Before:
Jonathan Hilliard KC sitting as Deputy Judge of the High Court
IN THE MATTER OF COGNISM LIMITED
AND IN THE MATTER OF THE COMPANIES ACT 2006
B E T W E E N : -
MR JAMES ISILAY
Petitioner
-and-
(1) AVP CAPITAL A FCPI
(2) AVP CAPITAL B FCPI
(3) PEAKSPAN CAPITAL GROWTH PARTNERS II, L.P.
(4) VIKING GLOBAL OPPORTUNITIES ILLIQUID INVESTMENTS SUB-MASTER LP
(5) VIKING GLOBAL OPPORTUNITIES DRAWDOWN (AGGREGATOR) LP
(6) BLUE CLOUD VENTURES IV LP
(7) BALDERTON CAPITAL GROWTH I, S.L.P.
(8) COGNISM LIMITED
Respondents
Orlando Gledhill KC and Ben Lewy (instructed by Charles Russell Speechlys LLP) for the Petitioner
Daniel Lightman KC and Stephanie Thompson (instructed by Paul Weiss, Rifkind, Wharton & Garrison LLP) for the First to Seventh Respondents (the “Respondents”)
Hearing date: 20 March 2026
Draft judgment circulated: 19 May 2026
APPROVED JUDGMENT
JONATHAN HILLIARD KC sitting as a Deputy Judge of the High Court:
The Petitioner Mr Isilay was the CEO of Cognism Ltd (the “Company”). He remains a shareholder in the Company. Last year he brought an unfair prejudice petition (the “Petition”) against the venture capital funds named as Respondents, who together hold the majority of the other shares. The grounds for the Petition are founded on what Mr Isilay alleges was a boardroom coup that brought about his removal as CEO and the taking of subsequent steps in relation to the Company that he considers to have been inappropriate.
I have two inter-related applications before me. The Respondents apply to strike out, or in the alternative for summary judgment in respect of, two elements of the Petition:
the inclusion of the Sixth Respondent (“Blue Cloud”), as a Respondent; and
the allegations that the board observer appointed by Blue Cloud, Mr Rami Rahal, and Ms Emily Nolop- another observer appointed by the Fourth and Fifth Respondents (“Viking”)- were de facto directors of Cognism (together with limb (1) the “Respondents’ Application”). I shall refer to Mr Rahal and Ms Nolop together as the “Observers”.
The above applications are brought by all the Respondents, but are targeted on the aspects above, rather than seeking any broader strike-out of the claim. No defence has been served by any of them. That is because CPR r.3.4(7) provides that a defendant who applies to strike out all or part of the claim need not file a defence before the hearing of such an application.
The Petitioner applies for permission to amend the Petition, among other things to allege specifically in [11] of the draft amended Petition (the “Draft”) that the parties to the plan to remove him included not only the Respondents (termed in the Petition and Draft the Preferred Shareholders) and their appointed directors but also the Observers (the “Amendment Application”). The Respondents do not oppose the amendments save for those in [11]. Rather they contend that the usual order for costs should be made in their favour.
The inter-relationship between the Respondents’ Application and the Amendment Application, and the subject-matter of both applications, therefore lies in the role and status of the Observers. The Respondents contend that the pleaded case in respect of the role of the Observers is so thin and weak that strike-out and summary judgment should be granted in respect of it (limb (1) of the Respondents’ Application above), and that it follows from this that the addition of the Observers into [11] of the Petition through the Amendment Application should be rejected. As part of that, but also as a separate limb of their application, the Respondents contend that the pleaded allegation that the Observers were de facto directors is so thin and weak as to be struck out or attract summary judgment (limb (2) of the Respondents’ Application). The reason why limb (1) of the Respondents’ Application focuses on Blue Cloud, rather than Blue Cloud and Viking, is that Viking, unlike Blue Cloud, also had the ability to, and did, appoint a director. The Respondents contend that the de facto director limb of the application is a helpful but not necessary part of their application in respect of the inclusion of Blue Cloud as respondent.
In my judgment, while the claim against Blue Cloud could be considerably more clearly pleaded and appears on what I have seen to have some hurdles to surmount, the tests for strike-out and summary judgment are not met in respect of the claim against Blue Cloud as a whole or the allegations of de facto directorship and I should allow the amendment. However, there are- within the paragraphs that the Respondents seek to strike out as part of their attempt to strike out the claim against Blue Cloud- a number of parts that do not themselves disclose reasonable grounds for bringing a claim. Therefore, while the core of the claim against Blue Cloud is one that gets over the strike-out threshold, there is substance in some of the Respondents’ objections, which were put powerfully before me in oral submission by leading and junior counsel. In my judgment these parts should be struck out unless Mr Isilay brings an application to amend in respect of them and such application is granted.
The relevant factual background
The Company, which was founded in 2015, is a sales intelligence platform, assisting sales teams to generate and manage leads and update their customer relationship management records. Mr Isilay was its co-founder and currently owns just over 9% of the shares. Following a number of funding rounds, the Respondent investors hold a little under 60% of the shares. Blue Cloud holds the smallest shareholding out of that group, at a little over 4% of the total shares. There are also a number of other funds that have not been joined as respondents to the Petition.
The Shareholders’ Agreement (“SHA”) and Articles of Association (“Articles”) detail the appointment rights of the foregoing. The most recent versions are dated 1 August 2023. Mr Isilay had the right to appoint up to two natural persons as directors while he is CEO and/or holds shares (and he would be one of those directors while CEO): cl.3.3; art.6.2. Each of the following had the right to appoint one natural person as director (i) the First and Second Respondents taken together (“AVP”), (ii) the Third Respondent (“PeakSpan”), (iii) the Fourth and Fifth Respondents taken together (Viking), and (iv) the Seventh Respondent (“Balderton”): cls.3.4-3.6; arts.6.3-6.6. While its appointed director was not an employee of Viking, Viking also had the right to appoint an observer: cl.3.10, art.6.9, and the same right was afforded to each of AVP, PeakSpan, Balderton and Enterprise Innovation Fund (“ENIF”) (one of the investors not joined as Respondent) but only so long as they had no director appointed: cls.3.9, 3.11-3.12, arts.6.8 and 6.10. Importantly for present purposes, Blue Cloud had the right to appoint an observer for so long as Blue Cloud held at least 25% of the shares that it had held at completion: cl.3.10; art.6.9.
Those provisions dealing with observers provide that an observer shall be given notice of all directors, remuneration committee and audit committee meetings at the same time as the directors, and shall be entitled to attend, speak and place items on the agenda for discussion provided that they shall not be entitled to vote and shall not be treated as a director of the Company.
The Company also issued management rights letters.
Until the events complained of, Mr Isilay was the CEO. He pleads in the Petition that he managed the Company with great success, that his performance was never found to be inadequate on annual reviews, and that he believed he had an excellent working relationship with the venture capital investors: [9]-[11]. At 5 February 2025, the date on which he was removed as CEO, the other directors were Mr Daffern and Mr Khan (appointed by Mr Isilay), Mr Akram (appointed by AVP), Mr Melymuka (appointed by PeakSpan), Ms Kannan (who was independent of, but appointed by Viking), and Mr Thévenon (appointed by Balderton). The observers were Mr Rahal (appointed by Blue Cloud), Ms Nolop (appointed by Viking), Ms Zabasu (appointed by ENIF), Mr Rosen (appointed by Aurora Investment Pte. Ltd, an investor not joined to the present proceedings) and Mr Kuentz (of Swisscom (Schweiz) AG, an investor not joined).
The SHA also provided that each director and observer would be given 10 business days’ notice of board meetings and committee meetings: cl.3.16, that no resolution may be passed at such meetings unless the nature of the business had been specified in the agendas: cl.3.17, and that each shareholder shall exercise all voting rights and other powers available to it in relation to the Company so as to procure as far as reasonably possible that the provisions of the SHA are promptly observed and given full force and effect according to its spirit and intention: cl.14.1.
The Petition and Draft
Following a background section, the Petition and Draft summarise at section B Mr Isilay’s complaint as follows (I underline the words added by the Draft):
“11. Notwithstanding that Mr Isilay founded the Company and has managed it for the past decade with great success, the Preferred Shareholders and their appointed directors and/or observers have conspired to remove him in a boardroom coup, and have repeatedly breached the Shareholders’ Agreement so as to entrench their control of the Company, exclude Mr Isilay from the Company’s affairs, inhibit his ability to act effectively as a director of the Company and dilute his influence and shareholding.
12. The Preferred Shareholders have since removed Mr Isilay as CEO and made commercial decisions which he considers to be irrational and perverse.”
Having outlined in the sections that follow the Company’s governance arrangements contained in its Articles and the SHA, and the relevant duties of directors, the Petition and Draft then set out the following sections. I focus as I go through on the specific mentions of Mr Rahal, Blue Cloud, Ms Nolop or de facto directorship given their relevance to the Respondents’ Application.
Section E, headed “The board meeting of 5 February 2025”. This section culminates at [30] and [31] with the allegation that Mr Daffern (one of Mr Isilay’s director appointees, subsequently CEO)informed Mr Isilay at the end of the day that the board had voted to remove Mr Isilay as CEO, and Mr Isilay’s as yet unvested share options were immediately cancelled. That section does not itself plead the role that the Preferred Shareholders are alleged to have played in the events pleaded in that section.
Section F, headed “Subsequent exclusion [of] Mr Isilay from the Company’s affairs”, commences with the following paragraph:
“32. Since Mr Isilay’s purported removal as CEO on 5 February 2025, the Preferred Shareholders and their representatives on the board have acted so as to exclude Mr Isilay from the Company’s affairs and inhibit his ability to act effectively as a director of the Company. The Preferred Shareholders have taken similar steps to exclude directors (namely Ms Maria Dramalioti-Taylor, Mr Giles Palmer and Mr Paul Hacker) whom they perceive as aligned with Mr Isilay.”
The section then sets out the allegations under 9 subsections.
[33]-[35] (comprising section F(I), entitled “Mr Daffern sidelined the Company’s lawyers”)contain one mention of the Observers, at [35]. The context is that [33] pleads that the Company’s longstanding lawyers wrote to Mr Daffern the day after the events of 5 February 2025 informing him that Mr Isilay’s termination was likely to be invalid because of the failure to follow due process, before sharing such advice with Mr Isilay a week later. [34] then pleads that Mr Isilay wrote to the board asking them to contact those lawyers urgently. [35] pleads that Mr Daffern responded the next day, stating that “[o]n behalf of the Board and Observers, I hereby confirm that [the law firm in question] is not acting as Company Counsel for Cognism in this matter” (underlining added).
