On 14 July 2026, the Supreme Court handed down its judgment in Saxon Woods Investments Ltd and others v Costa [2026] UKSC 21, unanimously dismissing an appeal by Mr Costa, the former chairman of Spring Media Investments Limited (the “Company”), who was found to have covertly derailed the Company's agreed exit strategy and, in doing so, breached section 172 of the Companies Act 2006. The decision is a significant addition to the case law on what constitutes “good faith” in the context of directors’ duties and settles an important question as to whether a director's honestly held belief justifies pursuing that belief by deception.

“Can [a director] simply act single-handedly in driving the company towards his preferred objective, if necessary concealing what he is doing from his colleagues, or is his status as a fiduciary owing a duty of loyalty to the company, and the requirement that he act in good faith, sufficient to require him to disclose his opinion to his colleagues, to discuss it with them and to assist them in forming a collective view as to the best way forward for the company?”  

Lord Briggs, Supreme Court

Counsel for Mr Costa contended that a director who chooses to take the single-handed and covert route, genuinely believing that to be the best course for the company, cannot be held by the court to have committed a breach of fiduciary duty to the company, because of the effect of what used to be a principle of equity, now enshrined in the fiduciary duty of loyalty set out in section 172(1) of the Companies Act 2006, which provides:

1. A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to –

(a) the likely consequences of any decision in the long term,

(b) the interests of the company's employees,

(c) the need to foster the company's business relationships with suppliers, customers and others,

(d) the impact of the company's operations on the community and the environment,

(e) the desirability of the company maintaining a reputation for high standards of business conduct, and

(f) the need to act fairly as between members of the company.”

“The individual director cannot go it alone”  Lord Briggs, Supreme Court

The Company, a creative services holding company, and its investors had entered into a shareholders' agreement committing to work in good faith towards a sale of the Company by 31 December 2019. The board delegated the sale process exclusively to Mr Costa, its then chairman.

Believing that a later sale would achieve a better price, Mr Costa took steps to ensure the 2019 deadline was missed: he kept his fellow directors in the dark about the sale process, gave the board a false impression that the Company was complying with its obligations under the shareholders' agreement, and withheld from the board that his instructions to the Company's advisers did not target a 2019 exit. He succeeded in delaying the sale, but the value in the business was subsequently eroded by the Covid-19 pandemic. 

Saxon Woods, a minority shareholder, petitioned for unfair prejudice relief under sections 994 to 996 of the Companies Act 2006, seeking an order that Mr Costa buy out its shares at the value they would have commanded had the 2019 exit gone ahead.
 

“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’”  - Deputy Judge Gleeson, High Court ([2024] EWHC 387 (Ch))
 

The trial judge found unfair prejudice had been made out but declined to find a breach of the section 172 duty to promote the success of the company, on the basis that Mr Costa had not acted dishonestly. A conditional buy-out order was granted.
 

The Court of Appeal disagreed with High Court determination on section 172, holding that Mr Costa's deception of the board was dishonest under the objective test in Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67 and that this took him outside the protection of good faith. It further held that the shareholders' agreement had, in any event, conclusively fixed the strategy the Company had to follow. The Court of Appeal, accordingly, substituted an unconditional buy-out order. Mr Costa appealed to the Supreme Court on both points.
 

            The travaux preparatoires leading to the 2006 Act - Lord Briggs, Supreme Court

The Supreme Court's reasoning centres on what "good faith" in section 172 actually governs. Mr Costa argued that the good faith requirement attaches only to a director's state of mind, not to his conduct, meaning a director who genuinely believes he is acting in the company's best interests is free to pursue that belief by whatever means necessary, however deceptive. The Supreme Court rejected this reading decisively. In his judgment, Lord Briggs held that the better construction, and the one consistent with the pre-2006 case law that section 172 subsequently codified, is that good faith extends to conduct as well as thought: a director may hold his own honest view about the best way forward, but he cannot pursue it by covertly subverting the strategy the board as a whole has resolved upon. 

 
“Straining credulity” - Lord Briggs, Supreme Court

The Supreme Court held that this conclusion was further reinforced by the practical consequences of the alternative: a rule permitting directors to lie to their colleagues so long as they are personally convinced they are right would, in Lord Briggs' judgment, be "a recipe for chaos and paralysis in corporate governance, and destructive of the collegiality of the board of directors as a whole”.

“His conduct was manifestly disloyal to the Company, and he acted in bad faith towards the Company.” - Lord Briggs, Supreme Court

Notably, the Supreme Court took a narrower analytical path than the Court of Appeal on the question of dishonesty itself. Rather than settling the finding of breach on the Ivey objective dishonesty test, Lord Briggs held that where a fiduciary duty of loyalty is already in play, the relevant question is simply whether that duty has been breached. Dishonesty, while potentially evidence of a breach, does not need to be separately established using the Ivey framework designed for non-fiduciary contexts. “An elaborated test for dishonesty as set out in the Ivey case makes sense in the context of legal duties which arise irrespective of a pre-existing or separate fiduciary relationship by which the defendant is bound. But where the defendant owes a fiduciary duty of loyalty, the question is whether that duty has been breached, and while dishonesty may be evidence of that, the duty itself supplies the relevant analytical framework; it is unnecessary to elaborate it by reference to the Ivey case.”

“…a matter for the business judgment of the board” - Lord Briggs, Supreme Court

The principle that it is for directors to exercise their business judgment in managing the affairs of a company, with which the court will not interfere if the directors act bona fide in what they consider to be in the best interests of the company, is of long standing. In his judgment, Lord Briggs acknowledged that he had been unable to trace any authority or any academic writing prior to 2006 which suggested that the court’s respect for the business judgment of directors extends to a case where one director has sought to pursue his own judgment as to the best way to promote the company’s best interests by a covert strategy to pursue an objective which directly conflicts with the business judgment and strategy already resolved upon by the board as a whole.

“…such conduct would appear to be obviously disloyal by a fiduciary, and contrary to the mode of governance of the company laid down by its typical constitution. It would not appear to be acting bona fide or, in the English translation, in good faith.”  - Lord Briggs, Supreme Court

The Supreme Court declined to reach a concluded view on the Court of Appeal's alternative reasoning that the shareholders' agreement had conclusively fixed the company's strategy, finding it unnecessary to decide the appeal. On remedy, the Supreme Court upheld the Court of Appeal's unconditional buy-out order, agreeing that the trial judge's finding that there was no breach of section 172 had improperly influenced his exercise of discretion, and that the Court of Appeal was entitled to exercise that discretion afresh.

For practitioners, the takeaway is straightforward but significant: the business judgment principle protects a director's honest, good faith view about the right course for the company, but it offers no shelter once that director starts concealing information from, or misleading, fellow board members to force that view through. In advising individual directors, particularly those given delegated authority over discrete company matters, firms should be alert to the risk that acting unilaterally and covertly, even from a place of genuine conviction and even where the outcome cannot be known in advance, exposes the director to a section 172 breach and the full range of remedies that can follow, including a personal buy-out obligation running into tens of millions of pounds.