Saxon Woods Investments Ltd v Costa – A Shareholder Dispute and Director’s Duties Case

Saxon Woods Investments Ltd v Costa and others (2024) EWHC 387 (Ch)

Imagine a 15-day trial. The stress, the tension, the rest of your life being on hold. What about the cost of legal fees? Running into millions.

What issue could make a trial like that worthwhile for you? For Mr. Mark Loy, it seems the principal issue was getting proper value for his shares in a company called Spring Media Investments Limited (Spring Media).

Mr. Loy, who held shares in Spring Media through his company Saxon Woods Investment Limited, entered into a shareholder agreement with Mr. Francesco Costa and others that stated Spring Media would be sold by the end of 2019. It wasn’t, and Mr. Loy wanted money for his shares.

For Mr. Costa, the 15-day trial was apparently worthwhile to defend his actions as the guiding director of Spring Media.

Was that really the issue, though? In his Judgment, Mr. Simon Gleeson said that much of the evidence had not helped in resolving the issues at hand and had mostly been about Mr. Loy and Mr. Costa accusing each other of dishonesty.

The Judge’s view? Neither Mr. Loy nor Mr. Costa had been dishonest. So, maybe the reason for the 15-day trial was more to do with personal animosity than reaching a fair resolution of a shareholder dispute. An important lesson for all litigants.

What was the Judge’s view on the legal issues raised; namely the balance between director’s duties under the Companies Act 2006 and the obligation to comply with the shareholder agreement? To find out, please carry on reading.

Read the full case on Saxon Woods Investments Ltd v Costa

The Shareholders’ Agreement That Promised a Sale by 2019

Mark Loy founded Spring Studios Limited in 1996 alongside two other individuals, both of whom had departed by 1998, leaving him as the sole owner. By 2012, the business had grown into a creative-services group spanning an advertising agency, a content-production arm, photography studios and an events division.

Mr. Loy felt growth was being constrained by its existing premises and hatched a plan to expand into New York, a project so large it required outside capital. A New York real-estate developer introduced him to Francesco Costa, who came on board as chairman and brought a constellation of investors with him.

The Spring Studios Group ultimately operated from three cities; London, New York, and Milan, serving major fashion, beauty, and luxury brands through its four divisions. In return for the investment, everyone signed a shareholders’ agreement (the SHA) in May 2016 committing to work together in good faith towards selling the company by 31 December 2019. If no sale occurred by that date, the board was contractually required to engage an investment bank to cause an Exit at a valuation set by that bank. The board could only refuse if doing so was not unreasonable.

When a Shareholders’ Dispute Killed a £100M Sale

Things didn’t quite go as planned and by late 2017 the relationship between Loy and Costa had broken down. Loy believed Costa was dragging his feet, saying the right things in the boardroom while quietly reshaping the process to suit his own timetable. Costa believed Loy was disruptive, second-guessing management and undermining a carefully planned strategy to maximise value. Each became convinced the other was acting in bad faith.

On one side, Costa, the chairman and key investor, took almost complete control of the “Exit” process and the relationship with Jefferies, the investment bank. Communications with Jefferies flowed through him and a trusted colleague, not through the board as a whole. Updates given to other directors were heavily filtered. Requests by Loy to see the mandate letter, valuation work or even to speak directly to Jefferies were met with resistance, warnings and, eventually, legal letters.

On the other side, Loy, now a significant but minority shareholder through Saxon Woods, felt locked out of the sale process he thought he’d been promised. If the chairman wouldn’t seriously explore a sale, he would find his own route out. He began quietly talking to potential buyers, including Metric Capital, and at one point produced a short pitch document suggesting a sale at £100m.

From the board’s perspective, what started as a commercial disagreement over timing became a bitter personal conflict. Emails became intemperate, to say the least. Board minutes were contested. Lawyers were instructed on both sides. Each man began to see the other not just as wrong, but as fundamentally untrustworthy.

“Neither Was in Fact Engaged in a Nefarious Scheme…”

Taking into consideration all of the allegations made, it’s interesting to note what the judge said about their characters. After hearing days of cross examination and wading through reams of internal emails, Mr. Simon Gleeson concluded that, despite all the accusations, neither man had behaved dishonestly. Costa, he said, was passionate and sometimes let that override his judgment. Loy, in turn, put the worst possible construction on Costa’s actions and saw conspiracy where there was none. Neither was running a nefarious scheme to line his own pockets at the expense of everyone else. The conflict, the judge said, “could and should have been avoided. Sadly, it was not.”

The Sale That Never Quite Happened

By mid 2018, the business looked ready to sell on the surface as turnover was climbing, EBITDA was forecast to grow, and Jefferies had indicated valuations in the $120m+ range. A Seller Information Document was prepared, and the board agreed that Jefferies would lead what was described as an “Exit process”.

