Saxon Woods Investments Limited and others v Francesco Costa

Section 172(1) of the Companies Act 2006 requires a director to act, and not merely to think, in good faith. A court must respect a genuine business judgment about the company’s interests, but it determines objectively whether the director’s conduct satisfies the fiduciary duty of loyalty.

Where the constitution entrusts management to the board collectively, a dissenting director must disclose and discuss an alternative strategy. A genuine belief that the strategy would benefit the company does not permit covert action, deception or the subversion of a board decision. Such conduct may breach section 172(1), alongside duties to comply with the constitution and use delegated powers for their proper purposes. Dishonesty may evidence disloyalty, but a separate dishonesty test is unnecessary where fiduciary loyalty supplies the governing framework.

Saxon Woods Investments Limited and others v Francesco Costa concerned a director who had been entrusted with a corporate sale process. Believing that a later sale would produce a better return, he concealed information, misled the board and delayed the process contrary to the strategy approved by the board and recorded in a shareholders’ agreement. The anticipated sale was subsequently frustrated by the pandemic.

The High Court, [2024] EWHC 387 (Ch), found unfair prejudice but no breach of section 172(1) of the Companies Act 2006, because the director sincerely believed that he was advancing the company’s interests. It made a conditional buy-out order. The Court of Appeal, [2025] EWCA Civ 708; [2025] Bus LR 2443, held that the director had breached his fiduciary duty and substituted an unconditional buy-out order.

The principal issue was whether good faith under section 172(1) concerns only the director’s genuine business judgment or also governs the conduct used to implement it. A related issue concerned the proper analytical role of the objective dishonesty test.

1. Appeal dismissed unanimously. Lord Briggs gave the judgment, with which Lord Sales, Lord Hamblen, Lord Burrows and Lady Rose agreed. The director had acted in bad faith towards the company and had breached section 172(1) of the Companies Act 2006.

2. The court respects a board’s genuine business judgment about the means most likely to promote the company’s success. That subjective element prevents the court from substituting its own commercial assessment. It does not give an individual director carte blanche to implement a dissenting view through covert, deceptive or disloyal conduct. The pre-existing equitable duty of loyalty and sections 170(3) and 170(4) required section 172(1) to be construed as regulating conduct as well as thought.

3. Under the usual corporate constitution, responsibility for management belongs to the board acting unanimously or by majority. An individual director must bring an independent view to colleagues, participate openly in collective decision-making and refrain from secretly subverting the resulting decision. The flexible loyalty analysis in Item Software (UK) Ltd v Fassihi [2004] EWCA Civ 1244 supported treating necessary disclosure as an aspect of the fundamental duty rather than as a separate duty.

4. The director had concealed his intended frustration of the approved exit strategy, rebuffed enquiries, misled the board and used delegated authority to pursue an incompatible strategy. His sincere belief that colleagues would ultimately benefit did not make that conduct loyal or undertaken in good faith. The conduct was also capable of breaching section 171(a), by undermining the constitution, and section 171(b), by using delegated powers for purposes inconsistent with those for which they were conferred. That overlap did not remove the conduct from section 172(1).

5. The elaborated objective dishonesty test in Ivey v Genting Casinos (UK) Ltd (trading as Crockfords Club) [2017] UKSC 67 was unnecessary. Dishonesty could be evidence of breach, but fiduciary loyalty supplied the relevant framework. It was also unnecessary to decide whether the shareholders’ agreement conclusively fixed the company’s strategy: changed circumstances may require a board to reconsider a contractual course, even where departure might entail breach of contract.

6. The High Court’s error concerning section 172(1) invalidated its remedial discretion. The Court of Appeal was entitled to exercise that discretion afresh and order the director immediately to buy the petitioner’s shares at their pro rata undiscounted value on 31 December 2019.

1. United Kingdom Supreme Court: In Saxon Woods Investments Limited and others v Francesco Costa [2026] UKSC 21 , the court unanimously dismissed the director’s appeal and left the Court of Appeal’s unconditional buy-out order in place.
2. Court of Appeal: In [2025] EWCA Civ 708 ; [2025] Bus LR 2443, the court dismissed the director’s appeal, allowed Saxon Woods’ appeal, found a breach of section 172 of the Companies Act 2006 and substituted an unconditional buy-out order.
3. High Court: In [2024] EWHC 387 (Ch) , the deputy judge found unfair prejudice but no breach of section 172 or dishonesty. He ordered a buy-out conditional upon proof at a later hearing that the agreed exit process would have produced a qualifying offer by the end of 2019.