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

When the SHA was entered into, Mr Kulkarni did not in fact hold the shares in the Company which the SHA recorded. While Gwent became the owner of the 1,718 shares specified in the SHA at that stage, Mr Kulkarni had just the single share which he had acquired on the Company’s incorporation. As I have mentioned, it was his belief that he should not have to pay for the other 1,651 shares which the SHA attributed to him.

As for the Company’s board, at the point the SHA was concluded that comprised Mr Kulkarni and a number of other individuals who had been directors of OldCo. These included Mr Stuart Hammond, who had been the chief executive of OldCo and now became the chief executive of the Company.

On 17 February 2020, Mr Andrew Lewis, a brother of Mr Lewis, joined the Company’s board. Mr Lewis largely left the running of the Company to Mr Andrew Lewis, who was also a director of Gwent.

Mr Andrew Lewis and Mr Kulkarni had very different views about the future direction of the Hospital and the Company. From an early stage, Mr Andrew Lewis formed the view that Mr Kulkarni was not someone who should be managing the Hospital. Matters were aggravated by the Covid-19 pandemic. Not only was elective surgery such as Mr Kulkarni undertook suspended, but he was advised to shield. While Mr Andrew Lewis had initially tried to work with Mr Kulkarni, from 7 May 2020 he ceased to do so and instead sought to resolve the situation unilaterally.

On 21 June 2020, Mr Kulkarni emailed Mr Hammond to inform him that he was going to stop shielding and would be returning to work. That same evening, Mr Andrew Lewis purported to dismiss Mr Kulkarni for gross misconduct. The Judge described this action as “wholly misconceived” (paragraph 239 of the Judgment) and said that Mr Kulkarni was “fully entitled to feel aggrieved” (paragraph 248).

On 25 June 2020, Mr Kulkarni resigned both as a director and as an employee of the Company with pay in lieu of notice. He was sent a stock transfer form so that he could transfer to Gwent the only share in the Company that he then held. He did not, however, execute this. The Judge commented in paragraph 267 of the Judgment that Mr Kulkarni “was in a position he did not want and he hoped that Mr and Mrs Lewis would step in”.

On 21 August 2020, however, Gwent procured the Company to allot to it both the 1,651 A Shares which had been attributed to Mr Kulkarni in the SHA and also 2,000 B Shares.

A week later, on 28 August 2020, Mr Andrew Lewis wrote to Mr Kulkarni attaching a termination notice which read:

“Without prejudice to any argument we might have that the [SHA] never came into force and effect, we are writing to you today to give notice to terminate (or cancel) the SHA with immediate effect.

Our termination is on the grounds that the SHA is based on a fundamental flaw, namely that the Initial Shareholders included Mr … Kulkarni owning 1,652 A Shares in [the Company]. By contrast, Mr Kulkarni only owned 1 A Share and he did not properly subscribe for, nor was he issued with, any additional 1,651 A Shares.

Our termination of the SHA is without prejudice to any other rights or remedies we might have, and we reserve all those rights and remedies. You do not have to acknowledge this letter for it to be effective. However, we would be grateful if you could acknowledge receipt by return email.”

On 21 May 2021, Mr Kulkarni’s then solicitors sent letters of claim to Gwent and the Company. As well as asserting claims, these sought to exercise the right conferred on Mr Kulkarni by clause 13.2 of the SHA to appoint a director. Mr Shelim Hussain was named as the appointee.

However, Mr Andrew Lewis promptly sent Mr Hussain an email in which he said that “neither Gwent Holdings nor I personally accept the validity of your purported appointment”. On 10 June 2021, Gwent’s solicitors wrote that, “as the SHA has been rescinded by our client, your client has no entitlement to appoint a director”.

Gwent subsequently backtracked. In a letter from its solicitors dated 24 September 2021, the Company recognised that Mr Kulkarni was still entitled to appoint a director. At first, the solicitors argued that clause 13.4 of the SHA required notification to every other shareholder and the Hospital before Mr Hussain’s appointment could be confirmed. At a meeting on 12 November 2021, however, the Company’s board approved the appointment.

Also on 24 September 2021, the Company’s solicitors wrote to Gwent’s solicitors inviting it to return the 1,651 A Shares with a view to their being registered in Mr Kulkarni’s name and also to return the 2,000 B Shares. The Judge explained what happened next as follows in paragraph 303 of the Judgment:

“[Gwent’s solicitors] agreed to the proposal on 27 September 2021. Shareholder approval for the buyback of the A and B Shares was granted by way of written resolution on 29 September 2021. The shares were returned to [the Company], which held them in treasury, and the purchase price refunded to Gwent. This is what the Defendants rely on to show remediation of the A and B Shares Breaches. On 26 May 2022 following unconditional payment by Mr Kulkarni of £80,000 [the Company] transferred to him the A shares that it held in treasury.”

The present proceedings had been issued on 13 October 2021. By them, Mr Kulkarni claimed, among other things, that Gwent had breached the SHA by procuring the Company to allot the 1,651 A Shares to it (“the A Shares Breach”), by causing the Company to allot 2,000 B Shares to it (“the B Shares Breach”), by purporting to terminate the SHA on 28 August 2020 (“the Termination Breach”) and by refusing to recognise Mr Hussain’s appointment as a director of the Company (“the Hussain Breach”). Mr Kulkarni claimed that, in consequence, Gwent was deemed to have served a Transfer Notice pursuant to clause 7.1(d) of the SHA.

By the time the matter came on for trial before the Judge, Gwent admitted the A Shares Breach, the B Shares Breach and the Termination Breach; that those breaches were “material” (within the meaning of clause 7.1(d) of the SHA); and that the first and third were repudiatory. The Judge concluded that all three breaches were “persistent” (within the meaning of clause 7.1(d)) as well as “material”: see paragraphs 6.9 and 425 of the Judgment. He held, too, that the delay in appointing Mr Hussain as a director was a breach of the SHA and that that breach was “material” and “persistent”: see paragraphs 6.7, 6.8, 419, 424 and 425.

The Judge also, however, concluded that the A Shares Breach, the B Shares Breach, the Termination Breach and the Hussain Breach had all been capable of being remedied and had in fact been remedied: see paragraph 6.10 of the Judgment. On that basis, the Judge held that Mr Kulkarni was not entitled to declarations in respect of the service of a Deemed Transfer Notice: see paragraph 6.14 of the Judgment.

Mr Kulkarni now appeals against the Judgment.