Patrick Hughes v Martin Bellamy & Ors [2026] EWHC 1871 (Ch)

[2026] EWHC 1871 (Ch)

Case No BL-2026-000104

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

BUSINESS LIST (ChD)

Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NL

Date 23/07/2026

Before

MR JUSTICE TROWER

Between

PATRICK HUGHESClaimant

Defendants

Paul Downes KC, Joseph Sullivan and Maya Chilaeva (instructed by Eversheds Sutherland (International) LLP) for Claimant

Andrew Thornton KC and Chantelle Staynings (instructed by Quinn Emmanuel Urquhart & Sullivan UK LLP) for First Defendant

Nikki Singla KC and Caspar Bartscherer (instructed by Winston Taylor International LLP) for Second, Third, Fourth and Fifth Defendants

Tom Weisselberg KC (instructed by Sidley Austin LLP) for Sixth, Seventh, Eighth, Ninth and Tenth Defendants

David Head KC and Adrian Pay (instructed by Branch Austin McCormick LLP) for Eleventh Defendant

Hearing Hearing dates: 18 and 19 May 2026

Further written submissions: 13 and 15 July 2026

Approved Judgment

This judgment was handed down remotely at 10.30am on 23 July 2026 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

.............................

MR JUSTICE TROWER

Introduction

[1]This is an application by Mr Patrick Hughes for permission to continue a double derivative claim on behalf of the eleventh defendant, AI Pathfinder Inc Limited (“AIP”), and for an order that AIP indemnify Mr Hughes for the costs of this application and of the claim. By order made on 16 March 2026, Edwin Johnson J considered the papers, which only included evidence adduced by Mr Hughes, and determined that he had established a prima facie case for permission to be granted. Edwin Johnson J therefore gave directions for the substantive hearing of the application.

[2]The claims which Mr Hughes wishes to continue on behalf of AIP were commenced by claim form issued on 23 January 2026. The Particulars of Claim are dated 29 January 2026 (the “PoC”). Mr Hughes seeks a number of heads of relief, which fall into two broad categories. As against the sixth defendant, APA Asset Co Limited (formerly Sovereign AI Ltd) (“SAI”), he seeks rescission of the sale to SAI of the business and assets of AIP pursuant to a transaction which completed on 14 January 2026 (the “Transaction”). His case is that the Transaction involved a sale at a significant undervalue. He also seeks declaratory relief that the transferred assets are held by SAI on constructive trust for AIP, an order that they be transferred back to AIP, an account of profits and equitable compensation.

[3]As against the first to fifth defendants and the seventh to tenth defendants, Mr Hughes seeks damages, an account of profits made by them out of their breaches of fiduciary duty and equitable compensation. The first defendant (“Mr Bellamy”), the second defendant (“Ms Chekunaeva”), the third defendant ("Lord Johnson”), the fourth defendant (“Mr Mowat”) and the fifth defendant (“Mr Whiteley”) (together the “Directors”) were all directors or shadow directors (if not validly appointed as asserted by Mr Hughes) of AIP at the time of the Transaction. Mr Bellamy, Ms Chekunaeva and Mr Whiteley were also employees of AIP, holding the positions of CEO, Chief Strategy Officer and Chief Operating Officer respectively. The seventh defendant (“Mr Lewis”), the eighth defendant (“Mr Lloyd”), the ninth defendant ("Mr Sarafin”) and the tenth defendant ("Ms Yap”) (together the “Employees”) were all senior employees of AIP and, by the time of the Transaction, were also directors of SAI and holders of its shares, either directly or, in the case of Mr Lloyd, indirectly through a company owned or controlled by him.

[4]AIP is a recently incorporated English company whose sole shareholder, the twelfth defendant (“Mulberry”), was incorporated in the Isle of Man. 50% of the shares in Mulberry are held by Mr Hughes and 50% are held by Mr Bellamy. Mulberry’s only assets are its shares in AIP and its shares in another English company, Pathfinder 1 Limited (“P1”). AIP’s business was to be the development of a UK-based AI and digital infrastructure company. By the time of the Transaction, P1 had the benefit of a three year option to acquire a 196 acre site in Ayrshire from North Ayrshire Council (the “i3 option”) on which it was intended that the infrastructure and power supply necessary for AIP’s business would be built.

[5]The only specific relief sought against AIP is an indemnity as to Mr Hughes’ costs of the proceedings. Like Mulberry, AIP is also joined to the proceedings as a defendant to ensure that it is bound by any relief that is granted. All of the defendants apart from Mulberry were represented at the hearing.

[6]Voluminous evidence was served by all parties except Mulberry. It was submitted on behalf of Mr Hughes that the defendants’ evidence was largely irrelevant because, on an application of this sort, the court must be careful not to embark on a mini-trial for the purposes of determining whether the merits of the proceedings justify the grant of the relief sought.

[7]While Mr Paul Downes KC, who appeared for Mr Hughes, was correct to caution against the conduct of a mini-trial at this stage in the proceedings, I do not agree that this means that the defendants’ evidence was largely irrelevant. For reasons which will become apparent, this is a case in which a proper understanding of(a) the background to the dispute raised by the proceedings,

(b) the precise nature of the claims made by Mr Hughes and

(c) the steps which have been and may be taken in proceedings elsewhere, are essential aspects of the decision as to whether or not permission ought to be granted.

Double Derivative Claims: the Law

[8]The claim brought by Mr Hughes is a double derivative claim because the causes of action are not his to pursue, nor are they vested in a company of which he is a shareholder. They are vested in AIP and Mr Hughes’ interest derives from his status as a shareholder of its parent, Mulberry. Because it is a double derivative claim, neither the provisions of Part 11 Chapter 1 of the Companies Act 2006 (“CA 2006”) nor the provisions of CPR 19.14 to 19.20 have direct application. This is because section 261(1) of CA 2006 makes clear that only a shareholder of the company in which the cause of action is vested may take advantage of the statutory process.

[9]However, it is well established that the pre-CA 2006 common law principles continue to apply to a double derivative claim: Boston Trust Co Ltd v Verhoef

[2021] EWCA Civ 1176

(“Boston Trust”) at [15]. Many, but not all, of the same principles apply to a double derivative claim as apply to a claim brought under section 261.

[10]The starting point for the applicable principles is that the rule in Foss v Harbottle (1843) 2 Hare 461 is an impediment to the making by a shareholder of a derivative (or double derivative) claim, whether or not it is governed by Part 11 Chapter 1 of the CA 2006. The essence of the rule is straightforward: where a wrong is done to a company, only the company may sue for the damage caused to it. A shareholder has no right to bring an action on behalf of the company in order to protect the value of his shares, unless one of the exceptions to the rule applies.

[11]In Prudential Assurance Co Ltd v Newman Industries Ltd (No. 2)

[1982] Ch 204

(“Prudential”) at 210F to 211B, the Court of Appeal explained the principles and identified the exceptions in five propositions, of which the fifth is most relevant for present purposes:

“(1) The proper plaintiff in an action in respect of a wrong alleged to be done to a corporation is, prima facie, the corporation. (2) Where the alleged wrong is a transaction which might be made binding on the corporation and on all its members by a simple majority of the members, no individual member of the corporation is allowed to maintain an action in respect of that matter because, if the majority confirms the transaction, cadit quaestio; or, if the majority challenges the transaction, there is no valid reason why the company should not sue. (3) There is no room for the operation of the rule if the alleged wrong is ultra vires the corporation, because the majority of members cannot confirm the transaction. (4) There is also no room for the operation of the rule if the transaction complained of could be validly done or sanctioned only by a special resolution or the like, because a simple majority cannot confirm a transaction which requires the concurrence of a greater majority. (5) There is an exception to the rule where what has been done amounts to fraud and the wrongdoers are themselves in control of the company. In this case the rule is relaxed in favour of the aggrieved minority, who are allowed to bring a minority shareholders' action on behalf of themselves and all others. The reason for this is that, if they were denied that right, their grievance could never reach the court because the wrongdoers themselves, being in control, would not allow the company to sue.”

[12]Since Prudential, there have been many other summaries of the most relevant exception to the rule: see e.g., the recent decision of the Privy Council in Tianrui (International) Holding Company Ltd v China Shanshui Cement Group Ltd

[2024] UKPC 36

(“Tianrui”) at [37]:

“There is an exception to the operation of these principles where the wrongdoers are guilty of dishonest conduct or attempting to appropriate or have appropriated to themselves property or opportunities to which the company is entitled or in which other shareholders are entitled to participate, and the wrongdoers are themselves in control of the company. In that event, which is often called “fraud on the minority”, the aggrieved shareholder or minority may bring a derivative action seeking relief on behalf of the company in whom the cause of action is vested.”

[13]To the same effect is the succinct summary by Templeman J in Daniels v Daniels

[1978] 1 WLR 406

at 408G-H, cited with approval by the Court of Appeal in Harris v Microfusion 2003-2 LLP

[2016] EWCA Civ 1212

(“Microfusion”) at [14]:

“.. fourthly, if there is fraud and there is no other remedy. There must be a minority who are prevented from remedying the fraud or taking any proceedings because of the protection given to the fraudulent shareholders or directors by virtue of their majority.”

[14]In the recent double derivative case of McGaughey v Universities Superannuation Scheme Limited

[2023] EWCA Civ 873

(“McGaughey”) at [64], Asplin LJ emphasised that the underlying justification for Templeman J’s fourth exception is that access to the court would otherwise be denied, a point which had been made in the last sentence from the judgment in Prudential cited above. As she explained:

“That exception arises where what has been done amounts to fraud and the wrongdoers are themselves in control of the company. The rationale for the derivative action is to enable justice to be done where the wrongdoer is in control of the entity in which the cause of action is vested.”

[15]The concept of wrongdoer control referred to by Asplin LJ in this passage (and by the Privy Council in Tianrui) includes any situation in which the wrongdoer’s interest is sufficient to prevent the proper claimant from bringing the proceedings(Konamaneni v Rolls Royce (India) Ltd

[2002] 1 WLR 1269

) (“Konamaneni”) at [27]). In this regard a 50/50 split between the claimant and the alleged wrongdoer will satisfy the test (Barrett v Duckett

[1995] 1 BCLC 243

(“Barrett”) at p.250d and Abouraya v Sigmund

[2014] EWHC 277 (Ch)

(“Abouraya”) at [17]), but there must be a direct link between the wrongdoer control and the alleged wrong for which redress is sought, in the sense that the control must be by those who are responsible for or benefit from the wrong which the derivative action seeks to address (Desmarais v Misbourne Investment Corpn

[2025] EWHC 813 (Comm)

(“Desmarais”) at [72]).

[16]Prudential also makes clear that the exception to the rule requires the claimant to establish to the requisite standard that “what has been done amounts to fraud”.In a passage from his judgment in Abouraya at [18] and [25], which was specifically approved by the Court of Appeal in Microfusion at [31], David Richards J said:

“18. The scope of “fraud” for the purposes of this exception has been considered in many cases. … The nineteenth century authorities proceeded largely on the basis that the exception applied only to cases of what might be called actual fraud, that is to say deliberate and dishonest breaches of duty. However, derivative actions were permitted … where allegations of fraud were rejected but the directors exercised their powers in a manner which conferred personal benefits on themselves at the expense of the company and the other shareholders. … “25. It follows, on the authorities as they stand, that financial or other loss to the shareholders, albeit normally of a reflective character, is essential to give a claimant shareholder sufficient interest in the proceedings to make the shareholder an appropriate claimant on behalf of the company, whether he is a member of that company or of its holding company. Equally, the authorities require that, in the absence of actual fraud or an ultra vires act, the wrongdoers should themselves have benefitted from the wrongdoing. The significance of this requirement is that their breach of duty cannot be ratified by a majority vote which depends on the votes of the wrongdoers. It is essential to the exception to the rule in Foss v Harbottle that the alleged wrongdoing is incapable of lawful ratification: see Smith v Croft (No 2) [1988] Ch 114.”

[17]The need for the putative claimant to establish either actual fraud or that the defendant has personally benefitted from the wrong to the company in respect of which the claimant seeks to sue is an essential aspect of the common law jurisdiction (although the benefit does not need to be financial: McGaughey at [132]). This appears from Microfusion at [33], where McCombe LJ gave a pithy description of the exception as one that “prevents directors from improperly benefitting themselves at the expense of the company”. This is not the case where a claimant seeks to bring a derivative action under the CA 2006 provisions, where the language of section 260(3) does not limit the actionable breaches of duty to those which amount to fraud or the acquisition of personal benefit by the wrongdoer.

[18]As to the requisite standard, it is not sufficient for the claimant simply to make the necessary averments relying on the relevant exception and proceed with his action until such time as the defendant applies to strike it out. It is now well established that claimants require permission to proceed with a double derivative claim to the same extent that they do for a derivative claim to which section 261 of CA 2006 applies. Referring to a former version of the applicable provisions of the CPR (McGaughey at [76]), Sir David Richards explained the position in his judgment in Boston Trust at [20] as follows:

“… it is the settled practice of the court to require permission to be obtained for double and multiple derivative claims. In my judgment, the court is entitled and right to impose this requirement, and to apply by analogy the practice in CPR 19.9. As the underlying claims are necessarily vested in the company, a member of its holding company has no right to bring a derivative claim, save as permitted by statute or the common law. In the latter case, just as the courts have laid down the circumstances in which derivative claims may be brought, so they may develop the procedure to which they are subject.”

[19]As to the test for permission to continue a derivative claim at common law, Prudential (at 221H to 222A) is also the starting point. The Court of Appeal said that whatever may be the properly defined boundaries of the exception to the rule, the claimant:

“ought at least to be required before proceeding with his action to establish a prima facie case (i) that the company is entitled to the relief claimed, and (ii) that the action falls within the proper boundaries of the exception to the rule in Foss v. Harbottle.”