[38]-[42] contain a number of following allegations against the Observers. The opening paragraphs to this section F(II), entitled, “The Company held shadow board meetings without informing Mr Isilay”, are [36] and [37]. [36] pleads that Mr Daffern was unavailable for a call with Mr Isilay on 7 February 2025 because- according to Mr Daffern’s WhatsApp message, he was “on [the phone] with [the] board”, so that it is averred that a board meeting was held that day to which Mr Isilay was- improperly- not invited. [37] pleads that the proposed 2025 budget tabled for discussion at the 21 March 2025 board meeting was in fact only subject to limited discussion at that meeting and had been approved in advance by the “appointees of the Preferred Shareholders”. Against this background, [38]-[42] then plead as follows:
[38] pleads that Mr Rahal referred at a 21 March 2025 board meeting attended by (among others) Mr Isilay to “our daily meetings” and alluded to regular investor meetings with Mr Daffern, Mr Melymuka (the director appointed by the Third Respondent) and Ms Nolop: [38].
[39] goes on to plead that “[i]t is therefore averred that Mr Daffern and the Company’s other directors and observers have been having regular informal board meetings (“Shadow Board Meetings”) at the behest of the Preferred Shareholders without including Mr Isilay, Ms Dramalioti-Taylor or Mr Hacker” (Ms Dramalioti-Taylor and Mr Hacker being two of the directors whom Mr Isilay pleads at [32] were “excluded” by the Preferred Shareholders because of those shareholders’ perception that the individuals were aligned with Mr Isilay).
[40] states that while Mr Isilay is unable to give full particulars of the Shadow Board Meetings, “[i]n light of the matters set out in this Amended Petition, it is averred that the Preferred Shareholders and those representing them (including Mr Daffern and Ms Rushforth) have regularly met in forums other than the Company’s board in order to discuss, plan and decide their strategy against Mr Isilay and to discuss, plan and take decisions on behalf of the Company”.
[41] draws the allegations together, pleading that “[t]he Preferred Shareholders” have therefore breached the provision of the Articles requiring decisions of the Company’s board to be made by resolution at a duly-convened meeting (unless the decision is unanimous) and the provisions of the SHA and Articles requiring Mr Isilay to be given 10 business days’ notice of meetings.
[42] deals with the role of Mr Rahal and Ms Nolop, pleading that:
“Mr Rami Rahal and Ms Emily Nolop, who are board observers representing Blue Cloud and Viking respectively, have participated in the Preferred Shareholders’ scheme against Mr Isilay. Ms Nolop has also been involved in taking decisions on behalf of the Company (such as by participating in the interview and selection process for a new CEO and participating in the decision to close one of the Company’s subsidiaries). They have therefore been acting as de facto directors and/or shadow directors, in breach of Clause 3.10 of the Shareholders’ Agreement and Article 6.9 of the Articles, which provide that observers shall not be treated as directors of the Company “for any purpose”.” (The striking through reflects the changes made by the Draft.)
As can be seen from [41], the allegation is that these Shadow Board Meetings were actual (purported) board meetings at which board decisions were made, such as to breach those provisions of the Shareholders’ Agreement and Articles. The contention in [42] that Mr Rahal was a de facto director by virtue of having participated in the Preferred Shareholders’ scheme against Mr Isilay appears to me clearly to be founded on these allegations at [39]-[41] which immediately precede and lead into [42].
Section F(III), at [43]-[45], does not refer to the Observers. It is entitled “Mr Daffern and Ms Rushforth instructed the Company’s directors and employees not to talk to Mr Isilay”. Mr Daffern and Ms Rushforth are two of those who are pleaded in [40] to have attended the Shadow Board Meetings referred to in [39]-[40].
One of the paragraphs in Section F(IV), entitled “Refusal to allow Mr Isilay to call a board meeting”, mentions Mr Rahal, namely [48]. That paragraph pleads that “[o]n 24 March 2025, Mr Isilay proposed that a number of issues relating to corporate governance (including the separation of the Chairman and CEO roles, and best practices for future CEO transitions, be discussed at the next board meeting. Mr Rahal of Blue Cloud Ventures responded that “[w]e have more important things to discuss at the next board meeting”.”
No mention of the Observers is made in Section F(V) at [49]-[51], entitled “Refusal to provide Mr Isilay with minutes of the 5 February 2025 board meeting”.
[52], the opening paragraph of Section F(VI) (which section is entitled “The Preferred Shareholders added an extra director so as to entrench their control”), pleads that the Preferred Shareholders passed a board resolution. However, it does not explain the precise relationship between the shareholders’ actions and those of the board (given that the board passes the board resolution) or how it is alleged that Blue Cloud and the Observers were involved in this if it is contended that they were.
Section F(VII), entitled “The Preferred Shareholders pushed out Mr Isilay’s choice of non-executive director”, complains that the Company’s remuneration committee, which comprised the directors who had been appointed by AVP, PeakSpan, Viking and Balderton, refused to award Mr Isilay’s new appointed non-executive directors any remuneration, contrary to the practice in respect of his earlier appointees. While Blue Cloud is included within the category of Preferred Shareholders in the title to the section, there is no mention of the Observers in the section. However, the opening wording of [89] together with [89(4)] pleads that “the Respondents and their representatives…[r]efused to pay any directors’ fees”. I read “their representatives” as extending beyond the de jure directors to the Observers, and the Preferred Shareholders include Blue Cloud. Therefore, on the face of it, its is being alleged that Blue Cloud and Mr Rahal were among those involved in the refusal to pay the directors’ fees. However, it is not pleaded specifically what that involvement in the refusal to pay the directors’ fees is alleged to have consisted of.
Section F(VIII), entitled “The Preferred Shareholders cancelled a planned board meeting”, pleads that on Mr Isilay asking for a cancelled board meeting to be reinstated, Mr Daffern told Mr Isilay that the “directors representing the Preferred Shareholders” did not believe that such a meeting is necessary: [63], and that amounted to a threat that the Preferred Shareholders would prevent any board meeting called by Mr Isilay from taking place: [64]. Given [63] pleads that Mr Daffern referred to the directors representing the Preferred Shareholders, this does not read as including the Observers.
Section F(IX), entitled “The Preferred Shareholders circumvented Mr Isilay’s pre-emption rights”, refers to Mr Rahal at [69]. That paragraph pleads that at the 10 September 2025 board meeting continued on 11 September 2025, “the directors representing the Preferred Shareholders (i.e., Mr Daffern, Mr Rahal, Mr Yared, Ms Kannan, Mr Melymuka and Mr Akram) passed a resolution” (underlining added) that had the effect of preventing Mr Isilay from exercising pre-emption rights in respect of participating in convertible loan note financing. Mr Gledhill contended orally that Mr Rahal was being referred to here as a de facto director (as he was not a de jure director) but this is not how the pleading reads and he is not mentioned in the minutes of the meeting as acting as a director. Therefore, it is very difficult to see how he could have acted in this capacity at the 10 September 2025 meeting, whatever allegation is made about whether he acted as a director at Shadow Board Meetings (as to which see point (4) above).
Section G, entitled “Ongoing mismanagement of the Company”, commences with the following paragraph:
“73. The Preferred Shareholders have also made a series of business decisions which have had the effect of entrenching their control of the Company. These decisions were each taken without Mr Isilay’s involvement.”
The section then sets out the allegations under the following 5 subsections: “I Appointing an Interim CFO on 27 March 2025 without a board vote”: [74], “II Project Ghost”: [75]-[78]; “III Closing [a subsidiary]” (which Mr Isilay pleads was a perverse decision): [79]; “IV Appointing a new CEO on terms which dilute Mr Isilay’s shareholdings”: [80]-[83]; and “V Approving the CLN financing” (which financing, Mr Isilay pleads, offered very generous terms to the Preferred Shareholders as participating investors and diluted his shareholdings in the Company): [84]-[86].
Section G(I) (“Appointing an Interim CFO on 27 March 2025 without a board vote”) pleads at [74] that Mark Logan was appointed on 27 March 2025 as interim CFO without a board meeting or vote and without Mr Isilay’s involvement. Taken together with the pleading in the opening paragraph of Section G ([73]) that “[t]he Preferred Shareholders have also made a series of business decisions”, this reads as alleging that the Preferred Shareholders, including Blue Cloud, through their representatives made the decision to appoint him.
Section G(II), entitled “Project Ghost”, pleads that this project was a purported investigation into alleged historic irregularities at a subsidiary but in fact was “an attempt to manufacture an ex post facto rationalisation for his removal as CEO”: [78]. It is pleaded, among other things, that Mr Daffern accused Mr Isilay at a 29 May 2025 board meeting of lying in relation to the project: [76(1)], and that “board members” cross-examined Mr Isilay about the project without Mr Isilay having been given any notice this would occur: [76(2)]. There is no specific pleading in the section referring to Blue Cloud or Mr Rahal. However, it is later pleaded in [89(5)], taken together with the opening words of [89], that “the Respondents and their representatives…[p]ursued an investigation (Project Ghost) in an attempt to blame Mr Isilay for various issued [sic] which have apparently arisen within [a subsidiary]. This involved ambushing Mr Isilay with allegations about the contract about [the subsidiary] at the 29 May 2025 board meeting without giving Mr Isilay any advance notice of the allegations”. Therefore, it appears from [89] that all of the Preferred Shareholders are being alleged in the Petition to have been behind the decision to take the investigation (which in turn coheres with the broader wording of the opening paragraph of Section G, [73], which refers to the Preferred Shareholders generally). The implication, but it is not made explicit, is that this is intended to be a reference back to the Shadow Board Meetings. There is no other reference to Blue Cloud being involved in Project Ghost in any other way.
Section G(III), “Closing [the subsidiary]”, comprises [79], which pleads that Mr Isilay considered the decision to close down the subsidary to be perverse and was not involved in that decision. The implication from [73] is that it is being alleged that the Preferred Shareholders, including Blue Cloud, took the decision.
