Declaratory relief and foreign proceedings: Radia v Jhaveri

The case of Radia v Jhaveri confirms the reluctance of English courts to exercise their discretion to grant a declaration which may or is likely to influence foreign proceedings, unless there is a special reason to do so.

Brief background to declaratory relief

The High Court’s power to grant a declaration derives from section 19 of the Senior Courts Act 1981. The court is entitled to make a declaration without another remedy or financial award.

The court has discretion whether or not to grant a declaration in the circumstances of any particular case. Aikens LJ summarised seven principles for the court to consider in exercising this discretion in Rolls-Royce Plc v Unite the Union.

In general, English courts will refuse to grant declarations intended or likely to influence the outcome of proceedings before foreign courts unless there is a special reason to grant one. The position may, of course, be different where the request for assistance has come directly from a foreign court.

Context of the case

The Claimant asked the court to make a declaration regarding his ownership of shares. Unusually, the Claimant wanted a declaration that he had no beneficial interest in shares held either solely or jointly with his brother, and that these shares were instead held on bare trust for the Defendant and/or the Defendant’s company. The reason for this request to confirm lack of ownership related to enquiries by Indian authorities. They had issued a notice to the Claimant, alleging he and his brother had borrowed money from an overseas company to acquire the shares without obtaining prior approval from the Reserve Bank of India, as was required of an Indian resident and national under local law. The notice required the Claimant to prove he had not contravened the relevant Act. The Claimant alleged that the investigation had been prompted by a letter sent on behalf of the Defendant containing false statements about the acquisition and ownership of the shares.

Key considerations in this case

In deciding whether or not to exercise discretion to make the declaration, Greenbank J referred to the seven principles, analysing three in more depth:

1. Whether there was a real dispute between the parties – here there was a dispute between the parties, but the judge noted: (i) the shares in this case were worthless and so the Defendant’s unwillingness to participate in costly proceedings over their ownership was understandable; and (ii) the Claimant’s real purpose in bringing the proceedings was that he hoped to obtain the declaration to use in his response to the Indian authorities.

2. Was the court satisfied all sides of the argument will be fully and properly put – the Defendant had acknowledged service and filed a Defence, but then refused (by emails to the court and Claimant) to participate any further in the proceedings. He did not produce any evidence. The judge noted, in particular, evidence relating to a disputed oral agreement between the parties regarding the creation of a bare trust over some of the shares could have assisted the court. The company in which the shares were held had also refused (by email to the Claimant’s solicitors) to participate in proceedings. Evidence regarding detail of the payments made to subscribe for the shares and the entries made in the register of members could have assisted the court. The Claimant’s brother would also be affected by the declaration and was not a party to the proceedings. For all these reasons, the court could not be satisfied that the case of all those potentially affected would be fully and properly put.

3. Were the proceedings the most effective way of resolving the issues raised – the Claimant’s real dispute was with the Indian authorities. Greenbank J did not consider it appropriate to make a declaration in proceedings, where not all parties were engaged, that could impact the Indian authorities’ investigation.

For these reasons, the judge declined to grant the declaration, commenting “it would not be appropriate for the court to grant declaratory relief in this case”.

Implications

The courts have discretion to consider whether or not to grant a declaration, but they will be very unlikely to do so – as evidenced by this case – where granting the declaration could fetter a foreign court or authority. In this case, the court could not fully resolve all disputed issues of fact without the engagement of other parties, and there were no foreseen English proceedings or other utility to the declaration except to influence foreign proceedings.

This article forms part of our Parallel Proceedings Autumn 2021 update.