But the small print mattered. The Jefferies engagement letter was drafted in very broad terms as Jefferies would help with “a possible sale, disposition or other business transaction… involving all or a material portion” of the company’s equity or assets. That’s banker speak for we’re here to raise capital or do deals, not necessarily to sell the whole company.

The letter said nothing about the SHA’s hard deadline of 31 December 2019, and Jefferies never even saw the SHA. They were never told that their client was contractually committed to seeking an Exit by a specific date.

Inside the company, the business was not yet ready for sale. A new CEO needed time to find his feet while results needed to improve, and vendor due diligence needed to be completed. Jefferies’ internal updates spoke of keeping investors warm until a second phase, and expressly anticipated running a more competitive process later, well into 2020.

That didn’t stop anyone from making real offers that they couldn’t help but consider. Metric came forward with non-binding proposals valuing the company at around $100m–$125m, and The Hut Group (THG) showed interest. These were exactly the kinds of “Exit opportunities” the SHA said should be given good faith consideration. Yet Costa and his allies treated them as distractions, especially because they were linked, directly or indirectly, to Loy.

Meetings were delayed, narrowed, or cancelled. Information was withheld and the judge was clear that the company did not give good faith consideration to these opportunities as the SHA required.

Just as the business might have been ready for a more traditional sale process, the pandemic smashed revenues, made valuations impossible, and scared bidders. The wait for a better price later strategy became a catastrophic gamble.

Shareholder Dispute and Director's Duties

What The Court Decided

Loy didn’t sue for breach of contract (breach of the SHA). Instead, through Saxon Woods he brought an unfair prejudice petition under section 994 of the Companies Act 2006, arguing that the way the company’s affairs had been conducted, in particular the failure to pursue the agreed Exit, had unfairly harmed it as a shareholder. The main remedy sought was a classic corporate divorce: Costa should be forced to buy Saxon Woods’ shares.

The judge’s key conclusions included:

The shareholders’ agreement really did mean what it said. The company and investors had agreed to work in good faith towards an Exit by 31 December 2019, and, if that failed, to instruct an investment bank to “cause” an Exit as soon as reasonably practicable thereafter. There was no hidden “we’ll only sell if it’s a perfect time” override.

The company breached those obligations. It didn’t seriously market itself for sale by the deadline, and it didn’t give good faith consideration to the Metric and THG approaches. Rejecting Metric largely because of its association with Loy could not be squared with the SHA.

Costa personally caused that breach. He tightly controlled information flows, misled the board about what Jefferies had been asked to do, and blocked proper engagement with bidders. Without his approach, the company would likely have behaved differently.

On the other hand, he did not breach his core director’s duties of loyalty and good faith. The judge accepted that Costa honestly believed he was acting in the longterm interests of the company and its shareholders by holding out for a higher price and a better track record. His decision to disregard the SHA timetable was deliberate, but, in his own mind, justified. That subjective good faith was enough to keep him on the right side of sections 172 and 174.

Saxon Woods had suffered “unfair prejudice” in principle as it had bargained for a structured, timebound Exit and was instead locked in, unable to realise the value of its shares on that agreed timetable. The details of what that loss is worth are to be decided in a separate quantum hearing, but the judge indicated that, if it can be shown that a credible offer above $75m net of debt would likely have emerged, Costa will be ordered to buy out Saxon Woods’ 22.33% stake at a price reflecting that valuation.

Let’s Talk

If any of this feels uncomfortably familiar in your own boardroom, it’s probably time to talk. Use the book a meeting button on this page for a FREE consultation and let’s talk about where you are now, where you want to get to, and the practical steps that can get you there without ending up in a courtroom.

Saxon Woods Investments Ltd v Costa – A Shareholder Dispute and Director’s Duties Case

Saxon Woods Investments Ltd v Costa and others (2024) EWHC 387 (Ch)

The Shareholders’ Agreement That Promised a Sale by 2019

When a Shareholders’ Dispute Killed a £100M Sale

“Neither Was in Fact Engaged in a Nefarious Scheme…”

The Sale That Never Quite Happened

What The Court Decided

Let’s Talk

Services

Christopher Burgon Solicitors Litigation Specialists

Saxon Woods Investments Ltd v Costa and others [2024] EWHC 387 (Ch)

Song & Zhao v Smith & Smith & Others [2025] EWHC 949

Otto vs Happy Lamb Catering – An Unfair Prejudice and Beneficial Interest Case

Enforcement of Court Judgments in England

The Story Behind Elser v Mandel-Mantello – A Beneficial Interest Case

What’s the Difference Between Legal and Beneficial Interests in Shares?

Manolete Partners Plc v Trevor Howarth: An Insolvency Case Study

Understanding How Damages for Breach of Contract Are Calculated

How to Remove a Director from a Company Effectively