Public airing of fall-out between Web Summit directors takes another turn

Dispute between high-profile CEO and fellow founders hits Commercial Court once more amid accusation and counter-accusation

Web Summit CEO Paddy Cosgrave is embroiled in a legal wrangle with the company's co-founders Daire Hickey and David Kelly. Picture: Horacio Villalobos - Corbis/Getty Images

On Thursday last, Paddy Cosgrave accepted an invite to become a European Innovation Council Ambassador, further cementing his status as one of Ireland’s most noteworthy tech ambassadors.

On Monday however, in the Commercial Court in Dublin, proceedings will officially open in the latest legal wrangle involving the chief executive of Web Summit.

Again, the disputing party is a former close colleague of Paddy Cosgrave — his co-founder of the tech conference and fellow shareholder, Corkman Daire Hickey.

The Commercial Court hearing will see an affidavit by 35-year-old Mr Hickey read into the official record, in his case against Mr Cosgrave, taken in the name of his company Lazvisax.

Many details of the document are already in the public domain however. It follows a similar narrative to that seen in another affidavit in a separate case taken against Mr Cosgrave, by the third co-founder of Web Summit, David Kelly, earlier in November.

It describes a relationship soured beyond repair. What is perhaps more surprising is that appears to have been the case as far back as 2013, as the tech conference began to make an impression on the global stage.

The case is the latest twist in a matter which first came to public attention in September, when Mr Cosgrave initiated legal proceedings against Mr Kelly in both the US and Ireland regarding an alleged attempt on Mr Kelly’s part to set up an investment fund, Semble Fund II, separate to Web Summit, but which Mr Cosgrave alleged could only succeed as a successor to the Web Summit-endorsed Amaranthine Fund, which was established in 2012 to take advantage of the power of Web Summit’s contacts book.

In his Irish suit, Mr Cosgrave alleged breach of fiduciary duty to Web Summit as a director on the part of Mr Kelly.

Mr Kelly’s official response was to lodge a suit of his own, via his company Graigueridda, in early November, against Mr Cosgrave alleging oppression of shareholder rights (Mr Cosgrave owns 81% in shares of Web Summit, Mr Kelly just under 12%, and Mr Hickey the remaining 7%).

In his sworn affidavit in that case, Mr Kelly alleged that Mr Cosgrave’s conduct in managing Web Summit was often motivated by his negative feelings towards Mr Hickey, whom he first met when both were students in Trinity College.

Given the extent to which Mr Hickey’s name was mentioned in Mr Kelly’s affidavit, in which the alleged circumstances surrounding the breakdown of Mr Cosgrave and Mr Hickey’s relationship are outlined in detail, it’s perhaps less surprising that Mr Hickey has now launched a court action of his own.

Daire Hickey, a co-founder of Web Summit, resigned as director in 2017.

In his own affidavit, Mr Hickey —  a former journalist who, since leaving Web Summit in 2017, has founded a successful US-based tech public relations and consulting firm named 150 Bond —  alleges shareholder oppression both towards himself and Mr Kelly by Mr Cosgrave, via an alleged failure to observe corporate governance norms, alleged disreputable conduct with regard to Web Summit’s brand, and an alleged concerted strategy to force Mr Hickey out of the company.

Mr Cosgrave has yet to formally respond to Mr Hickey’s affidavit. A spokesperson for Web Summit described the new case as an “opportunistic legal action… without merit”.

“The claims that he and David Kelly are making seek only to distract and deflect from the legal case Web Summit has taken against David Kelly in Ireland for breach of fiduciary duty,” they said.

“We look forward to future court hearings when matters of fact, not wild allegations, will be given due consideration.” 

Counsel for Mr Cosgrave, meanwhile, vowed to “vigorously defend” the allegations by Mr Kelly heard in the Commercial Court earlier this month.

Web Summit said at that time that Mr Kelly is “rehashing old claims and piling up new ones” in an attempt to deflect from the legal case Web Summit had taken against him in Ireland. Mr Kelly’s case is next due for mention in March of next year.

Where the various strands of this most spectacular of fallings-out go next, no one can say.

Mr Hickey’s affidavit mentions Mr Kelly liberally with regard to the evolution of their respective relationships with Mr Cosgrave.

While Mr Cosgrave alleges actions of an underhand corporate nature on the part of Mr Kelly with regard to the establishment of Mr Kelly’s new investment fund in Mr Cosgrave’s own case (something Mr Kelly swore in court to “vociferously” defend), the legals of Mr Hickey are more in line in tone with that of Mr Kelly — focusing on Mr Cosgrave’s alleged behaviour towards his fellow shareholders in the course of his management of Web Summit, and in his very public campaign against Ireland’s Tánaiste Leo Varadkar.

It’s understood that Mr Hickey’s affidavit asserts that “nothing positive” can accrue to the Web Summit from its chief executive “engaging in gratuitous online abuse” of both his fellow shareholders and Mr Varadkar.

Mr Hickey’s affidavit contains details of multiple alleged electronic communications, including emails and text messages, between himself, Mr Kelly, and Mr Cosgrave detailing “aggressive” behaviour on the part of the Web Summit CEO towards his fellow shareholders.

When Web Summit’s corporate structure was formed in 2012, the affidavit alleges, it became the norm for only Mr Hickey and Mr Cosgrave to speak on behalf of the company.

In November 2015, as relations between the Web Summit and the Irish Government soured to such an extent that the conference moved to Lisbon the following year, it was Mr Hickey who spoke to RTÉ News from that year’s event in the RDS to defend the company’s stance with regard to the Portugal move.

At the time, per the affidavit, his relationship with Mr Cosgrave had long since descended into a distressed state.

In the sworn affidavit in Mr Kelly’s case, it is alleged that Mr Cosgrave had harboured an “intense animus” towards Mr Hickey and operated what “can best be described as a vendetta against him” with a view to “coerce” the return of Mr Hickey’s 7% shareholding in Web Summit.

Mr Hickey’s own affidavit alleges that Mr Cosgrave in 2015 “attempted to coerce me out of 1% of the 7% equity I held in the company” by “falsely representing to me that to do so would be to my advantage for tax and other financial reasons”, something he alleges Mr Cosgrave described as being “nothing unreasonable”. He alleges that he had “no idea of the ferocity of Mr Cosgrave’s feelings in this regard until recently informed of same by Mr Kelly”.

Mr Hickey, who resigned as a director of Web Summit in 2017, says he has no oversight of Web Summit’s financials, but estimates the company as being worth between €200 million and €350 million.