What did the Supreme Court decide in Saxon Woods?
On 14 July 2026, the UK Supreme Court (Supreme Court) handed down its unanimous judgment in Saxon Woods Investments Limited and others v Costa [2026] UKSC 21. The decision sharply clarifies section 172 of the Companies Act 2006 (Companies Act) and confirms that a director cannot rely on a sincere belief that they are acting in the company’s best interests to justify covert and disloyal behaviour.
Why did the Supreme Court find breaches of directors' duties?
Saxon Woods, a minority shareholder in Spring Media Investments Limited (Company), brought proceedings against Francesco Costa (Mr Costa), the Company's chairman. Under a shareholders’ agreement, the Company and its shareholders were required to work towards an exit by no later than 31 December 2019, and Mr Costa was entrusted with leading the sale process.
Mr Costa believed that a later sale would produce a better return. Instead of advancing that view openly, he delayed the sale, excluded their fellow directors and shareholders from key decisions, misled the board as to the investment bank’s mandate and steered the process away from the agreed strategy. When Covid-19 struck in early 2020, the value of the Company collapsed and the prospect of a profitable exit was lost.
The Supreme Court unanimously dismissed Mr Costa’s appeal and upheld the finding that he had breached section 172 of the Companies Act, which in summary requires a director of a company to 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 to relevant factors.
The Court held that section 172 requires a director not merely to think in good faith, but to act in good faith towards the company. It also declined to apply the Ivey v Genting Casinos1 test of dishonesty, holding instead that the broader fiduciary duties of loyalty and good faith supplied the relevant framework.
Mr Costa argued that section 172 is purely subjective and that their sincere belief in a delayed sale should have been enough. Lord Briggs rejected that reading for three practical reasons:
- Consistency with previous law: section 172 codifies a long-standing fiduciary duty that has always been assessed by objective standards of loyalty and honesty. As Lord Briggs emphasised, there is "no previous case" extending deference to business judgement so far that it protects a director who covertly pursues their own dissenting view.
- Coherence with the statutory scheme: sections 170–177 are intended to operate together and in harmony with the company’s constitutional arrangements. Section 172 is not a free-standing licence for an individual director to override the constitution or subvert collective board decision-making.
- Straining credibility: Parliament is highly unlikely to have intended section 172 to regulate only what a director thinks and not what the director does. Lord Briggs warned that such a reading would produce "chaos and paralysis in corporate governance" and undermine the collegiality of the board.
Directors should note the practical line drawn by the Supreme Court. A director may disagree with the board’s strategy and may argue for a different course, but they must do so openly and within the company’s governance framework.
That matters especially where delegated authority has been given to one director. Mr Costa used authority delegated by the board to evade, rather than implement, the agreed exit strategy, which is why the case also illustrates the continuing force of section 1712 and the proper use of delegated powers.
How do Jersey directors' duties differ from section 172 of the UK Companies Act?
Article 74(1)(a) of the Companies (Jersey) Law 1991 (Companies Law) and section 172 of the Companies Act share common law roots, but the two provisions are structured differently.
Article 74(1)(a) of the Companies Law requires a director to act honestly and in good faith with a view to the best interests of the company. Unlike section 172(1) of the Companies Act, it does not include the words "he considers".
That said, as matters stand, Jersey treats article 74(1)(a) of the Companies Law as imposing a subjective duty.
In AI Airports International Ltd and PI Power International Ltd v Pirrwitz [2013] JCA 177 (considered further below), the Jersey Court of Appeal held that a director is not in breach if he acts in a way that he bona fide considers to be in the company’s best interests. Jersey’s framework is also less exhaustively codified than the English regime, so common law fiduciary duties continue to sit alongside the statute.
A brief comparative analysis of the current position is as follows.
- England. Following Saxon Woods, the objective element relating to conduct sits within section 172 itself. Good faith governs not only what a director believes, but also whether the director’s conduct is loyal when judged against objective standards.
