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Doctrine of merger does not apply where judgment is for declaratory relief only

Insights / / London

Zavarco plc v Tan Sri Syed Mohd Yusof Bin Tun Syed Nasir [2021] EWCA Civ 1217

The doctrine of merger treats a cause of action as extinguished once judgment has been given upon it; the Claimant’s sole right then becomes the right to enforce the judgment. 

There was no decided case on whether this doctrine applies where a judgment is given for declaratory relief only, either in this country or in any other Commonwealth country, until Zavarco v Nasir recently determined this.

Background

We previously reported on the 2019 order of Chief Master Marsh, in which he declared that the court had no jurisdiction and dismissed proceedings involving a claim for payment for shares (i.e. payment of a debt) on the basis that the doctrine of merger applied in the case of a prior declaratory judgment in respect of the same cause of action, thereby precluding a subsequent claim on the same cause of action for payment of a debt. Read our previous article here.

Chief Master Marsh reached his decision notwithstanding the view expressed since 1924 in editions of the leading practitioners‘ text Spencer Bower & Handley: Res Judicata (that the doctrine of merger does not apply in the case of a purely 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.

This matter came before the Court of Appeal in April 2021 and judgment was handed down in August 2021.

Court of Appeal

In considering the question of whether merger applies where the judgment is for declaratory relief only, Sir David Richards held that a declaration is a quite different remedy from judgment for a debt or damages.  Whilst it makes sense to speak of a merger of a claim for a debt or damages, so creating “an obligation of a higher nature” (the lesser right being merged into the higher right in the form of a judgment), the same simply cannot be said of a purely declaratory judgment, which itself imposes no obligation but only confirms the obligation which already exists.  The Court went as far as to say it found it:

 “…hard, indeed I would say impossible, to think of a sound reason why a declaration of legal right or obligation should automatically bar a subsequent claim for enforceable relief”.

Sir David Richards stated that as the authorities demonstrate, merger is a very long standing doctrine of the common law and one which judgments of the early 19th century make clear was by then fully formed.  Declaratory relief, on the other hand, is an equitable remedy, and declarations as a sole remedy were virtually unknown until the mid-nineteenth century.  He said (of merger):

“…it is my view that the basis and development of the doctrine shows that it has no application at all to declarations...” 

Comment

Whilst the issue of whether the doctrine of merger applies where the judgment is for declaratory relief only has now been clearly answered by the courts, it is important for those involved in dispute resolution to keep in mind the Court of Appeal’s comments on the potential relevance of other principles designed to prevent abuse of the court’s process: “…Of course, depending on the circumstances of the case, a claimant who first seeks only declaratory relief may be precluded, by the other principles designed to prevent abuse, from bringing further proceedings”

Chris Kidd

Chris Kidd Head of Shipbuilding and Offshore Construction, Joint Head of Energy & Infrastructure, Partner

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