Nasir v Zavarco plc

The doctrine of merger applies when a coercive judgment, such as a judgment for debt, damages or the return of property, supersedes the claimant’s right to a remedy arising from the same cause of action. The claimant’s sole enforceable right is then the right on the judgment.

A purely declaratory judgment falls outside the doctrine. It confirms an existing right or obligation but neither extinguishes it nor replaces it with an obligation of a higher nature. A claimant who has obtained declaratory relief may therefore pursue a later coercive remedy, subject to issue estoppel, abuse of process and the court’s case-management powers.

The appellant acquired shares in Zavarco plc without paying the €36 million subscription price in cash. He maintained that a transfer of other shares constituted valid consideration. In earlier proceedings, the High Court declared that the shares were unpaid and that Zavarco was entitled to forfeit them: [2017] EWHC 2877 (Ch).

After forfeiture, Zavarco claimed the unpaid subscription price. The Chief Master held that the cause of action had merged in the declaratory judgment: [2019] EWHC 1837 (Ch). Birss J reversed that decision: [2020] EWHC 629 (Ch); [2020] Ch 651. The Court of Appeal dismissed the appellant’s further appeal and held that merger does not apply to declarations: [2021] EWCA Civ 1217; [2022] Ch 105.

The issue before the Supreme Court was whether a declaratory judgment extinguishes the cause of action on which it was granted, preventing a later claim for a coercive remedy.

1. Appeal dismissed unanimously. Lord Hodge, with whom Lord Hamblen, Lord Leggatt, Lord Stephens and Lady Rose agreed, held that the doctrine of merger does not extend to purely declaratory judgments.

2. Merger is a substantive rule concerning the effect of an English judgment. Its established operation is that a coercive judgment replaces the claimant’s right to a remedy arising from the relevant factual circumstances. The prior right ceases to exist independently, and the claimant’s sole right is the right on the judgment. The doctrine concerns the right to obtain a remedy, not the underlying facts themselves.

3. The doctrine developed in relation to judgments for payment of money or recovery of property. Such a judgment creates an enforceable obligation of a higher nature. A declaration is different. It imposes no obligation and merely confirms an existing right or obligation. It therefore cannot extinguish the right that it declares. The longstanding account in Spencer Bower and Handley: Res Judicata, excluding declarations from merger, was correct.

4. Several considerations supported that conclusion. Merger was fully developed before purely declaratory relief became common, yet no authority had applied it to a declaration. A litigant may have a proper reason to establish its rights before seeking coercive relief. Extending a rigid doctrine capable of producing injustice was unwarranted. A declaration also fixes the relevant legal issue through issue estoppel, so later proceedings need not repeat the trial on the merits.

5. Modern doctrines of cause-of-action estoppel, issue estoppel and abuse of process, together with judicial case management, adequately control duplicative or vexatious litigation. There was no lacuna requiring enlargement of merger.

6. Section 34 of the Civil Jurisdiction and Judgments Act 1982 was consistent with this conclusion. Properly construed, it bars a second domestic action where the Scottish or foreign proceedings produced a coercive judgment on the cause of action. It does not treat the foreign equivalent of a purely declaratory judgment as extinguishing the underlying right.

7. The Court reserved its position on final injunctions and on declarations against the Crown under section 21 of the Crown Proceedings Act 1947.

1. United Kingdom Supreme Court: Dismissed the appeal unanimously and affirmed that the doctrine of merger does not apply to purely declaratory judgments: [2025] UKSC 5 .
2. Court of Appeal: Dismissed the appellant’s second appeal and held that merger has no application to declarations: [2021] EWCA Civ 1217; [2022] Ch 105.
3. High Court, Birss J: Allowed Zavarco’s appeal from the Chief Master. He held that the particular declaration had not extinguished the cause of action: [2020] EWHC 629 (Ch) ; [2020] Ch 651.
4. High Court, Chief Master Marsh: Held that the cause of action had merged in the earlier declaratory judgment and had been extinguished: [2019] EWHC 1837 (Ch) .
5. High Court, Deputy Judge Martin Griffiths QC: Declared that the appellant’s shares were unpaid and that Zavarco was entitled to forfeit them: [2017] EWHC 2877 (Ch) .