Section G(IV), “Appointing a new CEO on terms which dilute Mr Isilay’s shareholdings”, pleads that an offer of employment was made on 23 May 2025 to Mr Dominic Allon to act as CEO on particular terms by Mr Daffern, in circumstances where Mr Daffern was acting with “Preferred Shareholder approval” (which phrase would include Blue Cloud) but without board approval: [80].
Section G(V), “Approving the CLN financing”, pleads that “[a]s set out at paragraphs 56 to 72 above, on 11 September 2025 the Preferred Shareholders procured that the Company pass a board resolutiondeeming the CLN financing [an intended new source of finance] not to be Relevant Securities for the purposes of the Articles” which had the consequence that “Mr Isilay was denied the opportunity to participate in the CLN financing”: [84], in circumstances where the CLN financing offered very generous terms to the participating investors, and therefore to the Preferred Shareholders (including the ability to convert their securities into equity on attractive terms): [85], which in turn will cause Mr Isilay’s shareholdings in the Company to be diluted: [86]. Therefore, that is an allegation made against the Preferred Shareholders generally, seemingly including Blue Cloud.
Section H, headed “Breaches of the Shareholders’ Agreement and Articles”, pleads that “[b]y reason of the matters set out above, the Respondents by their representatives on the Company’s board have repeatedly breached the Shareholders’ Agreement and Articles, and continue to do so, namely [by acts (1)-(12) that then follow]: [87]. Subparagraph (3) complains of the holding of board meetings, including Shadow Board Meetings, without giving Mr Isilay proper notice. Subparagraphs (6) and (7) comprise “[a]llowing board observers to act as Company directors, in breach of the…Shareholders’ Agreement and… the Articles” and “[m]aking decisions of the directors other than by resolution at a duly-convened board meeting through the practice of holding Shadow Board Meetings, in breach of…the Articles”. Other subparagraphs plead that they purported to pass resolutions removing Mr Isilay as CEO and appoint Mr Daffern as CEO in circumstances where the Articles and SHA had been breached by failure to give due notice of such resolutions and agenda items (subparagraphs (1) and (2))
Section I, headed “Breaches of duty”, pleads that “[f]urther, by reasons of the matters set out above, the director representatives of the Preferred Shareholders have acted in breach of their duties to the Company, in [the three respects that follow]”: [88]. Those respects are purporting to pass resolutions removing Mr Isilay as CEO and deeming the CLN financing not to be Relevant Securities, refusing to approve remuneration for Mr Isilay’s chosen replacement candidates as non-executive director.
Section J, headed “Breakdown in trust and confidence”, pleads that “[b]y reason of the matters set out above, the Respondents and their representatives have caused a breakdown of trust and confidence between the shareholders, [on the six grounds that then follow]”: [89], and that “[b]ecause of this course of conduct, relations between Mr Isilay and the Preferred Shareholders and their representatives are now dysfunctional and beyond repair, and Mr Isilay cannot sensibly be expected to work together with them”: [90]. Subparagraphs (1) and (2) of [80] plead that the Respondents and their representatives have “[c]overtly plotted to remove Mr Isilay as CEO and used unlawful means to achieve this i.e., not giving valid notice of the resolution” and “[s]idelined Mr Isilay from carrying out his proper role as director: important decisions that should have been taken by directors at board meetings are instead being taken by informal processes and also by board observers, who are not entitled to take decisions for the Company. Mr Isilay has also been prevented from receiving all the information he needs and has asked to carry out his proper role as director.” The other paragraphs refer to ignoring Mr Isilay’s attempts to provide input into a number of key board decisions (subparagraph (3)), refusing to pay Mr Isilay’s chosen replacement non-executive directors any director’s fees contrary to the previous practice (subparagraph (4)), pursuing Project Ghost (subparagraph (5)) and approving the CLN financing on very generous terms whilst denying Mr Isilay the opportunity to participate in the transaction (subparagraph (6)).
Section K, headed “Conclusions”, pleads that “[i]n the premises, the affairs of the Company have been and continue to be conducted in a manner which is unfairly prejudicial to the interests of Mr Isilay as holder of Ordinary Shares and B Ordinary Shares”: [91], so that Mr Isilay seeks an order that the Preferred Shareholders purchase his shares at a price to be assessed by the Court without applying a minority discount and valued at 5 February 2025 as the date from which he contends that he was excluded from full participation in the Company’s affairs and a date before the alleged mismanagement of the Preferred Shareholders took place: [92].
The relevant law
There are three relevant areas of law: (1) the test for unfair prejudice and the relief that can be granted on such a petition; (2) the test for strike-out and summary judgment, and (3) the test for when a person is a de facto director. None of them were in dispute. I take them in turn.
Unfair prejudice
The relevant principles are as follows:
s.994 of the Companies Act 2006 provides that a member of a company may apply to the Court by petition on the ground that the company’s affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or some part of its members (including at least himself): s.994(1)(a).
Therefore, in a s.994 petition, it is necessary for the petitioner to plead and prove that the relevant respondent was concerned in conducting the affairs of the company in an unfairly prejudicial manner.
A petitioner may not travel outside the allegations pleaded in the petition: Re Coroin Ltd [2013] 2 BCLC 583 at [56]. The breadth of the jurisdiction means that the petition plays a vital role in defining the basis of the petitioner’s case. The petition must be read sensibly, but the grounds on which the petitioner says that the affairs of the company have been conducted in an unfairly prejudicial manner should be fairly set out in the petition, so that the respondents are able properly to meet the case and the Court is able to keep the proceedings within manageable bounds: ibid.
If the Court is satisfied that a petition is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained of: s.996(1), including- as sought by Mr Isilay in this case- providing for the purchase of the shares of one member by other members or by the company itself: s.996(2)(e).
The test for whether relief should be granted against a respondent under s.996 is whether that respondent is so connected to the unfairly prejudicial conduct that it would be just to grant a remedy against him in relation to that conduct: F&C Alternative Investments (Holdings) Ltd v Bartholemy (No. 2) [2012] Ch 613 at [1096].
Strike-out and summary judgment
Taking first strike-out:
Three grounds on which a Court may strike out a statement of case is if it appears to the Court (a) that the statement of case discloses no reasonable grounds for bringing the claim, (b) that the statement of case is an abuse of the Court’s process or is otherwise likely to obstruct the just disposal of the proceedings, or (c) that there has been a failure to comply with a rule, practice direction or court order: CPR r.3.4(2). The present case is put on the basis of r.3.4(2)(a).
In an application under r.3.4(2)(a), the primary facts are assumed to be true, and the application is to be analysed without reference to evidence: Libyan Investment Authority v King [2020] EWCA Civ 1690 at [96]; Duchess of Sussex v Associated Newspapers Ltd [2020] EWHC 1058 (Ch) at [33].
Rather the focus is on the statement of case, and the allegations pleaded in it e.g. Re Pederson (Thameside) Ltd [2017] EWHC 3406 (Ch), [2018] BCC 58 at [11].
Examples given in PD3A of cases where the Court may conclude that the particulars of claim fall within r.3.4(2)(a) are those which set out no facts indicating what the claim is about, those which are incoherent and make no sense, and those which contain a coherent set of facts but those facts, even if true, do not disclose any legally recognisable claim against the defendant: [1.2].
An example of where the jurisdiction may be exercised in relation to unfair prejudice petitions is where the Court considers that the likelihood of the trial judge exercising his discretion to grant the claimed relief is so remote as to be perfectly hopeless: Re the Hut Group [2021] EWCA Civ 904, [2021] BCC 970 at [82].
Where a statement of case is found to be defective, the Court may consider whether the defect may be cured by the respondent making an amendment; however, such an option only arises, “provided that there is reason to believe that he will be in a position to put the defect right” (Kim v Park [2011] EWHC 1781 (QB), at [40]). In my judgment this approach is not a freestanding principle, but rather an application of the overriding objective. Accordingly, a number of orders are open to the Court. If a corrective amendment is put before the Court, the Court may decide to give permission for the amendment. If such an amendment is not put before the Court by the time of the hearing of the strike-out application but the Court considers that there is reason to believe that the relevant party is in a position to put the defect right, one possible order that the Court can make in the circumstances in the first sentence is that the claim is struck out unless the claimant applies for permission to amend within a certain period. However, as I shall come onto later, another order open to the Court, at least where the respondents have not taken up an earlier opportunity to put right the defect, is simply to strike out the relevant part of the statement of case rather than give them a further opportunity to do so. The recent decision in Cohen v Morrison [2026] EWHC 184 (Ch) at [37] is a good example of the latter order. Mr Simon Gleeson, sitting as a deputy High Court Judge commented at [37] that “[w]here a party comes to court with a fixed position, and refuses to change that position in response to challenges by the other party, they should not be allowed- if that position is rejected- to come back with an amended position at a later stage in the same matter” because “that would be tantamount to an abuse of process of the Court”.
Turning to summary judgment:
The Court may give summary judgment if it considers that the party has no real prospect of succeeding on the claim: CPR r.24.3(a).
On a summary judgment application, the applicant may adduce evidence to contradict allegations made in a statement of case.
As Lewison J explained in Easyjet Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15], (i)the Court must consider whether the claimant has a realistic rather than a fanciful prospect; (ii) a realistic claim is one that carries some degree of conviction and is therefore a claim that is more than merely arguable; (iii) in determining a summary judgment application, the Court must not conduct a mini-trial; (iv) equally that does not mean that the Court must take at face value and without analysis everything that a claimant says in their witness statements before the court; (v) in reaching its conclusion the Court must take into account not only the evidence placed before it but also the evidence that can reasonably be expected to be available at trial, but it is not enough simply to argue that the case should go to trial because something may turn up; and (vi) if the Court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it.
A Court will scrutinise the matter particularly carefully where the petition rests on allegations of bad faith akin to fraud: Hut Group at [83].
An amendment will only be allowed if it has a real prospect of success, and therefore the applicable test is in this regard the same as for summary judgment.
De facto directorship
In assessing whether a person is a de facto director:
The question is whether the person has assumed responsibility to act as a director: Smithton v Naggar [2014] EWCA Civ 939, [2015] 1 WLR 189 at [35], reflecting HMRC v Holland [2010] 1 WLR 2793 (UKSC) at [93] per Lord Collins.
To answer this question, one must examine what the person did: Smithton, [36].
