The Supreme Court has allowed Fyffes plc’s appeal in its civil insider-dealing case against DCC plc, three associated defendants and James Flavin, finding that confidential trading reports in his possession were price-sensitive when he dealt in Fyffes shares in February 2000.
The judgment, delivered by Denham J on 27 July 2007, concerned the price-sensitivity issue only. The High Court had dismissed Fyffes’ statutory claim under the Companies Act 1990, finding that the November and December 1999 reports were not shown to be likely materially to affect the share price. No appeal was brought against the High Court’s separate decision on Fyffes’ non-statutory claims for breach of fiduciary duty and related remedies.
The Supreme Court said the reports contained bad news about Fyffes’ trading and earnings in the first quarter. They showed losses, mainly linked to weak banana prices, and a risk that the company’s and analysts’ expectations for the half-year and full year would not be met. That information was confidential and not generally available to the market.
The court held that the statutory test was objective: whether the information, if generally available, would likely materially affect the share price. It rejected the High Court’s use of a “reasonable investor” approach and its decision to offset the trading information against factors including market enthusiasm for Fyffes’ online venture, wof.com. The Supreme Court said information already reflected in the market could not be used to negate the effect of the undisclosed reports.
It also ruled that Fyffes’ 20 March 2000 profit warning was relevant evidence. The warning was significantly similar to the earlier reports, and the share price fell after its release. The Supreme Court said the later market reaction could be used as a comparator; differences in information or market conditions would affect the evidence’s weight, not make it inadmissible.
The court concluded that the reports were price-sensitive and that the High Court had erred in reaching the opposite conclusion. Denham J would allow the appeal. The judgment does not state an order awarding damages or an account of profits.