The marathon courtroom battle will resume in the new year, writes Colm Keena, Public Affairs Correspondent
The marathon slug-out between, in the one corner, DCC and its executive chairman Jim Flavin and, in the other corner, Fyffes, continued through 2007 and will resume in the new year. The finding by the High Court that Mr Flavin had not been in possession of insider information when he dealt, on DCC's behalf, in Fyffes shares worth €106.7 million in February 2000, was one of the biggest business stories of 2006.
The overturning of that ruling by the Supreme Court, in a unanimous judgment, was one of the major business stories of 2007.
What decision the High Court will now make as to the size of the damages DCC will have to pay Fyffes, will no doubt be one of the biggest business stories of 2008.
On a straightforward reading, the legislation seems to allow for Fyffes to be paid damages equal to the entire profit DCC made on the shares. DCC made a profit over cost of approximately €85 million from the sale. However, DCC will be arguing in the High Court that Fyffes should only get the difference between what was received for the shares, and what would have been received had the market had the bad trading information which was known to Mr Flavin by way of his position as non-executive director of Fyffes, when he dealt in February 2000. When Fyffes did issue a trading statement in March 2000, the value of Fyffes's shares fell by 25 per cent.
In the wake of the Supreme Court judgment, the board of DCC issued a statement supporting Mr Flavin. It was later disclosed to this newspaper by senior independent DCC director Michael Buckley that the board debated for four hours how it should respond to the ruling.
However, Mr Buckley said, the board came to the view that there was no intentional misconduct on Mr Flavin's part or any lack of probity. "Our belief and our judgment is that neither justice nor honesty nor fairness would have been served if Jim Flavin had either resigned or been pushed out by the board after the Supreme Court judgment."
The other major development this year was the intervention of Paul Appleby, the Director of Corporate Enforcement, in a Supreme Court hearing on the issue of costs. Mr Appleby said the legislation allowed for the court to make any disqualification orders it considered appropriate, given what had been heard by the High Court in the course of the action. This would save his office from having to take what would no doubt be very costly and very slow actions, should he deem such actions necessary.
Mr Appleby's affidavit to the court made it clear he was inviting the court to consider such orders, both in relation to Mr Flavin and others.
This brought into focus an aspect of the case that had been referred to by Ms Justice Mary Laffoy in her lengthy High Court judgment in 2006.
The case arose from the charge by Fyffes that Mr Flavin was in possession of price-sensitive information when DCC sold its Fyffes shares. Yet the evidence showed that Fyffes had not even considered issuing a profit warning to inform the market of its concerns in February 2000, as it was obliged to if its directors felt they had information that would materially affect the market's expectations.
The court also heard that in late January 2000, Fyffes issued options to senior executives and allowed a senior executive to sell shares. Again, this should not have occurred if the company had believed it was in possession of price-sensitive information.
Ms Justice Laffoy referred to these matters as being a "fundamental incongruity" in the Fyffes case, and noted that she would have had a difficulty awarding damages to Fyffes after a hearing where such shortcomings on the part of that company, had been aired.
She did not have to address this issue because of her finding that Mr Flavin did not have price-sensitive information, but that finding has now been overturned by the Supreme Court.
The Supreme Court did not take up Mr Appleby's suggestion that it consider making disqualification orders, but did refer the matter to the High Court, something which Mr Appleby afterwards described as the achievement of his objective.
In the High Court, Ms Justice Laffoy found that because of various other factors in the market at the time, not least the boost Fyffes's shares were receiving from the dotcom boom, the information in Mr Flavin's possession at the time of the February 2000 share sales, was not price sensitive.
At the time of the sales, Fyffes had a dotcom venture, worldoffruit.com, which was adding significantly to the Fyffes share price. Ms Justice Laffoy found that Mr Flavin's decision to sell was motivated by the high price the Fyffes shares were getting as a result of this.
The Supreme Court found that a "commonsense" analysis of the situation led to the conclusion that the information Mr Flavin had access to remained price sensitive, irrespective of other factors in the market.
There was a second plank to the hearing. Mr Flavin and DCC held that he had not in fact dealt in the shares and had only acted as conduit to a DCC subsidiary, Lotus Green, which was resident in Holland and was part of a tax structure DCC had put in place.
However, Ms Justice Laffoy found DCC and Mr Flavin's argument that Lotus Green, and not Mr Flavin, had dealt in the shares, to be an "absurdity".
