CA-2024-001924 - [2025] EWCA Civ 1206

Mr Kulkarni is a consultant surgeon. By 2019, he had worked at St Joseph’s Independent Hospital (“the Hospital”) in Newport, South Wales for many years and was its medical director and, as its “responsible officer”, responsible for clinical governance processes.

The Hospital was owned by St Joseph’s Hospital Limited (“OldCo”). Mr Kulkarni was a director and shareholder of OldCo, as were Mr Brian Staples and Mr Paul Jenkins. Mr Kulkarni held about 22.5% of the shares. Other consultants at the Hospital also had shareholdings, but they were smaller and, unlike the shares held by Mr Kulkarni, Mr Staples and Mr Jenkins, carried no voting rights.

Mr Kulkarni and other consultants had acquired their shares under an Enterprise Investment Scheme, which had tax advantages. One consequence was that Mr Kulkarni could not be an employee of OldCo for the first three years. He became one later, in 2018, in order to meet the requirements of the Private Healthcare Market Investigation Order 2014, which had followed an investigation into the private healthcare market by the Competition and Markets Authority. The 2014 Order imposed a prohibition on clinicians having equity interests in hospitals at which they held practising privileges, but there was an exception for employees.

Mr Kulkarni was also a creditor of OldCo. He put the total amount owing to him at around £750,000.

However, a dispute had arisen involving Mr Kulkarni, Mr Staples and Mr Jenkins and, at least in part as a result, OldCo had serious financial problems. In mid-2019, OldCo sought advice from Begbies Traynor, insolvency practitioners. On 14 February 2020, OldCo appointed administrators.

Some months earlier, Mr Kulkarni had approached Mr David Lewis (“Mr Lewis”), a successful businessman, for assistance. Mr Lewis came to agree to invest in a company (in the event, the Company) that would buy the Hospital from OldCo.

A meeting to work through the arrangements was fixed for 7 February 2020 and, before joining that meeting, Mr Kulkarni, Mr Lewis and Mr Robert Davies, a solicitor who was also a director of both OldCo and the Company, had a separate discussion (referred to in the Judgment as the “Pre-Meeting”) lasting in the region of 15 to 20 minutes. During the Pre-Meeting, Mr Lewis insisted on Gwent having control of the Company’s board and Mr Kulkarni accepted that “because he was forced to”: see paragraph 72 of the Judgment. For his part, Mr Kulkarni raised the £750,000 that he said he was owed by OldCo and a “highly contingent” agreement was reached in that connection which Mr Kulkarni “believed … was binding in honour only”: see paragraphs 77 and 79. A third issue which arose at the Pre-Meeting related to the shares which Mr Kulkarni was to have in the Company. A complicating factor was that, to comply with the Private Healthcare Market Investigation Order 2014, Mr Kulkarni needed to be an employee of the Company, but, if he wished to participate in an Enterprise Investment Scheme, he could not be an employee for three years: see paragraphs 80 and 81. The Judge found that, at the end of the Pre-Meeting, Mr Lewis said something to the effect of “You can have the shares”: see paragraphs 85 and 89.4. The Judge concluded that Mr Kulkarni “could not have understood it to be a binding agreement” and that no contract was in fact concluded: see paragraphs 360 and 362 to 387. However, Mr Kulkarni “strongly believed … that he should not have to pay [for his shares in the Company]”: see paragraph 170.

On 14 February 2020, the day that OldCo went into administration, the Company purchased the Hospital for £2 million.

Mr Kulkarni, Gwent and the Company had entered into the SHA on the previous day. Gwent is a vehicle for Mr Lewis. While his wife is the company’s shareholder and director, Mr Lewis is its directing mind.