The UK Supreme Court’s decision in Saxon Woods Investments Limited and others v Costa [2026] UKSC 21 provides useful guidance on the duties of a director who genuinely believes that the board has chosen the wrong course for the company.
The case concerned a director, Mr Costa, who believed that delaying the sale of the company would produce a better financial outcome than the strategy which had been agreed.
The difficulty was not simply that he disagreed with his fellow directors.
The trial judge found that he pursued his preferred strategy covertly, restricted the involvement of other directors and allowed the board to believe that the agreed strategy was being followed when it was not.
The Supreme Court unanimously held that this amounted to a breach of his duty under section 172 of the UK Companies Act 2006.
Independent judgment has limits
The Court reaffirmed the long-established principle that directors are generally entitled to exercise their own business judgment as to what is in the best interests of the company. A court will not ordinarily substitute its own view merely because it considers that another decision would have been better.
However, the Court drew an important distinction between exercising independent judgment and covertly implementing a strategy which conflicts with a decision already taken by the board.
A director who considers that another course would better promote the company’s success should bring that view to the attention of the board. What the director should not do is pursue an alternative strategy without the knowledge of fellow directors and contrary to the board’s decision.
The Court also made clear that good faith is concerned with conduct as well as belief. A director cannot rely solely on a genuine belief that they are acting in the company’s best interests if the means used to pursue that objective are inconsistent with the director’s fiduciary obligations.
Why does this matter in the Isle of Man?
There is no direct equivalent in Isle of Man company law of section 172 of the UK Companies Act 2006, but that does not make the decision irrelevant.
The Supreme Court’s reasoning is closely connected with the common-law fiduciary principles of loyalty and good faith which underlie directors’ duties more generally. The Court expressly approached section 172 as part of the existing fiduciary framework rather than as a wholly self-contained statutory obligation.
Those principles form part of the common-law framework applicable to directors of Isle of Man companies.
Accordingly, while Saxon Woods is not binding on the Isle of Man Courts, its reasoning is likely to be highly persuasive if a similar dispute arises here.
The practical point for directors
The decision does not suggest that directors must simply agree with the majority.
Directors should continue to exercise independent judgment, challenge decisions where appropriate and put forward alternative strategies where they consider that this would better serve the company.
The key distinction is between disagreement within the company’s governance process and unilateral action outside it.
If a director believes the board has chosen the wrong course, that view should ordinarily be raised and addressed through the board. A genuine belief that another strategy is preferable does not, without more, justify implementing that strategy independently of the board’s decision.
For Isle of Man directors, Saxon Woods is therefore a useful clarification of the relationship between individual judgment, fiduciary loyalty and collective board governance.
This article is intended as a general overview and does not constitute legal advice.
