Animosity towards one of his fellow Web Summit founders often determined how Paddy Cosgrave ran the tech events company, High Court documents claim.
Graiguearidda, which owns co-founder David Kelly’s 12 per cent stake in Web Summit companyManders Terrace, is suing that firm, Mr Cosgrave and his vehicle, Proto Roto, for oppression of shareholders’ rights.
Bernard Dunleavy, senior counsel for Mr Cosgrave, Manders Terrace and Proto Roto, told the High Court they would "vigorously defend the proceedings".
Mr Kelly's affidavit (sworn statement) says Mr Cosgrave's exercise of his director's powers and conduct of the company's affairs was often motivated by his enmity for fellow founder and shareholder, Daire Hickey.
Mr Hickey – who is not involved in the case – owns 7 per cent of Manders Terrace through his company, Lazvisax. He resigned as a director in 2019.
The affidavit opened in court on Monday claims Mr Cosgrave’s conduct often disregarded minority shareholders’ interests and was directly oppressive of Mr Hickey.
Mr Kelly argues that Mr Cosgrave twice torpedoed possible investment in the Web Summit partly because it would have led to Mr Hickey receiving payment for his 7 per cent holding.
In January, 2017, Manders Terrace appointed venture capitalist Patrick Murphy to begin talks with British group Ascential.
Mr Kelly maintains that Ascential could have valued Web Summit at €100 million to €300 million, but Mr Cosgrave intervened on March 14th to end the talks.
“This would have provided substantial investment but would also likely have resulted in large sums being paid to the shareholders in the company and through them, in effect, to Mr Cosgrave, Mr Hickey and me,” says Mr Kelly.
He calls Mr Cosgrave’s intervention a gross violation of fundamental principles of corporate governance.
Proposed investment
Mr Kelly says Mr Cosgrave blocked a proposed €15 million investment by venture capital fund Inflexion in 2020 for the same reason.
The day after Inflexion made its offer, Mr Cosgrave texted Mr Kelly stating that Mr Hickey should get “absolutely nothing”, the affidavit states.
Mr Kelly says that Mr Cosgrave attempted to coerce him into agreeing that they should leak details of a worker's complaint against Mr Hickey to the media by suggesting that Mr Kelly had behaved inappropriately on a visit to Thailand. His affidavit points out that Mr Kelly has never visited the country.
The employee who made the complaint against Mr Hickey was satisfied that the issue had been dealt with appropriately through an informal process handled by the worker’s own direct managers.
Last month, Manders Terrace alleged in separate legal proceedings, taken in Ireland and California, that Mr Kelly breached his duty to the company by attempting to secretly use Web Summit's resources to set up an investment fund for his own personal gain.
Mr Kelly says these claims are without foundation and pledges to defend both cases.
Lawsuit
A Web Summit spokesman described the Graiguearidda case as Mr Kelly’s attempt to deflect attention from the company’s Irish lawsuit for breach of duty.
Mr Justice Denis McDonald entered the Graiguearidda case into the High Court’s commercial list on Monday. He noted that Mr Kelly’s affidavit set out compelling grounds for his claims.
Mr Kelly alleges that Mr Cosgrave behaved oppressively and aggressively towards him, that there was a “complete absence” of any meaningful corporate governance and that Mr Cosgrave used Web Summit resources to further his own endeavours.
Mr Kelly said in a statement that he had exhausted every avenue in trying to resolve the dispute.
He maintained Mr Cosgrave’s actions towards him and others had forced him to take legal action.
“Bullying and interfering in the lives of colleagues is not acceptable in the workplace,” he added.
“Utilising company resources to pursue personal vendettas and promote personal interests is wholly inappropriate.”
Mr Kelly stated he looked forward confidently to the court resolving the dispute. The case is due back before the court next March.
