The Director of Corporate Enforcement has reminded the High Court it can of its own volition make disqualification orders following the Supreme Court finding that DCC chief executive Jim Flavin was in possession of insider information at the time of the sale of the DCC stake in fruit distributor Fyffes in early 2000.
Disqualification orders, made under Section 160 of the Companies Act, restrain a person for a specified time from involvement in the management of any company on grounds of unfitness.
Brian O'Moore SC, for the Director, said the matter of Section 160 orders had been 'avoided' by both Fyffes and DCC in their action to date.
The Director was, 'with deference', now taking the step of reminding the court it could of its own motion make Section 160 orders because it was 'too much of a risk'' the Section 160 issue might not be to the forefront of the court's mind when dealing on June 17 with the final stage of proceedings between Fyffes and DCC.
Those proceedings are to assess the amount of compensation to be paid to Fyffes and institutional investors over the insider dealing.
Mr O'Moore said the Director had moved because of his 'acute concern' about the serious issue of insider dealing and because the case was very significant for corporate governance. The Director had a unique responsibility to ensure compliance with the Companies Acts.
The Director had consciously not set out those persons whom he believes are open for disqualification because he believed the court should not be prompted by submissions in that regard, counsel said. However, the Director would gladly compile a list of persons if the court wished and, if matters reached that stage, such persons would be entitled to respond.
It would be very onerous and costly for the Director to bring a free standing application to disqualify one or more persons, counsel added.
The Director was not 'at this stage' pressing to be joined to the June case but, if the court decided to address the Section 160 issue, it was open to the court to join the Director at that stage to the case as an amicus curiae (assistant to the court on legal issues).
Counsel also said the court, given the Supreme Court's finding of insider dealing, was entitled to make disqualification orders even if the case settles.
The Director, Paul Appleby, has said in an affidavit 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'.
Among issues which may need to be addressed were the support that other senior persons in the DCC group gave to the execution of the insider dealing transactions and Fyffes' own conduct, including the grant of share options to some persons in January 2000 when it had information found by the Supreme Court to be price sensitive, he added.
After hearing the submissions from the Director and from Fyffes and DCC, Mr Justice John
McMenamin said there was no actual application by the Director before the court and he would make no order.
This was the first time he had ever encountered a situation where an applicant had come to court for the purpose of reminding the court of the law and where no order was sought, the judge remarked.
Applicants should remember applications are usually made to the court for the purpose of seeking an order, he said. While the Section 160 issue might arise in the future, he would not comment whether that should be dealt with by him or another court, the judge added.
Earlier, Mr Brian Murray SC, for Fyffes, said the Director's application should be dismissed as 'utterly misconceived', saying he was trying to draw the court into a constitutionally flawed process.
The purported purpose of the Director's application was to remind the court of its power to make Section 160 orders and that purpose was now exhausted, counsel said. It was 'astonishing' the Director was suggesting Section 160 orders could be made against any person whether they were parties to the case or not. The Section 160 procedure did not affect Fyffes at all, he added.
Fyffes was also concerned the Director's intervention would disrupt the case which his side wanted determined in a cost effective manner.
Michael Cush SC, for DCC, accepted the court has jurisdiction of its own motion to make Section 160 orders and said the court could now consider itself 'well reminded' of that. The law did not envisage the involvement of an additional party to agitate for such orders.
There was no application now for the court to decide but if the Director pressed later to
be joined to the case, the court should refuse. Mr Cush added that DCC took issue with the Director's characterisation of the findings of the High Court and Supreme Court. There remained an unappealed High Court finding that the price sensitive information - on Fyffes's trading performance in possession of Mr Flavin at the time of the share sales - had no bearing on the share sales.
Responding, Mr O'Moore said Mr Cush had referred only to a portion of the courts' judgments. In the Supreme Court, Mr Justice Niall Fennelly had powerfully characterised the act of trading on secret information as 'a fraud on the market'.
The June 17 compensation hearing is expected to be the final stage in the marathon legal battle between DCC and Fyffes which resulted in a Supreme Court decision last July that Mr Flavin was in possession of insider information when he sold the DCC stake in Fyffes on three dates in February 2000.
Fyffes has argued it is entitled to some €85m compensation over the share sales while DCC has insisted its aggregate liability is closer to €50m. Some 20% of institutional investors have also sued DCC over the share sales.