Result due in insider trading case

THE High Court will this week deliver its ruling in the €85 million insider dealing claim brought by Fyffes against former shareholder DCC Group.

Ms Justice Mary Laffoy will deliver her ruling in the case on Wednesday.

Fyffes allege that DCC and its chief executive Jim Flavin (a non-executive director of the fruit importers) were in possession of price sensitive information when it sold a 10% stake in Fyffes over three days in February 2000.

Fyffes says that DCC and Mr Flavin breached the insider dealing sections of the 1990 Companies Act when the shares were sold and it is entitled to compensation equivalent to the profit DCC made - €85m.

Fyffes said that between December 1999 and January 2000, Mr Flavin was in possession of internal company accounts showing that its trading position was worsening.

The company’s banana division, which accounts for a quarter of sales but more than 60% of annual profits, was seeing a serious fall in profits as prices came under pressure. Fyffes claims that this information was so confidential that if it was released, its share price would have fallen.

Fyffes also said Mr Flavin was central to the deals, negotiating the price, class and number of shares to be sold.

DCC and Mr Flavin have denied the allegations. It argued that the share dealings were properly organised through DCC’s Dutch-based subsidiary Lotus Green. Beneficial ownership of DCC’s Fyffes stake was transferred to Lotus Green in the mid-1990s to take advantage of the Netherland’s tax laws.

DCC says Mr Flavin acted only as a “conduit” for the “unsolicited” bids for its shares in Fyffes.

It also rejects the suggestion that Mr Flavin was in possession of price sensitive material, arguing that the information about Fyffes could be gleaned from other sources and that the market was generally aware that the fresh product industry was facing a tough year.

The case has proved to be one of the longest and costly in Irish legal history. The action was launched in January 2002, but the hearing only began last December.

The two sides spent more than 80 days in court at a total cost of around €20 million so far.

The losing side is expected to appeal the ruling to the Supreme Court.

A loss for DCC could have serious implications.

Several other legal actions against it are in abeyance pending the outcome of the Fyffes case. It has made no provision for payment of any damages to Fyffes.

It could also face investigation by the Office of the Director of Corporate Enforcement and the Revenue Commissioners.

Equally, a loss for Fyffes could put its management team under pressure to quit and leave the company liable for DCC’s costs.