Can A Repudiatory Breach Be Remedied? UK Contract Law Explained

If a breach of contract is repudiatory in nature, can that breach ever be remedied, or is it automatically irremediable? The Court of Appeal recently considered this and related questions in its judgment in Kulkarni v Gwent Holdings Ltd & Anor [2025] EWCA Civ 1206. In this article we outline key aspects of the judgment and highlight practical considerations for parties assessing termination rights, remedies and next steps when a breach arises.

Breach of contract made simple

Where one party is in breach of contract, the innocent party may have various options:

• Common law rights – for the most serious ("repudiatory") breaches, which deprive the innocent party of substantially all the benefit of the contract, the innocent party can choose either to affirm or terminate the contract – unless this right has been clearly excluded.
• Contractual rights – the parties' contract may also provide for termination rights and other remedies in the case of breaches which may not necessarily amount to repudiation at common law. The contract may classify these as 'material', 'substantial' or 'serious' breaches for example.

Background to the dispute

The dispute arose in the context of a shareholders agreement (SHA) concerning the operation of an independent hospital. There were two initial shareholders in the hospital operating company – Mr Kulkarni, and Gwent Holdings.

Under the SHA, certain events would trigger a process for the compulsory transfer of a shareholder's shares. One of those trigger events was "the Shareholder committing a material or persistent breach of [the SHA] which, if capable of remedy, has not been so remedied within 10 Business Days of notice to remedy the breach being served..."

Following disagreements between the shareholders about operation of the hospital, Mr Kulkarni brought proceedings alleging that Gwent had committed various material breaches of the SHA, and that those breaches had triggered the provisions in the SHA for compulsory transfer of Gwent's shareholding.

By the time of the trial, Gwent admitted three of the alleged breaches of the SHA. It also admitted that these breaches were 'material' within the meaning of the SHA, and that two of them were repudiatory in nature. At trial, the judge found that there were four 'persistent' and 'material' breaches within the meaning of the SHA – but concluded that all four breaches (a) were remediable and (b) had in fact been remedied - meaning that Mr Kulkarni was not entitled to compel Gwent to transfer its shares. Mr Kulkarni appealed.

Issues on appeal:

The main issues in the appeal were as follows:

If a shareholder's breach of the SHA is remediable, but no notice to remedy is served, is the compulsory transfer process triggered?

The compulsory transfer clause in the SHA contained cure wording – "a material or persistent breach of [the SHA] which, if capable of remedy, has not been so remedied within 10 Business Days of notice to remedy the breach being served."

At first instance the judge held that, on a proper interpretation of this clause, in the event of a breach that was capable of remedy, the share transfer process was not triggered until the 10-day cure period had elapsed. Since no notice to remedy had ever been served in this case, the transfer process was not engaged.

On appeal, Mr Kulkarni argued that remediation was only relevant if a notice to remedy was actually served. If no notice to remedy was served, then any material or persistent breach triggered the transfer clause, regardless of whether the breach was remediable (or in fact remedied).

The Court of Appeal upheld the judge's decision – on a proper construction of the SHA, a shareholder could not trigger the compulsory transfer process on the strength of a remediable breach without serving a remedy notice.

This led the court to the second issue under consideration – whether a breach which is repudiatory in nature can ever be remediable.

Is a repudiatory breach of the SHA necessarily incapable of remedy for the purposes of clause 7.1(d)?

Under this issue, the court considered the interaction between the common law right to terminate for repudiatory breach, and alternative contractual rights that may arise from the same breach. At first instance, the judge made clear that while the breaches were repudiatory in nature (i.e. they could have given a right to terminate at common law), that did not necessarily mean they could not be remedied within the meaning of the SHA.

Mr Kulkarni argued on appeal that a repudiatory breach of the SHA could never be capable of remedy, and so there was no need to serve a notice to remedy.

Citing a number of authorities drawn from different sectors, the Court of Appeal agreed with the judge that "[t]he fact that certain of the breaches of the SHA were repudiatory in nature ... did not, in itself, render them irremediable for the purposes of clause 7.1(d)".

A practical, not technical test

The court went on to say that, when determining if a breach of contract is remediable, the court will usually apply "a practical rather than technical approach" in which common law rules of repudiation have no place. The key question is whether the mischief caused by the breach can be removed, to put matters right for the future. For example, drawing on previous authorities:

• Most breaches of tenant covenants are remediable – for example repainting a house in the sixth year of a lease rather than the fifth does not remove the breach, but it removes the mischief. By contrast, unauthorised subletting and illegal or immoral use of the property are incapable of remedy.
• Meanwhile in Force India Formula One Team Ltd v Etihad Airways PJSC & Anor [2010] EWCA Civ 1051, the court found that displaying a Formula 1 car with new sponsor livery was not remediable by reverting to the old livery, saying "the marketing genie cannot be put back into the bottle".

Were Gwent's breaches of the SHA remediable?

Applying that "practical not technical" test, the Court of Appeal held the judge in this case was entitled (and right) to find that Gwent's various breaches of the SHA were capable of remedy:

• The mischief of unauthorised transfers of shares could be reversed by returning the shares to the company;
• A breach whereby Gwent terminated the SHA was remediable as nothing changed in practical terms – to borrow the court's phrase in the Force India case, "the genie never truly left" the bottle;
• The failure to appoint Mr Kulkarni's nominated director had been remedied for the future. While exclusion from management could in principle have irremediable consequences, in this case the late appointment made no practical difference.
• The court added that motivation for the breach, and whether it is deliberate, will not normally be important in assessing whether the breach is remediable.
• Finally, Mr Kulkarni argued that a breach was not "capable of remedy" within the wording of the SHA if the remedy could not be achieved within the 10-day cure period – and in this case the share transfers were not effected within that period. The court was not persuaded by this argument – first, because it considered the share transfer was capable of being achieved within that period (even though it was not, in practice); and secondly because no remedy notice had actually been served in this case, meaning the 10-day period was immaterial.

What is the impact for shareholders and beyond?

While this judgment revolved around a shareholders' agreement, the principles considered by the Court of Appeal may have potential application in a much wider range of scenarios - for example when exercising termination rights for material breach in commercial contracts. Key considerations for those operating any such contracts can be summarised as follows:

• The same breach of contract may in principle be both:
  • repudiatory at common law – giving the innocent party a right to terminate which, once accrued, cannot be remedied; and
  • remediable under the contract – meaning that the innocent party may need to take further steps (e.g. serving a cure notice) before exercising their rights under the contract.
• If the parties intend that any repudiatory breach of the contract should be considered incapable of remedy (or indeed if they wish to exclude the possibility of repudiatory breach at common law) this can be achieved, but will require clear drafting.
• In the absence of such drafting, whether any particular breach is capable of remedy is to be assessed by taking a practical rather than technical approach, focusing on whether the mischief caused by the breach can be put right for the future.
• Parties seeking to exercise contract rights arising on breach must therefore take care to comply with any contractual requirements for cure notifications etc.

Read the original article on GowlingWLG.com

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