The Supreme Court has this morning (14 July 2026) handed down judgment in Saxon Woods v Costa [2026] UKSC 21.
The case concerned the director’s duty under section 172(1) of the Companies Act 2006 to act in the way the director considers, in good faith, would be most likely to promote the company’s success for the benefit of its members as a whole.
Spring Media and its investors had agreed in a shareholders’ agreement to work towards a sale by the end of 2019. The board entrusted the sale process to its chairman, Mr Costa.
Mr Costa believed that waiting would produce a better return. Rather than putting that view openly to the board, however, he controlled the process himself, excluded other directors, misled the board about progress and instructed the company’s advisers on a basis which did not encompass a 2019 sale. He succeeded in delaying the sale, but the Covid pandemic then destroyed the prospect of a profitable exit.
Saxon Woods, a minority shareholder, brought an unfair-prejudice petition.
The trial judge found unfair prejudice but no breach of section 172, because Mr Costa sincerely believed that he was acting in the company’s interests: in effect, “they wouldn’t like it now if they knew, but they will thank me in the long run”. The judge therefore made only a conditional buy-out order, dependent upon Saxon Woods later proving that compliance with the agreed exit strategy would have produced an offer exceeding US$75 million net of debt by the end of 2019.
The Court of Appeal found a breach of section 172 and ordered an unconditional buy-out of Saxon Woods’ shares at their pro rata, undiscounted value as at 31 December 2019.
The Supreme Court has unanimously dismissed Mr Costa’s appeal.
Its central conclusion is that section 172 requires a director not merely to think in good faith, but also to act in good faith towards the company. The court will continue to respect a director’s genuine business judgment and will not substitute its own view of what would best promote the company’s success. But a genuine belief does not give an individual director carte blanche to pursue a dissenting strategy covertly, mislead fellow directors or subvert the board’s constitutional responsibility for managing the company.
The Supreme Court did not use the Ivey test of dishonesty which applies, for example, to dishonest assistance claims. The broader fiduciary duties of loyalty and good faith supplied the relevant framework. Nor did it decide that a shareholders’ agreement invariably prevents a board from changing strategy if circumstances change. The vice was the covert and disloyal means by which Mr Costa pursued his own course.
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