- Jersey. The objective constraint relating to proper purpose sits outside article 74(1)(a). Even where a director honestly believes he is acting in the company’s best interests, they must still use their powers only for the purposes for which those powers were conferred.
- Common ground. Both systems remain anchored in Re Smith and Fawcett Ltd [1942] Ch 304: directors must act bona fide in what they consider to be the interests of the company. The practical consequence is the same. Covert subversion of the board is unlikely to be tolerated, even if Jersey reaches that result through the proper purpose doctrine rather than article 74(1)(a) itself.
What is the leading Jersey authority on directors acting in good faith?
The leading Jersey authority on article 74(1)(a) is AI Airports International Ltd and PI Power International Ltd v Pirrwitz [2013] JCA 177.
The Jersey Court of Appeal held that article 74(1)(a) is not breached if a director acts in a way he bona fide considers to be in the company’s best interests. The touchstone is therefore the director’s honest belief, not a Jersey court’s own view of the commercial merits.
That is the clearest statement that, notwithstanding the apparently objective language of article 74(1)(a), Jersey presently treats the provision as subjective.
As noted above, the Companies Law does not purport to codify the full range of directors’ duties, so common law fiduciary principles continue to inform and supplement the statutory text.
As such, the Jersey Court of Appeal also made clear that directors owe duties beyond article 74. In particular, the proper purpose doctrine continues to operate as an objective constraint.
Saxon Woods and AI & PI address the same structural question differently: where does the objective check on directorial conduct sit? England now treats loyal conduct as part of section 172 itself. Jersey retains the traditional subjective good faith duty in article 74(1)(a) and polices abuse through separate fiduciary rules.
There is, however, an unresolved tension. Article 74(1)(a) requires directors to act honestly and in good faith, yet it omits the subjective qualifier found in section 172. A Jersey court faced with Saxon Woods-type facts in the future could revisit the present reading and move closer to an objective conduct standard. That issue may become increasingly important if a director seeks to justify covert conduct by pointing only to sincere belief.
What are the practical implications for Jersey directors?
Saxon Woods does not eliminate an English court's respect for genuine business judgement, but it does sharpen the limits of unilateral conduct. Directors of Jersey companies should keep the following points in mind:
- The proper purpose rule remains an important limit. Saxon Woods is significant because Mr Costa acted alone, covertly and against the board’s agreed strategy. The case is not authority for imposing liability merely because a director would have chosen a different commercial course.
- The decision does not open the floodgates. Courts will continue to respect honest business judgement and will not substitute their own view of what best promotes the company’s success. The line is crossed when a director uses sincere belief as cover for disloyal means, creating the ‘chaos and paralysis in corporate governance’ identified by Lord Briggs.
- Jersey could potentially reach the same outcome through article 74 itself. Article 74(1)(a) requires directors to act honestly and in good faith, without the subjective qualifier found in section 172. A future Jersey court faced with analogous facts could therefore revisit the present interpretation of article 74(1)(a) and treat the provision as imposing an objective duty of honest conduct.
- However, even if article 74 remains subjective, the practical result may still be the same. A director who uses delegated authority to undermine a board-approved strategy and misleads fellow directors is likely to fall foul of the proper purpose doctrine.
Key lessons for directors of Jersey companies
The practical message for directors in Jersey is clear. If a director disagrees with the board’s strategy, that disagreement should be raised openly through the board’s proper processes. The Supreme Court's decision in Saxon Woods is likely to be persuasive in Jersey. However, it remains to be seen whether it will introduce an objective element to the test under article 74(1)(a) of the Companies Law.
We can see good reasons as to why it should but, in any event, the prudent course of action for directors of Jersey companies is to both think and act honestly and in good faith, with a view to the best interests of the company.
[1] [2017] UKSC 67.
[2] Section 171 of the Companies Act requires a director to act in accordance with the company’s constitution and only exercise powers for the purposes for which they are conferred.
