Business Irish

Friday 21 July 2017

Justice delayed can be justice denied in our commercial court

Dearbhail McDonald and Thomas Molloy

THREE years ago the Supreme Court, the court of last resort, decreed that former DCC chief Jim Flavin had engaged in insider dealing.

Five judges unanimously found that Mr Flavin had been in possession of price-sensitive information when he sold DCC's shares in Fyffes in February 2000, weeks before Fyffes' share price tanked along with the rest of the dotcom bubble as investors finally realised selling bananas over the internet did not make sense.

In what was widely seen as a warning to would-be rogue traders, Supreme Court Judge Nial Fennelly described insider dealing as "a fraud on the market".

Yesterday High Court inspector Bill Shipsey, a Senior Counsel tasked with investigating the same circumstances that led to Ireland's first and only insider dealing case, found that Mr Flavin's crime -- if any -- was simply a "costly error of judgment".

At first sight, Mr Shipsey's conclusions appear to be as far removed from the Supreme Court's as possible.

For good measure, Mr Shipsey said the market could be reassured that DCC -- one of Ireland's largest listed public companies -- was a good corporate citizen, and found the share sales "measured up to the standards required by law" notwithstanding what he described as Mr Flavin's error of judgment.

How could the final court of appeal declare that Flavin was guilty, in civil terms at least, of insider dealing, while other legal institutions -- including the High Court whose earlier ruling it overturned -- conclude he was not?

The differences can be explained in part by the fact that the Supreme Court was dealing with a single legal issue on appeal following a mammoth adversarial trial in the High Court lasting almost 90 days.

Sensitive

This issue was whether the information in Mr Flavin's possession was price sensitive and whether he used the price-sensitive information.

Despite the byzantine, technical matrix of fact, neither Fyffes nor the Supreme Court challenged the factual findings of High Court judge Mary Laffoy.

She ruled that Mr Flavin was not in possession of price-sensitive information at the date of the share sales.

The Supreme Court said he was.

Mr Shipsey's report does not interfere with that ruling: the Supreme Court decision is binding.

But the senior counsel says that Flavin misjudged the information he had in his possession when he was approached by stockbrokers with a view to buying the shares.

He concluded that Flavin did not "deal" without considering whether he or DCC were free to sell the shares.

There are other reasons that may explain the gulf in findings.

In our adversarial legal tradition, commercial trials are case-managed according to agreed and often narrow legal issues and evidence.

Mr Shipsey's role was closer to the continental tradition of investigative magistrate.

He had a freer hand. He is not a court and described himself as an inquisitorial air crash investigator searching for a black box.

Shipsey had access to personnel and documentation that were not before the courts, including extensive interviews with stockbroker Kyran McLaughlin and DCC's current chairman, Michael Buckley.

There is also the question of the "crime".

In the 1990s, the Irish Government had enacted a harsh regime (imported from Australia) which stated that mere possession of inside information rendered dealing in shares unlawful.

That legislation was soon scrapped in Australia and then replaced here when we adopted the EU-wide Market Abuse Directive which was more relaxed and requires inside information to be used before it become illegal.

The DCC/Fyffes case was unprecedented, the insider dealing legislation untested.

Ten years after the original affair, it still manages to raise more questions than answers but one of the key questions is whether we need to overhaul our court system to deal more effectively with the avalanche of commercial cases which will be heard over the next few years as the recession's victims and villains appear before the courts.

Would some sort of court of final appeal for commercial matters which by-passed the Supreme Court be fairer and more effective?

The Director of Corporate Enforcement, Paul Appleby, told an Oireachtas committee yesterday that it takes an average of more than 30 months to get a case heard in the Supreme Court at present and that cases involving National Irish Bank and dating back to the 1990s are still unresolved because of such delays. Mr Flavin, a wealthly man, has had to wait a decade for his name to be effectively cleared. How much longer will people without resources and with the avalanche of cases have to wait?

What has happened to the old adage that justice delayed is justice denied?

Irish Independent

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