Therefore, it is extremely fact-sensitive, as it generally requires an assessment of the corporate governance structure of the company to decide whether the person has participated or been able to participate at a directorial level of decision-making: Allianz Global Investors GmBH v G4S Ltd [2022] EWHC 1081 (Ch) at [174]. See to similar effect Smithton at [45] and the paragraphs that precede that.
This focus on what the person actually did means that one is not merely considering the roles formally assigned to them in the corporate structure: Smithton at [38]; Allianz at [175].
It also means that the person in question need not have thought that they were acting as a director: Smithton at [39].
Equally, whether the company considered the person to be a director and held him out as such, and whether third parties considered the person a director, will be relevant factors: Smithton at [42].
The focus on whether the person participated or was able to participate at a directorial level of decision-making means that the fact that a person is consulted about directorial discussions or their approval is sought does not in general make them a director because they are not taking the decision: Smithton at [43]. The function undertaken must be one that could properly be discharged only by a director, rather than one that can for example properly be performed by a manager below board level: Re Hydrodam (Corby) Ltd [1993] BCC 161 at 163C-D.
Where there are a number of possible capacities in which the individual may have been acting, the Court may need to decide what capacity the individual was acting in: Smithton at [36], a good example of this being the question confronting the Supreme Court in Holland of whether the individual was acting merely as director of the sole corporate director of the company in question or whether he was acting as director of the latter company.
Where it is not clear in what capacity the individual’s acts have been taken, the person is entitled to the benefit of the doubt and their acts will not be treated as having been carried out as a director: Re Richborough Furniture Ltd [1996] 1 BCLC 507 at 524.
Analysis of the Respondents’ Application
The Claim against Blue Cloud
The claim against Blue Cloud is generally made by allegations against all of the “Preferred Shareholders” without distinction, and is not always easy to follow. Taking some examples:
There is no mention of Blue Cloud’s role in Section E itself, which is the section that deals specifically with the events of 5 February 2025. Section F, which makes at [39]-[40], the allegation of Shadow Board Meetings, is in a section entitled “Subsequent exclusion of Mr Isilay from the Company’s affairs”, rather than dealing with Mr Isilay’s removal, and the allegation in [89(1)] that the Respondents and their representatives “covertly plotted to remove Mr Isilay as CEO and used unlawful means to achieve this i.e. not giving valid notice of the resolution” does not contain a cross-reference back to what passages earlier on this is referring back to or based on. While Mr Gledhill stated orally that the reference to covert plotting to remove Mr Isilay as CEO was intended to be a reference back to the Shadow Board Meetings alleged at [39]-[41], which are in turn part of what is being summarised in [11]-[13], there is no cross-reference back to these paragraphs, and [39]-[41] are in a section on steps after Mr Isilay’s removal.
Nevertheless, I accept that, as Mr Gledhill contends, [39]-[41] (together with [11]-[13]) are realistically the only earlier passages that this allegation at [89(1)] can be referring back to. Therefore, one does get through the route above to what is being alleged against Blue Cloud in this regard but it would have been better for Blue Cloud’s role to have been dealt with in Section E itself.
The Respondents submitted that it was not clear from the pleading whether dishonesty is being alleged against Blue Cloud. The pleading contains allegations of “covert plotting” to remove Mr Isilay and using unlawful means to do so, that board directors and observers held shadow board meetings, which would mean that they were not genuinely taking a decision at the ordinary board meetings as they purported to do, and of “schemes”, “conspiracy” and “boardroom coup(s)”. At the very least, they are suggestive of inappropriate behaviour. However, Mr Gledhill made clear in the opening to his oral submissions that dishonesty was not being alleged, and pointed out that the fact that their behaviour was inappropriate and the means employed by them wrongful did not mean that it was necessary to show dishonesty. I accept that latter point.
The pleading of the Shadow Board meetings in Section F(II) does not deal expressly with which of the acts criticised in Sections E to G are said to have been decided upon at the Shadow Board Meetings and which are not. Orally Mr Gledhill explained that Mr Isilay’s case was that all of them were. However, the Petition does not state that expressly. A “practice” of holding Shadow Board meetings is pleaded: [87(7)], it is also pleaded that “important decisions that should have been taken by directors at board meetingsare instead being taken by informal processes and also by board observers”: [89(2)], which I read as a reference to such Shadow Board Meetings, there is an allegation of “covert…plott[ing] to remove Mr Isilay as CEO”: [89(1)], and it is pleaded in [40] that there have been regular meetings of the Preferred Shareholders and their representatives in forums outside the formal board meetings “in order to discuss, plan and decide their strategy against Mr Isilay and to discuss, plan and take decisions on behalf of the Company”. However, there is no specific allegation that the Shadow Board Meeting allegation is intended to cover all 15 specific acts complained of in section E, F(I)-(IX) and G(I)-(V), and the Shadow Board Meetings allegation is found in a specific section, F(II).
The important paragraph at [87] setting out 12 alleged breaches of the SHA and Articles refers to “the Respondents and their representativeson the Company’s board” having breached the SHA. I can see the argument that this phrase does not include Blue Cloud and the Observers, which was put to me by the Respondents in submissions. It might be argued in this regard that “on the board” has been added in [87] but not the allegations of breakdown of trust and confidence in [89] because it is only intended to refer in [87] to the conduct of the Preferred Shareholders through their de jure directors. Mr Gledhill contended that it was intended to cover Blue Cloud and the Observers, and in my judgment in context it is clear enough that they fall within “the Respondents and their representatives on the board”: (a) [38] and [42] refer to observers as “board observer[s]”; (b) they are physically present at and participate in board meetings; (c) it is clear from [39] that observers are being treated as participants in informal board meetings; (d) [87] refers to all of the Respondents, and therefore one should be inclined to read representatives on the board as covering the representatives of each of them as otherwise it gives no meaning to the inclusion of Blue Cloud within the phrase “the Respondents”; (e) the similar phrase at the start of section F (“the Preferred Shareholders and their representatives on the board”: [32]) appears to be intended to catch Observers as for example a key subsection of section F- section F(II)- is explicitly targeted at Observers as well as the directors appointed by the Preferred Shareholders; (f) it is clear from Sections F and G, together with [11], that it is alleged that Blue Cloud has breached the SHA and Articles, which is what [87] is directed at: see for example [41] and [42] in relation to Shadow Board Meetings and de facto directors; (g) it is alleged that the Observers took board decisions at the informal board meetings; and (h) as developed further in [71] of my judgment below, a number of the sub-paragraphs of [87] appear to be targeted at Blue Cloud and the Observers.
Prior to the proposed amendment to [11], in my judgment the natural meaning of the reference to “the Preferred Shareholders and their appointed directors” who are alleged to have conspired to remove him in a boardroom coup is that it does not include Observers as they are not directors formally appointed to the board. However, Mr Gledhill contended that the intention was that they should do so, hence the proposed amendment to add in “and/or observers” after the passage above.
There is no specific express linkage within Sections F and G themselves of a number of the specific alleged acts of board directors or a board committee on one hand to the Preferred Shareholders on the other, and certainly to a Preferred Shareholder who does not have an appointed director, namely Blue Cloud e.g. [43]-[45], [49]-[51], [52]-[53], [54]-[60] and [61]-[63]. Mr Gledhill’s submission orally was that the linkage in relation to Blue Cloud lay in the acts of Blue Cloud through Mr Rahal at Shadow Board meetings, but this is not done expressly in the pleading.
A number of these points extend beyond Blue Cloud, but the application before me relates to Blue Cloud and the Respondents contend that the claim is particularly weak against Blue Cloud because the linkage of director acts to Blue Cloud is far more tenuous given that Blue Cloud has no ability to appoint directors.
However, while some piecing together is necessary, the core of the pleaded case in the Petition insofar as it affects the Observers appears to me to be as follows, largely as Mr Gledhill submitted:
Mr Isilay was removed and Mr Daffern appointed as interim CEO following the 5 February 2025 meetings of the board and committees of the board, without his future as CEO having been placed on the agenda in advance, following a 30-minute session of the non-executive directors, and following which his e-mail access was immediately terminated: [22]-[31]. Therefore, it is, Mr Isilay contends, a fair inference that this was planned and decided on in advance outside board meetings. This is reflected in the vivid if slightly vague pleading of the Respondents and their representatives (intended to include the Observers as they are representatives of the Respondents as much as the directors appointed by them) having “[c]overtly plotted to remove Mr Isilay as CEO [using] unlawful means to achieve this, i.e., not giving valid notice”: [89(1)]. The shadow board meetings referred to in [38]-[40] to “discuss, plan and decide their strategy against Mr Isilay” ([40]) were the fora at which these plans were developed and decided on.
The above involved a number of breaches of the SHA and Articles, including by making director decisions outside duly-convened board meetings, allowing board observers to act as directors at such other meetings, holding shadow board meetings without giving Mr Isilay notice, not giving appropriate notice of the resolution to remove Mr Isilay at the 5 February board meeting, and not specifying the nature of the business to be included in the agenda for that board meeting: [87].
Two days later, Mr Daffern was apparently unavailable to speak to Mr Isilay because he was on a telephone call with the board, which it is averred was therefore a board meeting to which Mr Isilay was not invited or given notice of: [36].
A month or so later, the budget, while formally approved at the 21 March 2025 board meeting, had “in fact been approved in advance by the appointees of the Preferred Shareholders”: [37].
At that board meeting, Mr Rahal referred to “daily meetings” held outside the board meetings and “alluded to regular investor meetings with Mr Daffern, Mr Melymuka and Ms Nolop”: [38]. It is therefore averred that Mr Daffern and the Company’s other directors and observers had been having “regular informal board meetings” at the behest of the Respondents without including Mr Isilay or those directors with whom he was aligned.
Therefore (a) those references at the 21 March 2025 board meeting, taken together with (b) the apparent 7 February 2025 informal board meeting held in Mr Isilay’s absence and without notice to him: [36], coupled with (c) the limited discussion of a major item like the budget at the 21 March 2025 board meeting: [37], and (d) the apparent approval in advance of the budget outside the meeting: [37], gave rise to an inference that informal board meetings were taking place outside the formal board meetings: [39].
