The Supreme Court allowed Fyffes Plc’s appeal in its insider trading case against DCC Plc, S & L Investments Limited, James Flavin and Lotus Green Limited. It found that the High Court had applied the wrong legal test when assessing whether confidential trading information would have materially affected Fyffes’ share price.
The appeal concerned share sales in February 2000. Fyffes alleged that Flavin, then a non-executive director of Fyffes and chief executive of DCC, possessed inside information from two internal trading reports while shares registered to DCC were being sold. The reports covered November and December 1999 and had been provided to Fyffes directors in January 2000.
The High Court had found that Flavin dealt in the shares and had caused or procured the dealing. It also found there was sufficient evidence to treat the three corporate defendants as a single entity if Fyffes was entitled to a statutory remedy. Those findings were not appealed by the defendants. The High Court nevertheless concluded that Fyffes had not established a breach of section 108(1) of the Companies Act 1990, which has since been repealed.
On appeal, the only issue was whether the High Court used the correct test for deciding if the reports contained price-sensitive information. In a judgment delivered by Macken J, the Supreme Court held that the statute required the court itself to decide whether releasing the information would likely have materially affected the share price. The “reasonable investor” test adopted and reformulated by the High Court was not the appropriate legal test.
The court also held that the High Court was wrong to reject entirely the market reaction to a Fyffes trading statement issued on 20 March 2000. That statement was followed by an immediate share-price fall. Macken J said the later statement and the earlier reports were sufficiently similar to provide a useful pointer to how the market might have reacted to the earlier information. The market conditions did not have to be identical; the court found them sufficiently similar for the March reaction to be considered.
Relying on Fennelly J’s reasons, Macken J concluded that the November and December reports, if released on the relevant dates, would have materially affected Fyffes’ share price and that section 108(1) had been breached by the defendants. The Supreme Court therefore allowed the appeal. The judgment does not set out a separate damages award or other remedial order.