The Commercial Court has begun to hear a "bitter" legal row involving the tech conference giant Web Summit to be fought out between chief executive Paddy Cosgrave and minority shareholders and former directors Daire Hickey and David Kelly.
Opening the case today, Bernard Dunleavy SC, for Mr Cosgrave said it was alleged Mr Kelly had been "disloyal" to the company when acting as a director before his 2021 resignation and the subsequent setting up of a rival tech investment fund.
Mr Kelly and Mr Hickey are also suing Mr Cosgrave and Web Summit, alleging shareholder oppression and breaches of a profit-sharing agreement.
Mediation in the cases failed last week and all parties deny the allegations.
Mr Dunleavy said it is alleged that Mr Kelly, a 12 per cent shareholder in Manders Terrace, the holding company behind Web Summit, was “disloyal and faithless” when setting up a competing tech fund. In 2021, Mr Cosgrave sued Mr Kelly and sought over €10 million in damages.
Mr Dunleavy said the case had “a bitterness which animates every aspect of the parties’ proceedings” and likened it to a divorce.
Counsel said there were sections in the papers before the court that must have reminded the judge of a family law matter that was better off being privately solved, rather than one litigated in the Commercial Court.
Mr Dunleavy said Mr Kelly in his role as a director had failed to show “loyalty” and “faithfulness” to Web Summit when setting up a venture fund while he worked for Web Summit.
This, counsel said, deprived Mr Cosgrave and Web Summit the opportunity to capitalise on the success of an earlier fund they operated, called Amaranthine.
It is alleged that Mr Kelly engaged in an “active deception” and “real badness” when it came to his fiduciary duties as a director to the company, said Mr Dunleavy.
"Success has many fathers but failure is an orphan. Mr Kelly and Mr Hickey [a seven per cent shareholder] are former directors and early employees and deserve large credit but only one person was there in it all and it was only one person's vision, and that is Paddy Cosgrave," said Mr Dunleavy.
Counsel said Mr Cosgrave is the "engine of this business" who drives it forward and seeks constantly to improve" and had the attitude that there was "no point in being world’s biggest if you are not the world’s best".
It is alleged by Mr Cosgrave that Mr Kelly and another man, Patrick Murphy, who had involvement in the Web Summit's tech fund operation, Amarthine - known in court as Fund One - but that Mr Kelly wanted to leave and told Mr Cosgrave he was to resign as a director in March 2021.
It is alleged that Mr Kelly then "co-opted for private profit" the workings, expertise, networks of the original fund in starting up a new tech fund called 'Semble' to rival the proposed Fund Two planned by Web Summit.
Mr Dunleavy said that in the area of tech funding Web Summit was a "secret sauce" and caught investors' attention worldwide.
Counsel said Web Summit was like a "Californian gold rush" but with people wearing "comfortable T-shirts instead of overalls".
"He [Mr Kelly] owed loyalty and faithfulness but did not prove himself capable of that. Mr Kelly's conduct flies full square in the face of established case law in relation to the responsibilities of the fiduciary duties of a director," said counsel.
Counsel said it is alleged that before Mr Kelly resigned he had, through "secret" communications and negotiations, set up "an advantage for himself that reached fullness of ripeness when he took advantage of it for his own private profit in bad faith".
Mr Dunleavy said that it was "clear from the outset" that Web Summit intended to launch a second fund off the back of the strength of the first fund and that this was known to Mr Kelly.
Counsel claimed that Mr Kelly had been "speaking out of both sides of his mouth" but was not entitled to do so as he was a director who owed "fidelity and loyalty" before "swiping" the second fund from "under the nose of Web Summit".
Mr Cosgrave's side claims the loss to Web Summit is over €11 million and the profits made by Mr Kelly were just over €1 million.
The case continues tomorrow and is scheduled to last nine weeks.
