Non-executive directors' support flies in the face of a unanimous Supreme Court ruling, writes Arthur Beesley, Senior Business Correspondent
In the face of a unanimous Supreme Court ruling that DCC executive chairman Jim Flavin illegally held insider information when selling the firm's stake in Fyffes, the company is defending Mr Flavin by selectively invoking favourable aspects of the High Court ruling in the case.
Despite the clear conclusion of the highest court in the land, DCC's non-executive directors have unanimously given Mr Flavin their full support. This vote of confidence comes from some of the most senior business people in Ireland, among them former Bank of Ireland chief executive Maurice Keane and former AIB chief Michael Buckley.
They have been unstinting in their support for Mr Flavin, even though the ruling of the Supreme Court has the effect of overturning the High Court judgment at large. To back him, they are relying exclusively on a narrow part of the High Court ruling that was not appealed by Fyffes and was, therefore, not tested by the Supreme Court.
In correspondence with the Irish Association of Investment Managers and in a stock exchange statement, DCC said the Supreme Court ruling "did not imply that Mr Flavin had used price-sensitive information" when selling the Fyffes stake.
Making reference to citations of Miss Justice Laffoy's High Court ruling by the Supreme Court, DCC underlined the finding of the lower court that "the evidence is not open to the interpretation that Mr Flavin used the information". DCC also underlined the High Court finding that the "information simply had no bearing on the share sales".
DCC said such findings of the High Court stand. "No appeal was made against the strong findings of the High Court on this matter and the Supreme Court judgment did not interfere with them." However, this ignores the fact that the Supreme Court was silent on that question because it simply did not examine it.
"No appeal was brought from this decision and so the matter is not before this Court," said Mrs Justice Denham in her judgment.
For all their eminence and seniority, DCC's non-executive directors were themselves silent on the core finding of the Supreme Court that Mr Flavin was in breach of the law when selling the Fyffes stake.
Mrs Justice Denham said the wording of the relevant part of the 1990 Companies Act was plain and clear. "The section provides that it shall not be lawful for a person who is connected with a company to deal in any shares of that company if by reason of his connection with that company he is in possession of information that is not generally available and which is likely materially to affect the price of those shares," she said.
"The test, as to whether the information is likely to affect the price of the shares, is objective. Thus the subjective view of Mr Flavin is not the test, nor is the view of the directors the test. The test is whether the information would be likely materially to affect the price of the shares, if it were generally available."
Mr Flavin held trading reports which were not generally available and those reports constituted bad news for Fyffes, according to the High Court.
DCC made a profit of €85 million on the transaction. Between legal fees and damages, the company could now be facing a bill for €110 million. That DCC claims its aggregate liability will not exceed €50 million suggests the firm is still likely to take a significant financial hit as a direct result of Mr Flavin's actions.
The judgment casts new light on a case that was previously referred to the DPP.
The company is already facing fresh scrutiny from Director of Corporate Enforcement Paul Appleby, who indicated yesterday that his office was examining the ruling.
Mr Flavin and DCC's board want to tough it out. The wisdom of that course will be determined in the future.
