The publication yesterday of Bill Shipsey’s report into dealings at DCC and the statement from the Office of the Director of Corporate Enforcement (ODCE) that it does not propose to take any further proceedings appears to bring to an end a legal saga that has spanned almost 10 years.
Fyffes V DCC was a landmark case in company law. It was also one of the longest-running. Commencing on December 2nd, 2004, and concluding on July 18th, 2005, the case ran for 87 days in the High Court, one of the longest cases in the history of the State.
The action centred around the activities of listed company DCC, and, in particular, its chief executive and founder Jim Flavin, who was also a director of Fyffes. The plaintiff, Fyffes, alleged that Flavin was in possession of price-sensitive trading information when, in February 2000, DCC disposed of its shareholding in Fyffes – a breach of Part V of the Companies Act 1990, it was alleged.
DCC had held a shareholding in Fyffes since 1981, the year in which Jim Flavin became a non-executive director of Fyffes. In 1995, DCC and a subsidiary company SL Investments Limited transferred its 10.5 per cent shareholding in Fyffes to a Dutch subsidiary company Lotus Green Limited in three separate tranches.
In February 2000, Lotus Green sold its entire holding of shares in Fyffes, netting some €106 million for the group. The 31.2 million ordinary shares were sold in three tranches on February 3rd, 8th and 14th, immediately sending Fyffes’ share price higher.
In March, Fyffes issued a profit warning citing poor trading conditions. Within two days its share price had shed 25 per cent.
In early 2002, Fyffes initiated civil proceedings alleging insider dealing against DCC, SL, Lotus Green and Mr Flavin.
During the course of the proceedings, it emerged that Mr Flavin, in his capacity as director of Fyffes, was in the possession of information relating to Fyffes’ financial performance that was not publicly available. In January 2000, he had received management accounts and trading statements for November and December 1999, which showed losses which had not been forecast and figures that were well behind the equivalent numbers for the previous year.
The plaintiff’s case rested on the issue of whether Mr Flavin was guilty of using “price-sensitive” information and hence insider trading. On December 22nd, 2005, the High Court ruled against Fyffes, ruling that Mr Flavin did “deal” in Fyffes shares in relation to the February 2000 sale of the DCC stake in Fyffes, but did not do so unlawfully, as the information in Mr Flavin’s possession was not price sensitive.
Fyffes appealed the ruling to the Supreme Court. In July 2006 the Supreme Court overturned the High Court finding.
The case was subsequently settled when DCC agreed to pay €41 million compensation to Fyffes.
However, the Office of the Director of Corporate Enforcement launched its own inquiry, with the High Court appointing Bill Shipsey SC as investigator. The result was the 970-page report which was published yesterday.
Fyffes vs DCC was one of the most significant company cases of the decade, and, for many in the corporate and legal world, one of the most absorbing.
The court proceedings had all the ingredients of a Shakespearean drama – adversaries who were two of the biggest names in Irish corporate life, with the colourful Jim Flavin as protagonist, and all wedded together by the intriguing theme of insider trading.
Unfolding at a time when Ireland’s economic boom was accelerating, the case threatened to cast an unwelcome eye on the heart of corporate Ireland.
As Ireland comes to terms with the string of banking and corporate scandals that have emerged in recent years, it seems that such legal battles will become a feature of Irish public life in the decade to come.
