Are repudiatory breaches capable of remedy? Kulkarni v. Gwent Holdings [2025] EWCA 1206

A recent judgment by the Court of Appeal decided that a repudiatory breach of a contract may be capable of remedy. In this article we look at the decision in more detail and consider its practical consequences for the contract drafter. 

The facts

The case arose from a shareholder's agreement (‘SHA’) between Mr Kulkarni (a surgeon) and Gwent Holdings (‘Gwent’), relating to a company (the ‘Company’) that owned a hospital in Newport. Whilst each shareholder had a right to appoint a director to the board of the Company, Gwent had a majority shareholding and control of the board. There were restrictions on dealing with shares without shareholder consent.

The key term of the SHA (Clause 7) provided that whenever a party committed a material or persistent breach which, if capable of remedy, was not remedied following a request to do so, they were deemed to serve a transfer notice on the other shareholder(s), and the price of the  shares transferred would be restricted to “a maximum of the lower of the subscription price paid in respect of each Sale Share, including any share premium, and the Fair Value of each such Sale Share.” 

The relationship between the shareholders broke down and Gwent and the Company took various steps to limit Mr Kulkarni’s rights, namely: 

1. Dismissing Mr Kulkarni for gross misconduct – something which the court said was “wholly misconceived” (Mr Kulkarni subsequently resigned as a director but remained a shareholder);
2. Seeking to procure Mr Kulkarni’s shares without shareholder consent;
3. Purporting to terminate the SHA on a technical basis that Mr Kulkarni hadn't actually subscribed for the shares that were set out in the SHA; and
4. Rejecting an attempt by Mr Kulkarni to appoint a director to the board of the Company on the basis that the SHA had been terminated. 

Some months later, however, the Company backtracked and accepted the new director's appointment and Gwent returned Mr Kulkarni’s shares and, in doing so, tacitly recognised that the SHA was ongoing.

The dispute

Mr Kulkarni argued that Gwent had committed material, persistent and repudiatory breaches of the SHA by procuring his shares, attempting to terminate the SHA and refusing to recognise the appointment of his nominated director. He argued that, as a result, Gwent was deemed to have served a share transfer notice, and he was entitled to buy its shares at a lower of the purchase price and market value.
Gwent accepted that it had breached the agreement, even in a repudiatory manner, but claimed that it had remedied those breaches by returning the shares, accepting the director's appointment and recognising the continued effect of the SHA. In its judgment, the High Court found for Gwent and held that there was no deemed transfer of shares. Mr Kulkarni appealed. 

The appeal

Can repudiatory breaches be remedied?

Mr Kulkarni’s appeal raised various issues, the key one being whether a repudiatory breach is, by its nature, capable of remedy. If Gwent’s repudiatory breaches in this case were not capable of remedy (as Mr Kulkarni argued), Gwent would be deemed to have served a transfer notice automatically, irrespective of the ‘remedy’ wording in Clause 7. 

The Court of Appeal rejected Mr Kulkani’s argument, holding that:

1. A repudiatory breach may or may not be capable of remedy, depending on the nature of the breach.
2. Clause 7 made no distinction about the type of breach; all breaches, if not remedied after notice was given would give rise to the deemed transfer.
3. The clause could have been drafted differently, to expressly exclude repudiatory breaches from the process, and to provide that they were to be treated as irremediable under the contract. This was a purely contractual issue – and the parties did not agree to such wording. 

The court drew a clear distinction between repudiatory breaches of common law, which give an innocent party the right to either affirm the contract or accept the repudiation and terminate, and the contractual position. In contract, the analysis of repudiatory breaches must be “practical rather than technical” and there is therefore no presumption whether repudiatory breaches can be remedied.

Meaning of ‘remediable’ 

Having established that repudiatory breaches can in principle be remedied, the court considered whether, in practice, the breaches in this case were remediable.

The court summarised the key case law on the issue, citing various decisions from the commercial courts, including two key examples concerning breaches of a lease. The first was in Rugby School v Tannahill[1], where the illegal use of the property as a brothel was deemed irremediable, because although the illegal use could be stopped, the property and the freeholder would suffer prejudice on an ongoing basis – “the continued stigma precluded remediability”. The court contrasted this with a breach of an obligation to paint a property every fifth year in Hoffmann v Fineberg[2] - although the leaseholder couldn’t rewind the clock to meet that obligation, they could easily remedy the breach by painting in the sixth year and there wouldn't be any ongoing prejudice.

The court also considered Force India Formula One Team v Etihad Airways[3], a case concerning sponsorship of the Spyker Formula One team. Etihad paid to sponsor Spyker for a period of three years. During this period, Spyker was bought by Force India, and its new owner changed the name of the team and the logos on the car. Although, at first instance, the court held that this breach was remediable, because Force India could change the logos and the name back, the Court of Appeal disagreed, noting that “the marketing genie cannot be put back into the bottle” - a proper marketing campaign is a single, coherent exercise and the change of team name and logos would have a lasting effect on how fans and businesses would view the team and the value that Etihad would get out of its sponsorship. As such, there would continue to be lasting prejudice.

Applying this caselaw to the present case, the Court of Appeal held that Gwent’s breaches were remediable and were remedied:

1. The transfer of shares could be, and was, reversed by returning the shares.
2. The purported termination of the SHA in fact, had changed nothing as it wasn't effective – the SHA was ongoing because the termination was invalid, and so there was no damage to remedy.
3. The director breach was remedied by accepting the appointment at a later date. The court remarked that this breach could have caused ongoing prejudice - for instance, if decisions were taken or information was discussed at meetings where a director wasn't present – but it did not in this case.  

Finally, Mr Kulkarni argued that because Gwent’s breaches were intentional and repetitive, they had caused ongoing and irremediable damage to the parties’ relationship. The court also rejected this argument – holding that the SHA was “a commercial agreement, when assessing remediability” and that, although Gwent had breached the SHA, it hadn't stepped outside the “range of decisions that the management of a business frequently has to consider”. The parties could therefore assume that the SHA would continue to operate on a reasonable commercial basis.

Key takeaways
The key takeaway from this case is that repudiatory breaches of contract may be capable of remedy. Whether in fact a breach can be remedied is a practical, forward-looking question: can matters be put right, or will ongoing prejudice flow from the breach?

On a practical note, therefore, parties wishing to ensure that repudiatory breaches lead to a termination right, without any potential for remedy, should expressly provide for this in the wording of the contract.