The DCC group could face a bill of more than €110 million after the Supreme Court yesterday overturned a High Court ruling that had cleared the group and its executive chairman Jim Flavin of insider dealing. Colm Keena, Public Affairs Correspondent, reports.
The board of DCC, which has interests ranging from healthcare to energy, met in the wake of the Supreme Court decision and expressed its "unanimous support" for Mr Flavin, the 64-year-old founder and driving force behind the group.
"The board of DCC wishes to express its full confidence in and unanimous support for Jim Flavin as executive chairman of DCC," the company said in a statement to the Stock Exchange.
In an earlier statement the group said the maximum it now expected to have to pay, inclusive of legal costs, was €50 million. Legal costs to date for both sides are believed to total approximately €25 million.
Five judges of the Supreme Court unanimously supported the appeal by Fyffes plc against a judgment of the High Court in December 2005 that had found in favour of Mr Flavin and DCC.
The High Court case was an unprecedented civil action taken by Fyffes alleging that Mr Flavin was in possession of price sensitive information at the time he and DCC sold Fyffes' shares worth more than €106 million.
The fruit distributor claimed that under the law it was entitled to all of the profit the defendants made from the sale of its shares as they were in possession of price sensitive information at the time.
The profit made by DCC was approximately €85 million.
A month after DCC sold its large shareholding in Fyffes, Fyffes issued a profit warning and its share price fell.
A Garda inquiry was conducted into the share sale by DCC and there was contact with the Director of Public Prosecutions. No action has been taken.
In the light of the Supreme Court's ruling, the High Court will now have to decide how much DCC should pay to Fyffes.
While Fyffes will argue for the maximum amount possible, DCC is expected to argue that it should have to pay only the difference between what it got for the shares and what it would have received had the price sensitive information been publicly known.
DCC will have to shoulder the legal costs incurred to date by both sides, which total approximately €25 million. That means that if Fyffes was awarded €85 million by the High Court, the total charge to DCC would be in excess of €110 million.
At the time of the share sale Mr Flavin was a non-executive director of Fyffes and had seen confidential trading reports which the High Court found contained "unquestionably bad news" about Fyffes' affairs.
Under the law a party is not allowed sell shares while in possession of price sensitive information, or information that would affect the share price if generally known.
Ms Justice Laffoy found that because of various other factors in the market at the time, not least the boost Fyffes' 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 yesterday said a "common sense" 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.
The original High Court case lasted for 87 days and was one of the most expensive legal battles to ever come before the courts.
Mr Justice Fennelly of the Supreme Court said in his ruling: "It is difficult to escape the [ impression] that the length of the trial was the product of the large amounts of money at stake and the depth of the respective corporate pockets, rather than of the complexity of the issues."
Fyffes, in a statement yesterday, said it was "pleased" that its appeal had been successful. Its share price ended the day up 1.3 per cent, while that of DCC fell 2.7 per cent.