Declaratory relief escapes the doctrine of merger
The doctrine of merger is a long standing rule of English law designed to stop abusive and repetitious litigation. It effectively extinguishes a cause of action once judgment has been given, leaving the Claimant’s sole right as a right on the judgment. The Claimant is thus prevented from bringing a second claim to recover a remedy that had already been the subject of the judgment between the same parties.
What happens, however, when the judgment is declaratory in nature only? Should this preclude a subsequent enforcement action?
This week the English Court of Appeal (Zavarco Plc v Nasir [2021] EWCA Civ1217) examined the doctrine and took a markedly pragmatic and commercial view when an initial judgment was limited to declaratory relief. In this instance, the Claimant was intending to assert its rights of forfeiture under the company’s articles, following an alleged failure to fully pay up shares. The Court found it made good sense to resolve this dispute without the Claimant having to seek judgment on the unpaid calls. Had the Claimant been limited to selling the shares upon forfeiture then it would not have been entitled to judgment for the full amount but only to judgment on the net amount upon giving credit for any proceeds (and of course also constrained as to the timing of the sale).
The Court of Appeal found that the doctrine of merger should not prevent a party from subsequently seeking an enforcement remedy, such as damages, nor prevented from obtaining a judgment debt, simply because it had previously obtained a declaration as to its rights.
Flexibility on the timing of enforcement can often be key and the ability to confidently assert a right independently is commercially desirable.
