Declaratory Judgments. YOU SHALL, NOT, MERGE!

The common law doctrine of merger in judgment does not apply to declaratory judgments. So confirmed the UK Supreme Court when today it handed down its judgment in Nasir v Zavarco Plc [2025] UKSC 5.

Lee Donoghue, Jessica Verrall, and Rabia Azam at Teacher Stern LLP acted for the Appellant Tan Sri Nasir, with Paul Downes KC, Robert-Jan Temmink KC, Tom Nixon, and Tom Hall of Quadrant Chambers as counsel.

Understanding the Doctrine of Merger

In England and Wales, the doctrine of merger operates to ensure finality and efficiency of judicial proceedings. It applies such that once a court renders a judgment on a cause of action, that cause of action merges into the judgment and is extinguished, thereby preventing subsequent litigation on the same matter.

Traditionally, the doctrine of merger serves to prevent repetitive litigation by treating a cause of action as subsumed into a court’s final judgment. This transformation means the claimant’s rights are now defined by the judgment itself, precluding further claims based on the original cause of action. This principle is integral to the broader concept of res judicata, which encompasses various doctrines aimed at upholding the conclusiveness of judicial decisions.

Declaratory Judgments: A Distinct Category

Declaratory judgments differ from other forms of judicial relief in that they do not impose obligations or award financial relief but instead clarify the legal relationship or rights between parties.

In Nasir v Zavarco Plc the difference between declaratory and coercive judgments was addressed before the Supreme Court. The appellant argued that there was no good basis for distinguishing declaratory judgments from other forms of judgment for the purposes of applying the doctrine of merger. The respondent argued that application of the doctrine to declaratory judgments involved an extension of the doctrine which was unnecessary and unjustified. The court decided in favour of the respondent and dismissed the appeal.

The Facts of the Case

Zavarco plc obtained a declaratory judgment affirming its right to forfeit shares held by Nasir due to non-payment. It then forfeited the shares. Subsequently, the company pursued a second claim for payment of the par value of the shares, which it claimed remained owing pursuant to Zavarco’s articles of association. The Particulars of Claim in the second claim were virtually identical to those in the first claim, the only significant differences being the addition of an update in relation to the forfeiture of the shares and a different plea for relief.

Proceedings in the Courts Below

The defendant applied to strike out the claim on the basis that the court had no jurisdiction to deal with it, due to the application of the doctrine of merger to the declaratory judgment obtained in the first claim. The parties agreed that the second claim was based on substantially the same set of facts as the first claim.

The defendant was successful at first instance before (then) Chief Master Marsh, who struck out the claim ([2019] EWHC 1837 (Ch)). In reaching his decision the Chief Master disagreed with a statement in a leading textbook on merger (Spencer Bower and Handley: Res Judicata, 5th ed (November 2019)) (“Spencer Bower”) to the effect that the doctrine of merger does not apply to declaratory judgments. Although that statement was not supported by any case law authority, the Chief Master considered the authority of the textbook to be such that his disagreement with the position it stated was sufficient to justify the grant of permission to appeal his judgment to a High Court Judge.

On appeal Birss J (as he then was) allowed Zavarco’s appeal ([2020] EWHC 629 (Ch)). The Court of Appeal granted permission for a second appeal by Nasir against the judgment of Birss J. The Court of Appeal (Henderson, Warby LJJ and Sir David Richards) subsequently dismissed that appeal ([2021] EWCA Civ 1217). Nasir then sought from and obtained permission to appeal to the UK Supreme Court.

The Supreme Court’s Decision

In its judgment handed down today, the Supreme Court states conclusively that the doctrine of merger does not apply to declaratory judgments. It rejected the argument by the appellant that to exclude declaratory judgments would be creating a new and unwarranted exclusion to the doctrine’s applicability. Instead it preferred the case of the respondent, that the doctrine was fully formed and complete in the era before the adoption by the courts of the practice of granting declaratory, as opposed to compulsory, mandatory or coercive orders and that there are good reasons for refusing to extend it to encompass declaratory judgments.