[20]A little more colour is given to the requirement for at least a prima facie case in the judgment of Lewison J in Iesini v Westrip Holdings Ltd

[2011] 1 BCLC 498

(“Iesini”). This case was an application under section 261(1) of CA 2006 and, in response to the submission that it would be quite wrong to allow the permission application to turn into a mini-trial, Lewison J said at [79]:

“No doubt that is correct; but on the other hand not only is something more than a prima facie case required, but the court will have to form a view on the strength of the claim in order properly to consider the requirements of ss 263(2)(a) and 263(3)(b). Of course, any view can only be provisional where the action has yet to be tried; but the court must, I think, do the best it can on the material before it.”

[21]In Abouraya, David Richards J also addressed the question of what is meant by the phrase “a prima facie case” in the context of a double derivative claim. In doing so he concentrated at [53] both on the characteristics of the test itself and on the material to which the court was entitled and required to have regard:

“A prima facie case is a higher test than a seriously arguable case and I take it to mean a case that, in the absence of an answer by the defendant, would entitle the claimant to judgment. In considering whether the claimant has shown a prima facie case, the court will have regard to the totality of the evidence placed before it on the application.”

[22]In Bhullar v Bhullar

[2016] BCC 134

(“Bhullar”), another application to continue a double derivative claim at common law, Morgan J at [25] adopted a similar approach, but with a slightly different emphasis, adopting a more explicit recognition that where the evidence conflicts:

“it is still open to the court to hold that the claimant has made out a prima facie case because it would be wrong to assume that the defendant’s evidence will be accepted at the trial and it may simply not be possible to predict with any degree of confidence whether the defendant’s evidence will be so accepted.”

[23]In support of his argument that much of the voluminous evidence filed on this application was largely irrelevant, it was submitted on behalf of Mr Hughes that on a permission application the court need only determine whether the pleaded case would, if not answered by the defendants, entitle the claimant to judgment. This was a point that was emphasised throughout his written and oral submissions, but in my view is not a sufficient description of the approach the court is required to adopt.

[24]The difficulty with stopping the enquiry at that stage is illustrated by Lawrence Collins J in Konamaneni at [31]. In considering what amounts to a prima facie case that the conduct falls within the proper boundaries of the exception to the rule in Foss v Harbottle, he drew attention to the dilemma which would emerge if:

“… the claimant could require the court to assume, as a fact, every allegation made by the claimant, since this would absolve the claimant from the burden of bringing himself within the exception simply by alleging fraud and control. But if the claimant had to prove fraud and control before he could establish his title to prosecute the action, then the action may need to be brought to a conclusion before the court could decide whether or not the claimant should be permitted to prosecute it.”

[25]The solution, as explained by Lawrence Collins J, was to recognise that a prima facie case was a minimum requirement (see the words “at least” in the citation from Prudential at p.221H). He said that, as Knox J made clear in Smith v Croft (No 2), the Court of Appeal in Prudential focussed on the essential underlying question of whether a proper commercial assessment had been made as to whether the prosecution of the action on behalf of the company was likely to do more harm than good.

[26]Mr Downes was of course correct to emphasise that this exercise does not involve a trial. But the obligation on the court to ask itself more than just whether a claim by the company would survive an application for reverse summary judgment has long been recognised. The formulation which requires something more than a prima facie case reflects the kinds of concern expressed by the Court of Appeal in Barrett at p.250c-d in which Peter Gibson LJ said that “it is the duty of the court to decide as a preliminary issue the question of whether or not the plaintiff should be allowed to sue in that capacity” and that “it is for the shareholder to establish to the satisfaction of the court that he should be allowed to sue on behalf of the company”. Other judges have made a similar point in different language. Thus, in Halle v Trax BW Ltd

[2000] BCC 1020

at 1023E, Sir Richard Scott V-C paraphrased the prima facie case test as being “a case worth taking to trial”.

[27]These cases also recognise that, if permission is granted, it is a matter of real consequence, not just for the defendants against whom the claim is brought, but also the company whose internal governance structures will be circumscribed by the process. The exercise the court is therefore required to carry out is an evaluative one based on the form and quality of the evidence and taking into account the totality of the evidence placed before it, which requires the court to give weight to the fact that someone other than the company seeks to sue on its cause of action.

[28]The importance of this consideration is echoed in the statutory scheme (sections 263(2)(a) and 263(3)(b) of CA 2006) referred to in the passage I cited above from Iesini. Under the statutory procedure the court: i) must refuse permission if a person acting in accordance with section 172 (duty to promote the success of the company) would not seek to continue the claim (s.263(2)(a)); and ii) must take into account when considering whether to give permission the importance that a person acting in accordance with section 172 would attach to continuing it (s.263(3)(b)).

[29]Section 263 does not have any direct application to the current case but, in Abouraya, David Richards J made clear at [26] of his judgment that the same principles should apply to a double derivative claim:

“The court exercises a discretion whether to grant permission and will have regard to all relevant factors. … Above all, it is illustrated by the requirement that a reasonable board of directors would consider it to be in the best interests of the company to pursue the proceedings.”

[30]David Richards J’s description of the requirement that a reasonable board of directors would consider it to be in the best interests of the company to pursue the proceedings requires the court to have regard in that context to the strength of the claim. Merely because a company has a prima facie case does not mean that its best interests are served by pursuit of the proceedings.

[31]This language is similar to the language used by HHJ Robert Reid KC in Mumbray v Lapper

[2005] EWHC 1152 (Ch)

(“Mumbray v Lapper”) at [5]:

“The central question in any case such as this is “Would an independent board sanction pursuit of the proceedings?””

[32]At first blush this test has a different emphasis to that adopted by Warren J in Airey v Cordell

[2006] EWHC 2728 (Ch)

(“Airey v Cordell”) at [75], which was that it would not be right to shut out a minority shareholder on the basis of the court’s assessment of what it would do, rather than the test which is easier to apply of whether any reasonable board could take that decision. This formulation was then adopted by Morgan J in Bhullar at [26] and [38], albeit as common ground. More recently, however, the issue was reconsidered by the Court of Appeal in McGaughey at [75], where Asplin LJ cited with apparent approval the formulation which had been adopted by David Richards J in Abouraya, albeit there is no indication that the contrary was argued, nor was there any citation from either Airey v Cordell or Bhullar.

[33]I did not hear any detailed argument on what appears to be a difference between the ‘would’ and the ‘could’ approach, but the issue was addressed in some of the skeletons. In my view, the right approach is identified by Mr David Head KC in his skeleton argument for AIP. He suggested, and I agree, that any difference between Airey v Cordell and Bhullar on the one hand, and Mumbray v Lapper and Abouraya on the other, can be explained as follows. There is a threshold requirement for granting permission that a reasonable board could decide to continue the proposed action. This principle comes close to being subsumed in the prima facie case requirement, but is not quite the same thing. It simply recognises that, if a reasonable board could not properly decide to sue on the relevant causes of action, a shareholder should not be entitled to do so either.

[34]If that threshold requirement is satisfied, the court will then go on to consider how a reasonable board would approach the question of whether or not to pursue the proceedings. This would be a factor for the court to take into account as relevant to the exercise of its discretion on whether or not to grant the permission sought. Questions as to the timing and funding of proceedings might come in at this stage.

[35]In my view, this is a coherent and principled reconciliation of the differences in emphasis to be found in the authorities on the common law test and accords closely with the corresponding tests under the statutory regime. Section 263(2)(a) provides for a mandatory bar to permission where a director complying with their duties would not seek to continue, while section 263(3)(b) provides for the court to exercise its discretion by reference to where in the range of reasonable responses, the facts of the case would fall.

[36]It follows that the submission made on behalf of Mr Hughes does not capture the full extent of the enquiry which the court is required to carry out. It ignores the fact that the court must take into account all of the available evidence when assessing whether the test of prima facie case has been met, including (as it must) the allegations which have to be made in order to bring the claim within the proper boundaries of the exception to the rule in Foss v Harbottle. It also pays insufficient attention to the question of whether a reasonable board of directors would consider it appropriate to bring a claim against the defendant.

[37]It is also necessary for the would-be claimant to demonstrate that they have standing to bring the claim. This is referred to in Abouraya at [25] and was confirmed in McGaughey at [72]. It was also the principal issue which arose in Boston Trust: see at [28]. Issues as to standing can arise in a number of different ways and in a number of different contexts, but the starting point is that the would-be claimant must be able to establish both that the relevant company has sustained financial or other loss from the conduct complained of, and that they have done so as well. Their loss will normally be of a reflective character, so as to give them a sufficient interest in the proceedings to make them an appropriate claimant on behalf of the company.

[38]The importance and significance of this aspect of the test is emphasised in the following passage of Asplin LJ’s judgment in McGaughey at [108]:

“If there is a divergence, it is likely that the applicant’s interest is different from that of the company and accordingly, it is likely that they are not an appropriate representative or to put the matter another way, that they have no standing or to put the matter yet another way, that they are seeking to use the derivative action for ulterior purposes. A derivative action is not an opportunity for someone to pursue their own grievances or claims or to further their own particular interest in the name of the company.”

[39]The reference to ulterior purposes is illustrative of one of the other matters which the court will take into account when determining as a matter of discretion whether permission should be granted. The court must be satisfied that the would-be claimant brings the action bona fide for the benefit of the company and not for an ulterior purpose (Barrett at p.250c, Nurcombe v Nurcombe

[1985] 1 WLR 370

at p.376 and Abouraya at [26]). It must also be satisfied that they do so on behalf of themselves and all other minority shareholders (Prudential at p.211A). This is similar to one of the factors which the court is required to take into account when determining whether or not to grant permission for a derivative action to which Part 11 Chapter 1 of the CA 2006 applies (see section 263(3)(a) of CA 2006).

[40]This principle has also provided the foundation for a requirement that the wrong to the company must be one for which no other adequate remedy is available (Barrett v Duckett at p.250c). This may simply be a reflection of the fact that, where there is an adequate alternative remedy, it cannot properly be said that there is wrongdoer control (Konamaneni at [29]), but whether or not that is the only reason, there are numerous cases in which the court has refused permission to proceed by way of derivative action on the grounds that a more appropriate jurisdiction was to proceed with unfair prejudice proceedings under section 994 of CA 2006: for a useful list of the authorities see Chimbganda v Kundodyiwa

[2025] EWHC 1543 (Ch)

at [35].

[41]A proper application of these principles means that, in seeking to sue for a loss sustained by AIP, Mr Hughes must establish at least a prima facie case(a) that AIP has a right to recover for the relief claimed

(b) that the wrongdoing amounts to actual fraud or is wrongdoing from which they themselves have benefitted and

(c) that the wrongdoers are themselves in control of AIP. He must also show that a reasonable board of directors could consider it to be in the best interests of AIP to pursue the proceedings and that the balance of whether or not they would do so comes down in his favour. In exercising its discretion, the court must also assess whether the wrong is one for which no other adequate remedy is available to him and the others, including AIP itself, on whose behalf and for whose benefit he seeks to sue. If there is another adequate alternative remedy the balance may come down against granting the relief sought.

The Background Factual Allegations

[42]The PoC challenges the Transaction, which was a single event. Its consequence was that assets of AIP ended up in the hands of a corporate entity (SAI), apparently controlled by AIP’s former employees, who did not appear to have acted in any way for AIP and were not themselves directors or controllers of AIP. In light of the requirements for a derivative action I have just summarised, it is not immediately obvious how a claim against any one of the participants in the Transaction satisfies all of those requirements. It is Mr Hughes’ submission that such a straightforward description of what has occurred is quite wrong. It is necessary to recite the background in some detail to put in context why that is said to be the case and why the defendants all disagree.

[43]The PoC alleges that Mr Hughes and Mr Bellamy first met in October 2024 when Mr Hughes told Mr Bellamy about his existing investments and activities in the AI infrastructure sector, including his progress on equipment procurement and site development. It is said that Mr Bellamy was keen to be involved in that sector and suggested that they look for business opportunities together. At this stage P1 was already incorporated with what Mr Hughes says was an option to purchase a site in Scotland.

[44]There were then discussions to that end and, in or around April and early May 2025, Mr Hughes and Mr Bellamy reached an oral agreement (the “Agreement”) as to the structure and funding of their proposed joint venture. It is common ground that it was agreed that the group structure would take the form described in paragraph 4 above. It was also agreed that both Mr Hughes and Mr Bellamy would be directors of Mulberry, but that Mr Bellamy would initially be the sole director of both AIP and P1.

[45]The PoC make further allegations as to other terms of the Agreement, which are not common ground. They are: i) that both Mr Hughes and Mr Bellamy would each lend £12.5 million to Mulberry, which Mulberry would then on-lend to AIP in order to provide AIP with working capital; ii) that AIP would seek third party investment only from investors who would bring strategic value to AIP, including by providing business critical supply arrangements and/or revenue generating contracts, such as Dell Corporation (“Dell”), Nvidia Corporation, DP World and Verizon Corporation; and iii) that AIP would not seek investment from non-strategic investors where the result would be a dilution of equity without corresponding strategic value to AIP.

[46]Mr Bellamy does not accept that he agreed to lend £12.5 million to Mulberry for on-loan to AIP and he did not do so. Indeed, it is the core of his case that, although the parties agreed on an initial investment of £25 million, the full amount was to be paid by Mr Hughes. He also disputes that there was an agreement between them which restricted future third party investment to what Mr Hughes called “investors who would bring strategic value to AIP”.

[47]In the event, on 23 May 2025, AIP was incorporated in England and Wales by Mr Bellamy. On 27 June 2025, Mulberry was incorporated in the Isle of Man by Mr Hughes. Since 30 June 2025, 50% of the shares in Mulberry have been held by each of Mr Hughes and Mr Bellamy and each has been a director. At the beginning of July 2025, all of the shares in AIP and P1 were transferred by Mr Bellamy to Mulberry. Shortly thereafter, the rights under the i3 option were assigned to P1 and Mr Hughes lent £12.5 million to Mulberry, which was almost immediately on-lent by Mulberry to AIP.

