High Court appoints inspector to DCC

The High Court has appointed an inspector to examine a number of transactions carried out by DCC.

The court today found finding there are circumstances suggesting unlawfulness in the conduct of its affairs relating to the 1995 transfer of the DCC stake in Fyffes and/or the sale of that Fyffes stake in 2000.

A "thorough investigation" into the dealings was in the public interest, Mr Justice Peter Kelly ruled today

However, the judge agreed to put a 48-hour stay on his order appointing Bill Shipsey SC as inspector to allow DCC decide whether to appeal that order to the Supreme Court.

The stay expires on Thursday afternoon.

However, if DCC decides to appeal, it will seek a further stay pending the outcome of that appeal. Because of the volume of cases before the Supreme Court, it is unlikely an appeal would be heard for several months.

The appointment of an inspector to DCC and its two subsidiaries - S & L Investments Ltd and Lotus Green Ltd - was sought by Director of Corporate Enforcement Paul Appleby following the Supreme Court finding last year of unlawful insider dealing by DCC and its former chief executive Jim Flavin in the €106 million sale of the DCC stake in Fyffes in early 2000.

The application, the first ever by the Director, was opposed by DCC. An inspector's report could provide the basis for disqualification proceedings against any persons involved in the 2000 share sales or in the 1995 transfer of DCC's Fyffes stake to Lotus Green, effected to avoid payment of capital gains tax on any subsequent sale of the shares.

In his reserved judgment, Mr Justice Kelly ruled the appointment was justified on the basis of circumstances suggesting unlawfulness in the conduct of the affairs of the company in relation to the events of 1995 (the transfer to Lotus Green) and 2000 (relating to events up to the February 2000 sale of the Fyffes shares and until Fyffes issued a profit warning in April 2000).

A thorough investigation was also in the public interest so as to show how DCC and persons associated with it conducted their affairs relating to the transactions at issue, the judge said. The inspector is empowered to examine whether there were breaches of the Companies Act by the officers and directors, including shadow directors, of DCC and its servants or agents.

The judge said he acknowledged the appointment of an inspector to this publicly- listed company with 3,500 shareholders and some 7,000 employees had the potential to impinge on the group.

However, he had to bear in mind the activities in question gave rise to court findings and ultimately resulted in DCC paying Fyffes more than €37 million in damages, he said. In those circumstances, it could not be considered disproportionate to appoint an inspector.

His order appointing Mr Shipsey as inspector to DCC, S & L and Lotus Green, subject to the stay, provides that Mr Shipsey will provide interim reports to the court. The first report is due by January 28th, 2009.

The judge stressed the inspector's investigation should be strictly confined to the matters outlined and, if the inspector wished to inquire into additional matters, he must apply to the court.