14 September 2026
When directors disagree about how best to serve their company’s best interests, can a single director unilaterally and covertly pursue their preferred approach because they honestly believe it is the right one?
That question was before the United Kingdom’s Supreme Court earlier this year, after a 2024 decision in which, somewhat surprisingly, the trial judge determined the answer to be ‘yes’: Saxon Woods Investments Ltd v Costa & Ors [2024] EWHC 387 (Ch). The court at first instance was satisfied that the director in question genuinely believed his preferred strategy to be in the company’s best interests and, on that basis, held that he had not breached his duties or acted dishonestly.
However, this finding was reversed on appeal, and the reversal upheld, effectively confirming that the correct answer to the question is ‘no’: Saxon Woods Investments Ltd v Costa [2026] UKSC 21 (Saxon Woods). In so concluding, the Supreme Court confirmed that whilst an individual director’s genuine, subjective belief as to the best approach is relevant, the Court must assess whether the director has breached their duties of loyalty and good faith by reference to objective elements.
Although Saxon Woods ultimately confirms long-settled principles regarding individual directors’ duties and collective Board responsibility, it offers a useful reminder of how those principles apply when directors hold genuine, but competing, views as to the company’s best interests. It also serves to warn directors that, even if they honestly believe their preferred approach is in their company’s best interests, this does not give them licence to ‘go rogue’ by pursuing that approach without their fellow directors’ knowledge.
Background
The appellant, Francesco Costa, was a director and former chairman of the board of Spring Media Investments Limited (the Company), the ultimate holding company for a group that provided creative services in the fashion, beauty and luxury brand sectors. The first respondent, Saxon Woods Investments Limited (SW Investments), was a minority shareholder in the Company.
In 2016, the Company executed a shareholder’s agreement with SW Investments and other investors (the SHA) to pursue an exit strategy for the sale of the Company’s share capital. The SHA contemplated an exit by the end of 2019, and Mr Costa was entrusted by the Board to pursue the exit strategy.
Mr Costa, contrary to the majority, considered that a delayed sale would produce a greater financial return for the Company and its investors. He therefore used his control of the sale process to pursue a different exit strategy, without the Board’s knowledge. This included rebuffing fellow directors’ attempts to gain knowledge of the exit process; misleading the Board; and employing various delaying tactics. While Mr Costa’s goal of delaying any sale until after 2019 succeeded, that decision unfortunately proved catastrophic due to the COVID-19 pandemic’s effect on the Company’s business: Saxon Woods at [19] – [22].
Procedural history
At first instance, SW Investments successfully argued that Mr Costa’s conduct of the Company’s affairs had caused it unfair prejudice. However, the trial judge also concluded that Mr Costa’s conduct did not involve dishonesty or constitute a breach of his duty of good faith, relying upon a 2001 decision in which the duty was characterised as ‘subjective’. His Honour then went on to state at [208]:
I do not believe that it was his intention … actively to injure either the Company or any investor. I think his state of mind might be summarised as ‘they wouldn’t like it now if they knew, but they will thank me in the long run’. Put another way, I think Mr Costa did sincerely believe that he was acting in the best interests of the Company and its investors.
This finding was unanimously overturned: Saxon Woods Investments Ltd v Costa (Re Spring Media Investments Ltd) [2025] EWCA Civ 708 (EWCA Decision). The Court of Appeal noted that the 2001 case merely confirmed that it is for the company’s directors to decide the best commercial approach for a company, and a court will not find a breach of fiduciary duty simply because it may have taken a different commercial view: EWCA Decision at [106].
The Court of Appeal confirmed that the test for whether a director has acted dishonestly requires an objective assessment of their conduct, in the light of the facts as they knew or believed them to be at the time: EWCA Decision at [110]. Their Honours concluded that Mr Costa’s conduct could only have led to a finding that he had acted dishonestly and thus breached his duty, observing at [123]:
The finding that Mr Costa appreciated that his fellow directors and members, ‘wouldn’t like it now if they knew, but they will thank me in the long run’, emphasises, rather than negates, that dishonesty and thus the breach of fiduciary duty … Deliberately deceiving the board of a company must, either always or almost always, be inconsistent with a director’s duty under section 172. We do not rule out the possibility of wholly exceptional circumstances where this may not hold good, but nothing of the kind exists in this case.
Mr Costa appealed to the Supreme Court, effectively arguing that provided an individual director genuinely believes their preferred way forward for the company is most likely to promote its success, it is entirely a matter for that director how they should act to secure that objective: Saxon Woods at [3].
Arguments presented and Supreme Court decision
Counsel for Mr Costa contended that, as the test for breach of the duty has been described as ‘subjective’, the only relevant consideration in determining whether Mr Costa had acted in good faith was whether his thought process evidenced a genuine belief that he was acting in the Company’s best interests.
Conversely, counsel for SW Investments argued that the good faith requirement imposed by the statutory duty extends beyond the director’s thinking, to include their conduct in pursuit of their desired objective. SW Investments argued that, even if a court will not second-guess a director’s genuine view about the best way forward, the assessment of whether they have acted in good faith still involves an objective element.
The Supreme Court ultimately preferred SW Investments’ construction as more consistent with pre-existing common law principles, and with the context and purpose of the Companies Act 2006 (UK) (UK Act). The Court confirmed that whilst its analysis should begin by accepting the business judgment of the Board or an individual director, this does not give an individual director ‘carte blanche to seek to implement their dissenting view by any means, however covert or disloyal, he thinks necessary’: Saxon Woods at [56].
The Court also observed that Mr Costa’s proposed construction of s 172, by which a director would only be required to think rather than act in good faith, ‘would be a recipe for chaos and paralysis in corporate governance, and destructive of the collegiality of the board of directors as a whole which all stakeholders in limited companies are entitled to expect’: at [60].
The Australian context and implications for directors
Section 172 of the UK Act mirrors the duty of good faith in s 181(1)(a) of the Corporations Act 2001 (Cth). Given the similarity between the provisions, Australian courts would very likely reach a similar conclusion to the Court in Saxon Woods. The decision thus confirms that ‘rogue’ directors cannot unilaterally pursue a course of action without the knowledge of their fellow directors, even if they honestly believe they are acting in the company’s best interests.
However, notably, the Court of Appeal did not rule out the possibility of ‘wholly exceptional circumstances’ where deliberately deceiving a Board may not be inconsistent with the duty of good faith, and the Supreme Court did not comment on this point. That possibility being left open could, seemingly, invite potential cases where a single director could act unilaterally against a Board’s collective decision and not be found to have breached their duties.
For instance, one might imagine an extreme scenario in which the board of a weapons manufacturing company determines by majority to sell arms to a terrorist group, which decision is opposed by one or two directors. If the dissenting directors proceeded to take actions designed to undermine the sale process, without the knowledge or consent of the majority, they would be acting against the course of action determined by the majority to be in the company’s best interests. This would then leave a court to have to consider whether those individual directors should be found to have breached their duties to the company, even if few would doubt that they were trying to do the right thing.
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Disclaimer: The information published in this article is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.
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