[48]Mulberry’s articles of association provided that the minimum number of directors was to be two, that the business of Mulberry was to be managed by the directors, that the quorum for the transaction of the business of the directors was two and that the management and control of its business was to be in and from the Isle of Man. Mr Bellamy was AIP’s only director and there is no suggestion that Mr Hughes would be or become a director as well. This meant that the formal corporate structures that were adopted at the outset meant that Mr Bellamy retained control of AIP in relation to anything that did not require shareholder consent. He was its sole director and Mulberry would be unable to exercise positive shareholder control in the absence of agreement between Mr Hughes and Mr Bellamy as to how it might intervene.

[49]Mulberry’s first board meeting took place in the Isle of Man on 15 July 2025. It was recorded in the minutes that Mulberry’s loan to AIP would be converted into shares and that all key strategic decisions of Mulberry, including governance oversight of AIP and P1, were to be deliberated and determined within the Isle of Man.

[50]It is said by Mr Hughes that this meant that any informal discussions or sharing of ideas between him and Mr Bellamy would not be sufficient to constitute a decision, agreement, or approval of the board of Mulberry. All such decisions or approvals had to be taken at a board meeting in the Isle of Man. It is Mr Hughes’ case that this operated to vary AIP’s articles of association so as to prevent Mr Bellamy from making decisions as AIP’s sole director without the consent and approval of Mr Hughes. This variation is said to have extended to what would otherwise have been the ability of Mr Bellamy to appoint new directors to the board of AIP. Mr Bellamy disputes that this is the case.

[51]At the first board meeting there were also discussions about the recruitment of talented employees. The minutes recorded that the appointment of Mr Lewis (then with Dell), Ms Yap and Mr Whiteley to senior management positions was approved. What was described as a hiring trajectory of a foundational technical team of 10 employees to be in place by the end of 2025, scaling to 230 employees at full operational maturity, was also approved subject to the CTO’s submission of a phased recruitment plan to Mulberry’s board within Q4 2025.

[52]At this stage, and indeed right through to the time of the Transaction, AIP was a start-up, with few, if any, tangible assets and no revenue-generating agreements. Its investment from the outset was in the hiring of a management team with suitable expertise in the business. This proved to be expensive and the cost is now challenged by Mr Hughes. Whether that challenge is justified, having regard to what he knew and approved at the time, is one of the issues at the core of the underlying dispute between him and Mr Bellamy.

[53]On 15 September 2025, AIP’s own subsidiary (Pathfinder 2 Limited) (“P2”), of which Mr Bellamy was also the sole director, entered into an exclusivity and early access arrangement with a company owned by the Wykes family in relation to a development site at Chelveston in Northamptonshire. As Mr Mowat explained in his evidence, the arrangement prevented the Wykes family from marketing the site to anyone else during an exclusivity period ending on 31 March 2026 and granted access to AIP staff and contractors to perform preliminary assessments. Heads of terms for a lease were agreed but they remained subject to contract.

[54]Mulberry’s second board meeting was held in the Isle of Man on 17 October 2025. Evidence adduced on behalf of Mr Hughes is to the effect that parts of the meeting were acrimonious, more particularly over how the £12.5 million which had already been advanced by Mr Hughes had been spent and the question of whether Mr Bellamy had advanced the £12.5 million loan, which Mr Hughes said Mr Bellamy had agreed to make. It is plain that Mr Hughes was concerned about how c.£7.5 million had been spent in the four months since his original advance, as well as incurring what he said were significant ongoing liabilities.

[55]Mr Bellamy’s denial that he had ever agreed to advance £12.5 million was said by Mr Hughes to have been inherently unlikely, because it took him some time to respond to the complaint that he had failed to make his promised investment by asserting that he had never agreed to do so. Mr Hughes also relied on the fact that it was inherently unlikely that he would have been the only committed funder from the outset.

[56]It is Mr Bellamy’s evidence that, during the course of the meeting, Mr Hughes agreed to authorise Mr Bellamy to execute all necessary resolutions on behalf of Mulberry for the purposes of obtaining seed funding (the “seed round”).Mr Hughes does not dispute that the seed round was discussed and that Mr Bellamy’s proposal was for £100 million to be sought in return for 20% of the shares in AIP. But there is significant disagreement about other aspects of the seed round and in particular the extent to which the detail of Mr Bellamy’s proposals would be shared with Mr Hughes before an agreement as to how the funding would be sought (and whether its terms were fair) had been reached between them.

[57]On this application, I cannot resolve the disputes between Mr Hughes and Mr Bellamy as to what was agreed between them in the period immediately before Mulberry and AIP were incorporated, nor can I make findings as to precisely what transpired at the two Mulberry board meetings held on 15 July and 17 October. In part that is because it is not part of the court’s function at this stage to conduct a mini-trial, but it is also because resolution is in any event sought in proceedings in the Isle of Man (the “IoM proceedings”), the significance of which I will explain later. Nonetheless, for reasons that will become apparent, it is clear that the very existence of those disputes is relevant to the events which culminated in the Transaction.

[58]On 5 November 2025, Mr Bellamy, as the sole director of AIP, took a number of steps preparatory to the initiation of the seed round. He executed written board resolutions recording and approving proposals for the issue and allotment of new shares in AIP. At the same time, he executed on behalf of Mulberry, as AIP’s shareholder, written resolutions disapplying statutory pre-emption rights and approving the subdivision of AIP’s shares. He also executed on behalf of Mulberry applications for the issue of shares in AIP in discharge of the £12.5 million advanced by Mulberry under the shareholder loan made at the time of Mr Hughes’ original investment.

[59]On 6 November 2025, Mr Bellamy, acting as AIP’s sole director in accordance with Articles 11(3) and 17(1) of its Articles of Association, appointed four new directors of AIP, namely Ms Chekunaeva (who was already AIP’s Chief Strategy Officer), Mr Whiteley (who had been appointed AIP’s Chief Operating Officer at the outset), Lord Johnson and Mr Mowat. The undisputed evidence is that each of them had had long experience in business with a significant range of other interests. Three of them (Ms Chekunaeva, Lord Johnson and Mr Whiteley) had had some prior business contact with Mr Bellamy, while Mr Mowat was introduced to Mr Bellamy by Ms Chekunaeva shortly before his appointment.

[60]Mr Hughes says that he was not informed of these four appointments in advance and did not agree to them. It is his case that they were invalid because of what he says occurred at the Mulberry board meeting held on 15 July (see paragraph 51 above), but he says that Ms Chekunaeva, Lord Johnson, Mr Mowat and Mr Whiteley were nonetheless shadow directors of AIP and, in that capacity, owed it fiduciary duties, which they breached through their involvement in the Transaction.

[61]Shortly after the appointment of the four new Directors to AIP, further steps were taken by the new board (and by Mr Bellamy acting on behalf of Mulberry) to implement the proposed seed round. These included the adoption of new Articles of Association for AIP, a shareholders’ agreement to which Mulberry was a party through Mr Bellamy and a subscription agreement to which the investors, AIP, Mulberry and Mr Bellamy were party; they were all adopted and executed on 17 November 2025. Mr Bellamy contends that these steps were in accordance with what had been agreed with Mr Hughes. Mr Hughes says that he did not know of the relevant resolutions and that he did not authorise or consent to those steps being taken.

[62]Once those steps had been taken, the seed round proceeded with the intention of raising seed capital of £100 million. The subscription agreement contemplated a subscription price of £4 per seed preferred share. Thereafter, AIP collected total subscriptions of approximately £37.6 million from the initial investors, with commitments of a further c.£62 million. On various dates between 17 and 28 November, seed preferred shares were issued to investors. The largest seed round investor was Wykes Engineering and/or members of the Wykes family. It is Mr Hughes’ case that he had no knowledge of these allotments at the time they were made.

[63]Mr Hughes says that, on 19 November, he became aware of the AIP shareholder resolution passed by Mulberry on 5 November. This caused him to seek to inspect AIP’s register of members pursuant to section 116 of CA 2006 and to raise concerns that the appointment of the new Directors and other corporate actions had been taken without consultation with him. Very shortly thereafter, Mr Hughes alleged that Mr Bellamy had no authority to cause Mulberry to pass the resolutions of AIP connected with the fundraising. The allegation of want of authority is disputed by Mr Bellamy and is one of the issues to be decided in the IoM proceedings.

[64]Over the course of the next few days, there was extensive inter-solicitor correspondence from which it was very obvious that a significant shareholders’ dispute had arisen. The dispute related both to what was agreed before Mr Hughes made his initial investment shortly after the incorporation of Mulberry and AIP, and what occurred at the Mulberry board meetings in July and October 2025. The approach adopted by AIP, through the four new Directors, was to encourage Mr Hughes and Mr Bellamy to do all they could to resolve their differences so as not to disrupt or prejudice investor engagement in the seed round process.

[65]At a board meeting of AIP held on 30 November 2025, Mr Bellamy explained to the other four Directors his account of the origins of the dispute between him and Mr Hughes, including his assertion that Mr Hughes owned a business called Carbon3AI which Mr Bellamy said was competing with AIP. He then left the meeting and the remaining members of the board went on to discuss the allegations that had been made by Mr Hughes in correspondence. At that stage they agreed that AIP should not be accepting further investor funds, should put on hold efforts to seek additional investors and should not enter into significant contracts and payments.

[66]Over the course of the next few days there were a number of further AIP board meetings at which Mr Bellamy informed the other members of the board on developments in the shareholders’ dispute. On one of those occasions the minutes record that Mr Bellamy informed the board that he had received information from his contacts at Dell that Michael Dell had received an email from someone Mr Bellamy assumed to be Mr Hughes, which sought to denigrate Mr Bellamy by alleging misuse of AIP’s funds. This appeared to the rest of the board to be directly damaging to AIP’s commercial position at a sensitive moment in its development. That email was exhibited to evidence adduced on this application on behalf of Mr Hughes. In the email, Mr Hughes told Mr Dell that his trust in Mr Bellamy as a steward of the business had been undermined by the way he had operated and that he (Mr Hughes) could not be certain that the information shared with Mr Dell to date was accurate of complete. Meanwhile AIP sought and obtained advice from leading counsel in relation to the seed round. AIP asserts privilege in relation to the contents of that advice, which was not therefore in evidence.

[67]The minutes of the various AIP board meetings (the substance of some of which were verified in witness statements from the Directors) record that Mr Bellamy left the meeting when the remaining members of the board went on to discuss the consequences of these developments on the position of AIP. The evidence was that Mr Bellamy recused himself because of a conflict of interest which arose out of the close interrelationship between Mr Hughes’ challenge to the seed round and the shareholders’ dispute between himself and Mr Hughes. Both the board minutes and the evidence adduced on this application from the other Directors make clear that the effect of the dispute between Mr Hughes and Mr Bellamy on the seed round gave rise to very difficult decisions for the board once it became apparent that investors’ funds might need to be ringfenced for return to them.

[68]On 9 December, initial advice was given to AIP about the lawfulness of the seed round. Mr Mowat’s evidence is that about the same time, Mr Lloyd raised with him the option that he and other members of the senior management team might be interested in buying AIP’s assets in order to take the business forward.

[69]On 12 December, after Mr Bellamy was recorded as having left the meeting, the board of AIP formally concluded that it was in AIP’s interests to unwind the financing achieved as a result of the seed round. The Directors’ evidence is that this decision was reached because of a lack of clarity as to whether Mr Bellamy had had the requisite corporate authority to authorise the seed round on behalf of Mulberry, and with reluctance. The Directors have all said that they do not understand the commercial rationale for Mr Hughes acting in the way that he did given how ultimately value destructive it was. The way that Mr Mowat put it was that:

“Irrespective of the rights and wrongs of the Mulberry Dispute, Mr Hughes appears to have taken the view that it was preferable for Mulberry to have 100% of a company worth very little rather than 80% of the share capital of a company with an implied valuation of up to £500 million (had the full £100 million Seed Round been completed for the other 20% of the shares).”

[70]The subscription monies were returned to investors and AIP’s register of members was corrected to reflect the position prior to the seed round. This decision was conveyed to Mr Hughes’ solicitors on 16 December 2025, who said amongst other things that the Directors would now manage AIP pursuant to the original Articles of Association. On the same day a committee of AIP’s board (the “Committee”), comprising all of the Directors other than Mr Bellamy, was constituted. The Committee’s function was to make all decisions on behalf of AIP in relation to the consequences for AIP of the failure of the seed round.

[71]There was then further correspondence between solicitors in which AIP's solicitors informed Mr Hughes that it had very limited cash resources as a result of the need to return the subscription monies to investors, and sought immediate financial support. Whatever the cause, the evidence is that at this stage AIP was in a precarious position. It had no seed investors, no revenue generating agreements to defray its ongoing costs and no ability to agree leases or purchase equipment in the absence of further funding. It had no medium term plan for the future and no ability to agree one in the light of the dispute between Mr Hughes and Mr Bellamy. It was spending at the rate of £1 million per month and, as at 10 December 2025, its cash resources were only sufficient to enable it to continue for a further six weeks.

[72]Mr Hughes’ position was to dispute that the unwind of the seed round was the root cause of AIP's liquidity issues and to state that he would only consider further funding once AIP had answered outstanding information requests to enable him to make an assessment of AIP's assets, liabilities, prospects and value. His position, which included a request for the appointment of Scott Martin as a director of AIP, was conveyed by his solicitors to AIP on 19 December 2025. The evidence of AIP’s solicitors is that the information sought was provided two days later.

