Fyffes Plc v DCC Plc

JudgeDenham J
Judgment Date27 July 2007
Neutral Citation[2007] IESC 36
CourtSupreme Court
Docket Number[2002 No. 1183 P]; [S.C. No. 144 of 2006],[S.C. No: 144/06]
Date27 July 2007
Fyffes Plc
DCC Plc S & L Investments Limited, James Flavin and Lotus Green Limited

Denham J.

Geoghegan J.

Fennelly J.

Macken J.

Finnegan J.

[S.C. No: 144/06]



Company law - Shares - Insider dealing - Whether trial judge erred in concluding that information not price-sensitive - Jurisdiction of Supreme Court on appeal - Companies Act 1990

Fyffes plc brought proceedings against the defendants claiming insider dealing in shares. The central issue to be determined was whether the trial judge erred in concluding that the information in possession of Mr. Flavin relating to the business of Fyffes plc on three days in February 2000 when Mr. Flavin dealt in the shares of Fyffes plc was not price-sensitive vis-à-vis those shares.

Held by the Supreme Court (Denham, Geoghegan, Fennelly, Macken and Finnegan JJ) in allowing the appeal that the information was price-sensitive.

Reporter: R.W.


Judgment delivered the 27th day of July, 2007 by Denham J.


In this case the High Court was required to consider and to decide upon many complex issues. The case was at hearing before the High Court for 87 days, and the judgment contains 368 pages. However, on this appeal there is a single issue, that of 'price-sensitivity', in the context of alleged insider dealing.


2. Fyffes Plc, the plaintiff/appellant, and hereinafter referred to as 'Fyffes', has appealed from the judgment and orders of the High Court (Laffoy J.), in which claims made by Fyffes were dismissed, and in which it was ordered that Fyffes pay to the defendants the costs of the action (with a few exceptions). Fyffes is a public company, with shares listed on the Dublin and London Stock Exchange, and business in the fresh produce trade, especially bananas.


3. DCC Plc, the first named defendant/respondent, is a public company limited by shares. Mr Flavin, the third named defendant/respondent, has been Chief Executive of this company since 1976, and is Deputy Chairman. The second named defendant/respondent and the fourth named defendant/respondent, S & L Investments Limited and Lotus Green Limited, are Irish registered companies and are part of the DCC Plc group of companies. The defendants/respondents will be referred to collectively as 'the defendants'. Mr Flavin was a director of S & L Investments Limited, but not a director of Lotus Green Limited. Mr Flavin was a director of Fyffes, until his resignation from 9th February, 2000.


4. Fyffes brought proceedings against the defendants claiming insider dealing in its shares. The central issue to be determined is whether the learned trial judge erred in concluding that the information in the possession of Mr Flavin, relating to the business of Fyffes, on three dates in February, 2000, when Mr Flavin dealt in the shares of Fyffes, was not price-sensitive vis-à-vis those shares.


5. Fyffes sought, inter alia, a declaratory order that certain share


sales were unlawful dealings within the meaning of Part V of the Companies Act, 1990 (the Act of 1990), and an account pursuant to s.109(1)(b) of the Act of 1990. In the High Court the parties agreed that the Court should determine first, whether the share sales were in breach of s.108 of the Act of 1990; and, secondly, whether, in principle, liability to account arose.


6. The High Court


6.1 Statutory Claim


The High Court held that Fyffes had not discharged the onus of proving that, on the dates of the share sales, Mr Flavin, by reason of his connection with Fyffes, was in possession of information which, if generally available, would have been likely to materially affect the share price. The High Court held that the statutory claim failed because Fyffes had not established the price-sensitivity issue: Fyffes had not established that, if the information contained in the November and December 1999 Trading Reports was generally available on 3rd, 8th and 14th February, 2000, it would have been likely to materially affect Fyffe's share price.


The High Court summarised the conclusions it reached on this aspect of the claim as follows:-


"Having regard to the manner in which I have construed the provisions of Part V of the Act of 1990, essentially the following three questions remain on the statutory claim:

  • (1) ho dealt in the Share Sales and in what capacity?

  • (2) id Mr. Flavin have, by reason of his connection with Fyffes, price-sensitive information on the dates of the Share Sales?