Lord Hodge, giving the only written judgment (with which Lord Hamblen, Lord Leggatt, Lord Stephens and Lady Rose agreed), stated his agreement with the following passage of the judgment of the Court of Appeal:

“A declaration is a quite different remedy from judgment for a debt or damages. It makes sense to speak of a merger of a claim for a debt or damages into a judgment for the payment of a specified sum as debt or damages, so creating ‘an obligation of a higher nature’. The lesser right is merged into the higher. The same simply cannot be said of a purely declaratory judgment, which itself imposes no obligation but only confirms the obligation which already exists. As Birss J aptly put it: ‘I do not see how a declaration which declares to exist the right which the claimant already had before judgment was given, could be said to extinguish that pre-existing right. It does the opposite.”

The Supreme Court also stated the following reasons for dismissing the appeal:

  • There may be justifiable reasons for a litigant to seek a declaration before pursuing a claim for a coercive remedy.
  • The doctrine of merger has often been criticised for its rigidity and its capacity to cause injustice. See for example, Kendall v Hamilton (1879, Brunsden v Humphrey (1884) 14 QBD 141 and Republic of India v India Steamship Co Ltd [1993] AC 410 (“The Indian Grace”). That possibly of injustice is a relevant consideration against extending the doctrine of merger to circumstances in which it has not been applied and in which it would be incongruous.
  • To allow a claimant to obtain a purely declaratory judgment without excluding its rights thereafter to seek a remedy such as damages does not give rise to the mischief of duplication or vexatious litigation, or at least not to the extent of a repetition of a trial on the merits.
  • There are currently a range of rules and remedies by which a court can achieve finality of litigation and prevent duplicative and vexatious suits. There is no need to extend the scope of the doctrine of merger to remove a lacuna.
  • Excluding merger from applying to declaratory judgments does not create any inconsistency with Section 34 of the Civil Jurisdiction and Judgments Act 1982.

Section 34 of the 1982 Act reads:

“No proceedings may be brought by a person in England and Wales or Northern Ireland on a cause of action in respect of which a judgment has been given in his favour in proceedings between the same parties, or their privies, in a court in another part of the United Kingdom or in a court of an overseas country, unless that judgment is not enforceable or entitled to recognition in England and Wales or, as the case may be, in Northern Ireland.”

Lord Hodge acknowledged that:

“On a superficial reading this is a complete bar on all proceedings in England and Wales.”

But expressed the view that:

“a closer examination of the statutory words (“proceedings … on a cause of action in respect of which”) reveals that the Scottish or foreign judgement would be a judgment on a cause of action, or, in other words, a coercive remedy….A first judgment which was the equivalent of declaratory relief in the law of England and Wales would not be a judgment on a cause of action to which the section applies.”

Analysis

The Supreme Court’s decision appears to be largely policy based, preferring the flexible nature of other doctrines of res judicata and case management which give the court discretion over the circumstances in which they ought to be applied (including the principles in Henderson v Henderson (1843) 3 Hare 100) over the long-established but rigid doctrine of merger.

It is now clear that the position stated without authority for nearly a century in the various editions of Spencer Bower, to the effect that merger does not apply to declaratory judgments, is correct.

An analysis of the logic by which the court determined that a money claim brought in England and Wales or Northern Ireland following the Scottish or foreign equivalent of a declaratory judgment does not constitute “proceedings…on a cause of action in respect of which a judgment has been given” is beyond the scope of this article, but we suggest that it might attract further academic consideration in due course.

Merger in judgment remains a potential trap for the unwary litigant. A claimant who believes they are immediately entitled to one financial remedy but might be entitled to a further financial remedy based on the same set of facts, depending on what action they take following their having obtained a declaration of rights, would potentially be forced to delay seeking a judgment on that immediately viable money claim until after they have sued for and obtained the declaration which they also consider to be necessary. If they do not, it seems unlikely that the Supreme Court’s judgment in Nasir v Zavarco Plc would come to their aid. Any coercive judgment obtained would merge with the cause of action on which it was based, thereby ruling out a subsequent claim for a coercive judgment following action having been taken based on the declaratory part of the initial judgment. Whether this is a lacuna that will ever be addressed remains to be seen.

If you would like to discuss any of the matters raised in this article please contact Lee Donoghue.