[73]Also on 19 December, Mr Bellamy (through his solicitors) made an open offer to Mr Hughes proposing that Mr Bellamy purchase Mulberry’s stake in AIP for £40 million. In his evidence Mr Bellamy described this offer as a silver bullet because it gave Mr Hughes a 320% return on his investment and was an attempt to try to settle the whole dispute and save the business before it was too late.

[74]Mr Hughes relies on this offer for another reason. He said that it gave an implied value to the Mulberry stake in AIP of £80 million. The offer was not accepted by Mr Hughes, although on 24 December, he made a counter-offer which was not in evidence. Mr Hughes said that he rejected Mr Bellamy’s proposal because he did not believe that Mr Bellamy could raise the necessary funds. Mr Bellamy strongly denies that this was the case.

[75]Amongst the material provided by AIP to Mr Hughes was a cashflow document which recorded that AIP’s cash at bank was £2.3 million, thereby indicating that it had spent c.£10.2 million of the initial £12.5 million by 21 December 2025. It also made clear that AIP had no regular source of income, that its monthly expenditure was stated to be in excess of £1 million and that on that basis it would run out of money in February / March 2026. The cash flow document also indicated that AIP had net assets of £915,702 and “off-balance sheet liabilities and commitments” totalling almost £3 million.

[76]Mr Hughes criticises the expenditure which led to AIP’s financial position being as disclosed in the cashflow document. In the PoC he describes much of it as having been improper and/or unreasonable, pointing to substantial employee costs and professional fees, specifically naming the Directors and a number of individuals connected to Mr Bellamy as recipients of benefits.

[77]Mr Bellamy’s answer to these criticisms was summarised in the following passage from his witness statement:

“AIP had incurred the relevant expenditure because it was seeking to build its business, and because it was shortly expected to receive substantial further investment through the Seed Round. Building a business of this nature required significant expenditure at the outset in order to secure the vital management team to take forward the AIP business and ultimately secure the support of Dell. Without these individuals, there was no chance that AIP would grow substantially as we hoped. The fact that AIP had no source of regular income by 21 December 2025 is because of Mr Hughes’ actions in refusing to consent to any investment that had been obtained in the Seed Round.”

[78]Meanwhile, Mr Lewis, Mr Lloyd and Ms Yap had sought and obtained from the Committee a limited release from the restrictions in the contracts of employment to enable them to evaluate and formulate proposals for a management buy-out. They did so against the background of a request by the Committee to consider a salary holiday so as to enable the cash runway to be extended. A deferral in their salaries was agreed and they were given express permission by the Committee to participate in the preparation for an MBO.

[79]On 21 December 2025, the Employees made a framework offer to AIP’s board for the acquisition of its business and assets and on the following day (22 December) they had what Mr Mowat called a “gun to the head” meeting with the Committee at which they are recorded as having emphasised three points: i) that without a short period of exclusivity, the management team would not agree to the salary deferrals, which had been requested by AIP’s board and which were important to support short-term liquidity; ii) that the management team did not wish to participate in any third-party asset sale (other than the MBO) and may consider exercising rights to resign in the event of such a sale; and iii) that the MBO team would not continue negotiations if AIP were to initiate contact with alternative potential buyers of the business (other than the ongoing discussions between Mr Bellamy and Mr Hughes regarding the buy-out).

[80]Mr Mowat explained in his evidence that the Committee found the Employees’ position to be “deeply uncomfortable”. He said that the Committee would have preferred to test the market, or to see a resolution at shareholder level so that AIP could pursue its business plan. However, he said that the Committee had to confront the reality that the Employees’ position was not a bluff and that substantially all of the value of AIP’s business was dependent on the continued involvement of those senior executives. If they were not willing to work for a third party, market testing would be futile; they understood that there was no obligation on the Employees to accept a TUPE transfer, making a third-party asset sale impossible without their co-operation.

[81]On 24 December, Mr Hughes’s solicitors wrote to AIP’s solicitors accepting that AIP was in a dire financial position with liabilities far exceeding assets, an unsustainable cash burn, no revenue prospects, and no credible business plan. He offered to provide financing to fund working capital for up to three months, conditional on Mr Bellamy being removed from involvement in AIP. He said that his funds were available immediately and he offered to meet the Directors (save for Mr Bellamy). Mr Bellamy was not informed of this offer, but it was rejected by the Committee on the basis that it was not an appropriate solution as it did not address AIP’s medium or long-term solvency. It is clear that at this stage, Mr Hughes regarded the dispute as one between himself and Mr Bellamy as shareholders in Mulberry.

[82]There was detailed evidence from the Directors other than Mr Bellamy as to the processes they went through in considering Mr Hughes’ proposals. The main issue was that, although it involved short term funding to enable a sale, the position of the management team was that they would not work for any third party. It would therefore have led to the departure of the people on whom AIP's value depended. Acceptance of the conditions that Mr Bellamy must resign as a director and no longer have access to AIP's premises would also have introduced partial elements of the dispute between Mr Hughes and Mr Bellamy into the Committee’s consideration of how best to preserve value for AIP. The members of the Committee contended that, acting as they were as directors of AIP, this was an outcome which they had sought to avoid.

[83]On the same day, SAI as the intended MBO vehicle acting through Mr Lloyd, entered into a letter of intent with AIP, acting by Mr Mowat on the instructions of the Committee (the “LOI”), which, amongst other things, granted it exclusivity in relation to the purchase. The position of the Committee was that an immediate asset sale to the management consortium was the best available means of preserving value. The negotiations which were to ensue were to be conducted on a confidential and exclusive basis.

[84]Under the express terms of the LOI, Mr Lloyd, Mr Lewis, and Ms Yap were released from performing active duties for AIP. It also permitted them to undertake any activities reasonably required to evaluate, structure, finance, negotiate, document and implement what was then the proposed transaction; any such activities were not to be capable of being treated as a breach of the express or implied terms of their contracts of employment. The LOI was entered into by AIP after it had considered and rejected the possibility of bringing a claim against the Employees.

[85]Mr Bellamy’s evidence is that he had no involvement in the proposed MBO and was not involved in any part of the decision-making in relation to the management’s offer or the valuation processes undertaken on the instruction of the other members of the board. The other Directors’ evidence is to the same effect.

[86]On 2 January 2026, AIP’s solicitors wrote to Mr Hughes querying the commercial rationale for his contest of the seed round and referring to funding said to be associated with Mr Bellamy’s proposal. There is evidence that at the same time the Committee was discussing whether to notify Mulberry (i.e., Mr Hughes and/or Mr Bellamy) of what was proposed. The minutes of a meeting held on 6 January 2026, record that they decided that the risk of delaying or jeopardising the proposed transaction by informing both Mr Hughes and Mr Bellamy of it outweighed the risks of not notifying them. They therefore did not do so, although, as I shall explain below, around this time Mr Bellamy was separately told in the context of his role as a director of P2.

The Transaction

[87]At this stage, Mr Hughes was therefore still unaware of the proposal that had been made by the management consortium. On 12 January 2026, his solicitors wrote to AIP proposing what Mr Hughes advanced as practical ways forward to preserve the status quo, including the appointment of a receiver. It was made clear that Mr Hughes was considering making an application to court for interim relief. At the same time there was solicitors’ correspondence in which a meeting between Mr Hughes and the Committee to consider the way forward was discussed. On the same day, Mr Hughes issued proceedings in England for specific performance of what he said was Mr Bellamy’s obligation to contribute £12.5 million to Mulberry. I was told that those proceedings continue and have reached the stage of close of pleadings.

[88]So far as Mr Hughes was concerned, the next development occurred on 14 January 2026 when his solicitors and Mr Bellamy’s solicitors received a letter from the solicitors to the Committee informing them that an asset purchase agreement (the “APA”) had been entered into and that the Transaction had been completed. AIP’s assets, comprising its intellectual property, employees, hardware, software and real estate (in the form of its shares in P2) had been sold to SAI, described as “an entity formed by certain management of [AIP]” for a cash consideration of £17,745,250.81, quantified as £20 million net of assumed liabilities.

[89]In the letter by which the Transaction was notified to Mr Hughes and Mr Bellamy, the Committee’s solicitors said:

“The Purchaser is neither funded, nor controlled by either Mulberry shareholder, nor does either Mulberry shareholder have a director on the board – i.e. to the best of the Company’s knowledge (having made due enquiry from the Purchaser), the Purchaser is totally disconnected from either shareholder.”

[90]Mr Hughes said that the description of SAI as “totally disconnected” from either shareholder was misleading as regards Mr Bellamy and deliberately so. He said that this was because SAI was at that time wholly owned by Mr Lloyd, who was a close associate of Mr Bellamy’s. The Employees (whose MBO vehicle SAI was) said that this allegation was wrong because the evidence is clear that SAI was not owned, controlled, funded or directed by either Mr Hughes or Mr Bellamy, which was obviously what was meant by the language used. The mere fact that Mr Bellamy and Mr Lloyd had had prior business dealings does not form any basis for inferring that Mr Bellamy was connected to SAI in the manner alleged. It was said by the defendants that the absence of any connection was a conclusion which the Committee had taken specific steps to verify and on which it deliberated before the Transaction was approved.

[91]The final decision to approve the Transaction on behalf of AIP was made by two of the Directors: Lord Johnson and Mr Mowat. Mr Bellamy had recused himself some time earlier from participating in the discussions about the consequences of the failure of the seed round. On 29 December 2025, Ms Chekunaeva and Mr Whiteley also recused themselves from participating in any decision about the MBO because they were both employees of AIP and would become employees of SAI by operation of TUPE if the MBO were to proceed. In the event, neither of them was employed by SAI after the Transaction had completed.

[92]In approving the Transaction, Lord Johnson and Mr Mowat relied on a valuation dated 9 January 2026 obtained from Touchstone Advisory (“Touchstone”). This identified the total proposed Transaction consideration as £20 million less assumed liabilities of c.£2.3 million. It assessed the market value of AIP’s assets on the basis that it was not a going concern as c.£3.3 million. Mr Mowat’s evidence was that this demonstrated an implied premium to the net cash consideration payable in excess of £14 million.

[93]It is Mr Hughes’ case that he had no knowledge that the Transaction was being negotiated or even contemplated prior to the notification that it had been completed. He contends that the discussions between solicitors immediately prior to completion of the Transaction were aimed at giving him the false impression that AIP was willing to discuss the matters set out in his solicitors’ correspondence so as to dissuade him from applying for interim relief prior to completion of the Transaction.

[94]The members of the Committee do not dispute that they were making arrangements to finalise the Transaction, while at the same time engaged in the process of seeking to arrange meetings with Mr Hughes and then deferring them. They said that their concern was that Mr Hughes would take steps to derail what the Committee had determined to be the appropriate way forward (an MBO) if he were to be forewarned of the sale.

[95]In these circumstances, paragraphs 102 and 103 of the PoC allege that:

“102. The disposal of the business and assets of AIP to SAI was made without the authority of AIP and was accordingly void, since the AIP Directors who purported to take the decision on AIP’s behalf were not validly appointed and had no authority to act on behalf of AIP. 103. The Transaction was furthermore a dishonest disposal of the AIP Directors, contrary to the interests of AIP and in furtherance of the interests of Mr Bellamy, Lord Johnson, Mr Mowat and Ms Chekunaeva.”

[96]In making the allegation that the Transaction was dishonest and in the interests of Mr Bellamy and the members of the board identified in paragraph 103 of the PoC, Mr Hughes contends that it is to be inferred that Mr Bellamy was involved “on the purchaser side” of the Transaction. This is hotly contested by Mr Bellamy who says that he has got nothing to do with SAI. He also denied that he was consulted by the employees who were engaged in the MBO. He points out that his priority, once the Transaction was completed, was to gain control of P1, because that was where he considered that the value lay.

The IoM Proceedings

[97]Meanwhile, on 8 January 2026, Mr Bellamy had commenced the IoM proceedings under section 7 of the Isle of Man Companies Act 1968 (“section 7”), which provides as follows:

“(1) Any member of a company who complains that the affairs of the company are being conducted or that the powers of the directors of the company are being exercised in a manner oppressive to him or some part of the members (including himself), or in disregard of his or their proper interests as member or members respectively, may apply to the court for an order under this section. (2) If on any application under sub-section (1) the court is of opinion that the company’s affairs are being conducted or that the directors’ powers are being exercised as aforesaid, the court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit, whether directing or prohibiting any act or cancelling or varying any transaction or for regulating the conduct of the company’s affairs in future, or for the purchase of the shares of any members of the company by other members of the company or by the company and, in the case of a purchase by the company, for the reduction accordingly of the company’s capital, or otherwise.”

[98]The IoM proceedings are therefore the Manx law equivalent of unfair prejudice proceedings brought under section 994 of CA 2006. Section 7 gives the Manx court powers to grant wide-ranging relief where the requirements of section 7(1) are satisfied.

[99]In the IoM proceedings, Mr Bellamy seeks an order granting him options to purchase P1 from Mulberry (i.e., what he says was his priority once the Transaction had completed) and/or to purchase Mr Hughes’ interest in Mulberry at a fair value. In the alternative he seeks an order that Mr Hughes purchase his 50% shareholding in Mulberry. Mr Bellamy also seeks an order in the IoM proceedings requiring Mr Hughes to pay compensation for the breaches of duty to Mulberry committed by his conduct to AIP, which caused what he called a massive loss in the value of Mulberry’s shareholding in AIP.

[100]The basis for the IoM proceedings was Mr Bellamy’s belief that Mr Hughes had acted oppressively and in breach of his duties to Mulberry: i) by resiling from his delegation of management authority to Mr Bellamy in respect of AIP and P1 and by threatening legal action against prospective investors and directors of AIP, thereby forcing AIP to return at least £75 million in committed capital, pushing a company previously valued at £500 million to the brink of insolvency; ii) by seeking to resile from his agreement that Mr Bellamy would be a director of AIP (and P1) but that Mr Hughes would not be a director of either company; and iii) by engaging in a campaign to sabotage AIP’s seed round and destroy Mr Bellamy’s professional reputation, including by making defamatory and unfounded allegations of fraud against him to key stakeholders and investors, including Michael Dell and David Wykes.

