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Get your ducks in a row – bring all elements of a claim together

08.10.2019 Energy & infrastructure

Simon Hems

Simon Hems Partner, Energy & Infrastructure

Mette Duffy

Mette Duffy Managing Associate

An important reminder from the High Court regarding res judicata and merger.

In the judgment in Zavarco PLC v Tan Sri Syed Mohd Yusof Bin Tun Syed Nasir1, Chief Master Marsh held that the High Court had no jurisdiction to deal with the claim before it; the claimant’s cause of action merged in a judgment and order made in proceedings brought in 20162 (the “2016 Proceedings”). As such, the claimant’s cause of action had been extinguished.

The 2016 Proceedings

The central issue was whether the defendant (Mr Nasir) is or was obliged to pay up the 360 million shares he received on the incorporation of the claimant (Zavarco Plc) in cash, or whether it was agreed or arranged that the par value would be satisfied by the transfer to the claimant of shares in another company and, if so, what the legal consequences of that might be. It was common ground that the defendant’s shares were never paid up in cash.

The claimant served a valid call notice on the defendant on 5 June 2015 for payment. The defendant did not pay, disputing his liability to do so. The claimant then served a valid Notice of Intended Forfeiture on 15 June 2016, but no action had been taken on that pending the outcome of the 2016 Proceedings, which concerned requests for declaratory relief (and only declaratory relief) relating to the claimant’s entitlement to proceed to forfeit the shares.

That defendant’s defence in the 2016 Proceedings was dismissed and, as a result, the claimant forfeited the defendant’s shares. Despite this, under the company’s articles of association (the “Articles”), the defendant remained liable to the claimant as a debtor for the nominal value of the shares.

The High Court made two declarations in the 2016 proceedings:

  1. The defendant’s shares in the claimant had not been paid; and
  2. The shares could be forfeited by the company (the claimant having taken steps under the Articles to call for payment and payment not having been made).

The 2018 Proceedings

The claimant brought a second set of proceedings in 2018 (the “2018 Proceedings”), for which it obtained permission to serve on the defendant in Singapore.

The claimant sought recovery from the defendant of €36 million (plus interest) as a debt. The claimant’s case in outline was described by Chief Master Marsh as:

  1. the defendant formerly held shares in the claimant;
  2. he was required to pay for the shares in cash;
  3. he has failed to pay for them; and
  4. he is, despite the shares having been forfeited, liable to the claimant as a debtor for the nominal value of the shares, which is €36 million.

It should be noted that the claimant did not put forward any reason why it could not include a claim for payment in the 2016 Proceedings, nor did it assert that the 2016 Proceedings concerned preliminary issues. It merely argued that the purpose of the 2016 proceedings was to provide the claimant with the confidence it had the legal right to forfeit the shares before taking that action.

Service of the claim in the 2018 Proceedings was followed by the defendant’s application under CPR 11.1, disputing that the court had jurisdiction to try the claim or, alternatively, that if the court had jurisdiction it should not exercise it. The defendant’s principal contention was that the determination of the 2016 Proceedings and accompanying order resulted in the claim being extinguished by merger.

Merger, and res judicata, are common law doctrines, each of which have the same ultimate effect and “which preclude a person who has obtained a decision from one court or tribunal from bringing a claim before another court or tribunal for the same complaint”3. Res judicata prevents inconsistent decisions by preventing already decided issues from being reconsidered, and merger prevents a party from obtaining different or additional remedies in respect of causes of action already extinguished by a prior judgment.

The basis of the claim for merger here was that in both the 2016 and 2018 Proceedings the parties, facts pleaded, and causes of action, were identical.

Decision in the 2018 Proceedings

Having considered the key authorities and practitioners’ texts on res judicata and merger, Chief Master Marsh agreed with submissions made by the defendant and that the necessary elements of merger had been satisfied.

Notwithstanding the view expressed in Spencer Bower & Handley (that the doctrine of merger does not apply in the case of a declaratory judgment), Chief Master Marsh held that whilst a declaration may not lead to merger in every case, it could do if the cause of action in both claims is the same, having in mind the substance of those claims.


Although res judicata and merger will depend on the nature of a claim and the terms of any declaration, the outcome of the 2018 Proceedings serves as an important warning to potential/existing claimants to ensure they bring all claims together. The effect of merger is to extinguish the cause of action once a judgment is made, ensuring there is no second bite of the cherry.

Chief Master Marsh refers to a “powerful twofold rationale” for the doctrines of merger and res judicata: first, “the public interest in finality of litigation rather than the achievement of justice as between the individual litigants4 and second, the private interest; that “it is unjust for a man to be vexed twice with litigation on the same subject matter”.5

1 [2019] EWHC 1837 (Ch).

2 [2017] EWHC 2877 (Ch).

3 Per Arnold LJ in Clark v In Focus Asset Management [2014] 1 WLR 2502.

4 Per Lord Goff of Chieveley in Republic of India v India Steamship Co Ltd (No. 2) [1998] AC 878, 903).

5 Per Sir Nicholas Browne-Wilkinson V-C in Arnold v National Westminster Bank Plc [1989] Ch 63, 69.

Article authors:

Simon Hems Mette Duffy