Jim Flavin Gets Some Justice

I do not now, and never have, owned any shares in either DCC plc or Fyffes plc. I do not know, am not related to, and have never met Mr Jim Flavin.

Bill Shipsey S.C.

Today, Bill Shipsey S.C.'s report as court-appointed Inspector into the affairs of DCC and certain related companies has been published. In my opinion, it provides a totally appropriate corrective to the torrent of mis-conceived vilification which descended upon Mr Jim Flavin, DCC's founder and then still its Executive Chairman, in 2007. This traducement followed the Supreme Court's decision, reversing the judgment of Laffoy J. in the High Court, that DCC's sale of its holding in Fyffes was technically "insider-trading".

I have emphasised the word "technically" because it was a more than normally "technical" decision, a consideration which by and in itself should have restrained the nature of the commentary upon it. Briefly, the Supreme Court's decision was that the definition of "price-sensitive information" in the Companies Act 1990 was such that insider-dealing had occurred. This was so even though, at the time of the dealing, all parties (even, it seems, the eventual complainants) agreed, some after taking legal advice, that such dealing was not involved (an opinion that the High Court shared).

Several commentators did not shrink from stating as a fact that the Supreme Court had found Mr Flavin guilty of the criminal offence of insider-trading, proving thereby that they had not looked at the judgments to which they were so anxious to attribute an excessive significance.

Mr Shipsey found

From the Chief Executive down, the officers and employees involved in the transactions in 1995 and 2000 each attempted to do what they understood to be right in all circumstances.

The report indicates that even the purchasers of the shares did not consider that they were victims of any insider-dealing.

Mr Shipsey concludes what in my view any objective observer would have concluded (as I did myself)

I believe that the only effective method of avoiding the adverse consequences which have been visited on DCC and Mr. Flavin by the events which occurred in 2000 would have been to have had in place written arrangements of the type envisaged by Section 108(7) of the 1990 Act.

The sub-section provides that a company will not be insider-trading:

... at any time by reason only of information in the possession of an officer of that company if—

(a) the decision to enter into the transaction was taken on its behalf by a person other than the officer;

(b) it had in operation at that time written arrangements to ensure that the information was not communicated to that person and that no advice relating to the transaction was given to him by a person in possession of the information; and

(c) the information was not so communicated and such advice was not so given.

Failure to put such an arrangement in place, which I suggest would have altered the form but not the substance of the transaction, was a mistake that was to cost the DCC Group over €42 million in costs and damages. As Mr Shipsey notes, it also gave rise to considerable disruption and upset to Mr Flavin and others, not least due to ill-informed commentary in the media which ultimately led to Mr Flavin retiring prematurely. Mr Shipsey does not say so, but the actions of the Director of Corporate Law Enforcement - in an extraordinary intervention, he asked the Supreme Court, in defiance of due process, to disqualify Mr Flavin from acting as a company director - appear to me to have been founded on a view of the case that owed more to over-excited media commentary than to mature consideration of the facts.

The Inspector accepts that a large part of the damage done is effectively irreparable but,

At least, however, the suggestion that the dealing was intentionally wrongful, or that it was evidence of dishonesty on the part of Jim Flavin and of a culture of disrespect for the companies code in DCC can be dispelled...

... The actions of Jim Flavin were not undertaken recklessly or with an absence of care. He was ultimately found to have misjudged the information he had in his possession when he was approached by the stockbrokers with a view to buying the shares, but he did not "deal" without considering whether he or DCC were free to sell the shares.