From: Matthew Hoyle <MHoyle@oeclaw.co.uk>

Sent: Wednesday 19 February 2025 11:52

To: obligations@uwo.ca

Subject: UKSC on declarations and merger by judgment

The UKSC today handed down judgment in Nasir v Zavarco, on whether merger applied to purely declaratory judgments. The claimant had obtained a judgment declaring that the share capital on Mr Nasir's shares in Zavarco needed to be paid, and that his shares could be forfeit if it was not paid up. A year later it commenced a new claim for the share capital owed. Marsh CM held the debt claim had merged with the first judgment. On appeal, Birss J held that the doctrine of merger did not apply to declarations, and also dismissed the arguments based on Henderson abuse. The CA upheld that judgment. The UKSC has unanimously dismissed the appeal.

There is an interesting discussion of the concept of a cause of action at [33]-[38], and some reflection on the history of declaratory relief (at [45]-[46]). It rather skips over the fact that the reason we have this problem is that courts were empowered to make purely declaratory orders without the legislation stating what the effect on related doctrines would be: prior to the  Chancery Procedure Act 1852, a declaration would only be given in conjunction with substantive relief (and there was no declaratory judgment in the common law courts). As such, the question of whether merger applied to declarations would never have occurred to the judges who developed the doctrine. A warning to all potential law reformers out there (including the courts themselves)!

I think the SC is clearly right to say that merger doesn't apply to declarations per se, given they serve a different function to and have different effects to judgments which confer new coercive rights (e.g. a liability to execution) and/or impose public law duties (e.g. to pay a sum of money comply with an injunction) upon the debtor (at [47]).

I am not so sure about merger being a doctrine simply designed to 'developed as a means to promote finality in litigation and to prevent duplicative and vexatious litigation' (at [17]).  Only one of the cases cited, King v Hoare, speaks in those terms, and it is much latter than the other cases cited. The others simply refer to the idea of a right which is 'of an inferior nature, is by judgment of law changed into a matter of record' (Higgens Case, cited at [19]). It is notable that in Virgin v Zodiac [2013] UKSC 46  at [17], Lord Sumption noted that 'there is the more general procedural rule against abusive proceedings, which may be regarded as the policy underlying all of the above principles [cause of action estoppel, issue estoppel and Henderson abuse] with the possible exception of the doctrine of merger' (Lord Hodge curiously omits this from his summary of the case).

As Lord Hodge notes at [24], merger is a rule which 'could operate harshly to defeat meritorious claims'. If merger were simply a rule about vexation then the doctrine of Henderson v Henderson abuse, which is more flexible, should surely supersede it? Moreover, why should merger not apply to foreign judgments (which it does not, see [21]) if that is the rationale? Cause of action estoppel and issue estoppel do apply to foreign judgments, as does Henderson abuse.

Merger of judgment is surely part of a more general doctrine of substantive English law that a person cannot hold two or more different but overlapping rights in relation to the same subject matter: for example, if one becomes a freeholder of land over which one has a rentcharge, the rentcharge ceases to exist whatever the intention of the parties. One cannot both have an absolute right to the land and also a right to payment from the land (similarly, at common law one could not have both a life estate and a fee simple in the same land). By the same token, one cannot hold both a right of action and a judgment right in relation to the same set of facts a judgment debt is a superior right not only because it is certain and final but that it entitles a claimant to access the coercive machinery of the courts. A declaratory judgment by itself, although a judgment of a superior court, is not superior in that sense (one cannot blame Stuart and Georgian judges for not emphasising this given, as I say above, it was impossible to have a standalone declaration in their time).

That rationale is the rationale adopted in Kendall v Hamilton (cited at [22]-[23]): 'the right of action which they pursued could not, after judgment [was] obtained, co-exist with a right of action on the same facts against another person' and 'Where a security of one kind or nature has been superseded by a security of a higher kind or nature'. It is also as Lord Sumption described it in Zodiac: 'Although [merger] produces the same effect as the second principle [the rule in Conquer v Boot], it is in reality a substantive rule about the legal effect of an English judgment' (this is quoted by Lord Hodge).

That is also why merger does not apply to foreign judgments: it is a rule of English substantive law about the nature of English law rights, and therefore a foreign law judgment right cannot 'merge' with an English law right of action (I leave open the possibility that an English court might accept that a Ruritanian judgment might by itself operate so as to destroy a Ruritanian law right of action if that is what would happen in a Ruritanian court, given in particular that both the Rome Regulations leave to the governing law 'the manner in which an obligation may be extinguished').

Best,

Matthew

Matthew Hoyle Barrister www.oeclaw.co.uk

Switchboard:

+44 (0)20 7583 2000

One Essex Court, London Temple London EC4Y 9AR United Kingdom Tel +44 (0)20 7583 2000 clerks@oeclaw.co.uk

One Essex Court, Singapore #04-14 Maxwell Chambers Suites 28 Maxwell Road Singapore 069120 Tel +65 6634 1363 singapore@oeclaw.sg

Information in this message is confidential and is likely to be subject to legal professional privilege. If you have received this message in error, please notify me immediately and do not disclose, copy, distribute or retain either the whole or any part of the message or any attachments. If you are not the intended recipient, please telephone (020) 7583 2000 immediately. Regulated by the Bar Standards Board.

Disclaimer

The information contained in this communication from the sender is confidential. It is intended solely for use by the recipient and others authorized to receive it. If you are not the recipient, you are hereby notified that any disclosure, copying, distribution or taking action in relation of the contents of this information is strictly prohibited and may be unlawful.

This email has been scanned for viruses and malware, and may have been automatically archived by Mimecast, a leader in email security and cyber resilience. Mimecast integrates email defenses with brand protection, security awareness training, web security, compliance and other essential capabilities. Mimecast helps protect large and small organizations from malicious activity, human error and technology failure; and to lead the movement toward building a more resilient world. To find out more, visit our website.