[101]In Mr Bellamy’s evidence, he expressed the belief that Mr Hughes was motivated by his desire to take control of AIP himself. He also relied on his contention that Mr Hughes had a conflict of interest as the owner of Carbon3AI, which he said that Mr Hughes plainly viewed as valuable and explained why Mr Hughes was prepared to risk destroying the value of AIP. In his submissions on behalf of the Directors other than Mr Bellamy, Mr Nikki Singla KC relied on the fact that, for the purposes of this application, Mr Hughes had not adduced sufficient evidence about Carbon3AI to demonstrate that Mr Bellamy’s beliefs were not well-founded.

[102]Mr Hughes’ response to being told of the Transaction was not to seek interlocutory relief in derivative proceedings to challenge the Transaction. Rather, he chose to apply for urgent injunctive relief pursuant to section 25 of the Civil Jurisdiction and Judgments Act 1982 (“section 25”) in support of a counterclaim he then intended to bring in the IoM proceedings. On that application, Michael Green J made an order on 15 January 2026 restraining AIP and P1 from dealing with or disposing of any of their assets save for payments made in the ordinary course of business and legal costs. On the return date 5 days later, Mr Hughes applied for a continuation of the injunction made by Michael Green J and for the appointment of a receiver.

[103]On the return date, Rajah J continued the relief granted against P1 until 14 days after judgment in the IoM proceedings or further order and directed a return date for the application against AIP in approximately 28 days, continuing the injunction against AIP until that hearing. The application for a receiver was also adjourned until the return date. At this stage, Mr Hughes had not commenced the current proceedings.

[104]On 16 February, Rajah J made an order by consent in the section 25 proceedings, which recorded that Mr Hughes no longer pursued his application for the appointment of a receiver. The consent order also extended the injunction granted against AIP until 14 days after judgment in the IoM proceedings or further order on slightly less stringent terms as to the basis on which payments in the ordinary course of business and in respect of legal costs could be made.

[105]In the event, Mr Hughes’ defence and counterclaim in the IoM proceedings was filed on 18 February 2026. The relief he seeks in the counterclaim includes an order that he be permitted to purchase Mr Bellamy’s shareholding in Mulberry. The basis for this relief includes Mr Bellamy’s conduct in connection with many of the same matters which are in issue in these proceedings, including complaints about the unreasonable expenditure I have referred in my summary of his criticisms based on the 21 December 2025 cash flow document.

[106]Material progress has been made in the IoM proceedings. On 15 April 2026, the First Deemster delivered a judgment in which he approved the parties’ agreement in principle that the trial should be expedited. I understand that the trial has now been listed for two weeks commencing on 8 March 2027. The First Deemster also gave directions for disclosure to deal with what he called the information disparity between Mr Bellamy and Mr Hughes to be completed by 29 May with any third party disclosure issue to be determined by 24 June. He directed expert evidence including in relation to the valuation of Mulberry and each of its subsidiaries, with reports to be produced by 28 August 2026.

[107]In the course of his judgment, the First Deemster gave consideration to these proceedings, which he called the “Double Derivative Claim proceedings”. He commented that they were progressing quite slowly at the moment and that their commencement had greatly complicated the dispute. However, he said that, if Mr Hughes were to succeed and the sale of AIP were to be rescinded, then the value of Mulberry would be affected and may well be greatly increased.

[108]The First Deemster also noted that these proceedings may not conclude in time for the trial in the Isle of Manand went on to say that “the key point” is that the IoM proceedings “must take primacy”. As he put it, “we are dealing here in this jurisdiction with the holding company whereas the Double Derivative Claim proceedings are addressing what has allegedly occurred in one of its subsidiaries.” On this basis he said that he was not going “to postpone, defer or delay matters in relation to this Manx case while we await progress in London”.

[109]This is consistent with one of the submissions made by all of the defendants on this application, namely that the outcome of the IoM proceedings is very likely to lead to a break of the current deadlock at Mulberry level, and will mean that one of Mr Hughes or Mr Bellamy will gain control by buying out the other. This will either lead to the abandonment of the current claim (the likely result if Mr Bellamy acquires Mr Hughes’ shares) or its continuation other than as a derivative claim (the likely, and certainly possible, result if Mr Hughes acquires Mr Bellamy’s shares).

The Proposed Claims

[110]All of the claims that Mr Hughes seeks to advance against the Directors are based on the underlying allegation that they caused the assets of AIP to be sold to SAI at an undervalue, such being the loss which AIP has suffered as a result of their conduct. The first way in which this complaint is pleaded is that, in so acting, the Directors breached their duties to promote the success of AIP and to exercise reasonable skill, care and diligence. It is also said against the Directors other than Mr Whiteley that they caused the assets to be sold to SAI in breach of their duty to avoid a conflict of interest, their duty to declare an interest in a proposed transaction, their duty of loyalty and their duty to act in good faith. It is said that they had a personal interest in the sale which they preferred over the best interests of AIP.

[111]By way of further allegation, it is said that the Directors all acted in breach of their duties to promote the success of AIP and to exercise reasonable care by failing to enforce the Employees’ duties to AIP. This was said to be contrary to AIP’s interests because taking such steps would have maximised the value of its assets. These breaches are all pleaded as causative of the loss which is said to have been suffered by AIP as a result of the sale of its assets to SAI at an undervalue. In this regard the conduct of the Directors other than Mr Whiteley is also said to have been a breach of their duty to avoid a conflict of interest and their duties of loyalty and good faith. In that context it is said that their failure to take steps to investigate, protect and enforce AIP’s rights against the Employees were part of what was done to facilitate the sale of AIP’s assets to SAI at an undervalue and for their own personal benefit.

[112]It was also said that all of the Directors acted in breach of duty by treating AIP as insolvent without taking steps to recover the £12.5 million owed to Mulberry by Mr Bellamy, and for incurring wasted fees and expenses on the seed round. It is said against all of the Directors that they knew it was in the best interests of AIP to seek to enforce that liability (or take it into account as an asset of the business) and that, in the case of the Directors other than Mr Whiteley, this conduct formed part of the steps taken in order to justify the sale of AIP’s assets at an undervalue to SAI. This was alleged to have been in their own personal interests, contrary to the interests of AIP and in breach of their duty to act in good faith.

[113]The claims against the Employees are also based on breaches of duty which caused AIP loss comprising the difference between the true value of the assets transferred as part of the Transaction and the price paid by SAI for those assets. These claims included breaches of their contracts of employment by misusing AIP’s confidential information and working to establish SAI while they were still employees of AIP.

[114]There is also a claim against the Directors, the Employees and SAI for conspiracy to cause loss to AIP through unlawful means in the form of the breaches of duty and knowing receipt I have already mentioned. As with all of the claims for breach of duty, it is said that the claims in conspiracy caused loss to AIP in the form of the sale of assets to SAI at an undervalue.

[115]The claims against SAI (of which it is said that Mr Bellamy was a shadow director) are brought in constructive trust based on an allegation of knowing receipt. The Employees are said to have had knowledge of both the breaches of duty by the Directors and the invalidity of the appointments of those other than Mr Bellamy, which were sufficient to mean that it was unconscionable for SAI to receive and retain AIP’s assets under the Transaction. It is also pleaded that Mr Bellamy’s knowledge was to be attributed to SAI because he was said to be a shadow director of SAI.

[116]In addition to the claim against SAI in constructive trust, it is said that the Transaction was void for want of authority on the part of those of the Directors who concluded the Transaction on its behalf because they had not been validly appointed in the first place. Alternatively, Mr Hughes seeks rescission of the APA on the grounds that, if not void, it was voidable on the same basis.

[117]It is pleaded that the Transaction was a dishonest disposal. This is not specifically alleged against particular individuals, but a number of the breaches against the Directors apart from Mr Whiteley are formulated as allegations of a failure to act in good faith. No specific allegations of bad faith are made against the other defendants, although all of them are said to have entered into a combination pursuant to which they agreed to use unlawful means with the intention of causing loss to AIP. In that regard it is not specifically pleaded that they intended to obtain a personal benefit from the conspiracy, but if they did have the intention alleged it would have amounted to bad faith.

[118]It is therefore central to all of the ways in which Mr Hughes makes his claims that the Transaction was at an undervalue. It is also at the root of the way that he puts his case that the undervalue would, and was intended to, enure to the benefit of the Directors (other than Mr Whiteley) and the Employees, either because of interests they all had in SAI, or because their ability to invest in the underlying business would be facilitated if it were not to end up under the control or influence of Mr Hughes.

[119]The allegations of undervalue and conflict of interest are also at the root of the claim in conspiracy, because it is said(a) that it was in the interests of those Directors and Employees that AIP’s assets be sold at an undervalue and

(b) that it was the purpose of a combination between all of the Directors and all of the Employees to achieve that end.

[120]As to personal benefit, although Mr Hughes accused all of the Directors of being complicit in the sale of the assets to SAI at an undervalue, the main thrust of the allegations are directed against Mr Bellamy. This is because he is accused of being a shadow director of SAI while still a director of AIP, as well as having been the driving force behind the Transaction.

[121]The way the case as to personal benefit is put against the other Directors is more limited than the way it is put against Mr Bellamy. It is said that Ms Chekunaeva, Lord Johnson and Mr Mowat stood to gain personally from the Transaction because they had always wanted to invest in the AIP business (as they did in the allegedly unlawful seed round), which they knew would be easier once the assets had been sold to SAI. It was said that, once that had occurred, the obstacle of Mr Hughes’ objection to investment by non-strategic investors would be avoided.

[122]The Directors concerned denied that was the case and submitted that there was no evidence which came anywhere close to substantiating the allegation. The case against Mr Whiteley is different from the case against the other Directors because it is not alleged that he was conflicted or had any personal interest in the outcome.

[123]In support of the way he pleaded his case, Mr Hughes relied on evidence that the Directors deliberately did not tell him about the Transaction before it completed for fear of derailing the arrangement. He said that this indicated an intention to cover up that the Transaction was at an undervalue and was an indication of dishonesty. He said that it was no answer for the Directors to rely, as they did, on the obligations of confidentiality in the LOI, because any confidentiality restriction was the product of the very process which he challenges. He pointed out that the other Directors had all been appointed by Mr Bellamy.

[124]In support of his allegation that Mr Bellamy was not just connected to SAI, but was in fact a shadow director, Mr Hughes submitted that it was inherently implausible that Mr Bellamy would voluntarily choose to have no involvement in a decision as to the sale of assets in which he had an indirect 50% interest, particularly where he had considered only a short time earlier that those assets would be worth many multiples of the sale price. It was said to be equally implausible that he was willing to give up on a business opportunity on which he had placed significant value up to and including early December 2025.

[125]Mr Hughes also cast doubt on the genuineness of the Directors’ evidence that Mr Bellamy had no involvement in the Transaction and relied on the fact that he remained a member of the board even though not a member of the Committee to which the board’s powers had been delegated. He also said that AIP’s false statements to the effect that SAI was “totally disconnected” from Mr Bellamy demonstrated the same disingenuous conduct as the Directors’ deliberate decision not to tell him about the Transaction before it completed.

[126]A further matter on which Mr Hughes relied as an indicator of conduct by the Directors which required investigation at trial was the fact that the ultimate owners of the land at Chelveston, which was subject to the exclusivity arrangements granted to P2, were members of the Wykes family, one of whom is now a director of and substantial investor in SAI. This was said to call into question the £100 attributed to the value of the shares in P2 pursuant to the terms of the Transaction.

Prima Facie case

[127]It is not sufficient for Mr Hughes to establish a prima facie case that the Directors or Employees failed to do that which a reasonably competent director would have done or that they otherwise acted in breach of duty. Thus, while an unreasonable misjudgement as to the right approach to selling AIP’s business or the manner in which the Directors responded to the “gun to the head” meeting with the Employees may give AIP a cause of action against the Directors, they are not claims which fall within the proper boundaries of the exception to the rule in Foss v Harbottle. They do not in themselves involve deliberate and dishonest breaches of duty, or breaches which amount to the conferring of personal benefits on themselves at the expense of AIP.

[128]In respect of each of the claims, it is necessary to identify whether Mr Hughes has made out a prima facie case that the Transaction was a disposal of AIP’s assets contrary to the interests of AIP, effected in breach of duty and either dishonestly and/or in furtherance of the personal interests of the wrongdoer. For these purposes, it is appropriate to consider the evidence both in the context of the allegations of individual breaches of duty by the Directors and the allegation that they were engaged in a conspiracy to injure AIP by unlawful means.

[129]Based on the way the case is put, Mr Hughes first has to show a prima facie case that the business was in fact sold at an undervalue. He then has to show a prima facie case that Mr Bellamy was in fact involved on both sides of the Transaction and that those of the Directors who are recorded as having made the decision that AIP should enter into the Transaction (Lord Johnson and Mr Mowat) permitted Mr Bellamy to be part of, or even to control, that process. Based on the way the case is put, he also has to show a prima facie case that the Directors who were involved in the decision-making were conflicted and made the decisions they did because they knew that, if the business continued to be run through AIP, they would not be permitted to invest and take a personal financial interest in the future of the business, whereas they knew that if the business was sold to SAI they would be likely to be permitted to take such an interest.

[130]As will appear, I have reached the clear view that Mr Hughes has not shown a prima facie case on any of the principal issues on which he must succeed to establish that AIP has a good claim which falls within the boundaries of the exception to the rule in Foss v Harbottle. I also have little doubt that an independent board of AIP would not take the view that it was in the best interests of AIP to pursue the proceedings.

