ANALYSIS:The director of corporate enforcement may face a hard choice, writes Com Keena
DIRECTOR OF corporate enforcement Paul Appleby's position between a rock and a hard place in the ongoing Fyffes/DCC case was nicely illustrated by the brief hearing before Mr Justice MacMenamin in the High Court yesterday.
Mr Justice MacMenamin is to decide the size of the damages that DCC must pay Fyffes because Jim Flavin, the executive chairman of DCC, was in possession of price-sensitive information when he dealt in Fyffes' shares worth €106.7 million, on behalf of DCC, in February 2000. The case is to be heard in June.
The amount of damages to be awarded is expected to be some tens of millions of euros.
In the original High Court case Ms Justice Mary Laffoy ruled that Flavin had not been in possession of price-sensitive information at the time of the sale, but that ruling was subsequently overturned in the Supreme Court.
As a result, the executive chairman of one of the State's better-known companies has been found by the courts - in a civil case - to have traded in shares worth more than €100 million, while in possession of price-sensitive information.
If the office of the director of corporate enforcement is not seen to act in such a case, then the public might be justified in coming to certain conclusions as to the seriousness of the office, and indeed in regard to the State's commitment to standards in corporate life.
On the other hand, if Appleby did initiate a case against Flavin, he would be setting out on a course that could end up costing his office many multiples of its annual budget in legal costs, just to take a case against one man, which he might well lose.
Furthermore, Appleby has made it clear he has noted not just Flavin's actions but also those of some senior figures in Fyffes.
Ms Justice Laffoy's huge judgment in the original case noted that if Flavin had been in possession of price-sensitive information about Fyffes at the time he dealt, then Fyffes should not have granted 900,000 share options it issued in January 2000. There is also an issue to do with allowing a senior executive sell shares during the same period.
The idea of Appleby's Parnell Square office taking on senior figures from two of the best-known plcs in Ireland, with his low seven-figure annual budget, seems implausible. As well as cost, one or more such cases would take up a huge amount of time, and would involve an enormous task in terms of presenting evidence.
Yesterday his counsel, Brian O'Moore SC, argued that one way out of the dilemma is for Mr Justice MacMenamin to decide, on the basis of Ms Justice Laffoy's lengthy ruling, if one or more persons should be disqualified from acting as directors, as a result of what the original High Court case heard, and the subsequent Supreme Court ruling.
The court, he said, had in law the right to make such a order of its own volition.
He said this was the case even if the parties before the court settled. No court has opted to act on its own volition in such a way heretofore.
In their responses to O'Moore, counsel for DCC and Fyffes had arguments to make. Brian Murray SC, for Fyffes, pointed out that he represented Fyffes, and no other party. "Findings in relation to parties represented before the court have no effect on anybody else." There was only one party before the court against whom an order could be made, he said, in an obvious reference to Flavin.
Mícheál Cush SC, for Flavin and DCC, pointed out that Ms Justice Laffoy had found that Flavin's decision to sell had not been prompted by the price-sensitive information.
If Flavin's potential disqualification was ever raised, then this finding would be used to argue against any order being made against him.
