High Court Rules in Favor of Petitioner in Saxon Woods Investments Ltd. v Francesco Costa & Ors: Breach of Shareholders' Agreement Results in Unfair Prejudice

Citation: [2024] EWHC 387 (Ch)
Judgment on


In “Saxon Woods Investments Limited v Francesco Costa & Ors,” the High Court of Justice deals with a complex dispute involving the enforcement of a Shareholders’ Agreement (SHA), specifically a clause referring to concerted efforts toward the sale of the company within a defined time frame. The case addresses several pivotal issues including breach of contract, director’s duties, and the principles surrounding unfair prejudice petitions under section 994 of the Companies Act 2006.

Key Facts

The crux of the case revolves around the allegation that the Eighth Respondent, Spring Media Investments Limited, and its shareholders did not adhere to the requirements of the SHA to facilitate a sale of the company (termed as an “Exit”) by the end of 2019. The Petitioner, Saxon Woods Investments Limited, claims that the First Respondent, Mr. Francesco Costa, in his capacity as a director and influential individual, did not act in accordance with this agreement. It is asserted that Mr. Costa’s conduct also amounted to breaches of director duties under the Companies Act 2006 and resulted in unfairly prejudicial conduct to Saxon Woods as a shareholder.

Breach of Contract and Unfair Prejudice

The case adjudicated on whether the SHA’s Exit clause was breached and, if so, whether this breach led to unfair prejudice against the Petitioner as a shareholder, as understood under s.994 of the Companies Act 2006. Unfair prejudice occurs when the affairs of a company are conducted in a manner prejudicial to some members, including at least the petitioner, and also unfairly so. The conduct must cause prejudice or harm and be unfair in the context of the agreements or understanding that constitute the affairs of the company.

Director’s Duties

The case further assessed whether Mr. Costa had breached his fiduciary duties as a director, particularly concerning acting in the company’s best interests (s.172), exercising reasonable care, skill, and diligence (s.174), and the avoidance of conflicts of interest (s.175). The case also examined whether Mr. Costa’s conduct justly warranted the triggering of indemnity clauses and the extent to which he could be held personally accountable for the company’s actions under his directive.


The Court examined the lawfulness of the indemnity for legal costs provided to Mr. Costa regarding the defense of the petition. This included considering whether the indemnity was valid under the terms of the SHA and the Companies Act 2006.


The Court concluded that Mr. Costa had indeed caused the company to breach the Exit clause of the SHA, resulting in unfair prejudice to the Petitioner. However, it was not decided that Mr. Costa breached his fiduciary duties under sections 172 and 174 of the Companies Act, as his actions were believed to be taken with the sincere belief of acting in the company’s best interests. Furthermore, the indemnity Mr. Costa received was deemed not allowable under applicable law, as the case centered on a shareholders’ dispute, and the company should not be paying for individual defenses in such situations.


The High Court’s decision in “Saxon Woods Investments Limited v Francesco Costa & Ors” emphasizes the imperative for directors to comply with contractual obligations and to manage shareholder relationships with transparency and good faith. The case reaffirms the principle that company resources should not be used to fund personal legal defenses in disputes that are essentially between shareholders. The upcoming Quantum Trial was set to establish the fair value of hypothetical offers that could have materialized had the company complied with its obligations for a potential buy-out by Mr. Costa. This case serves as a significant precedent for the interpretation of unfair prejudice under s.994 and the remedial outcomes that the Court may direct.

Related Summaries