Further, “in light of the matters set out in this Amended Petition”: [40], which includes, taking some examples (a) the manner of Mr Isilay’s removal without notice or inclusion on an agenda item in a manner which the Company’s longstanding lawyers considered invalid, (b) the apparent 7 February 2025 board meeting to which Mr Isilay was not invited, (c) the apparent determination of the budget in advance of the 25 March 2025 board meeting, (d) the appointment of an interim CFO on 27 March 2025 without a board meeting or vote and without Mr Isilay’s involvement: [74], and (e) the appointment of a new CEO with Preferred Shareholder approval but not with board approval: [80], it is to be inferred that these informal meetings in (5) above were important ones at which strategy was discussed- including with the Observers- and board decisions taken by all individuals present, including the Observers: [40], [89(2)].
Important decisions that should have been taken by directors at board meetings are instead being taken by such informal processes, including by the Observers: [89(2)], [87(3)], [87(6)], [87(7)]. This breaches the SHA and Articles and has caused a breakdown of trust and confidence between the shareholders.
Consistent with that role of the Observers, (a) Mr Rahal- despite being an Observer rather than (like Mr Isilay) a director- felt able to respond to Mr Isilay’s 24 March 2025 request to discuss certain points at the next meeting by rejecting Mr Isilay’s suggestion, stating that “[w]e have more important things to discuss on the next board meeting”: [48], and (b) Mr Daffern gave Mr Isilay confirmation of the change of legal adviser 10 days after the 5 February 2025 meeting “[o]n behalf of the Board and Observers” (underlining added): [35]. While these are examples, Mr Gledhill contended that they were emblematic of the considerably greater than typical role of the Observers, and that one could expect more evidence of the role of the Observers to emerge through disclosure.
I read the Petition as contending that even if Mr Isilay is wrong about the meetings outside the board meetings, there was still unfair prejudice through at the very least the acts of the de jure director appointees and those Respondents who appointed them, per [87] and [88]. However, an important part of binding in the Observers is that they were part of a strategy outside the formal board meetings, so that they were substantially involved in such strategy despite the fact that at the formal board meetings they were not voting.
I have considered carefully whether the pleading is sufficiently vague as against Blue Cloud as to be struck out as obstructing the just disposal of the case. I do have sympathy with some of the Respondents’ complaints about the imprecision of the Petition and Draft. However, while I consider that some of the Petition is not very clearly pleaded, in my judgment the claim against Blue Cloud as a whole does not fall into this category, given that one can extract from it the core case against Blue Cloud set out above. In any event, while I have the jurisdiction to strike out on these grounds of my own volition, the application before me was not put on that basis, but rather the vagueness of the pleadings was marshalled in support of the argument that the claim against Blue Cloud was a hopeless one.
Turning to whether the petition does disclose reasonable grounds for a claim against Blue Cloud for the purposes of strike-out, in my judgment it does. I strongly emphasise the limits of the exercise that I am conducting at this early stage of the proceedings, particularly given that no defence has yet been filed.
The nature of the core case being run by Mr Isilay is, whether couched in colloquial terms as a “conspiracy” or “covert plot” or simply a strategy settled on by the participants in the absence of Mr Isilay as to how the Company should be run, a case that focuses on a premeditated plan outside the formal board meetings rather than on who actually acts at the formal board meetings (i.e. the de jure directors). To that extent it is an allegation that is made against the Observers and those who appoint them as much as against the directors and those who appoint them. The pleaded case is that “Shadow Board Meetings” were attended by all Respondent representatives, rather than just the directors, and therefore included Mr Rahal, and that this was consistent with how he explained the matter at the 25 March 2025 board meeting. In other words, the focus of the Petition is on what steps were taken on the part of the directors and how Mr Isilay contends they came about, namely through a premeditated plan between the Respondents, their representatives and Mr Daffern. As Mr Gledhill put it orally, it is that the Company is being run, at least to some extent, by a group of powerful investors to the exclusion of Mr Isilay.
In my judgment, if there were separate meetings attended by Mr Rahal and Ms Nolop at which plans were agreed to take each, or failing that some, of the steps complained of in the Petition, and this would justify relief against the Respondents other than Blue Cloud, this may very well also justify relief against Blue Cloud:
Here, there is no sign of Blue Cloud and its representative Mr Rahal taking a different view to the other Investors and their representatives as to Mr Isilay’s removal or the subsequent matters complained of in the Petition.
On the contrary, it was on Mr Isilay’s case Blue Cloud’s representative, Mr Rahal, who mentioned the daily meetings outside the formal board meetings.
In my judgment, at more informal meetings like that, while larger investors are likely to carry more sway, divisions between observers and directors may well have been less important than at formal meetings.
Put another way, it seems to me less likely that a person would turn up simply to act as an observer at a meeting like this, rather than participate and determine the course of action to be taken, than at a formal board meeting.
Indeed, if there were informal meetings that in substance took board decisions, those meetings were not observing the requirement that such decisions only be taken at a properly convened meeting, so other proprieties such as the strict division between director and observer role may equally not have been observed.
Mr Rahal put forward a forceful negative response to Mr Isilay placing items on agenda on 24 March 2025 for an upcoming board meeting: [48]. While only one snapshot, that is consistent with Mr Rahal playing a fairly significant role in influencing company decision-making.
On the basis of the Petition I consider that there is a real prospect of showing that there were separate meetings of the character alleged by the Petitioner or close enough thereto to involve Blue Cloud sufficiently in the plans conceived and agreed on at such meetings to justify the relief sought against it:
The points in [22(1)] to [22(7)] above do give rise to a real prospect of showing that the steps complained of in the pleading were decided and agreed on by the Preferred Shareholders’ representatives, including Blue Cloud’s representative Mr Rahal, at meetings outside and proceeding the formal board meetings, and that this was in breach of the SHA and Articles and contributed to a breakdown of trust and confidence between the shareholders.
In particular, on the basis of the pleading:
Removal of the CEO without notice of this being considered or it being included as an agenda item, and following a short non-executive meeting on 5 February, gives rise to a seriously arguable inference that this course of action was agreed beforehand.
In my judgment, following an exit as CEO in such circumstances, it is far from implausible that other board members wished to discuss and determine future actions outside the formal board meetings at which they would have to engage with Mr Isilay. This is all the more so when one factors in that the removal was accompanied by cancellation of his unvested options (and removal of access to the Company’s computer systems and office), the acrimony that appears to have followed and apparent threats of legal proceedings (see e.g. the references as early as 15 February 2025 in [43] of the Petition).
Mr Daffern’s WhatsApp message of 7 February 2025 pleaded at [36] that he was in a meeting with the board could be taken to mean that he was having informal board meetings.
Mr Rahal having “daily meetings” with at least a number of other attendees of board meetings is suggestive of a fairly intense level of discussion of Company actions and policy outside board meetings by senior individuals in the Company.
These meetings were not simply between a couple of investors or between a single investor and management. They were regular meetings between a number of investor representatives and the interim CEO at the helm of the Company.
The later paragraphs of the pleading suggest that actions like appointing an interim CFO were conducted without a formal board meeting or vote and without Mr Isilay’s involvement: [74]. Again, that supports the idea of meetings or discussions having been conducted between senior Company individuals outside formal board meetings. Similarly, the later paragraphs plead that an offer of employment was made to a new CEO without board approval: [80].
More generally, while I emphasise that I base this solely on the Petition without prejudging any defence that may be put forward to it in due course, the matters alleged in the Petition set out a pattern of conduct that give rise to a case with a realistic prospect of success that he was sidelined and disadvantaged in breach of the SHAs and/or Articles through a series of steps taken towards him. If that is the case, then that may well not be as a result of isolated director decisions, but as a result of discussions and decisions reached outside the board meetings to bring this about. It may well have been by design, rather than through the accident of individual director decisions.
I do note that the attendees that Mr Rahal is alleged in [38] to have referred to comprise Mr Daffern (the interim CEO), Mr Melymuka (Peakspan’s appointed director) and Ms Nolop (Viking’s appointed observer) but does not mention AVP or Balderton’s appointed directors or Viking’s appointed director as opposed to their appointed observer. That weakens, at least to some degree, the inference that AVP and Balderton were through representatives attending Shadow Board Meetings and that Viking’s appointed director was too. However, in light of the above, I do not consider it takes it below the level necessary to survive a strike-out application.
Turning to the summary judgment application, that requires me to take into account the evidence submitted on the Respondents’ Applications. I have carefully taken into account all the evidence put to me and arguments put by the Respondents, but I do not consider that changes the result. Once the evidence has been taken into account, there is still a real prospect of success, for the reasons above.
One of the points I have considered most carefully was the arguments made by the Respondents about the management rights letters ([9] above). I see this argument, but I do not consider it alters the above reasons.
Similarly, I have considered the evidence put forward by the Respondents, including Mr Rahal’s denial that there were informal board meetings. Mr Rahal states that he spoke regularly with other investors in the aftermath of Mr Isilay’s removal as CEO, but he does not go into the content of those meetings or deal expressly with whether he had meetings that involved Mr Daffern outside board meetings. Given that and the points above, I do not consider that this changes the overall result. The same is true of the other arguments marshalled by the Respondents against a case founded on an allegation of covert meetings attended by the CEO, Investor board appointees and the Observers at which the real business of the Company was conducted including by Observers, such as: (a) the existence of formal board meetings that purport to be the forum at which director decisions are taken, (b) the documenting of those board minutes in minutes and (c) the permissibility and in many cases good sense of discussions outside board meetings, by investors and others, without pre-determining the decision at the actual board meeting. I consider that these are matters to be considered by the Judge at trial in reaching their conclusions as to unfair prejudice.
Criticism was made of a number of particular paragraphs of the Petition in the course of the Respondents’ more general submissions. Where particular paragraphs disclose no reasonable grounds for bringing a claim, they should be struck out. I return to that below. However, in my judgment that does not itself mean the whole claim against Blue Cloud should be struck out.
The de facto director issue
In my judgmentthe de facto director allegation is not a straightforward claim to make good in the present case, for the reasons below, and one that is pleaded quite briefly at [42].