[131]None of this detracts from the possibility that both Mr Hughes and Mr Bellamy may have good claims against each other as shareholders. It remains quite possible, and I express no view one way or the other, that conduct by Mr Bellamy was oppressive to Mr Hughes within the meaning of section 7 and that the Isle of Man proceedings will enable the losses Mr Hughes claims to have suffered as a result of that oppressive conduct to be recovered. But, on the basis of the evidence I have seen, none of this means that there is a prima facie case that the Directors have profited from the Transaction in the manner alleged by Mr Hughes. The evidence is that they have not.

Prima facie case: Undervalue

[132]It is appropriate to start with the question of undervalue without more, i.e., ignoring the question of whether there was a breach of duty by the Directors or a conspiracy. How strong is the evidence relied on by Mr Hughes that the business was in fact sold to SAI at an undervalue and does it substantiate a prima facie case?

[133]Mr Hughes relied on the fact that AIP was being valued at £500 million in November 2025 for the purposes of the seed round and that, as late as 19 December 2025, after the seed round had been abandoned, Mr Bellamy had offered to buy Mulberry's interest in AIP at an implied valuation of £80 million. He also said that there was evidence that, within days of the Transaction, SAI had already concluded significant commercial relationships and was representing that it already had very significant power capacity. This is all said to give what is to be regarded as a current implied value substantially in excess of the sum paid.

[134]The defendants’ answers to these allegations were that AIP was in distress, that there was deadlock between its shareholders and that the seed round had been lost, all of which was caused by Mr Hughes’ conduct. This was one of the reasons why the £500 million figure was wholly irrelevant to the true value by the time that the Transaction came to be consummated.

[135]Mr Hughes said that it was not his conduct which caused the problems. He contends that what caused the problems was Mr Bellamy seeking to undertake the seed round without any foundational authority. It is said by Mr Hughes that these arguments cannot be resolved on a summary basis on this application; they can only be resolved at trial. That may be right so far as the real cause of AIP’s financial distress is concerned but, while cause is a central issue in dispute in the IoM proceedings (where it will be determined in relatively short order), it has a limited bearing on what AIP’s true financial condition and value was at the time of the Transaction.

[136]Both Mr Andrew Thornton KC for Mr Bellamy and Mr Singla made submissions on the records of the many meetings held by the Committee during the course of December. This material substantiates the impact of what had occurred on AIP’s business and financial condition and the detailed consideration with which the Directors (apart from Mr Bellamy) gave to the options going forward. Whatever the position may have been as to expected value at the commencement of the seed round and whatever the value attributed as part of Mr Bellamy’s “silver bullet” offer, it is obvious from the evidence that AIP was in critical financial distress by the time of the “gun to the head” meeting, whether or not it was technically insolvent.

[137]It is also obvious that the Committee’s decision-making took place in circumstances in which those Directors who participated were all conscious that they may be operating in a pre-insolvency twilight zone. They clearly all knew that, as a business which was heavily reliant on the quality and stability of its workforce, AIP’s main asset might walk out of the door at any time and that any valuation was bound to be affected by the dispute between Mr Hughes and Mr Bellamy which had caused deadlock at the Mulberry level of the structure.

[138]Touchstone’s report recognised this weakness in AIP’s financial position but it still included a platform valuation based on an opportunity cost and a workforce valuation reflecting the replacement costs of the workforce transferred. It also opined that, in their view, P2’s exclusivity agreement with the Wykes’ family company had negligible market value to a market participant because it was short-dated with just under 3 months to run.

[139]On the other hand, Mr Hughes said that the Touchstone report was in fact a fait accompli, and that the business was never exposed to the market. He said that, given the assumptions on which it was prepared, the Touchstone report could not be relied on by the Committee as advice on the market value of AIP’s assets as a trading business. In particular, Touchstone stated in their description of the scope of service that it did not amount to a valuation of AIP as a going concern. The report also made clear that they were not making any assessment of enterprise value, or “any value attributable to synergies, future financing or business continuity”, nor did they include an assessment of the market value of any tangible assets or goodwill.

[140]The Directors other than Mr Bellamy contended that there was very good reason for them to proceed with the benefit of a valuation notwithstanding the limitations I have described. As it was put in the scope of services section, the Touchstone report was prepared “under circumstances of acute time and liquidity constraints, and where the proposed transaction represents the only transaction capable of execution within the Company's available cash flow runway”. This was the reason that, notwithstanding the Committee’s initial position that it might be appropriate and feasible for some market testing to be carried out, in the event that could not happen. In particular, their evidence was that, once the “gun to the head” meeting had occurred on 22 December, it became obvious to them that time was too short for this.

[141]Mr Singla for the Directors other than Mr Bellamy recognised the limitations of the Touchstone report, but explained that its significance was not that it was intended to tell the Committee what they should seek for AIP’s business in the market. In their view it was too late for that. Its purpose was to inform AIP on the question of whether the offer it had received from SAI was sensible, reasonable and fair, while recognising that fairness was ultimately a matter for them. In that context, Touchstone simply carried out the exercise of valuing the balance sheet items and demonstrated that the headline consideration of £20 million implied a premium relative to market value of the in-scope assets less the in-scope liabilities.

[142]As Mr Tom Weisselberg KC said in his oral submissions on behalf of the Employees:

“What Mr Lloyd says is that the 20 million was a rough estimate to cover AIP's liabilities and to return the initial investment made by Mr Hughes and Mr Bellamy. The management team knew that 12.5 million had been invested in some shape or form, and they knew the liabilities. They thought that the price was, to use Mr Lloyd's words, more than fair. What your Lordship is entitled to say, we submit, is that there is no red flag in this case in relation to the price paid by the management team for, effectively, the buyout of their employment obligations, the buyout of their restrictive covenants, and the ability for them to do what the company, in a deadlock situation, was not able to do, which was to go out and actually create a real business here. So we say, in relation to value, your Lordship is entitled to look at what the SAI directors thought.”

[143]Against this background, it was submitted on behalf of Mr Hughes that the Directors always expected that Touchstone’s opinion would be that the consideration exceeded market value. In particular, he criticised the Directors for failing to protect and enforce AIP’s rights against those of its employees who were involved in the MBO. It is alleged that any genuine threat by the Employees to resign could and should have been answered by an assertion from the Directors that they should continue to comply with their contracts thereby preserving the value of AIP’s assets. In effect they should not have allowed the Employees to get into the position of becoming exclusive bidders for AIP's business.

[144]Mr Hughes’ case on this aspect of his complaint was summarised in his skeleton argument by a contention that any truly independent director “would have called the employees’ bluff, or at least attempted to do so”. It is said that the board minutes suggests that this was not even considered as a responsive action and that the Directors did not take that course because the arrangement was designed to suit the financial interests of all of them. It was said that this was an area which required exploration at trial.

[145]The Committee’s position was that in practice they had little option. Whatever the reason for the position in which (for better or worse) they then found themselves, an accelerated M&A process was not the appropriate way forward in the light of the position then taken by the Employees. They also expressed themselves to be very concerned that keeping Mr Hughes informed of the MBO proposal would be potentially value destructive, not least because they had been told that he had his own competitor business in the form of Carbon3AI. Mr Hughes submitted that the decision not to proceed with an accelerated M&A process was not one which an independent board would or should have taken.

[146]In my view, it is clear that the weakness in Mr Hughes’ case is that the only evidence of what he says the business was worth in January 2026 relates to two assets which were quite different in their substance and characteristics to the assets transferred to SAI under the Transaction. The first relates to the figure of £500 million (20% of which was to be made available to the seed investors). This was the expectation value of AIP’s business after a successful seed round, carrying with it the ability to fund the anticipated development of AIP’s proposed business. Something similar was characterised by Mr Bellamy in the IoM proceedings as follows: “the value of AIP pre-raising of investment was £400 million and post investment was £500 million, with a potential valuation following an “A Round” investment of £4 billion”.

[147]It is self-evident that the use of these aspirational figures as statements of AIP’s potential are meaningless as any form of guide to the value of AIP’s business at the time of the Transaction. By that stage, AIP had a discontented workforce which was in a very strong negotiating position, there was no chance of a further seed round and the shareholder dispute was increasingly vitriolic. It is obvious that the consummation of the original strategy was unachievable.

[148]The second relates to the figure of £80 million reflected by Mr Bellamy’s own December offer to Mr Hughes. However, this offer was not made to AIP, and indicated a value attributed by Mr Bellamy to settle the dispute at Mulberry level, having regard to his intention to save the business from insolvency. It was made at a time before the “gun to the head” meeting, which made clear that the Employees were looking to set up their own concern. It follows that, although at first sight the disparity between those figures and the £20 million achieved on the Transaction is striking, on a proper analysis, neither of those figures assist in establishing a prima facie case that the assets were sold by AIP at an undervalue. In my view, the comparators are false ones.

[149]I have reached a similar conclusion in relation to the only other particular of undervalue pleaded in the PoC, which related to SAI’s post-Transaction fundraising. It is said that this “appears likely to ascribe value to the assets in excess of that paid for them”. In my view, this too is a false comparator because the fundraising was on behalf of SAI, not AIP, a business which in Mr Weisselberg’s words was not “racked by a shareholder dispute and has a management team that is contented and committed”. It is clear that the significance of this difference is fundamental, given that AIP was a start-up with little in the way of tangible assets and which self-evidently required a contented and committed workforce to survive.

[150]These conclusions do not of themselves mean that there was no undervalue, but they do require properly reasoned evidence from Mr Hughes to substantiate a figure which he says should have been achieved on a sale of the assets transferred by the APA as part of the Transaction. This is all the more important in circumstances in which the premium paid was several times the adjusted fair value of the assets assessed by Touchstone, including the values to be attributed to the platform and the workforce. This has not been done.

[151]There is also no material to counter Mr Mowat’s evidence that the Committee had to confront the reality that the position of the Employees, on whose continued involvement the value of the business was dependent, was not a bluff. It seems to me that much of what Mr Hughes complains of in this regard betrays an unrealistic failure to distinguish between the causes of AIP’s financial predicament, which is at the root of the shareholders’ dispute, and the steps which the Committee were taking to salvage the remaining value in the business having regard to the best interests of AIP as a whole.

[152]In reaching this conclusion, I am conscious that Mr Hughes has not yet had disclosure in these proceedings (although since the hearing, disclosure has taken place in the IOM proceedings and some material from that disclosure was put before me after the hearing). However, I was told that the information available to Mr Hughes to substantiate his case, included access to a data room. I agree with Mr Singla’s submission that there is no obvious reason why he could not have advanced a properly evidenced positive case as to the value he attributes to what was sold by the Transaction.

[153]It was said by Mr Singla that there may be tactical reasons relating to the IoM proceedings as to why a positive case on value has not been put forward by Mr Hughes for the purposes of this application. That may or may not be the explanation, but I consider that the absence of positive case on value, let alone any specific evidence to substantiate it, is a significant consideration when concluding that Mr Hughes has not done enough to demonstrate a prima facie case on this issue.

Prima facie case against the Directors: fraud and personal benefit

[154]Mr Hughes’ inability to establish a prima facie case on undervalue undermines one of the central planks of his application, without regard to the issue of fraud and personal benefit. However, it is also appropriate to consider the evidence in support of the allegation that the Directors stand to benefit personally from the Transaction, having breached their duties in permitting or procuring it to proceed.

[155]In the case of Mr Bellamy, this involves allegations that he participated on both sides of the Transaction. I shall deal first with the allegation that he was involved on the purchaser side of the Transaction, which also includes a claim that he has an interest in SAI and is a shadow director of SAI, a company of which Mr Lloyd is the indirect majority shareholder. Mr Downes did not develop some special meaning for the phrase “shadow director” and so I take the plea as an allegation that Mr Bellamy is a person in accordance with whose directions or instructions the directors of SAI (i.e., the Employees) are or were accustomed to act (cf. section 251 of CA 2006).

[156]Mr Bellamy and Mr Lloyd both gave direct evidence in answer to this allegation. They are clear and explicit in their denials that Mr Bellamy had anything to do with SAI. In his witness statement Mr Lloyd says in terms that Mr Bellamy: “holds no financial interest, whether direct, indirect, shadow, beneficial, contingent or of any other nature whatsoever in SAI or [the group of which SAI forms part]. He is not, and has never been, a shareholder, option holder, beneficiary or party to any arrangement by which he stands to gain financially from the acquisition of AIP's business or assets or from the subsequent performance or ownership of SAI or [the group of which SAI forms part] directly or indirectly”.

[157]Mr Bellamy is equally explicit. His evidence is that he has not discussed the details of the MBO with Mr Lloyd at any stage and has not sought to influence his decision-making. He also described how his relationship with Mr Lloyd has been put under very significant pressure by the events of the last few months and concluded by confirming that:

“I do not own any interest at all in SAI, I am not a creditor of SAI and there is no agreement or understanding whereby I am entitled to gain any interest in SAI in future. SAI is a wholly separate and independent entity from me and the companies I own and/or of which I am a director.”

[158]Mr Mowat was also clear that the Committee took specific steps to confirm the position and gave particulars as to how they did so. On this aspect of the case, I agree with Mr Weisselberg’s submission that there is nothing at all surprising about the Employees putting together an MBO offer without involving Mr Bellamy.

[159]Mr Hughes has adduced no direct evidence to contradict what is said by Mr Bellamy, Mr Lloyd and Mr Mowat. This means that Mr Hughes’ case on Mr Bellamy’s interest in SAI’s side of the Transaction can only be based on inferences which are sufficient to persuade the court that there is a prima facie case that Mr Bellamy and Mr Lloyd were both lying and that Mr Mowat was at least taken in by their lies or may himself be lying as well. I do of course accept that there are situations in which a powerful case can be built off the back of inferences, but in my view the current case is not one of them.

