The High Court was wrong in concluding that the chief executive of DCC plc did not have "price-sensitive" information when he dealt in Fyffes shares in early 2000, counsel for Fyffes has argued before the Supreme Court.
That conclusion by Ms Justice Mary Laffoy was inconsistent with her findings that the information in Jim Flavin's possession contained "unquestionably bad news" about Fyffes trading and economic performance in the first quarter of the financial year 2000, Paul Gallagher SC, the new Attorney General, said yesterday.
This was the essential issue in the Fyffes appeal against the High Court's rejection of its claim of insider dealing by Mr Flavin and DCC in connection with the €106 million sale of the DCC stake in the fruit distributor, Mr Gallagher argued in opening the appeal.
Mr Gallagher, who was appearing in court for the last time, was welcomed by Ms Justice Susan Denham, presiding over the five-judge court, who said the court looked forward to formally welcoming Mr Gallagher at a later stage in his position as Attorney General.
The Fyffes appeal arises from its unsuccessful 87-day High Court action in which it sought some €85 million compensation for the share deals of February 2000 which, it claimed, breached "insider dealing" provisions of the Companies Acts.
The action was against DCC plc and S & L investments, DCC House, Stillorgan, Co Dublin; Mr Flavin, Shankill, Co Dublin; and Lotus Green Ltd, Fitzwilton House, Wilton Place, Dublin, a subsidiary of DCC to which beneficial ownership of the Fyffes stake was transferred in 1995 to avoid payment of capital gains tax in the event of any future share disposal.
In her 365-page judgment in December 2005, Ms Justice Laffoy found Mr Flavin did "deal" in Fyffes shares in relation to the February 2000 share sales but did not do so unlawfully. She held the "only reasonable conclusion" from the evidence, particularly from tapes of phone conversations between stockbrokers and Mr Flavin, was that Mr Flavin had "controlled the whole process".
However, the judge ruled, there was "a fundamental incongruity" between Fyffes's own conduct in early 2000 and its claim that Mr Flavin had, at that time, price-sensitive information which would have materially affected Fyffes's share price had it been made available to the stock market.
That information consisted of Fyffes trading reports for November and December 1999, indicating negative trading performance in the first quarter of the financial year 2000.
What was being said and done by Fyffes executives did not reveal any awareness by them in February 2000 that the information in the November and December trading reports was price sensitive, the judge ruled.
As a result of the judge's rulings, Fyffes could face a €20 million bill for costs as a result of the marathon action.
DCC is also facing a substantial bill arising from the decision that it should pay its own legal costs of 25 hearing days of the action, plus 80 per cent of the costs of discovery of documents on the dealing issue, because of what the judge described as the "absurd" insistence that neither DCC nor Mr Flavin had "dealt" in the Fyffes shares.
In submissions yesterday, Mr Gallagher said the trial judge had failed to draw the correct inference from a number of critical facts found by her on the issue of price sensitive information. The judge had found the information in question was not price-sensitive on the basis of conclusions which did not bear on the issue of price sensitivity at all, he argued.
The trial judge also paid no regard whatever to the actual adverse impact on the Fyffes share price when the information in Mr Flavin's possession was ultimately released to the market on March 20th, 2000.
Mr Gallagher submitted that the information in Mr Flavin's possession contained what Ms Justice Laffoy described as "unquestionably bad news" about Fyffes's trading performance in the first quarter of the financial year 2000.
A commonsense reading of the information showed a deficit of €13.7 million on the previous year and a highly significant downturn in profits for the year 2000 compared with 1999.
However, the judge had held that notwithstanding the nature of the information, it was not likely materially to affect the Fyffes share price. It was very difficult, Mr Gallagher argued, to understand how the judge could have reached such a conclusion.
The correct inference from the findings of fact made by the judge was that the information was price sensitive. Had this information been released, it was inconceivable that the market would not have revised its expectations for Fyffes trading performance and there would have been an immediate and significant impact on the share price, he said.
Mr Flavin had the information and obtained a price for the shares which would not have been obtained had the information been generally known.
The appeal, which is expected to last five days, continues today.
