A LEGAL ROW involving tech conference Web Summit, its chief executive Paddy Cosgrave and minority shareholders and former directors Daire Hickey and David Kelly has been likened before the Commercial Court to a bitter divorce.

Opening the case today, Bernard Dunleavy SC, for Cosgrave said his client was suing Kelly, alleging he had been “disloyal” to the company when acting as a director through the creation of a tech investment fund to rival those of Web Summit.

Kelly and Hickey are in turn suing 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.

Dunleavy said it was submitted that Kelly in his role as a director had failed to show “loyalty” and “faithfulness” by setting up a venture fund while he worked for Web Summit.

Cosgrave sued Kelly, who resigned in 2021, seeking over €10 million in damages.

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.

Dunleavy said 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 Cosgrave and Web Summit of the opportunity to capitalise on the success of an earlier fund they operated, called Amaranthin.

It is alleged that Kelly engaged in an “active deception” and “real badness” when it came to his fiduciary duties as a director to the company, said Dunleavy.

“Success has many fathers but failure is an orphan. Kelly and Hickey (a seven percent 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 Dunleavy.

Counsel said 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 Cosgrave that Kelly had involvement in the Web Summit’s tech fund operation, Amaranthine – known in court as Fund One – but that wanted to leave and informed Cosgrave he would resign as a director in March 2021.

It is alleged that Kelly then “co-opted for private profit” the workings, expertise and networks of the original fund in starting up a new tech fund called ‘Semble’ to rival a proposed Fund Two planned by Web Summit.

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 (Kelly) owed loyalty and faithfulness but did not prove himself capable of that. 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 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”.

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 Kelly.

Counsel claimed that Kelly had been “speaking out of both sides of his mouth” before “swiping” the second fund from “under the nose of Web Summit” and was not entitled to do so as he was a director who owed “fidelity and loyalty” to the company.

Cosgrave’s side claims the loss to Web Summit is over €11m and the profits made by Kelly through the new fund were just over €1m.

The case continues tomorrow and is scheduled to last nine weeks.