Declaratory proceedings: discretion to declare and not declare

CPR rule 40.20 provides that ‘the court may make binding declarations whether or not any other remedy is claimed’. The power given to the court is broad and general, and a claimant may therefore institute proceedings to obtain declaratory relief. There is nothing inherently wrong or artificial about doing so: in insurance cases, for example, it is common, proper and desirable for an insurer to ascertain, by seeking such a declaration if necessary, whether he is liable to pay a claim which has been or may be made upon the policy. Such declarations are part of the common currency of insurance law and practice. And claims that a contract was rescinded, or that the claimant was entitled to rescind it, are really only claims for a negative declaration by another name.

As a matter of historical fact there has been, in some other areas, a reluctance to grant such declarations, presumably because (i) they deprive the would-be claimant of what had traditionally been seen as his privilege of selecting the forum in which his claim will be heard, and (ii) they may require the victim of a wrong to advance his claim, by way of defence, before he is ready to do so. In relation to both points, it can be seen as oppressive, even bullying, for the party that caused the harm to bounce his victim into court." Further, where the declaration was sought in order to counteract the possible or anticipated effect of foreign proceedings, there has been greater reluctance still.

A trilogy illustrates the point. In Guaranty Trust Co v Hannay,'² the court said that the declaration was one which would hardly ever be made, and that the applicant would be left to set up his defence in the substantive proceedings when they were brought (in that case, in America). In Camilla Cotton Oil Co v Granadex SA,'³ the court observed that its power to make the declaration was constrained by an assessment of whether it was useful to do so: if it would have no effect upon the foreign proceedings (in that case, in Switzerland), it would not be made. And, in First National Bank of Boston (‘FNBB’) v Union Bank of Switzerland,^[1] the Court of Appeal stated that the court would not act unless it saw some good purpose in making the declaration. Two factors led the court to the conclusion that no useful purpose would be served in that case. First, the substantive claims, in relation to which declarations were sought, were ‘properly’ brought against FNBB in Switzerland, in that FNBB carried on business in Switzerland. Second, the declaration, if made, would be ignored by the Swiss courts, and its proceedings would continue to judgment in any event. There was, the court considered, no purpose in making the declaration, and, though it had jurisdiction, the court would exercise its discretion not to do so.

The judgment which repudiated the earlier attitude of jurisdictional hostility also departed from the non-jurisdictional suspicion that such proceedings were inherently unwelcome. In Messier-Dowty Ltdv Sabena SA,' Lord Woolf MR acknowledged that the declaratory judgment was capable of helping to ensure that the aims of justice were met, and in such cases the court ‘should not be reluctant to grant such declarations’. So if the declaration will serve a useful purpose, it would not be wrong to make it. It is, no doubt, proper that a court keep a watchful eye on the proceedings, and exercise its discretion so as not to allow actions to be brought if they are premature or vexatious (such as where the opposite party has himself made no real threat to institute proceedings) or if the claimant has in some other sense brought the proceedings for improper or oppressive reasons. But in the adult world of commercial litigation it is at least arguable that, although a claim may be seen as the property of a claimant, a dispute held in common. As a result of this latter point, the choice of whether, where and when to sue should not be the sole prerogative of one party alone. As said above, a commercial concern may legitimately need to know whether it is or continues to be

D PROCEDURAL MATTERS RELATING TO JURISDICTION bound to another; an insurer may need to know whether he has a contingent liability to his insured.

There will therefore be cases in which a ‘natural defendant’ should be expected to wait for the ‘natural claimant’ to institute proceedings when he chooses, if at all. If, for example, it is said that a simple money debt is owed, there is no obvious reason why it should be considered appropriate, still less essential, for the debtor to bring matters to a head, before the potential creditor has decided whether to sue for it. To put the point another way, perhaps a privilege of non-going to a court is an aspect of, or the counterpart of, the right of access to a court. But if the claimant is facing a defendant who insists that he is entitled to act, or to continue to act, as distributor of the claimant’s goods, the claimant wishing to put in place different distributorship arrangements, it may be commercially impossible for the claimant to remain commercially inhibited or paralysed unless and until the defendant chooses to launch proceedings of his own. A sensible judicial service to commercial parties must allow such difficulties to be resolved in the light of commercial necessities; and the action for declaratory relief is often the best and fairest way for this to be done.

¹

The terminology is that of Lord Woolf MR in Messier-Dowty Ltd v Sahena SA.

• [1] [1915] 2 KB 536. See also Re Clay [1919] 1 Ch 66; Insurance Corporation of Ireland v Strombus International Insurance [1985] 2 Lloyd's Rep 138; Booker v B«?// [1989] 1 Lloyd’s Rep 516; New Hampshire Insurance Co v Strabag Bau AG [1992] 1 Lloyd’s Rep 361; New Hampshire Insurance Co v Aerospace Finance Ltd [ 1998] 2 Lloyd’s Rep 539. 2 [1976] 2 Lloyd’s Rep 10. 3 [1990] 1 Lloyd’s Rep 32. The litigation pre-dated the coming into force of the Lugano Convention. 4 [2000] 1 WLR 2040, applied Youell v Kara Mara Shipping Services Co £trf[2000] 2 Lloyd's Rep 102; Chase v Ram Technical Services Llr/[2000] 2 Lloyd’s Rep 418. 5 At 434. For the proposition that the question whether it would be useful to make the declaration does not benefit from being over-analysed, see BNP Paribas SA v Trattamento Rifiuti Metropolitan SpA [2020] EWHC 2436 (Comm). 6 It will not be useful to make a declaration of issues as an English court would see them ‘for the benefit of’ a foreign court when there is little or no evidence that the foreign court would be grateful for it; still less if the purpose of the application is really to establish a 'blocking'judgment of the English court: Howden North America Inc v Ace European Group Ltd [2012] EWCA Civ 1624, [2013] Lloyd's Rep IR 512; see also Citigroup Global Markets Ltd v Amatra Leveraged Feeder Holdings Ltd [2012] EWHC 1331 (Comm), [2012] 2 CLC 279. Cf Navig8 Pte Ltd v AI-Riyadh Co for Vegetable Oil Industry [2013] EWHC 328 (Comm), [2013] 2 Lloyd's Rep 104 (useful to make declaration because English law had been chosen to govern the bills of lading, and it was useful to give a judgment which would prevent enforcement of a contradictory Jordanian judgment).