[160]There are two main points relied on in support of the inferences which Mr Hughes invites the court to draw. The first is that it is improbable that Mr Bellamy would have been unwilling to give up his interest in AIP’s underlying business, given how vested he had been in its development. The second is the nature of his relationship with Mr Lloyd and the fact that he was AIP’s sole director at the time that Mr Lloyd and the other Employees joined AIP.

[161]As to the first, Mr Bellamy’s position is that there is nothing in Mr Hughes’ contention that it is unlikely he would have approved of a sale of AIP’s assets to an entity which would exclude him from the business. As is corroborated by the relief sought in the IoM proceedings, which had been commenced before the Transaction was completed, P1 was the business which he considered to have the most value moving forward. In his view, the unfortunate reality was that AIP was always unlikely to have any significant value to him by the time of the trial in the IoM proceedings in light of the dispute with Mr Hughes (including because it would be too late to save it). His priority was therefore to obtain control of P1, a business that he founded and continued to run as sole director, rather than participating in the acquisition of AIP.

[162]On the face of it, this is a credible explanation which undermines the inference that Mr Hughes invites the court to draw, whether looked at from the perspective of Mr Bellamy himself or that of SAI and the Employees. In my view there is obvious substance in Mr Weisselberg’s submission that Mr Bellamy’s involvement in the founding of AIP is irrelevant to his future with SAI, given “the events of late 2025, in particular(a) the unwinding of the seed round;

(b) the dire financial position in which AIP was then placed; and

(c) the management team’s understandable discontent and concerns about their future and that of the business that they had joined”.

[163]As to the second, there is no doubt that Mr Bellamy had an existing relationship with Mr Lloyd; indeed Mr Bellamy has throughout accepted that they were close business associates and good friends. But I agree with Mr Thornton that the nature of that relationship does not form a sufficient basis for drawing the inference (even on a prima facie basis) that Mr Bellamy was connected to SAI in the manner alleged. I did not understand Mr Hughes to suggest that there was any specific or direct connection between AIP and the business activity in which they had previously been engaged.

[164]Since the oral hearing of the permission application, the court has been informed by Mr Bellamy’s and Mr Hughes’ solicitors that disclosure has taken place in the IoM proceedings. Initially, there was a dispute as to whether the collateral use obligation under the Isle of Man equivalent of CPR 31.22 should be released so as to enable a few documents disclosed by Mr Bellamy to be used in these proceedings. In the event, Mr Bellamy has waived the collateral use restriction in relation to these documents and, on Mr Hughes’ application, I decided that I should look at the documents, which I have done. I have also received post-hearing written submissions from counsel for Mr Bellamy, Mr Hughes and the Employees on the conclusions I should draw from them.

[165]The first is a WhatsApp exchange between Mr Bellamy and Ms Chekunaeva which is said by Mr Hughes to demonstrate a disposition in Mr Bellamy to use Mr Lloyd as an undisclosed front and therefore corroborated an inference that he had done the same thing with SAI at the time of the Transaction. In my view there is little substance in this submission. The exchange occurred before the seed round was withdrawn, what was being discussed does not cut across any of the evidence on this application and there is no evidence that Mr Lloyd was ever approached by Mr Bellamy to implement what was being discussed. It is a very thin basis for drawing an inference that Mr Lloyd acted as a front for Mr Bellamy in acquiring any interest or control of SAI.

[166]The second is a spreadsheet and the draft email to which it was attached dated 21 December. It is said to evidence that Mr Bellamy was involved in the Employees’ MBO proposals at the time they were being prepared for presentation to the Committee at the “gun to the head” meeting. The inference is said to be that it sets out an ownership structure for SAI and so shows that he was involved with SAI’s bid and had been lying when he said that he was not.

[167]Mr Bellamy says that this is wrong, because it relates to something quite different, viz., what he envisaged as a potential funding structure for his £40 million offer to Mr Hughes to buy out his interest in Mulberry, which was still under consideration at that stage.In my view, this is a much more credible explanation than what seems to me to be a contrived attempt by Mr Hughes to link it to SAI. While there is some commonality of shareholding between what turned out to be the SAI structure after the Transaction and the names which appear on this spreadsheet, there is no reason to think that this supports the suggestion that Mr Lloyd has been acting as a front for Mr Bellamy in relation to SAI. As I have said elsewhere it is not very surprising that Mr Bellamy might have thought that the same investors would remain interested so long as they consider that the structure is not riven by discord at the shareholder level.

[168]I therefore think that the inference Mr Hughes seeks to draw from this spreadsheet is very weak. The rather more striking aspect of the recent disclosure of documents in the IoM proceedings, on two of which Mr Hughes now seeks to rely, is that there is nothing more persuasive than this material to support Mr Hughes’ case.

[169]I also do not agree that the fact that Mr Hughes was not told of the Transaction before it occurred substantiates or even supports a prima facie case that dishonesty, bad faith or personal benefit for the decision-makers is to be inferred. I have already explained the evidence as to why that decision was taken: a desire to ensure that the Transaction which the Committee had decided was in AIP’s best interests was not derailed so as to extinguish the value altogether. That is a credible and understandable response from directors in dealing with the difficult decisions with which they were faced: a financially distressed company and two warring shareholders of the parent. I do not think that this is affected by the evidence that Mr Bellamy, in his capacity as the sole director of P2, knew of the MBO before Mr Hughes. This difference in treatment appears on its face to do no more than reflect the fact that in this single respect Mr Bellamy’s cooperation was required by the Committee. It says nothing about his participation more generally, whether on the purchaser side of the Transaction or otherwise.

[170]It was also said by Mr Hughes that it is to be inferred that Mr Bellamy was involved on the purchaser side of the Transaction because he orchestrated a seed round which attracted a major investment of £12.5 million from an entity called Dewk Capital which was also pleaded to be a founding investor in SAI. I have difficulty in seeing how that supports an inference that Mr Bellamy was on both sides of the Transaction. It simply shows that Dewk was supportive of the business in both funding rounds. This was not very surprising given that, on the basis of Mr Mowat’s evidence, Dewk Capital was a Wykes family investment vehicle, and therefore may have had its own interest in the future conduct and development of what (until the Transaction) had been AIP’s business. There is nothing to indicate that this was connected to the interests of Mr Bellamy.

[171]Finally, I do not agree with Mr Hughes’ case that the statement by the Committee’s solicitors that SAI was “totally disconnected” from either shareholder has the significance he asserts. I do not consider that it amounts to a disingenuous statement, largely for the reasons given by the Employees as described in paragraph 91 above.

[172]Turning next to Mr Hughes’ allegation that Mr Bellamy was involved on AIP’s side of the Transaction it seems to me that the evidence all goes the other way. A great deal of contemporaneous documentation was in evidence. It records that the preparatory decisions and negotiations were in fact made and carried out by the Committee without participation by Mr Bellamy. This evidence has been explicitly confirmed by the Directors, and in particular Lord Johnson and Mr Mowat, whose witness statements on this point are clear and unambiguous. Mr Bellamy did not participate in the process by which the Committee reached the conclusion that the Transaction was the correct way to proceed. There is no credible evidence that he did so.

[173]It therefore follows that Mr Hughes has to invite the court to accept as credible an unevidenced allegation that a number of individuals, with limited prior connections to Mr Bellamy, have lied in their witness statements and created a false documentary record to hide the fact that Mr Bellamy participated in the Transaction while pretending that he did not do so. It is essential to Mr Hughes’ case to establish that is what occurred.

[174]The personal motives for the four other Directors to have taken that course are very difficult to identify. As I shall explain shortly, the suggestion that their motive was driven by a desire to participate in AIP’s business going forward, demonstrated by their investment in the original seed round, and that they had an uncorroborated fear that, if Mr Hughes remained involved they would not be permitted to do so, seems to me to be highly speculative. I regard it as an insubstantial ground for making such a serious allegation.

[175]This feeds into the way in which Mr Hughes puts his case on dishonesty and personal benefit against the other Directors, because the allegations of collusion, dishonest disposal and absence of good faith also rest on what is said to have been a personal interest in the outcome of the Transaction. It was pleaded that they were conflicted in relation to the sale of AIP’s assets because they knew that if the business continued to be run through AIP, they would not be permitted to invest and take a personal financial interest in its future, while also knowing that, if the business was sold to SAI, they would be likely to be permitted to take such an interest. It is said that, in agreeing to the Transaction, they therefore preferred their personal interests over the best interests of AIP. There are three reasons why I do not consider that Mr Hughes has established a prima facie case to that effect.

[176]The first is that there is no direct evidence that the other Directors were looking to invest in AIP’s business once it had been sold to the Employee’s MBO vehicle (SAI). It was not their project; it was a project that had been established by and was being driven forward by the Employees. It seems to me that, if they had wished to participate going forward, it is likely that there would have been some hard evidence, and not just the speculation on which Mr Hughes currently relies. The only hard evidence goes the other way. Thus, all of the other Directors said in their witness statements that such a suggestion was just wrong, while three of them went rather further: Mr Mowat expressing the view that it was far-fetched, Ms Chekunaeva that it was entirely without foundation and Lord Johnson that it was demonstrably wrong.

[177]Secondly, I do not accept that any inference can be drawn from the fact that the other Directors had acquired shares as part of the original seed round. The Directors’ evidence, which makes good sense, is that it was no more than a commonplace vote of confidence for them, as directors of a start-up, to invest at this stage. It says nothing at all about their intentions after the November seed round had failed and the business had been sold to SAI.

[178]Thirdly, and more positively, the documentary evidence as to the process which the Committee went through when determining the right way forward in light of AIP’s financial condition is inconsistent with the intention on which Mr Hughes relies. That evidence shows a focus on a number of different options including a preference for a deal between the shareholders if that could have been achieved. It also shows that, at the time of the LOI, there was what appeared on the face of it to be genuine negotiation between the Committee and the Employees, including on such issues as exclusivity, impact on any shareholder deal and salary deferrals. While it is clear that the Committee had its back to the wall in the sense that time was running out, the whole approach which is recorded as having been taken is difficult to square with an allegation that there was any form of conspiracy to sell AIP to the Employees at an undervalue.

[179]In my view the evidence of Lord Johnson and Mr Mowat as to how the decision to enter into the Transaction with the Employees was taken is inherently credible given the very strong evidence as to the precariousness of AIP’s financial position, whatever the underlying reason for that being the case. The documentary record shows that the Committee took the sort of steps which directors are expected to take in the circumstances with which they were then faced. Whether or not they should have held out for more, and whether or not it was in the long-term best interests of AIP to go with the management rather than exposing the business to the market, and the uncertainty of how Mr Hughes would conduct himself given his interests in what the Committee thought was a competing business, all gave rise to a series of difficult but classically commercial decisions. Even if with the benefit of hindsight the Committee can be seen to have got it wrong (and I am far from saying that might be the case), the inferences which can be drawn on the current evidence fall far short of deliberate dishonesty or a desire to obtain personal benefits for themselves.

[180]It follows that, in my judgment, the suggestions made by Mr Hughes are not a proper basis for inferring the type of collusion which Mr Hughes must prove for establishing that, notwithstanding the direct evidence to the contrary, Mr Bellamy had an interest both in SAI and in the decision-making on behalf of AIP which led to the Transaction. I also think that the circumstantial evidence on which Mr Hughes currently relies to demonstrate that any of the other Directors stood to gain personally from the decisions they were making about the future of AIP’s business falls well short of establishing a prima facie case.

[181]I have therefore reached the conclusion that Mr Hughes’ case on dishonesty and personal benefit is based on no more than unevidenced suspicion; he has not established a prima facie case that the clear evidence of the Directors as to what occurred is either wrong or untruthful.

Prima facie case against the Employees and SAI: fraud and personal benefit

[182]I can deal with the claims against the Employees and SAI more shortly in light of the conclusions I have reached about the claims against the Directors (including Mr Bellamy). The claims against the Employees for breach of duty all relate to what they did by way of preparation for making the offer which culminated in the Transaction. The core of Mr Hughes’ arguments is that they must have engaged in work to establish SAI and prepare for acquiring AIP’s assets while they were still employed by AIP and they must have used confidential information belonging to AIP for that purpose.

[183]I agree that the evidence points to that having been the case, but in the light of what was agreed under the LOI, I cannot see that this gives rise to an arguable claim by AIP against the Employees. The complaints which are now made by Mr Hughes are precisely what the LOI was intended to permit the Employees to do as part of the process of putting together a proposal for the MBO. The claims for breach of duty in the PoC do not allege that the LOI is not binding on AIP, nor is it pleaded that the LOI was itself entered into as part of what is alleged by Mr Hughes to be the conspiracy.

[184]As to the claims in conspiracy against the Employees, the reality is that they cannot survive the claims in conspiracy against the Directors as to which I am satisfied there is no prima facie case. The unlawful combination is pleaded as having been one to which all of the active defendants were party and the theory is unsustainable if all of them could not be stigmatised as conspirators, not least because the unlawful means are said to be the breaches of duty in respect of which I do not consider there is a prima facie case. In any event, Mr Hughes does not allege a case that some but not all of the Directors and Employees co-conspired.

[185]Furthermore, I think the nature of their prior relationships and the connections between the Directors and the Employees makes it implausible that there was the combination alleged. As against the Employees, the argument presupposes not just that there was in fact an undervalue, but also that the Employees knew that they were acquiring the assets for a price that could not properly have been agreed by AIP. There is no evidence to support that suggestion and the weakness of Mr Hughes’ case against them is demonstrated by the way in which his main particular of an unlawful combination (as against the Employees) is expressed, emphasising the circular nature of what is alleged:

“In order for the sale at an undervalue to take place, it was necessary for the AIP Directors, the AIP Employees and SAI to work together and it is to be inferred from their positions at AIP that they all had knowledge that the sale was at an undervalue and any valuation obtained which supported the sale price was likely to be inaccurate.”