  • (3) hat are the consequences of the answers to the first and second questions?

    I have answered the three questions as follows:

  • (1) (a) Mr. Flavin dealt as agent of the DCC Group.

    • (b) DCC and S&L dealt as principals, so they cannot rely on s.108(9).

    • (c) Lotus Green dealt as principal.

  • (2) Mr. Flavin was not in possession of price-sensitive information at the dates of the Share Sales.

  • (3) Therefore, the dealing was not unlawful under s. 108 and no civil liability to account arises under s. 109. However, I have concluded that, if the dealing was unlawful so as to give rise to a liability to account under s. 109, it would have been proper to treat the three corporate defendants, DCC, S&L and Lotus Green, as a single entity for the purposes of accounting for the profit accruing from dealing under s. 109. That conclusion is redundant because I have found that the dealing was not unlawful."


6.2 Non-Statutory Claim


On the non-statutory claim the High Court found:-


"It is worth reiterating that the basis on which the liability to account in equity may be imposed for insider dealing is that the insider director, in breach of his fiduciary duty, has made use of information acquired by him in that capacity for his personal advantage. To establish liability to account in equity against an insider, a corporate plaintiff bears a much heavier burden than it bears in establishing liability to account under s. 109(1), in that it must establish that the profit it seeks to attach was the result of the exploitation by the insider of the confidential price-sensitive information in issue for his own benefit.


In my view, in this case, the evidence is not open to the interpretation that Mr. Flavin used the information contained in the November and December Trading Reports which is alleged to have been confidential and price-sensitive, the negative information in relation to Fyffes' trading and earnings performance in the first quarter of financial year 2000, so as to enable the DCC Group to exit from Fyffes in manner which would avoid any share price impact which would ensue from the disclosure of that information. In my view, on the evidence, it is clear that what motivated Mr. Flavin in his involvement in the Share Sales and what motivated the almost total exit of the DCC Group from Fyffes in February, 2000 was the opportunity to make a substantial profit because of the increase of the share price on the back of wof.com. The plaintiff has not established any evidential nexus between the profit which the Share Sales generated for the DCC Group and the use by Mr. Flavin, or the use by any of the boards of the corporate defendants, of the confidential information contained in the November and December Trading Reports. On any view of the evidence, that information simply had no bearing on the Share Sales."


The High Court concluded that Fyffes had failed to establish a breach of fiduciary duty on the part of Mr Flavin, and that Fyffes was neither entitled to an account in equity, nor to damages, nor to compensation at common law. No appeal was brought from this decision and so the matter is not before this Court.


7. Submissions of Fyffes


On this appeal it was submitted, on behalf of Fyffes, that the trial judge erred in three respects:-

  • (i) The trial judge failed to draw the correct inferences from a number of critical facts found by her and, in particular, found that the information the subject of these proceedings was not price-sensitive on the basis of conclusions that, properly viewed, did not bear on the price sensitivity of the information at all. Further, her conclusions were inconsistent with her earlier findings.

  • (ii) The trial judge having identified what she stated was the kernel of the price sensitivity issue

    then failed to assess the information in the possession of Mr. Flavin by reference to that test. Instead she purported to develop a "reasonable investor" test, by reference to case law which did not support the test as formulated by her. In particular, instead of applying a reasonable investor test to determine the materiality of the information, a different test was posed and applied by the Court. This was a test based upon whether the reasonable investor (had he had the information in question at the relevant time) would have concluded that that information would probably impact on Fyffes share price to a substantial or significant degree. This question is significantly different from the question of whether a reasonable investor would have viewed the information as material, and finds no support in any of the authorities. Furthermore, she failed to apply properly the reasonable investor test. Finally, the reasonable investor test is not provided for by statute and is inconsistent with what the Court is required to do under the statute.

  • (iii) The trial judge failed to pay any regard whatsoever to the actual impact upon Fyffes' share price when the information in the possession of Mr. Flavin on the dates on which he dealt (or information substantially similar thereto) was ultimately released to the market on 20 March 2000. Furthermore, she disregarded the events of 20 March entirely and failed to attach any weight to them, not only in determining the impact upon Fyffes' share price of the information in Mr....

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