Taking first strike-out, Mr Isilay’s claim is not straightforward to make good in respect of Mr Rahal and Ms Nolop. Among other things, on the basis of the pleading (i) there is a clear delineation drawn in the governing documents between a director and an observer, (ii) reflecting, the Respondents argue, careful bargaining about the extent of individual investor’s rights, (iii) an observer can be consulted, express views, suggest agenda items and so forth without becoming a director, and (iv) Mr Rahal and Ms Nolop could have attended any meetings with the investor-appointed directors and Mr Daffern outside board meetings without seeking to go as far as taking board decisions themselves. For example, they could have expressed firm views about what should have been done but leave it to the investor-appointed and other directors to have the final say.
However, while the claim has hurdles to overcome I do not consider that it goes as far as disclosing no reasonable grounds for bringing a claim:
The contention in [42] that Mr Rahal and Ms Nolop were de facto directors by virtue of having participated in the Preferred Shareholders’ scheme against Mr Isilay appears to me clearly to be founded on the allegations at [39]-[41] which immediately precede and lead into [42]: [13(4)(e)] above. Those paragraphs plead that these Shadow Board Meetings were actual (purported) board meetings at which board decisions were made, such as to breach those provisions of the SHA and Articles. Consistent with that, Mr Rahal and his actions are mentioned specifically in the paragraph immediately before, namely [38].
There is a spectrum of possibilities of what could have happened at regular meetings between the investor-appointed directors, Mr Rahal, Ms Nolop and Mr Daffern. Taking some examples, they could have been talking shops to generate ideas or provisional views or occasions for the investors simply to discuss matters amongst themselves. However, they could have been in substance deciding on the appropriate courses of action for the Company. Here, while pleaded in quite general terms, it is pleaded that the meetings were taking such decisions: [40].
If they were used as occasions on which the participants all sought to take decisions that one would expect a board to take with observers having equal footing with the de jure directors, in my judgment that could make Mr Rahal and Ms Nolop de facto directors. I consider that there is at least a real prospect that it is correct. The argument is that taking such a role would go well beyond the role of an observer and amount to the exercise of a directorial function, because they would be taking decisions alongside and together with the de jure directors present on key business matters that were properly the exclusive domain of the board. This is, so the argument runs, not altered by the fact that there were often subsequent ‘official’ board meetings on the matters in question in circumstances where those attending the ‘shadow’ board meeting had already made up their minds and reached a decision.
For the reasons set out in [28] above, I consider that there is a real prospect on the basis of the Petition of showing that there were separate meetings of the character alleged by the Petitioner or close enough thereto to involve Blue Cloud sufficiently in the plans conceived and agreed on at such meetings to justify the relief sought against it. For the same reasons, I consider there is a real prospect of showing that the meetings were meetings at which decisions were taken by the investor representatives at them, whether that person was formally a director or observer.
Indeed,given they would not have had the formality of normal board meetings, there may well not have been a division into directors and observers, rather than simply the individuals effectively taking equal roles in the meetings and the observers therefore being on an equal footing in this regard.
The precise character of the meeting will need disclosure, full witness statements and trial to determine. It is not possible to do so without this.
While it is true that [39]-[41] do not themselves plead what specific board decisions were taken at the Shadow Board meetings, from the pleading taken as a whole they include the decision to remove Mr Isilay as CEO ([89(1)]), the 2025 budget ([37]), a 7 February 2025 meeting ([36]), it is pleaded that important decisions that should have been taken by directors at formal board meetings are instead taken through informal processes and by board observers ([89(2)]), and such meetings are pleaded to be the forum in which the strategy that Mr Isilay complains of in the Petition was put in place against him was in general terms decided on ([40]). If Shadow Board Meetings did take place, by definition Mr Isilay was not at them or generally informed of them, so there is necessarily some limit as to the specificity with which such a pleading can be drafted.
Therefore, in my judgment the de facto director allegation does not meet the threshold for strike-out.
I emphasise again that I am not deciding any more than that, because no defence has yet been filed and it will be a hotly disputed issue at any trial, with the benefit of disclosure and witness statements. I do consider that the claim has hurdles to surmount at trial, requiring it to be shown among other things that the relevant directors were pre-judging the decisions that they should have been making at board meetings, and I note that the pleading in [40] mentions Ms Rushforth without making clear whether she is alleged to have been part of the decision-making process or not.
Turning to the summary judgment application, similarly I do not consider that this should be granted on the de facto director issue. I repeat the points made above. Two particular evidential points were prayed in aid by the Respondents on top of the points about the general corporate governance structure that I have referred to above:
Both Mr Rahal and Ms Nolop give evidence that they were aware of the difference between an observer and director and that they were experienced individuals who would not have crossed the line into acting as a director. However, in my judgment while it is possible these points may carry the day at trial, this does not prevent there being a real prospect of success for the claim, for the reasons set out above. Further, were there regular separate meetings with management at which plans were formed outside formal board meetings as to important matters of Company policy and strategy, including as they affected Mr Isilay, and these plans involved in a number of cases breaches of the Articles or other breaches of duty on the part of the directors, it may be said that this overstepped the bounds of what should have happened, and that this diminishes the force of their evidence that they knew how they should be acting and not acting.
The level of consultation and dialogue with management envisaged under the management rights letter is prayed in aid. I have dealt with this at [30] above.
Finally, for completeness, in Ms Nolop’s case, I do not consider that her involvement in the interview process for a CEO or discussion on closing the subsidiary adds anything to the claim for de facto directorship.
The pleading that she “has also been involved in taking decisions on behalf of the Company (such as by participating in the interview and selection process for a new CEO and participating in the decision to close one of the Company’s subsidiaries)” is slightly ambiguous as to whether it is being alleged that Ms Nolop actually took the decisions. I took Mr Gledhill’s oral submissions to be that she was one of the people who did so alongside one or more other directors. I accept that the better reading of [42] is that it is alleging that she was one of the decision-makers. In relation to the allegation in relation to CEO appointment, it is pleaded that she has been involved in taking decisions, rather than just the process to a decision, the part in parentheses in [42] includes participation in the process for selecting i.e. choosing the new CEO, rather than just interviewing them, and this is also in the context of an allegation in [42] that she was acting as a de facto director which involves alleging that the person acted as a director. Similarly, in relation to the allegation relating to closure of one of the Company’s subsidiaries, it is pleaded that she was involved in the taking of the decision, and then in the parentheses it is alleged that she participated in the decision to close itself. Decisions as to appoint a CEO and close subsidiaries are important decisions that are normally only taken by directors. Therefore, while it is true that the allegations are somewhat briefly pleaded and do not specify what steps of participation it is alleged that Ms Nolop took in the interview and subsidiary closure processes, the pleaded allegations in this part of [42] are not in my judgment susceptible to strike-out.
Rather it is when one gets into the evidence that it becomes in my judgment plain that these allegations do not add anything separate to the points at [35] above.
Taking first the appointment of a CEO, the first part of the allegation is that Ms Nolop participated in an interview process. In my judgment, taking part in an interview process and through that expressing views on a candidate is not itself a directorial function. In contrast, the decision as to who the new CEO will be is such a function. It is at that stage that one crosses into the territory of a directorial function. The directors decide and others assist in providing information and inputs to them. There is nothing odd in the representative of an important shareholder being allowed to play a role in interviewing candidates and expressing views, given that interest in the issue. That does not make them a director. Similarly, an observer of such an investor is entitled to express views at board meetings, and it is not a significant extension of them to be invited to express views on a particular CEO candidate and participate in the recruitment exercise. Therefore, I do not consider that there is a real prospect of showing that such acts are themselves acts conducted at a directorial level. Failing that, at the very least this would be a situation where it is not clear what capacity the acts were taking place in, so that they will not make Ms Nolop a de facto director.
Mr Gledhill contended that the evidence, taken together with [80] of the Petition, showed that Ms Nolop went further than just the involvement in the interview process that I have referred to in the last paragraph. He submitted that after Ms Nolop had spoken with the candidate, Mr Allon, on 19 May 2025 and Mr Melymuka, a director, on 20 May, Mr Daffern had made the offer to the candidate on 23 May with Preferred Shareholder approval but without board approval, before the formal board meeting on 29 May 2025. This, he submitted, suggested that a decision must have been taken on Mr Allon before that board meeting, and that Ms Nolop must in light of her role in the process have been one of the people taking it. In my judgment that, taken together with the pleading in [80] that the offer to Mr Allon was made with Preferred Shareholder approval, is really a reiteration in a specific context of the Shadow Board Meeting allegation that I have already dealt with above.
In relation to the decision to close the subsidiary,it was accepted by Mr Gledhill that the relevant document showed that board approval would be needed to close. In my judgment it is at that stage that one crosses over into a directorial function. The fact that Ms Nolop and a director were tasked with looking into the issue does not alter the fact that the matter would need to be brought back to the board of directors, which did not include Ms Nolop. Therefore, it was at that stage and that stage alone that pe ople would act as directors. Therefore, I do not consider that there is a real prospect of showing that she exercised a directorial function or failing that, that this is a situation where it is not clear in what capacity the acts were taking place. Failing that, at the very least this would be a situation where it was ambiguous what capacity she was acting in and would be given the benefit of the doubt.
Finally, I was shown a number of pieces of evidence about how Ms Nolop and Mr Rahal had acted more generally. I did not consider that these bore directly on the pleaded instances of them acting as de facto directors so I do not mention them further.
Defects in specific paragraphs of the Petition
While I have refused the strike-out and summary judgment applications in respect of Blue Cloud generally, I have noted above that there are a number of problems with particular paragraphs of the pleading.
I consider that there are aspects of particular paragraphs within the list that the Respondents seek to strike out through their application that should indeed be struck out unless the Petitioner brings an amendment application in respect of them and such application is granted. In each of the cases, the relevant part of the pleading discloses no reasonable grounds for bringing the claim, because- without more being pleaded- the Petitioner stands no chance of making the pleaded allegation good.
The Respondents contend that Mr Isilay has ignored the points made in pre-action correspondence, the application and the skeleton about the need for proper particularisation of the claims, so he should not be given another bite at the cherry, taking into account the comments in Cohen v Morrison referred to at [16(6)] above. However, in my judgment it is clear for the following reasons that Mr Isilay should be permitted to seek to deal with the defects through amendment in circumstances where I consider there is reason to believe they can be put right:
This is a case where Mr Isilay contends that the Petition implicitly already makes the necessary extra averments that I would consider necessary to allow it to stand on these points. While I consider that this reads too much into the Petition, it is some way from a case where the relevant pleadings require wholesale change.