[186]I cannot rule out the possibility that evidence may emerge which casts what occurred in a different light and that possibility might persuade the court not to dismiss any claim by AIP itself on a reverse summary judgment application. But, in my judgment this case illustrates the difference between such an application and one for permission to commence a derivative claim where a prima facie case must be shown.

[187]Turning to the claim in constructive trust against SAI, it does not get off the ground if there is no prima facie case of breach of duty against the Directors, because it cannot be said that SAI took with notice of a breach sufficient to render it unconscionable to receive SAI’s assets.

[188]The final issue relates to Mr Hughes’ argument that the appointments of the Directors other than Mr Bellamy were invalid and that knowledge of the invalidity can be imputed to SAI with the consequence that the APA was void. It is alleged that the imputation of invalidity is through Mr Bellamy as a shadow director of SAI. As I have already concluded that there is no prima face case that Mr Bellamy was a shadow director of SAI and as it is not alleged that any of the other Employees had knowledge of any invalidity, this part of the claim fails at that hurdle.

[189]However, it is appropriate to say that the claim based on the invalidity of the Directors’ appointment is a difficult claim in any event, because everyone, including Mr Hughes, proceeded throughout the period up to the Transaction on the basis that the Directors had been lawfully appointed, an assumption that was plainly accurate having regard to the terms of AIP’s articles. Against that background, it is somewhat surprising that the argument now advanced by Mr Hughes as to why the Directors were not lawfully appointed was not utilised earlier because it was always available to him; it relies heavily on what he says had been agreed between him and Mr Bellamy much earlier at the meeting of Mulberry’s board in July 2025.

[190]In any event it is not straightforward to see how an agreement that key decisions by Mulberry would be taken in the IoM could affect the rights of AIP’s director or directors to make new appointments at the level of AIP’s board, when those rights were spelt out in AIP’s articles. Be that as it may, what occurred at that meeting is one of the matters in issue in the shareholders dispute which is the subject matter of the IoM proceedings and to which I will turn briefly at the end of this judgment. For that question to be resolved in separate English proceedings, when it is at the heart of the shareholders’ dispute in the Isle of Man, counts against the grant of the relief sought by Mr Hughes.

Wrongdoer control, best interests of AIP and other adequate remedy

[191]In light of the conclusions I have reached on prima facie case, I do not need to say very much about wrongdoer control, the position that a board of directors acting reasonably would have adopted when deciding whether to procure AIP to sue on the causes of action advanced by Mr Hughes or the adequacy of other available remedies. However, I think that it is appropriate to say something about the first of these requirements, while the second and third give rise to some difficulties for Mr Hughes in any event.

[192]As to wrongdoer control, Mr Hughes’ interest does of course flow from his shareholding in Mulberry, as the parent of the company on whose behalf he wishes to sue. Mr Thornton submitted that it must be established that Mr Bellamy is a wrongdoer in order for the claim against any of the defendants to fall within the boundaries of the exception to the rule in Foss v Harbottle. The reason he says this is that Mr Bellamy controls the litigation decision, because Mulberry is in deadlock and can neither ratify what occurred at the time of the Transaction nor procure the commencement of proceedings by AIP. As I have already explained control for these purposes includes the deadlock which enables Mr Bellamy (and indeed Mr Hughes) to prevent Mulberry from procuring AIP to litigate without their consent.

[193]I think that is right. The question for the court is whether the refusal by one of Mulberry’s 50% shareholders to agree to procure AIP to sue is causing a claim for the benefit of AIP to be improperly stifled. If Mulberry cannot take that step because Mr Hughes and Mr Bellamy have agreed a 50/50 structure, and one of them does not consent to the necessary decision, the control he is thereby exercising will only satisfy this aspect of the test for permission, if Mr Bellamy is a wrongdoer. If he is not a wrongdoer it will not, because the control is not wrongdoer control; it simply flows from the agreement reached by the parties which means that as a practical matter it is not possible for Mr Hughes to set either Mulberry and then AIP in motion (see the language used in Barrett at p.250d).

[194]It follows that wrongdoing by anyone other than Mr Bellamy would not in the event have been sufficient. It would only have been if wrongdoing by Mr Bellamy had caused the wrong for which redress is sought in these proceedings that relief against the other defendants could have got off the ground. This may not matter in the sense that Mr Hughes’ case was always that Mr Bellamy was at the centre of the wrongdoing, but it might have had some effect on the relief the court could in any event have granted against the other defendants.

[195]As to the position that a board of directors acting reasonably could or would have adopted when deciding whether to procure AIP to sue on the causes of action advanced by Mr Hughes, I think that, even if they had had concerns about the price which was achieved under the Transaction, it is very unlikely that they would have thought it appropriate to do so, anyway at this stage. In my view they would have been bound to take the view that the only reasonable course would be to await the resolution of the IoM proceedings. The Manx court is well placed to determine which of Mr Hughes and Mr Bellamy carries the greater responsibility for the obvious collapse in the value of AIP and whether any approach other than that adopted by the Directors and the Employees was feasible.

[196]In this regard, it is of some relevance that Mr Hughes himself recognised the overlap between the IoM proceedings and these proceedings at the time he first sought to challenge the Transaction. The injunctive relief he obtained from Michael Green J and Rajah J was granted under section 25 in aid of his proposed counterclaim in the IoM proceedings and included relief against AIP restraining the disposal of its assets pending resolution of the dispute in the IoM.

[197]He also informed the court through his solicitors that the IoM proceedings are the equivalent of an unfair prejudice claim under Isle of Man law, and that he intended to pursue a counterclaim in those proceedings seeking, amongst other things, orders restoring to Mulberry assets dissipated or misused by Mr Bellamy, “including the assets of AIP which have apparently just been sold.” He went on to say that, although he had yet formally to respond to the IoM proceedings, he intended to bring counterclaims against Mr Bellamy concerning the various categories of wrongdoing on which he now relies in these proceedings.

[198]In the event Mr Hughes’ counterclaim has not been formulated in quite that way, but it is clear that many of the same disputes in issue in these proceedings are at the centre of the IoM proceedings. While, in the IoM proceedings, the resolution of those disputes goes to the different question of which, if either, of Mr Hughes or Mr Bellamy is guilty of oppression to the other in the conduct of the affairs of Mulberry, the overlap between the points in issue in the two sets of proceedings is very significant.

[199]The reason for this is that the dispute between Mr Hughes and Mr Bellamy as to(a) what was agreed at the outset,

(b) the impact of that agreement on how the affairs of AIP were run in the period up to and including the seed round,

(d) the use to which the monies advanced by Mr Hughes to Mulberry were put in the six month period after his original investment and

(e) the extent to which Mr Hughes’ conflicting interest in Carbon3AI was relevant to the Committee’s decision as to how to proceed, are all fundamental not just to the question of oppressive conduct for the purposes of the IoM proceedings. They are also directly relevant to how AIP came to be in the financial predicament it was in by the middle of December 2025 and why the Directors and the Employees say that they were justified in conducting themselves in the manner they did during the period up to and including completion of the Transaction, i.e., the matters at the heart of these proceedings.

[200]Put another way, Mr Hughes’ position on the issues between him and Mr Bellamy in the dispute between them as shareholders is core to the reason why it is said by him in these proceedings that the true and unrealised value of AIP’s assets was very much greater than that which was achieved by the Transaction. On the other hand Mr Bellamy’s position on those issues is key to why it is said by him that the true value was destroyed by Mr Hughes’ conduct. Of course what matters is what the true value was at the time of the Transaction, but, in my judgment, in order to reach a conclusion on that, it is logical first to resolve the underlying dispute between the two shareholders.

[201]So far as the relief in the IoM proceedings is concerned, to the extent that Mr Hughes succeeds in his arguments in relation to the unlawfulness of the seed round, and indeed some of the other allegations of oppression on which he relies, it seems likely that those conclusions will be reflected in the buyout or other relief which is then granted. Nobody argued that that is not likely to be the case. To that extent, the financial benefits of the relief granted by the Manx court would be likely to be adequate when compared with any monetary relief granted against Mr Bellamy in these derivative proceedings.

[202]In my view, this consideration points against the grant of relief, even if the IoM proceedings had yet to be commenced, a point which is clearly explained by Lewison J in Iesini at [124] to [126], where he says that:

“From the point of view of the company itself a petition under s 994 is far preferable, principally because it will only be a nominal party and will not incur legal costs; whereas in the ordinary way if a derivative action is brought for its benefit it will be liable to indemnify the claimant against his costs, even if the claim is unsuccessful.”

[203]In a further passage with which I agree, Lewison J went on to say that the potential liability of the company for costs is a proper consideration for the court in deciding whether to allow a derivative claim to proceed. In many respects this chimes with the conclusion that I have already expressed in relation to the approach that a reasonable board of directors could and would take in determining whether or not to litigate. If, as a commercial matter, a properly informed board of directors would procure the company to sue on the claims asserted by the derivative claimant, that would support the grant of permission. If the court is not satisfied that it could or would do so, whether in light of the steps available to be taken elsewhere or otherwise, that will point to the opposite conclusion.

[204]However, Mr Hughes also submitted that the IoM proceedings do not provide an adequate remedy for a number of other reasons. The first is that none of the defendants apart from Mr Bellamy are parties to the IoM proceedings. That is of course true as far as it goes, but in my judgment is not a factor of great weight, bearing in mind that the principle is whether the suggested alternative remedy is adequate; it does not have to be the same. In my view, the assessment of whether the remedies currently being pursued in the Isle of Man are adequate is a more nuanced exercise than simply asking whether relief is available against the same defendants as those who are sought to be sued in England (i.e., SAI, the Directors and the Employees).

[205]In particular, it was suggested that Mr Hughes would not be able to cross examine the existing defendants as they would not be parties in the Isle of Man and would not be compellable there. Strictly speaking that is not correct, because there are well-known procedures for obtaining oral and documentary evidence from individuals domiciled in England by way of assistance to foreign proceedings (Evidence (Proceedings in Other Jurisdictions) Act 1975). However, I can quite see that this is likely to be more cumbersome than the procedures by which they might be able or required to give disclosure and evidence in English proceedings. To that extent, Mr Hughes would not have the forensic advantages available to him if he sues everyone involved in the Transaction here in England. However, its significance is reduced by the context in which the issues that are the subject of these proceedings will fall for consideration in the Isle of Man. Those on which evidence and disclosure from the defendants other than Mr Bellamy is likely to be relevant largely relate to the appropriate remedy and any buy-out figure which either party might be required to pay. The correct approach to that will be heavily influenced by the anterior question of which of the two protagonists is responsible for oppression to the other.

[206]Mr Hughes says it is also relevant that he seeks non-monetary relief in these proceedings. He seeks a declaration that the assets transferred to SAI under the Transaction are held on constructive trust for AIP, that they be transferred back to AIP and alternatively rescission. He submitted that this relief is not available in the IoM proceedings, not least because SAI is not a party. That may be the case but, even if I were to have been satisfied that the evidence established a prima facie case that those claims fall within the proper boundaries of the exception to the rule in Foss v. Harbottle, I think it improbable that I would have given permission to continue.

[207]The reason for this relates to all of the claims, but most especially to the claims in constructive trust and for rescission, having regard to what is likely to occur on the determination of the IoM proceedings, a consideration which also relates back to the obligation of the court to consider whether a reasonable board of directors would consider it to be in the best interests of the company to pursue the proceedings, anyway at this stage. If Mr Hughes succeeds in the IoM proceedings and obtains a buy-out order in his favour, there will no longer be any wrongdoer control by any of the defendants and he will be free to proceed as he sees fit without continuing these proceedings as a derivative claim. By contrast, if Mr Bellamy succeeds, Mr Hughes will no longer have an interest in Mulberry sufficient to give him standing to proceed with this derivative claim on behalf of AIP.

[208]One of Mr Hughes’ answers to this is that, if Mr Bellamy is granted an order for the purchase of Mr Hughes’ shares in Mulberry, he may not be good for the money. The evidence for this is unclear, but even if the Manx court were to conclude that a buy-out in favour of Mr Bellamy were otherwise to be the right order, it is to be expected that it would craft relief which made provision for the consequences of inability to pay.

[209]Another point made by Mr Hughes was that it is not certain that the IoM court will grant any relief at all because it is possible that it will not be satisfied that either of the two Mulberry shareholders has engaged in oppressive conduct within the meaning of section 7. Of course that is possible but, given the nature of the dispute between the parties, it seems unlikely that this will occur. But even if it does, this is a case in which a decision to refuse relief under section 7 will simply confirm that Mulberry is in deadlock. If either party then chooses to apply for the winding up of Mulberry on just and equitable grounds (section 162(6) of the Isle of Man Companies Act 1931), it seems improbable that the Isle of Man court would refuse such an application (cf the approach reflected in Deemster Doyle’s judgments in Donnell v Siboney Limited CP 2009/118 and Clifton Holdings Limited v Belgravia Corporate Services Limited, Re B3 Group Limited CPL 2005/2). The decisions as to whether AIP should sue would then be a matter for the liquidator.

[210]I agree that it is not possible to say that no reasonable director could authorise these proceedings in those circumstances. But even if a prima facie case were to have been established on the merits, I think it is very doubtful that a reasonable director would have done so. In my view, having regard to the issues to be determined in the IoM proceedings and the progress that has been made, a reasonable director would await the outcome of those proceedings before committing AIP to the costs, expense and disruption of continuing these proceedings.

Conclusion

[211]For all these reasons I am satisfied that the relief sought by Mr Hughes must be refused. The application dated 23 January 2026 for permission to continue the claim will therefore be dismissed. It follows that the claim for an indemnity as to costs out of AIP’s assets does not arise.