered.

Include evidence that cuts against your preferred account. If a transfer was described as reversing an earlier transaction, show whether it actually restored the original ownership position. In Kapova, the destination of shares was one reason the Court rejected the suggested explanation. Labels such as restructuring or correction do not replace the transaction trail.

A company deposit may not provide the reassurance you expect

The claimant in Kapova relied on an AED 1 million bank deposit made on behalf of another company and a joint undertaking intended to make it available as security. The Court considered the evidence but identified unanswered questions. It did not accept that the headline deposit figure resolved the concern.

Among the difficulties were the timing of its production, the lack of evidence about the company's finances and liabilities, the background to the deposit and the reason it was held through that entity. The Court also questioned why the money had not simply been paid into court or placed in an agreed escrow arrangement.

The practical question is not merely whether a bank statement shows a large balance. Who owns the funds? Is the person giving the undertaking entitled to commit them? Are there other claims or restrictions? What event permits their release, and who can prevent it? Ask for the proposed security to be tested against those questions.

If a related company is offering support, collect its authorisation documents and relevant financial information. Do not present a director's assurance as conclusive evidence that the company has no liabilities. Explain the relationship and why the arrangement would remain effective if the individual and company later disagreed.

None of this means third-party support can never be acceptable. The lesson is that the mechanism must answer the enforcement risk it is offered to address. A complicated arrangement with unresolved conditions may provide less practical protection than a smaller, clearly available fund.

Do not turn the security hearing into the trial

A claimant naturally wants to explain why the defendant deserves to lose. That account may be essential at trial but poorly directed at a security application. RDC 25.110 strongly discourages detailed investigation of the merits at this stage, subject to a narrow situation where success or failure is clear without such investigation.

Kapova applied that restraint to allegations about the underlying transactions and money said to have been taken by the defendant. The Court did not decide those merits questions in the security appeal. It also rejected the idea that confidence in eventual success displaced the need to address the application actually before it.

Prepare a response that distinguishes background from the points requiring decision. A short explanation of the claim may put the costs estimate in context. It should not expand into a substitute trial bundle unless the court's directions and the legal issue genuinely require it.

Where you argue that security would prevent the claim from being pursued, obtain advice on the evidence needed. The Court in Kapova identified the potential stifling of a claim as a possible discretionary consideration, but expressly said that issue did not arise there. The case did not establish that a bare assertion of financial difficulty defeats security.

Document practical constraints honestly: available resources, the proposed security's effect, the time needed and any alternatives. Do not describe a preference to keep cash in the business as proof that continuing the litigation is impossible. Equally, do not understate a genuine funding obstacle merely because you are worried it sounds commercially weak.

Test the costs estimate rather than attacking its total alone

The claimant's successful point in Kapova concerned the amount. The respondents' estimate did not adequately connect the fee earners, hours and generic work descriptions to particular stages. The Court also identified an implausible contrast between substantial document work and very low hearing-attendance figures.

The Court did not hold that use of the court's schedule automatically made an estimate sufficient. It treated the form as a guide that required more detail in the circumstances. Nor did it hold that an imperfect schedule required a nil order. It reduced security to an amount it considered justified.

Review the estimate stage by stage. Identify what has already been done, what remains, the expected hearing length and the assumptions about witnesses or experts. If the estimate includes tasks that the timetable does not currently require, ask why they are included and how likely they are to arise.

Separate duplication from disagreement over staffing. Two lawyers attending a complex hearing may have different functions. Ask whether those functions are identified and whether the time and rates fit the work. A response saying only that your own lawyers cost less may not answer the opponent's actual workload.

Prepare a supported alternative where possible. It can explain which items are accepted, which need clarification and which should be excluded or reduced. Showing how the estimate changes is more useful than asking the Court to invent a different total after rejecting yours.

Common mistake. Assuming that defects in the estimate eliminate the need for any security. Kapova resulted in a reduction, while the obligation to provide security remained.

Keep security distinct from a final costs assessment. The order protects a possible future recovery. It does not determine that the defendant will ultimately receive that amount, win the substantive case or recover every sum in its estimate.

Propose a form of security that can actually work

If security is likely to be ordered, address the practical mechanism early. Identify whether the proposal is payment into court, an agreed escrow or another form that the Court is asked to accept. Do not promise a bank instrument or corporate undertaking before checking whether it can be obtained on the required terms.

In Kapova, the alternative to payment into court was carefully conditioned: agreement between the parties within the specified period and submission of the escrow arrangement for court approval. Without those steps, payment into court was required. Informal discussions about escrow were not the completed alternative contemplated by the order.

For an escrow proposal, ask who holds the money, which instructions control release, how competing instructions are handled and what happens when the proceeding ends. Identify the fees and the person responsible for them. The document should describe an enforceable mechanism rather than simply promise that funds will remain available.

