Nasir v Zavarco plc

The Supreme Court considered whether the longstanding doctrine of merger, by which a cause of action merges with and is extinguished by a judgment, applies to a purely declaratory judgment. The court concluded that merger is confined to coercive judgments that create an obligation of a higher nature (for example judgments for payment of money or for the return of property) and does not extend to ordinary declaratory relief. Key reasons included the historical development of merger, the long-established practice of granting declarations only after merger was established, the absence of authority applying merger to declarations, the coercive and enforceable character of judgments that traditionally attract merger, and policy considerations favouring existing case-management and statutory mechanisms to prevent duplicative litigation.

Background and parties:

• The appellant, Tan Sri Nasir, a Malaysian citizen, subscribed for shares in Zavarco plc on incorporation and did not pay cash; he contended that transfer of shares in a Malaysian company provided consideration. Zavarco asserted a call for €36 million and later forfeited the appellant's shares after proceedings determining that the shares were unpaid.
• Zavarco later issued a fresh claim for payment of €36 million as a debt, following the earlier judgment in its favour by Martin Griffiths QC. The appellant sought to strike out or set aside the new claim on the basis that the cause of action had merged into the earlier declaratory judgment or, alternatively, that the proceedings were an abuse of process; the abuse argument was not pursued on appeal.

Procedural history:

• First instance trial judgment: Martin Griffiths QC ([2017] EWHC 2877 (Ch)) granted declarations that the shares were unpaid and that Zavarco was entitled to forfeit them.
• Chief Master (Marsh) ([2019] EWHC 1837 (Ch)) held that the cause of action had merged into the declaratory judgment and was extinguished.
• Birss J allowed Zavarco's appeal ([2020] EWHC 629 (Ch)), holding that a declaration can be a remedy and that merger does not necessarily follow in all cases; in that case the declaration did not extinguish the cause of action.
• The Court of Appeal ([2021] EWCA Civ 1217) held that the doctrine of merger has no application to declarations and dismissed the appellant's appeal to it. The appellant obtained permission to bring a further appeal to the Supreme Court.

Nature of the claim and issues:

• Nature of claim: claim by Zavarco for payment of €36 million as a debt following an earlier declaratory judgment.
• Principal legal issue: whether the doctrine of merger applies to a purely declaratory judgment so as to extinguish the cause of action and bar a subsequent coercive claim based on the same facts.

Reasoning and subsidiary findings:

• The court reviewed the historical development of the doctrine of merger and the authorities on its reach. Historical authorities demonstrate that merger developed to convert an existing right or remedy into a judgment of a higher nature that carries enforcement mechanisms; that coercive element underpins the doctrine.
• The court analysed the meaning of "cause of action" and concluded that, for merger, what is extinguished is the claimant's right to a remedy arising from given facts rather than the factual circumstances themselves.
• The court emphasised that there is no English authority applying merger to purely declaratory relief and that authoritative texts (Spencer Bower) treat declarations as outside merger. The long development of declaratory relief post-dates the formative period of merger, which supports treating declarations differently.
• Policy considerations weighed against extending merger: potential for harsh results, existing statutory controls and case-management powers to prevent duplicative litigation, and the utility of allowing parties to obtain a declaration before pursuing coercive relief where sensible (for example, to establish entitlement before forfeiture).
• The court expressly reserved on whether merger might apply to final injunctions or certain Crown declarations, as those issues were not argued or decided here.

Conclusion: The Supreme Court dismissed the appeal and held that the doctrine of merger does not extend to ordinary declaratory judgments; accordingly Zavarco’s present claim for the unpaid price was not barred by the earlier declaratory judgment.

Appeal dismissed. The doctrine of merger does not extend to purely declaratory judgments because merger historically and doctrinally applies to coercive judgments that produce an obligation of a higher nature; declarations ordinarily impose no such obligation and there is no authority warranting extension of merger to ordinary declaratory relief. The court also relied on policy reasons and existing statutory and case-management mechanisms to address duplicative litigation. The court reserved any conclusion on final injunctions or certain Crown declarations.

First instance: Trial before Martin Griffiths QC, judgment in favour of Zavarco ([2017] EWHC 2877 (Ch)). Chief Master Marsh held merger applied ([2019] EWHC 1837 (Ch)). Birss J allowed Zavarco's appeal ([2020] EWHC 629 (Ch)). Court of Appeal dismissed the appellant's appeal ([2021] EWCA Civ 1217). Permission to appeal to the Supreme Court granted; Supreme Court dismissed the appeal ([2025] UKSC 5).