THE HIGH Court has appointed an inspector to DCC plc after finding there are circumstances suggesting unlawfulness in the conduct of its affairs relating to the 1995 transfer of the DCC stake in Fyffes plc and/or the sale of that Fyffes stake in early 2000.

A "thorough investigation" is also in the public interest, Mr Justice Peter Kelly ruled. However, the judge agreed yesterday to put a 48-hour stay on his order appointing Bill Shipsey SC as inspector to allow DCC to decide whether to appeal that order to the Supreme Court.

The stay expires at 2pm tomorrow but if DCC decides to appeal, it will seek a further stay pending the outcome of that appeal. Because of the volume of cases before the Supreme Court, it is unlikely an appeal would be heard for several months.

The appointment of an inspector to DCC and its two subsidiaries - S & L Investments Ltd and Lotus Green Ltd - was sought by Director of Corporate Enforcement Paul Appleby following the Supreme Court finding last year of unlawful insider dealing by DCC and its former chief executive Jim Flavin in the €106 million sale of the DCC stake in Fyffes in early 2000.

The application, the first ever by the director, was opposed by DCC.

An inspector's report could provide the basis for disqualification proceedings against any persons involved in the 2000 share sales or in the 1995 transfer of DCC's Fyffes stake to Lotus Green, effected to avoid payment of capital gains tax on any subsequent sale of the shares.

In his reserved judgment, Mr Justice Kelly ruled the appointment was justified on the basis of circumstances suggesting unlawfulness in the conduct of the affairs of the company in relation to the events of 1995 (the transfer to Lotus Green) and 2000 (relating to events up to the February 2000 sale of the Fyffes shares and until Fyffes issued a profit warning in April 2000).

A thorough investigation was also in the public interest so as to show how DCC and persons associated with it conducted their affairs relating to the transactions at issue, the judge said.

The inspector is empowered to examine whether there were breaches of the Companies Act by the officers and directors, including shadow directors, of DCC and its servants or agents.

The judge said he acknowledged the appointment of an inspector to this publicly listed company with 3,500 shareholders and some 7,000 employees, had the potential to impinge on the group.

However, he had to bear in mind the activities in question gave rise to court findings and ultimately resulted in DCC paying Fyffes more than €37 million in damages, he said.

His order appointing Mr Shipsey provides that he will providetender interim reports to the court, the first of these by January 28th next.

The judge stressed that the inspector's investigation should be strictly confined to the matters outlined and that if the inspector wished to inquire into additional matters, he must apply to the court.

Before an inspector could be appointed, the director had to show; (1) circumstances suggesting unlawfulness in the conduct of the affairs of the companies and; (2) the appointment of an inspector would be likely to enable facts not already known to be found.

On the evidence before him, the judge said he was satisfied there were circumstances suggesting unlawfulness.

He noted that DCC conceded there was evidence suggesting, in relation to the 1995 transfer of the Fyffes stake to Lotus Green, a breach of the statutory provisions concerning notification requirements but denied any breach of the insider dealing provisions in 1995 or 2000.

On the second issue, the judge accepted, as a result of the lengthy court proceedings between Fyffes and DCC, there was much factual information available about the events to be investigated.

The director had also pointed out that the High Court, during the Fyffes case, had not had the benefit of evidence from persons whom he regarded as important witnesses to the events related to the insider dealing transactions.

These persons included Kyran McLaughlin, chairman of Davy stockbrokers, the then chairman of DCC, another director of DCC and two directors of Lotus Green.

The judge criticised the director's issuing of a press release on May 28th last in which the director expressed concern the rules of evidence did not allow the information given in the Fyffes court proceedings to be used in any enforcement proceedings. He had repeated those concerns in an Irish Times interview.

The judge said it was unclear what part of the director's statutory functions were being discharged by the issue of the press release, which contained a lot of "public relations spin", and it was "undesirable" for an officer with statutory functions to engage in such activity.

If he was convinced the director's sole motive in seeking an inspector was to get evidentially useful material, this would amount to improper motive - as DCC contended - and he would dismiss the application.

However, the director had sworn evidence of a much broader basis for the appointment (including the public interest and his concern about standards of corporate governance) and the court must accept at face value what he said.