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Negative declaratory relief: what is it and when may it be granted?

In the BVI and the Cayman Islands, as in the UK, the Court has the jurisdiction to grant a declaration of non-liability or a declaration that a certain state of affairs does not exist. This remedy, which is discretionary, is often referred to as negative declaratory relief.

The jurisdiction to grant declaratory relief in the Cayman Islands arises under GCR O.15, r.16. With regard to the BVI, the jurisdiction has been acknowledged by the Eastern Caribbean Court of Appeal decision in Greunier v Greunier.

Negative declaratory relief is unusual in the sense that it reverses the natural roles of claimant and defendant: rather than the claimant seeking to establish liability on the part of the defendant, instead the defendant seeks a declaration to the effect that it is not liable. If granted, a negative declaration will ordinarily make the issue with which it is concerned res judicata, thereby preventing the other side from subsequently bringing an action to vindicate the right denied by the declaration.

In former times, courts were reluctant to grant negative declaratory relief. That has now changed, in particular following the 2001 Court of Appeal judgment of Lord Woolf in Messier Dowty & Anor v Sabena & Anor. The Court’s approach to the relief is now better described as one of caution, rather than reluctance.

These issues have been addressed very recently by the English Commercial Court, in BNP Paribas SA v TRM, a case concerning rights arising under an interest rate hedging transaction. In summary, the judge concluded her review of the authorities as follows:

  1. The touchstone to negative declaratory relief is utility.
  2. The deployment of negative declarations should be scrutinised and their use rejected where they serve no useful purpose.
  3. The remedy is discretionary. The prime purpose is to do justice to both parties.
  4. The Court must consider whether the grant of declaratory relief is the most effective way of resolving the issues. Alternatives should be considered.
  5. The Court will not entertain purely hypothetical questions.
  6. There must be a real and present dispute between the parties.

The case serves as a helpful exposition of these principles and a reminder that the use of the negative declaration can be a valuable tool in an appropriate case. An obvious example of such a case (offered by the EC Court of Appeal in Greunier) is where a claimant is subjected to a demand or is threatened with litigation (in which case there may be a "cloud" endangering the claimant’s peace of mind, freedom or pecuniary interests).

The Messier Dowty decision has been cited with approval in the Cayman Islands on more than one occasion and it is likely therefore that this latest decision would also be followed there, as well as in the BVI.

Negative declaratory relief: what is it and when may it be granted?

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