knowledge 10 November 2026 |

Boardroom Dissent and Directors’ Duties: A Cautionary Judgment from the UK Supreme Court

The question put to the UK Supreme Court in Saxon Woods Investments Ltd and others v Costa was whether a director can single-handedly and, if necessary, covertly drive the company towards the director’s preferred objective where he or she genuinely believes that this course of action is most likely to achieve success for the company, or if such actions would actually amount to breach of the director’s fiduciary duty of loyalty to the company under section 172(1) Companies Act 2006.  The Supreme Court unanimously ruled that it was the latter, finding that the director had acted in bad faith and that his conduct was manifestly disloyal to the company.

Background: A Director’s Covert Strategy to Delay an Agreed Exit

Mr Costa was a director and chairman of Spring Media Investments Limited, the UK holding company of a corporate group providing creative services to the fashion, beauty and luxury brand sectors.  He also held a substantial indirect interest in the shares of the company.

Under a 2016 shareholders’ agreement, the company and its members agreed to work together in good faith towards an exit by 31 December 2019. The exit was to take the form of a share or asset sale on arm’s length terms. Mr Costa genuinely believed that a later exit would produce a better financial return for the company and its investors. When the board delegated the exit process to him, he pursued a strategy designed to slow down the sale. He excluded the other directors and shareholders from the process and aggressively rebuffed the directors’ requests for information. He also misled the board and used delaying tactics. No exit was achieved before the end of 2019. The following year, the COVID-19 pandemic ended any prospect of a beneficial exit.

The Claim and the Decisions of the Lower Courts

Saxon Woods Investments Ltd, a minority investor, sought an order requiring Mr Costa personally to buy its shares at the value they would have had if the agreed exit had proceeded. The English High Court found in Saxon Woods’ favour but held that Mr Costa had not breached his fiduciary duty under s172(1) Companies Act 2006.

The English Court of Appeal subsequently held that Mr Costa had breached his fiduciary duty because his deception of the board was dishonest and so not in good faith. It ordered him to buy out Saxon Woods’ shares.

Mr Costa appealed this decision to the UK Supreme Court.  He submitted that an objective test cannot be applied when determining whether a director has breached the duty of loyalty under s172(1) Companies Act 2006.  His argument was that provided the director genuinely believes that his preferred way forward is the most likely to promote the company’s success, then it is entirely a matter for the individual director how to act to secure that objective.

The Supreme Court’s Decision: Honest Belief Is No Defence

The Supreme Court dismissed Mr Costa’s appeal. It acknowledged that the courts have long respected directors’ business judgement and will not interfere where directors act in good faith in what they consider to be the company’s best interests. However, the Court found no authority for applying this principle where a single director covertly pursues his own view of the company’s best interests. That was particularly so where his objective directly conflicted with the business judgement and approved strategy of the wider board.  Therefore, the requirement of good faith in section 172(1) qualifies both the director’s thinking and his conduct, finding that an “individual director does not thereby obtain carte blanche to seek to implement his dissenting view by any means, however covert or disloyal, he thinks necessary”.

The Court found that Mr Costa’s conduct had been manifestly disloyal to the company and in breach of his duty of loyalty under s172(1) Companies Act 2006. In reaching this view, it had regard to aspects of his conduct including concealing his dissenting views on the company’s best interests, using covert tactics to delay the exit agreed under the shareholder’s agreement and deliberately misleading the board.

The Supreme Court upheld the Court of Appeal’s order imposing personal liability on Mr Costa to buy out Saxon Woods’ shares in the company.

Relevance for Directors of Irish Companies

Pursuant to this judgment, a director of a UK company may be held to have breached the duty of loyalty under s172(1) Companies Act 2006 where he or she engages in conduct to subvert the collective authority of the company’s board; this is so even if the director genuinely believed that his or her actions are most likely to achieve success for the company.

In an Irish context, the list of directors’ duties set out in the Companies Act 2014 does not include an equivalent duty to act in good faith to promote the success of the business.  However, s228(1) of the 2014 Act does impose duties on directors of Irish companies to act in good faith in what the director considers to be the interests of the company and to act honestly and responsibly in relation to the conduct of the company’s affairs.  These duties are quite similar to the duty of loyalty under s172(1) Companies Act 2016.

It remains to be seen whether the Irish courts would follow the UK Supreme Court’s decision.  However, the Irish courts often treat such decisions as persuasive, so directors should assume that a similar approach may be followed here.

Practical Steps for Directors

In light of this decision, directors of Irish companies should consider the following steps:

• Raise any disagreement in relation to the board’s strategy openly at board level and ensure that it is recorded in the minutes.

• Do not withhold information from, or mislead, fellow directors, particularly in relation to matters the board has delegated to you.

• Bear in mind that a breach of your fiduciary duties as a director can, in certain circumstances, give rise to personal liability.