Supreme Court clarifies directors’ duties: good intentions are not enough

The Supreme Court’s recent decision in Saxon Woods Investments Ltd v Costa provides an important reminder that directors cannot justify improper conduct simply by saying they believed they were acting in the company’s best interests.

The case concerned a director who disagreed with the board’s strategy to sell the company. Although he genuinely believed a different approach would achieve a better outcome, he pursued that strategy without the knowledge of his fellow directors. He concealed information, misled the board and delayed the agreed sale process.

The Supreme Court held that a genuine belief is not enough. Section 172 of the Companies Act 2006 does not protect a director who seeks to implement a personal strategy through concealment, deception or by undermining the authority of the board. The duty of good faith applies not only to what a director believes, but also to how they behave.

Importantly, the court reaffirmed that company management is ordinarily vested in the board collectively. Directors are entitled to disagree with strategy, but they must do so openly through proper governance processes. They cannot secretly pursue an alternative course simply because they think they know better.

Why does this matter?

For directors, the decision is a warning that good intentions will not excuse conduct that is disloyal to the company or inconsistent with proper corporate governance. Disagreements should be documented, debated and resolved through board processes, not through private action.

For insolvency practitioners, the judgment provides useful authority in claims involving directors who have:

• withheld information from colleagues
• misled fellow board members
• exceeded delegated authority, or
• pursued personal strategies outside approved governance structures.

Practical lessons

The Supreme Court’s message is straightforward:

• directors may disagree with the board, but they must do so openly
• genuine belief is not a complete defence to a breach of duty claim
• good faith is judged by conduct as well as intention
• transparency and loyalty remain central to directors’ duties
• directors who undermine collective decision-making risk personal liability.

The judgment reinforces a simple but important principle: directors may disagree, but they cannot govern from the shadows.