In Nasir (Appellant) v Zavarco plc (Respondent) [2025] UKSC 5, the Supreme Court clarified that the doctrine of merger does not extend to declaratory judgments.

Background

In 2015, Zavarco served a call notice on Mr Nasir demanding he pay €36m in consideration for Mr Nasir’s subscription for shares in Zavarco. Mr Nasir argued that he had already provided consideration by transferring to Zavarco his shares in a Malaysian company.

In 2017, Zavarco successfully sought declarations from the court which included declarations that the shares were unpaid and that Zavarco was entitled to forfeit the shares (the 2017 Declaratory Judgment), which it duly did.

In October 2018, Zavarco issued fresh proceedings and claimed €36m as a debt, following the 2017 Declaratory Judgment plus interest. In response, Mr Nasir applied to set aside service of the claim form on the basis of the doctrine of merger, namely, that the debt claim had merged into the 2017 Declaratory Judgment and had been extinguished as a matter of law.

In upholding the appeal, the Court of Appeal held in favour of Zavarco and found that the doctrine of merger has no application to declaratory judgments.

The doctrine of merger

The doctrine of merger has existed for hundreds of years as one of the doctrines of English law intended to ensure finality of litigation. It extinguishes a cause of action once judgment has been given on it. The doctrine deems that the judgment has created “an obligation of a higher nature” which extinguishes the claimant’s right to claim a further remedy arising from those same factual circumstances.

It is well established that the doctrine applies to claims for the payment of a debt or to enforce a right of property by ordering its return. However, the question for the Supreme Court was whether the doctrine applies to declaratory judgments.

Decision

The judgment found that there is “no authority that supports the extension of the doctrine of merger to cover the declaration of the existence of a right”. As the UK’s highest court, the Supreme Court could have decided nevertheless to extend the doctrine, but concluded that it should not.

In upholding the Court of Appeal’s decision and refusing to extend the doctrine, the Supreme Court provided a number of reasons including, most notably, the following.

1. A declaratory judgment does not impose a new obligation but rather confirms an obligation which existed before the judgment was given. Therefore, a declaratory judgment does not extinguish a subsequent right to bring a claim – if anything, it confirms it. In contrast, a judgment requiring a defendant to pay a debt creates a new obligation “of a higher nature” – the obligation to pay the original debt merges into the obligation to pay the judgment debt. But that analysis cannot apply to a declaratory judgment, which only declares the existence of a pre-existing right.
2. It was prudent for Zavarco to seek to resolve the dispute by seeking a declaration for forfeiture of the shares in order to compel Mr Nasir to pay for the shares. It can be a sensible and justifiable approach for a claimant to seek a declaration first and only claim a coercive remedy (such as damages) later, especially where, as the Supreme Court said, in this particular case “everyone concerned knew” that the claimant might enforce its right to payment if it succeeded in its claim for a declaration.
3. Historically the doctrine had been criticised for producing “harsh results”, which militated against extending its ambit. 
4. The 2017 Declaratory Judgment established the legality of Zavarco’s forfeiture of the shares. Given that, the present proceedings were not duplicative or vexatious but ought to have been a straightforward debt claim for the unpaid price of the shares.
5. The English court is already well equipped with modern case management powers to bring finality to litigation and prevent duplicative and vexatious litigation. There is therefore no need to extend the scope of the doctrine.

Conclusion

This judgment clarifies that a claimant seeking a declaratory judgment in respect of a cause of action will not be barred from later bringing a claim on that same cause of action in order to seek, for example, damages or payment of a debt. The only remaining avenue to extend the doctrine of merger in this context is in respect of final injunctions (“so that a grant of a final injunction enforcing a right would preclude a later claim to damages arising from the same facts”), on which the Supreme Court did not opine.

The Supreme Court’s refusal to extend the doctrine does not signal a sea shift to the English court’s approach of stopping duplicative and vexatious litigation in its tracks. Indeed, the English court continues to have at its disposal an array of powers to halt such claims both in the public interest and in the interests of litigants.

Finally, a note of caution: a declaratory judgment does not restart the clock in relation to limitation. Parties should be mindful that if a declaration proves insufficient to get a counterparty to meet their obligations, any subsequent claim for debt or damages would need to be issued within time i.e. by reference to the date the cause of action accrued, not the date of the declaratory judgment.