The extra pleading would build on and reflect the core of the existing case that I consider should not be struck out, namely the allegation of board decisions being taken in advance by particular individuals to the exclusion of Mr Isilay.
While less important, the case is at an early stage without a defence (or request for further information) having been submitted on the basis of the original pleading, unlike in Cohen, and
Cohen was more generally a very different case where a wide range of hopeless claims were brought.
I take in turn the items on the list in the draft order sought by the Respondents that accompanied their application notice. These are items in respect of which (putting to one side the de facto director pleading in [42]) the Respondents seek in essence deletion of references to the unfair prejudice claim being brought against Blue Cloud as one of the Preferred Shareholders.
Paragraph 11: “…the Preferred Shareholders and their appointed directors and/or observers have conspired to remove him in a boardroom coup, and have repeatedly breached the Shareholders’ Agreement so as to entrench their control of the Company, exclude Mr Isilay from the Company’s affairs, inhibit his ability to act effectively as a director of the Company and dilute his influence and shareholding” (wording added by Draft underlined).For the reasons set out in [25]-[31] above, I do not consider that the reference to Blue Cloud in this paragraph should be struck out, as the core of Mr Isilay’s case survives strike-out. Given this, I consider that the amendment underlined above should be allowed.
Paragraph 12:“The Preferred Shareholders have since [1] removed Mr Isilay as CEO and [2] made commercial decisions which he considers to be irrational and perverse” ([1] and [2] added by me). I consider limb [1] should be struck out unless an amendment application is brought and granted. It is one thing for the Preferred Shareholders to have conspired to remove him per [11] of the Petition, but another for them to have removed him. Whatever decision, if any, was reached at a shadow board meeting, he was removed formally by a resolution of the board. The directors who voted to remove him at the 5 February 2025 board meeting did not include the Blue Cloud representative Mr Rahal. I take Mr Gledhill’s stance on this to be that all the Preferred Shareholders were ‘behind’ that decision in the sense of having decided to bring it about, and that this is implicit from the Petition. However, I consider an amendment to limb [1] is needed to properly reflect that case as it cannot currently stand against Blue Cloud as pleaded. I do not consider that limb [2] should be struck out.The only decision that I can see that is alleged to be irrational or perverse is the closure of the subsidiary pleaded in [79]. As explained below, I do not consider that this allegation should be struck out as against Blue Cloud. Therefore, it follows that limb [2] of paragraph 12 should not be either.
Paragraph 13: this makes clear that Mr Isilay brings his claim against all Preferred Shareholders. Given my conclusion on [11] of the Petition and that I do not consider that the claim against Blue Cloud should be struck out generally, it follows that I do not consider that any of [13] of the Petition should be struck out.
Paragraph 32: “The Preferred Shareholders and their representatives on the board have acted so as exclude Mr Isilay from the Company’s affairs and inhibit his ability to act effectively as a director of the Company. The Preferred Shareholders have taken similar steps to exclude directors (namely Ms Maria Dramalioti-Taylor, Mr Giles Palmer and Mr Paul Hacker) whom they perceive as aligned with Mr Isilay.” This is the opening paragraph of Section F before the subsections start. In my judgment, the reference to Blue Cloud within the term Preferred Shareholders should not be struck out, because a number of the allegations in Section F that I do not consider should be struck out are made against Blue Cloud, such as the Shadow Board Meeting allegations at [39]-[42].
Paragraph 37:the budget had “in fact been approved in advance [of the 21 March 2025 board meeting] by the appointees of the Preferred Shareholders”. In my judgment, the reference to Blue Cloud within the term Preferred Shareholders should not be struck out, because it is clear from [38]-[41] taken together with [89(2)] and [11] that it is being alleged that all Preferred Shareholders, including Blue Cloud, agreed on the budget in advance of the meeting, through informal meeting(s).
Paragraphs 39-41: I have dealt with these above. [39]-[41] deal with Shadow Board Meetings. They should not be struck out as they do disclose reasonable grounds for bringing a claim for the reasons above.
Paragraph 42: This sets out the de facto director allegations. In my judgment they should not be struck out: see [36] and [40] above.
Paragraph 52: “On 17 March 2025, the Preferred Shareholders passed a board resolution increasing the permitted maximum number of directors from seven to eight and appointed Mr Daffern as a director of the company”: see [13(8)] above. Shareholders do not pass board resolutions. One may read this in respect of the Preferred Shareholders who have appointed directors as intended to mean that the Preferred Shareholders acted through their directors on the board who passed the resolution. However, if that is right, that does not apply to Blue Cloud. Therefore, any allegation against Blue Cloud in that sentence should be struck out, unless an amendment application is brought in respect of it which properly sets out any alleged involvement of Blue Cloud.
I took from Mr Gledhill’s oral submissions that Mr Isilay’s contention is that the decision to increase the number of directors was one that all Preferred Shareholders took at a Shadow Board meeting and therefore was a decision made in part by Blue Cloud: see [20(3)] above. However, if that is to be run, an amendment is needed to plead that, because the wording “the Preferred Shareholders passed a board resolution” (underlining added) at the formal board meeting is too far away from that allegation. Therefore, it would be appropriate to strike it out unless an amendment application is brought and granted.
The Respondents also seek to strike out in the heading to [52]-[53], “The Preferred Shareholders added an extra director so as to entrench their control”, the reference to Blue Cloud within the term Preferred Shareholders. In the Petition the headings fulfil the function of summarising what allegation the section is seeking to make. Therefore, I do consider that it should be dealt with in the same way as [52] above, to harmonise the title with the text of the paragraph that is intended to support the allegation in the heading.
Heading to paragraph 54: “The Preferred Shareholders pushed out Mr Isilay’s choice of non-executive director”. There is no mention of Blue Cloud or Mr Rahal in this section, which comprises [54]-[60]. The remuneration committee’s decision is pleaded at [56]-[57] it is pleaded at [60] that the committee’s decision was taken for an improper purpose, and the members of the remuneration committee named in that section are directors appointed by a number of the Preferred Shareholders other than Blue Cloud but there is no pleading that this links to Blue Cloud. I understand from oral submission that Mr Isilay’s argument is that the Preferred Shareholders including Blue Cloud were behind these actions in the sense of having decided on them in another forum. However, this needs to be pleaded if it is to be run. Therefore, in my judgment the inclusion of Blue Cloud within the term Preferred Shareholders in this heading should be struck out unless an amendment application is brought and granted.
Paragraph 64: As explained in [13(10)] above, [63] pleads that on Mr Isilay asking for a cancelled board meeting to be reinstated, Mr Daffern told Mr Isilay that the “directors representing the Preferred Shareholders” did not believe that such a meeting is necessary: [63], and [64] pleads that this amounted to a threat that the Preferred Shareholders would prevent any board meeting called by Mr Isilay from taking place: [64]. Given [63] pleads that Mr Daffern referred to the directors representing the Preferred Shareholders, this does not read as including the Observer. Therefore, without more, this does not explain how the e-mail in [63] could amount to a threat made by Blue Cloud. I took from Mr Gledhill’s oral submissions that it was alleged that a decision would have been taken (including by Blue Cloud’s representative Mr Rahal) at a Shadow Board Meeting to cancel the proposed board meeting. However, given the way that the e-mail is described in [63] and the fact that the allegation in [64] is based on the e-mail (“this[i.e. the e-mail] amounted a threat”), this would need to be pleaded if the allegation in [64] is to be based on that. Accordingly, again, I consider the appropriate course is to strike out any reference to Blue Cloud in [64] unless an amendment application is made in respect of it to plead that and is granted. The same should be done in the heading to the subsection above [61], “The Preferred Shareholders cancelled a board meeting”, for the same reason as set out in the last sentence of [59] above in respect of the above [52] of the Petition.
Paragraph 69:this includes the allegation that at the board meeting held on 10 and 11 September 2025, “the directors representing the Preferred Shareholders (i.e., Mr Daffern, Mr Rahal, Mr Yared, Ms Kannan, Mr Melymuka and Mr Akram) passed a resolution deeming the CLN [financing] not to be Relevant Securities for the purpose of the Articles”: see [13(11)] above.
Mr Rahal was not a de jure director. Mr Isilay pleads in the Petition that Mr Rahal acted as a de facto director through his involvement in Shadow Board Meetings, but there is no allegation outside [69] in the pleading that he purported to vote as a director at formal board meetings, and no basis is set out in [69] for such an allegation. Therefore, despite Mr Gledhill’s oral submission that the reference in [69] was to Mr Rahal acting as a de facto director at that meeting, in my judgment it cannot sustainably be read that way and should be struck out, as should the inclusion of Blue Cloud in the term Preferred Shareholders, as with the deletion of Mr Rahal from the passage in parentheses the directors listed were the representatives of the Preferred Shareholders other than Blue Cloud.
None of that disturbs the pleading that the real board decisions were taken by the Preferred Shareholders, including Blue Cloud through Mr Rahal, at Shadow Board Meetings. Rather it simply strikes out the allegation that he passed a resolution as a director at the formal board meeting held on 10 and 11 September 2025. As explained earlier, Mr Gledhill submitted orally that Mr Isilay contended that all the relevant decisions criticised in the Petition were taken at Shadow Board Meetings, which would include the decision at [69]. Therefore, this needs to be pleaded if an allegation is to be made in [69] that Blue Cloud was one of the Preferred Shareholders who in substance took the real decisions as to the CLN financing outside board meetings. Accordingly, in my judgment the strike-out referred to in the preceding paragraph above should take effect unless an amendment application is made in respect of the allegation in [69] and such application is granted.
Paragraph 72: this pleads that “[t]he directors representing the Preferred Shareholders then proceeded to approve the CLN financing, without allowing Mr Isilay the opportunity to participate in it”. The phrase “[t]he directors representing the Preferred Shareholders” appears to be intended to have the same meaning as the same phrase in [69], so the same reasoning applies as in respect of [69], namely that the reference to Blue Cloud within the Preferred Shareholders definition should be struck out, unless an amendment application is brought and granted.
Finally, it follows from my reasoning on [69] and [72] of the Petition that the reference to Blue Cloud within the heading to [65]-[72], “The Preferred Shareholders circumvented Mr Isilay’s pre-emption rights”, should also be struck-out unless an amendment application is brought and granted, for the same reason as set out in the last sentence of [59] above in respect of the above [52] of the Petition.
