Saxon Woods Investments Limited v Francesco Costa & Ors

Permission to appeal requires a realistic, properly arguable prospect of success, rather than a merely fanciful or arguable case. A good-faith decision by directors that breaching a contract serves the company’s or shareholders’ interests does not prevent the breach from occurring and does not necessarily breach fiduciary duty. Under Companies Act 2006, s.996, a buy-out is common but not automatic. The court must assess the parties’ position and the prejudice actually established. Where liability is established but material prejudice depends on a later valuation trial, relief and costs may be deferred. A company should not finance a shareholder unfair-prejudice petition where the dispute is substantively between shareholders and the company is not a genuine protagonist.

The judgment concerned consequential matters following the court’s earlier liability judgment of 22 February 2024. The petitioner alleged that the company’s affairs had been conducted unfairly because the first respondent delayed a sale process contrary to a shareholders’ agreement. Liability and unfair treatment had been established, but whether the petitioner suffered material financial prejudice depended on a further quantum trial concerning the offer that would probably have been obtained.

The court considered directions for that trial, applications by both parties for permission to appeal, costs, the financing of the first respondent’s defence from company funds, injunctive relief, and the form of order.

1. Permission to appeal. Under CPR r.52.6(1), permission requires a real prospect of success or another compelling reason. “Real” means realistic rather than fanciful, and the proposed appeal must carry some degree of conviction. Challenges to factual findings require a realistic prospect of showing that the findings lacked evidential support or that no reasonable judge could have reached them. None of the proposed grounds met that threshold.
2. Relief for unfair prejudice. The court explained that Grace v Biagoli did not require an immediate buy-out in every case. Although all relevant circumstances must be considered, the remedy must be related to the parties’ actual position and the prejudice proved. The petitioner’s principal alleged loss was the lost opportunity to exit, which depended on whether a sufficiently valuable offer would have been accepted by the shareholders. A buy-out was therefore to be ordered only if the quantum trial established the necessary conditions.
3. Directors’ duties and contractual breach. Applying Regentcrest plc (in liquidation) v Cohen, the relevant question was whether the director honestly believed that his act or omission was in the company’s interests. A good-faith decision to delay the sale could avoid a fiduciary-duty breach, but it did not answer whether the company had breached its contractual obligation to work towards an exit by the specified date.
4. Costs and company funding. Applying Ashdown v Griffin, with the proceedings viewed as a whole, it was premature to identify a successful party before the quantum trial; costs were reserved. Payments from company funds towards the first respondent’s defence were unlawful. The petition was substantively a dispute between shareholders, not one in which the company was a genuine protagonist. An injunction restraining further payments was granted, with the petitioner’s costs of that issue.

The judgment followed the court’s earlier liability judgment of 22 February 2024, for which no citation is stated in the judgment. It dealt with consequential directions and refused both parties permission to appeal.