The public enforcer of business law has asked the Supreme Court to consider whether anyone should be disqualified as a director in the case in which DCC executive chairman Jim Flavin was found to have engaged in insider dealing when selling shares in Fyffes.
As the mammoth legal action enters its final phase, DCC was ordered yesterday to pay all legal costs arising from the proceedings in the High Court and the Supreme Court. These costs are likely to be in the region of €25 million.
Paul Appleby, director of corporate enforcement, said he would be concerned "if any persons who actively participated in insider dealing transactions should be able to continue to discharge leading roles in Irish corporate affairs".
Such a situation "would give cause for belief that insider dealing involves minimal reputational risk and would encourage others to engage in similar practices to the detriment of the functioning of a fair and transparent market in company securities and in a manner contrary to the public interest".
He said "consequential issues" may also arise for DCC executives and for Fyffes.
The Supreme Court dismissed Mr Appleby's application to be joined as a notice party in the case. Ms Justice Susan Denham said it was a matter for the High Court.
"As the issue of a potential disqualification in these proceedings is now open, I have achieved my primary objective," said Mr Appleby.
The case centres on Mr Flavin's illegal sale in 2000 of DCC's shares in fruit-importer Fyffes shortly before that company issued a profit warning, transactions in which DCC made a profit of €85 million. The Supreme Court found in July that, at the time, Mr Flavin held insider information. After receiving the unanimous backing of its board, he remains in place as DCC executive chairman. Two days ago, Mr Flavin said DCC always fostered "high ethical standards".
In an affidavit opened in the Supreme Court yesterday, Mr Appleby said that any court could "of its own motion" make a disqualification order under the Companies Act of 1990 if it is satisfied certain matters are established in any proceedings. It would be particularly appropriate "that the issue of whether grounds exist for disqualification be considered" in the proceedings between Fyffes and DCC. Citing the Supreme Court ruling, he said "the support other senior persons in the DCC group gave to the execution of the insider dealing transactions" may require scrutiny.
DCC senior independent director Michael Buckley said in a responding affidavit that its board believes Mr Appleby's "attempted characterisation" of damage to the market was unfair and not founded in the court rulings.
Mr Appleby said Fyffes' grant of share options in January 2000 may also require scrutiny, as might its agreement at that time to allow a then non-executive director - John Ellis - to sell Fyffes shares. These events took place when Fyffes "was in possession of information which this court has concluded was price-sensitive", he said.
