Palladian Partners LP & Ors v The Republic of Argentina & Anor

When making a proportionate costs order, the court should identify costs attributable to individual issues and costs common to several issues. The overall successful party may recover common costs even where those costs also supported an issue that remains undecided or was later abandoned. The court may assess different periods separately where the procedural position changes. Costs incurred at trial in pursuing an undecided alternative case may attract no order, particularly where the party could reasonably have abandoned that case after a related issue was withdrawn.

The ruling concerned the costs consequences of an alternative bad faith case advanced by the claimants in proceedings concerning the construction and operation of securities. The court had previously decided the claimants’ primary construction case in their favour but had declined to determine the alternative bad faith case because it arose only if the primary case failed. The Republic had also abandoned, shortly before trial, reliance on binding effect provisions. The issue was whether the claimants should recover costs associated with the alternative bad faith case, either for the pre-trial period or for the trial.

1. Trial costs. No order was made in respect of the trial costs referable to the alternative bad faith case. Once the Republic abandoned reliance on the binding effect provisions, the claimants could have chosen not to pursue matters alleging bad faith in that context. They instead maintained the alternative case, although it remained undecided and was contingent on failure of the primary construction case.
2. Pre-trial costs. The position was different before the Republic abandoned its reliance on the binding effect provisions. The pleadings showed a clear overlap between the manifest error, wilful misconduct and bad faith issues and the alternative bad faith case. The relevant costs were therefore common costs rather than costs capable of being allocated exclusively to the alternative case.
3. Applying the approach stated by Jackson J in Multiplex v Cleveland Bridge [2008] EWHC 2280 (TCC) at [72(viii)], the court held that it was proportionate and just for the claimants to recover the pre-trial costs referable to the abandoned manifest error issue, notwithstanding that those costs also related to the alternative bad faith case.
4. The court accordingly declined to make no order for the pre-trial costs. The possibility that this approach would ease the costs judge’s later task of separating the costs was expressly treated as an incidental advantage, not as the reason for the decision.