The Supreme Court has allowed an appeal by Fyffes plc in its insider dealing case against DCC plc and three other defendants, finding that unpublished trading information would likely have materially affected Fyffes’ share price if it had been available to the market.
The appeal concerned a single issue arising from a High Court judgment delivered on 10 February 2006 after an 87-day hearing. The High Court had found that the defendants possessed information that was not generally available, but held that disclosure would not likely have materially affected Fyffes’ share price. The Supreme Court considered only whether that conclusion was correct.
The information came from Fyffes’ November 1999 management accounts and December 1999 trading report, circulated to its board in January 2000. They showed trading losses and shortfalls against budget and the previous year, particularly in the banana business. The December report recorded a €1.3 million loss for the month, against a break-even budget and a €3.3 million profit the previous year. It also forecast January profit of €1.3 million, compared with a €5 million budget and €6.3 million the previous year.
The defendants sold their Fyffes shares in three tranches on 3, 8 and 14 February 2000. At the time, Fyffes had publicly reported positive annual results and forecast another year of growth. Its share price had also risen amid strong market interest in its online venture, worldoffruit.com, alongside interest in the company’s core business and possible acquisitions.
The Supreme Court said the statutory question was whether the unpublished information, if available to the market, would likely materially affect the share price. It rejected the “reasonable investor” as the test, while accepting it could describe the objective nature of the inquiry. The court said the market’s reaction to later disclosures could provide evidence, with appropriate regard to differences between the information disclosed and market conditions at the relevant times.
On 20 March 2000, Fyffes issued a trading statement warning that first-half performance was expected to be below the previous year’s. Its shares fell by about 15 per cent, which the Supreme Court treated as compelling evidence of how the market would react to the earlier, more detailed figures. The court noted that the March statement also contained positive information about worldoffruit.com and that market conditions differed from February. It nevertheless concluded that the differences did not remove the evidential value of the share-price reaction.
The Supreme Court held that the High Court had erred by excluding those later market events entirely. It allowed the appeal, concluding that the unpublished information would have materially affected the share price. The judgment addressed that issue; it did not itself determine any further remedy or order in the proceedings.