Saxon Woods Investments Ltd v Costa

Saxon Woods had invested in Spring Media and expected an agreed exit process to be pursued. When the board approved a sale process, chief executive and director Mr Costa preferred a different route.

The case did not arise simply because he disagreed. It arose because he kept that disagreement from the board and covertly worked against the approved strategy while maintaining the appearance that he was implementing it.

The Court dismissed Mr Costa's appeal. A director's belief that a different course would help the company did not excuse disloyal methods. The section 172 duty to promote the company's success in good faith reaches the director's conduct as well as the intended result.

A single director cannot secretly replace a board decision with his own. The Court treated the covert subversion as a breach, and the buy-out remedy obtained by Saxon Woods was left standing.

Good governance does not require silent agreement. It requires disagreement to happen through the proper forum. Directors should put contrary information before the board, ask for reconsideration and make the limits of their authority visible.

The decision does not mean a board majority is always right, or that a director must suppress a genuine concern. Directors still need to exercise their own judgment and comply with their duties. A director may need to challenge assumptions, seek more information, call for another meeting or record a firm dissent.

The dividing line is the method used. Mr Costa did not openly ask the board to reverse course. The Court was dealing with conduct that was concealed from fellow directors and inconsistent with the decision he appeared to be implementing.

These questions matter most when a founder is also a director and chief executive. The roles overlap in practice, but the authority attached to each role is not identical. A decision made collectively by the board cannot be treated as optional because the founder prefers another commercial route.