BALDERTON CAPITAL is considering taking legal action against Payzone's former chief executive John Nagle for remarks he made in a personal statement to shareholders about the company and its partner Barry Maloney at an extraordinary general meeting in Dublin on Monday.

The venture capital group told The Irish Times that a "range of statements and allegations" made at the egm by Mr Nagle relating to Balderton and Mr Maloney were "absolutely without foundation".

"Balderton has put Mr Nagle's lawyers on notice that the content of this circular is defamatory," the firm said.

"In addition, the company by means of a letter accompanying Mr Nagle's circular, put shareholders on notice that Balderton considered Mr Nagle's statement to be untrue, misleading and defamatory to them."

In his personal statement read at yesterday's egm, Mr Nagle outlined how his relationship with Mr Maloney had deteriorated more than two years ago.

As a result of this, Mr Nagle told shareholders that he had threatened to quit his post last year if Balderton chose Mr Maloney as its board representative with Payzone. Mr Nagle said Mr Maloney told him that he would "live to regret" that decision.

Payzone was formed in December through the merger of Dublin-based e-payments group Alphyra, which Mr Nagle founded, with UK ATM operator Cardpoint.

Balderton owned 67 per cent of Alphyra and Mr Nagle and Mr Maloney had served together on its board since 2003.

In his statement, Mr Nagle said a number of indicative offers for Alphyra, valuing the business at more than €500 million, had been rejected.

In addition, he said a €100 million fundraising by Goldman Sachs had been cancelled by Mr Maloney at "an advanced stage".

Balderton yesterday rejected that assertion. The venture capitalist said it always "invested in and supported" the business.

"This was evidenced, most recently, by Balderton's full pro-rata participation in the €8 million placing for Payzone," it added.

Mr Nagle did not participate in that funding round.

Mr Nagle and Payzone's chief financial officer John Williamson were removed from their posts by shareholders at Monday's egm.

This brought an end to a saga that had raged for almost two months.

During that time it is understood that Mr Nagle was twice given the opportunity to remain as a non-executive director with the company but turned down the offers.

Payzone has yet to issue a trading update and its shares remain suspended. The shares last traded in London on January 17th at 47.75 pence, having floated in December at 76 pence.

A spokesman for Payzone yesterday declined to say when an update would be published.

In his statement to shareholders, Mr Nagle said he received "an unpleasant surprise" in relation to Cardpoint's trading performance on taking the reins at Payzone in early December.

"We investigated the situation and discovered operational issues that had been continuing for a number of months before the merger," Mr Nagle said.

"As a result, Cardpoint's forecast earnings for 2008 were reassessed from £29 million to £22 million."

Alphyra continued to "perform strongly", he added. Payzone declined to comment on those statements.

Mr Nagle said he spoke to Payzone chairman Bob Thian on December 18th about these issues.

Mr Nagle and Mr Williamson declined to participate in an investor roadshow around that time unless the shortfall in Cardpoint's earnings was first disclosed in a trading statement. A disagreement at board level ensued and Mr Nagle and Mr Williamson were dismissed by e-mail on January 15th.

The two executives were subsequently reinstated to their posts by the High Court before being dismissed for a second time at Monday's egm.

Mr Nagle told shareholders that the legal costs associated with the whole affair were likely to exceed €1 million.

He said the company had conceded that his original dismissal and that of Mr Williamson were "invalid" and had agree to pay all of their costs up to the date of its concession.