High Court refuses double derivative claim permission in Hughes v Bellamy AI dispute

The High Court has refused permission for a shareholder to pursue a double derivative claim against the directors and senior employees of an AI infrastructure start-up, finding he had failed to establish even a prima facie case that its assets were sold to a management buyout vehicle at an undervalue.

In Patrick Hughes v Martin Bellamy & Ors [2026] EWHC 1871 (Ch), Mr Justice Trower considered an application by Mr Hughes for permission to continue proceedings on behalf of AI Pathfinder Inc Limited, a company jointly owned through an Isle of Man holding vehicle, Mulberry Limited, in equal shares with the first defendant, Martin Bellamy. The claim sought to challenge the sale of substantially all of the company's business and assets to APA Asset Co Limited, an entity formed by members of the company's own senior management team, for a cash consideration significantly below figures previously discussed in connection with an aborted fundraising round.

The judge set out the well established common law principles governing double derivative claims, which fall outside the statutory derivative action regime under Part 11 of the Companies Act 2006 and instead depend on the fraud on the minority exception to the rule in Foss v Harbottle. Applying the guidance in Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) and more recent authorities including Abouraya v Sigmund and McGaughey v Universities Superannuation Scheme Limited, he confirmed that a claimant must establish at least a prima facie case, a standard higher than a merely arguable one, that the company has a good claim, that the wrongdoing amounts to actual fraud or has conferred a personal benefit on the wrongdoers, and that those wrongdoers are themselves in control of the company such that it cannot pursue the claim on its own account.

The judge rejected submissions on behalf of Mr Hughes that the extensive evidence filed by the defendants was largely irrelevant to a permission application, holding that a proper understanding of the background and the realistic alternative avenues for resolving the dispute was essential to the exercise. He found no prima facie case that the company's assets had in fact been sold at an undervalue, holding that the figures relied upon by the claimant, drawn from an aborted funding round and from a separate settlement offer made by Mr Bellamy to buy out the claimant's own shareholding, were not proper comparators against the distressed financial position the company was in by the time of the disputed sale.

Nor was the judge persuaded that Mr Bellamy had been secretly involved on the purchasing side of the transaction, notwithstanding his prior business relationship with one of the buyout's key participants, finding the direct evidence of the parties involved credible and the inferences invited by the claimant insufficiently supported even by material disclosed in parallel proceedings in the Isle of Man. Claims against the other directors and senior employees, based on alleged conflicts of interest and an unlawful means conspiracy, were found to rest on similarly unevidenced speculation.

The judge placed considerable weight on ongoing unfair prejudice proceedings between Mr Hughes and Mr Bellamy in the Isle of Man, concerning the same underlying shareholder dispute, observing that a reasonable board would await the outcome of that litigation before committing the company to the cost and disruption of pursuing separate proceedings in England. The application for permission was accordingly dismissed in its entirety, along with the associated claim for a costs indemnity from the company.