DCC argues Flavin did not deal in Fyffes shares during sales period

DCC has begun its closing legal submissions in the long-running action by Fyffes plc alleging 'insider dealing' in connection with the €106 million sale of the DCC stake in the fruit distributor in February 2000.

Mr Michael Ashe SC yesterday addressed the legal matters that underpin DCC's claims on some of the key issues in the case, including whether DCC chief executive Jim Flavin was in possession of 'price sensitive' information at the time of the share sales and whether Mr Flavin 'dealt' in the shares within the terms of the relevant provisions of the Companies Act.

DCC contends Mr Flavin did not deal in the Fyffes shares on the three days of the share sales and argues that the share sales were properly conducted by its Dutch-registered subsidiary Lotus Green Limited, to which beneficial ownership of the Fyffes shares was transferred in 1995 for tax reasons.

DCC also rejects Fyffes' claim that information contained in two documents made available prior to the share sales to Mr Flavin in his capacity as a non-executive director of Fyffes was information which, if it was known to the stock market and analysts at the time, was likely to have had "a material effect" on the Fyffes share price and was therefore 'price sensitive' .

The DCC side is expected to conclude its submissions on Friday after which Mr Paul Gallagher SC, for Fyffes, will respond and close the case, which entered its 82nd day yesterday.

The proceedings are against DCC plc, Mr Flavin, and two DCC subsidiaries - S&L Investments Limited and Lotus Green.

Yesterday, Mr Ashe said that price sensitive information, information materially likely to affect the price of a share, relates essentially to unusual and extraordinary situations.

He said the information in the documents available to Mr Flavin in early 2000 - Fyffes November 1999 management accounts and December 1999 trading reports was not price sensitive per se.

It was DCC's case that the information in those documents, had it been generally available, would not have had the statutory price effect on Fyffes' shares, counsel said.

He argued that, for liability to arise for dealing unlawfully, the person must first know that the information is price sensitive. T

he person must also act to their advantage in using that information.

It was DCC's case that Fyffes was wholly incorrect to claim absolute and strict liability was imposed under the relevant legislation once there was a deal.

The objective of the legislation was to prevent dealing by those who have an advantage through possession of inside information, Mr Ashe submitted.

The legislation was not designed to stop insiders legitimately dealing, merely to stop them having an advantage.

A person should not be put at risk either under the civil or criminal law for what might in terms of intent be a wholly innocent transaction.

The object of the legislation was to put all investors on an equal footing, he added. It was not designed to disadvantage insiders when they are not in possession of price sensitive information and it was a wholly wrong construction of the legislation for Fyffes to contend a connected person must be aware of the risk if they deal.

Asked by Ms Justice Mary Laffoy was it not the mere possession of the price sensitive information that puts the primary insider in the position of being subject to the ban on dealing, Mr Ashe said possession was "a loaded word".

Possession implied a person must know what they possessed. It was not just possession, it was about taking the advantage, he said.

The case continues today.