For any bank-backed proposal, obtain the actual draft instrument and review its expiry, conditions and payment mechanics. A letter saying a bank is willing to discuss security is not equivalent to an issued instrument. Leave time for account checks and approvals instead of assuming these can be completed on the final afternoon.

Check the currency too. If your available funds are held in a different currency from the ordered security, confirm how the required amount will be funded and evidenced. Do not assume an approximate conversion in a spreadsheet establishes compliance with the order.

Make any request for a different period before the deadline becomes unmanageable. Explain what has been done, what remains and why the proposed timing is realistic. Whether relief is available depends on the order and circumstances. A pending negotiation does not itself vary the Court's direction.

Keep the application proportionate and the timetable visible

The security dispute can become expensive in its own right. Kapova criticised the proliferation of written submissions in the appeal. The practical lesson for a client is to ask whether each additional submission answers a material issue or merely repeats an earlier position at further cost.

Maintain a single factual chronology and a current list of the evidence relied on. If an explanation changes, reconcile it openly. A sequence of letters that gives different reasons for the same transaction can create more work than a candid, documented answer provided at the outset.

The current rules address timing, successive applications and what should happen if security is not provided. Do not assume the substantive case automatically stops merely because security is requested or ordered. Read the actual directions and keep other case deadlines under review unless they have been altered.

RDC 25.112 discourages an automatic stay while security is being provided and describes allowing time with permission to apply in default. Failure to provide ordered security can ultimately put the claim at risk. It is not safe to treat a funding problem as a reason to let the deadline pass without advice.

If considering an appeal, identify the alleged error precisely and address any need for separate interim relief. Kapova distinguished review of the ground for security from review of the discretionary decision that an order was just. Disagreement with the outcome, without an identified error, is not a substitute for an appeal analysis.

Prepare a response that your legal team can use

Give the lawyer the application, evidence, proposed order, correspondence and relevant asset documents together. Identify every date already fixed. If a document is unavailable, explain where it should be and who may hold it. A complete initial file can prevent a hurried response based on assumptions that later prove wrong.

Ask for advice in separate parts: the likelihood of security, the justified amount, possible mechanisms and the commercial effect on the claim. That structure helps you decide whether to resist, offer a narrower arrangement or seek an agreed position while preserving the substantive case.

1. Identify the condition or enactment relied on and the evidence supporting it.
2. Prepare a focused response on assets, transactions and practical enforcement.
3. Address whether security would be just, including any genuine funding obstacle with evidence.
4. Review the costs estimate and propose a justified amount or workable mechanism where appropriate.
5. Track the order, funding arrangements and all other case deadlines, seeking any necessary relief promptly.

A commercial decision to offer security need not mean accepting that the defendant's account of the dispute is correct. Equally, resisting security should not become an exercise in withholding useful information merely to force an application. Compare the cost of the dispute over security with the protection sought and the resources needed to continue the claim.

A response should identify the applicable ground, supply the evidence needed to address it and test the amount and mechanism independently. Kapova shows that this work can materially affect the order even where the Court remains satisfied that some security is justified.

Sources were checked through 29 September 2026. The public later-history search was bounded, not an exhaustive appeal clearance. The later permission and stay order identified above is not a merits reversal of the security decision discussed here.

Frequently Asked Questions

Does a security order mean the Court thinks my claim is false? No. The application concerns protection for possible costs recovery. Kapova did not decide the underlying commercial allegations.

Is security automatic because I live outside the UAE? Residence outside the UAE is a listed condition, but the Court must also consider whether an order is just. Identify the actual ground relied on in your application.

Must the defendant prove I intended to make recovery difficult? Not under the asset-steps condition as applied in Kapova. The Court treated that test as objective, while still requiring the relevant steps, assets and enforcement difficulty to be established.

Can silence about my assets be used against me? It may contribute to an adverse inference in the circumstances described in Kapova. The legal burden remains on the applicant, and not every unanswered request establishes its case.

Will money held by my company necessarily answer the demand? No. Ownership, liabilities, authority and the mechanism making funds available may need evidence. The company deposit and undertaking in Kapova did not resolve the concerns.

Does an inadequate costs estimate defeat all security? Not necessarily. Kapova reduced security from USD 270,000 to USD 200,000 rather than removing it.

Can I negotiate escrow instead of paying into court? You can seek an acceptable arrangement, but it must satisfy the order and any agreement or approval requirements. An unfinished negotiation is not compliance.

Can I stop preparing the case until the security issue is resolved? Do not assume so. Check whether any stay was actually ordered and continue tracking operative case directions.

This article is general information and does not constitute legal advice. Consult a qualified advocate about the security application, evidence, funding arrangements and current procedural requirements in your case.

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