Banking & financial disputes

Palladian Partners LP & Ors v The Republic of Argentina & Anor – Tilting the Balance to Fraud

The recent decision in Palladian Partners & Ors v The Republic of Argentina & Anor [2020] EWHC 1946 (Comm) has provided further guidance on the standard to be met when a party is pleading fraud. While the bulk of the judgment addressed arguments of contractual interpretation, Cockerill J DBE also gave obiter consideration to this question and provided a helpful reminder of what it is reasonable to expect of claimants pleading fraud.




The underlying dispute relates to securities issued by the Republic of Argentina (the Defendant) and held by the Claimants as part of a debt restructuring. Annual payments are due under the securities subject to certain pre-conditions being met. The Claimants allege that the Defendant was seeking to avoid making the annual payments by changing the baseline used to determine whether the pre-conditions had been satisfied. The Defendant made an application for summary judgment / strike out. This article is focused on the arguments raised in relation to the strike out application.

Cockerill J DBE refused the summary judgment application on the question of construction of the terms of the securities. The strike out application dealt with whether the Claimants’ pleading of bad faith, wilful misconduct and manifest error was sufficiently particularised. In rejecting the application, Cockerill J gave thought to what the requirements are for claimants to plead fraud or bad faith.

The strike out application raised two main points: 1) whether, in the context of pleading fraud, it is necessary to plead facts which are only consistent with fraud; 2) whether bad faith is equivalent to fraud.


The Judge declined to answer the question of the equivalency of bad faith and fraud, but did address the first question of what facts are required when pleading fraud. The Judge determined that, claimants are not required to plead facts which lack any other possible explanation than fraud, but that they should be enough to “tilt the balance” to fraud. The reasoning behind this was that statements of case are intended to give the other party sufficient notice of the case being made against them, and so claimants ought to ensure that their case is presented clearly and unequivocally. However, where a case relates to fraud, it is not unusual for the claimant to be unaware of the details of much of what has taken place, and therefore, to be unable to particularise their case fully until they have had disclosure. The Court should take this into consideration unless it appears that the prospects of obtaining disclosure are fanciful. Cockerill J summarised that what is required of claimants at the interlocutory stage (i.e. once proceedings have been commenced but before they have reached trial) is to plead primary facts which would justify an allegation of fraud, with the question of whether the evidence will support those facts to be dealt with at trial.


While claimants should not plead fraud lightly as there may be costs consequences for bringing speculative claims (that is a claim with no merit to it), it is true that claimants can often face obstacles when attempting to bring a claim against a defendant who has committed fraud. This judgment provides a helpful review of what is required of claimants when pleading fraud to ensure that their claims are not found to be speculative whilst taking into account that they may not yet know all the facts.





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Helen Ingram




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