Paragraph 73: This is the first paragraph of section G, which section is titled “Ongoing mismanagement of the Company”, and reads: “The Preferred Shareholders have also made a series of business decisions which have had the effect of entrenching their control of the Company. These decisions were each taken without Mr Isilay’s involvement”. The specific subsections of Section G then follow. I do not consider that the reference to Blue Cloud within the use of Preferred Shareholders in this paragraph should be struck out. [80] alleges that the decision to make an offer of employment to Mr Allon to act as CEO was made with Preferred Shareholder approval and not board approval. This is an allegation that covers Blue Cloud, it does not suffer from the problem of some of the other paragraphs above of reading as if it is being alleged that Blue Cloud passed a board resolution at a formal board meeting, and putting [80] together with the pleadings in [89(2)], [11] and [39]-[41] the allegation being made is that the Preferred Shareholders acted outside a formal board meeting through a decision taken informally by them, which in turn coheres with the fact that [80] emphasises that the offer of employment was made without board approval. Therefore, there are clearly allegations made within Section G made against the Preferred Shareholders, including Blue Cloud, such as [80], criticising the business decisions taken by them. It follows that the summary in [73] should not be struck out in respect of Blue Cloud. For completeness, I would place [74] in the same category as [80]. While it does not refer expressly to the Preferred Shareholders, read together with [73] and the reference to Mr Logan being appointed as interim CFO without a board meeting or vote and without Mr Isilay’s involvement, I read what is being alleged to be that the Preferred Shareholders took the decision to appoint him outside a formal board meeting without the involvement of Mr Isilay. I would also, as mentioned at [51] above, regard the closure of the subsidiary referred to in [79] of the Petition as being intended to be an example of the Preferred Shareholders taking a business decision that Mr Isilay criticises, as he pleads that he learned that the subsidiary was being closed down, from which it follows that it is being alleged that he was not part of a decision to close it down, unlike in a number of other cases he does not plead a board decision on the point, and [73] is explaining that section G- of which Section G(III) (comprising [79]) is a part- is dealing with business decisions that the Preferred Shareholders took.
Paragraph 80: For the reasons in the preceding paragraph, I do not consider that the reference to Blue Cloud in the term Preferred Shareholders in this paragraph should be struck out.
Paragraph 84: “As set out at paragraphs 65 to 72 above, on 11 September 2025 the Preferred Shareholders procured that the Company pass a board resolution deeming the CLN financing not to be Relevant Securities for the purposes of the Articles”. This relies solely on the pleading at [65]-[72]. Therefore, for the same reasons as those set out above in relation to [69] and [72], the reference to Blue Cloud within the term Preferred Shareholders should be struck out unless an amendment application is brought and granted.
Paragraph 87 opening wording: “By reason of the matters set out above, the Respondents by their representatives on the Company’s board have repeatedly breached the Shareholders’ Agreement and Articles, and continue to do so, by”. The Respondents seek to strike out the reference to Blue Cloud in “the Respondents”. [87] is Section H, entitled “Breaches of the Shareholders’ Agreement and Articles”, followed by Section I [88], entitled “Breaches of duty” and Section J [89] entitled “Breakdown in trust and confidence”.
Whilst the opening wording of [87] could be argued not to cover the Observers, as explained in [20(4)] above I do read- as Mr Gledhill contended- the reference to the Respondents and their representatives on the Company’s board as intended to include Blue Cloud and its Observer (who in turn are alleged to have acted as directors and therefore acted as part of the board in that sense). Among other things the main body of the pleading in Section F does plead that Blue Cloud breached the SHA, and [87] is the paragraph collecting together those breaches, and [87(6)] and [87(7)], “[a]llowing board observers to act as Company directors…” and “[m]aking decisions of the directors other than by resolution at a duly-convened board meeting through the practice of holding Shadow Board Meetings” do appear to be allegations against Blue Cloud as well as the other Preferred Shareholders. The same is true of [87(3)] (“[h]olding board meetings, including Shadow Board Meetings, without giving Mr Isilay 10 Business Days’ (or any) notice”) and [87(4)] (“[r]efusing to allow Mr Isilay to call a board meeting”), as in the latter case it is Mr Rahal who is pleaded to have told Mr Isilay that the meeting should not be held: [48].
However, [87(1)] (“[p]urporting to pass resolutions to remove Mr Isilay as CEO and appoint Mr Daffern as interim CEO without giving 10 Business Days’ notice of such resolutions”), [87(2)] (“[p]urporting to pass resolutions to remove Mr Isilay as CEO and appoint Mr Daffern as interim CEO without the nature of that business having been specified in the board meeting’s agenda”), [87(5)] (“[r]efusing to provide Mr Isilay with minutes of the 5 February 2025 Board Meeting as soon as practicable after the meeting”), [87(8)] (“[a]ppointing an eighth director of the Company (namely Mr Daffern) for an improper purpose”), [87(9)] “[f]ailing to exercise their voting rights and other powers of control so as to procure that the [SHA] was given full force and effect according to its spirit and intention”),[87(10)] (“[r]efusing to provide Mr Isilay with sufficient information necessary to discharge his role as a director”), [87(11)] (“[t]hreatening to render any board meeting called by Mr Isilay inquorate”) and [87(12)] (“[p]assing a resolution to deem the financing not to be Relevant Securities”), do not themselves mention or refer back to sections that mention Blue Cloud, Rahal or Observers. I should say that in the case of [87(9)], the earlier passages of the pleading in which those allegations are found are at [53] and [64], neither of which- as explained above- refer to Blue Cloud. Therefore, in my judgment the inclusion of Blue Cloud in the term Respondents in the opening wording of [87] should be struck out in relation to those sub-paragraphs absent an amendment application being brought by Mr Isilay and granted. Again, I take his case to be that those decisions were taken by the Preferred Shareholders as a whole, including Blue Cloud, outside board meetings. However, that needs to be pleaded for those allegations.
The entirety of paragraph 87(6): “Allowing board observers to act as Company directors, in breach of Clause 3.10 of the Shareholders’ Agreement and Article 6.9 of the Articles”. In my judgment, this should not be struck out, as it reflects the allegations at [39]-[41], which I do not consider should be struck out.
Paragraph 88:“Further, by reason of the matters set out above, the director representatives of the Preferred Shareholders have acted in breach of their duties to the Company, in that…”. Mr Gledhill stated orally that the phrase “the director representatives of the Preferred Shareholders” was not intended to catch the Observers. In my judgment, given that the director representatives are only the representatives of the Preferred Shareholders with director appointment rights, the phrase is nonetheless too broad because as defined the Preferred Shareholders includes Blue Cloud, so the reference to Blue Cloud within this term in [88] should be struck out. I took Mr Gledhill’s general submission to be that these actions of the director representatives were pursuant to a scheme devised and agreed on by all Preferred Shareholders including Blue Cloud, so if this is to be pleaded in [88] an amendment is required. Hence the reference to Blue Cloud in [88] should be struck out unless an amendment application is brought to that effect and granted.
Paragraph 89 opening wording: the reference to Blue Cloud in “the Respondents” in the wording “By reason of the matters set out above, the Respondents and their representatives have caused a breakdown of trust and confidence between the shareholders, because they have:…”. [89] goes on to include six-sub paragraphs: I do not consider that the reference to Blue Cloud in the term Respondents should be struck-out in relation to [89(1)], [89(2)] and [89(3)], because these deal with allegations of Blue Cloud involvement which for the reasons set out above in respect of the relevant earlier paragraphs of the pleading I do not consider should be struck out. [89(1)] pleads a covert plot to remove Mr Isilay, which I have explained above is an allegation that should not be struck out, and [89(2)] is based on the allegation in [39]-[41] of Shadow Board Meetings. [89(3)] pleads the decision to hire Mr Logan as interim CFO, the 2025 budget, closing down the subsidiary and hiring Mr Allon as new CEO. I have held above that earlier paragraphs do plead that Blue Cloud was involved in each of these matters and that these allegations should not be struck out. [89(4)] concerns the refusal to pay director’s fees to Mr Isilay’s chosen non-executive directors. Therefore, given my findings in relation to the paragraphs in the earlier parts of the pleading about this refusal, namely that it is not currently pleaded against Blue Cloud, it follows that the reference in [89] to the Respondents including Blue Cloud should be struck out in relation to [89(4)]. [89(5)] concerns the pursuit of Project Ghost, which I read as an allegation made against Blue Cloud together with the other Preferred Shareholders: [13(14)] above. Therefore, I do not consider that the reference to Blue Cloud in the term Respondents should be struck out in relation to [89(5)]. [89(6)] refers to the approval of the CLN financing. Therefore, given my findings in relation to the paragraphs in the earlier parts of the pleading about the CLN financing, namely that it is not currently pleaded against Blue Cloud, it follows that the reference in [89] to the Respondents including Blue Cloud should be struck out in relation to [89(6)] unless an application to amend is brought and granted.
Paragraph 90: allegation that because of the course of conduct in [89], relations have broken down and Mr Isilay cannot sensibly be expected to work with the Preferred Shareholders and their representatives. Given that much of [89] survives strike-out, it follows that there should not be strike-out in relation to any of this paragraph.
Paragraph 92: Mr Isilay seeks an order that the Preferred Shareholders purchase his shares at a price to be assessed by the Court without minority discount and valued at 5 February 2025. Given that I do not strike-out the claim against Blue Cloud as a whole, there should not be strike-out in relation to this paragraph. The same holds true in relation to paragraph 1 of the Prayer, which sets out the claim to the relief against the Respondents.
I would also encourage the Petitioner to consider at the same time as making the amendments that I have set out above whether it should make clearer some of the other elements of the pleading that I have referred to above. It is of course true that these could be interrogated by the Respondents through requests for further information, given the early stages that the proceedings are currently at, but it is important to the efficient progress of the action that the pleadings are put into shape.
Amendment application
As explained above, I consider that the addition to paragraph 11 to make clear that the allegations of a scheme apply to the Observers should be allowed.
Appropriate relief
It follows from the above that- while I have sympathy with a number of the Respondents’ complaints about the formulation of the Petition and Draft- the strike-out and summary judgment applications fail, save in respect of the strike-out application succeeding on the specific paragraphs set out above unless an application for amendment is brought and granted.