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

Where a claimant has beaten a Part 36 offer, the court must consider all the circumstances when deciding whether the enhanced consequences would be unjust. The listed factors in Civil Procedure Rules 1998, rule 36.17(5), are not exhaustive.

The burden of establishing injustice is substantial. Part 36 operates as a self-contained costs code and generally takes precedence over the ordinary discretion under Part 44. A genuine offer involving a substantial discount will ordinarily attract the prescribed consequences. Objections based on joint acceptance, inability to pay, alternative allegations, potential precedent, or effects on other parties will not establish injustice where the offeree could have sought clarification or negotiated practical terms but did not do so.

This was a consequential costs hearing following judgment for the claimants in proceedings concerning payments due under securities issued by Argentina. The claimants had made a Part 36 offer to Argentina and the trustee on 5 February 2020. The offer proposed payment of 6.6 per cent per security, together with various provisions concerning the securities and the adjustment mechanism.

The judgment exceeded the offer, providing approximately 7.02 per cent per security plus interest. Argentina had not accepted the offer, made a counterproposal, or sought clarification. The issue was whether it would be unjust to impose the consequences specified in rule 36.17(4).

1. The court held that the enhanced Part 36 consequences should apply. The claimants had obtained judgment materially more advantageous than their February 2020 offer.
2. Under rule 36.17(5), the court must consider all the circumstances. The factors listed in that provision are specific examples and do not restrict the inquiry. The offer was clear, reasonable, made at an early stage, and made when Argentina had sufficient information to evaluate it.
3. The offer was a genuine attempt to settle. Although the amount represented about 85 per cent of the eventual monetary liability, it included a substantial discount and was not a merely nominal offer for the whole claim.
4. The fact that the offer was made jointly to Argentina and the trustee did not make application of Part 36 unjust. Argentina had not indicated any willingness to settle or sought to resolve the alleged need for the trustee’s agreement. It could have explored practical arrangements with the claimants and trustee.
5. Financial difficulties and the proposed 14-day payment period likewise did not establish injustice. Argentina could have proposed alternative timing, but did not do so. The existence of an alternative bad-faith case was immaterial because the offer was based on the claimants’ primary construction case and acceptance would not necessarily have admitted the allegations.
6. Concerns about precedent and other noteholders were insufficient. The parties could have entered a private settlement resolving the proceedings between them.
7. The court therefore ordered the consequences under rule 36.17(4), subject to the separate issue concerning the incidence of costs relating to the alternative bad-faith case.