Analysis: The nature of Jim Flavin's information was central to the judgment, writes Colm Keena

Judges have a habit of going all around the houses before eventually telling an anxious defendant whether he or she is on the hook or not.

Ms Justice Mary Laffoy, however, disclosed her key finding within a minute or two of sitting down on her bench in Court 13 yesterday.

The information that had been available to Jim Flavin was not price-sensitive, she ruled. According to this finding, the €106 million share dealing by the DCC group could not have been unlawful.

The judge had barely closed the door behind her on her way back into her chambers when Mr Flavin made a call to his wife, Mary, to tell her the news.

It was just as well for Mr Flavin and his wife that Ms Justice Laffoy dealt with the ruling in the humane way that she did. It is not until page 342 of the 367-page written judgment that she announces her view on the key issue of price sensitivity.

Strangely enough, the reasoning and conclusion do not have the appearance of emerging from what has gone before in the lengthy document.

Rather they come across as stand-alone common-sense assessments.

The question, she says, is whether as a matter of probability a reasonable investor would have thought the information Mr Flavin had in February 2000 was such that it indicated a lowering of Fyffes's expectations for its earnings, such that it would affect the the firm's share price "to a substantial or significant degree".

"I think that the answer to that question is that he would not." She said she thought the investor would think it was too early in the financial year (it began in November 1999) to make a judgment in relation to Fyffes's fruit business.

"But more importantly, I think, he would have concluded that the prospect of a merger or a major acquisition and the potential of the worldoffruit.com venture, which were the main focus of the interest of the market at the time, would offset the impact of the current trading problems."

She said that, moreover, the investor had no reason to suppose that Fyffes's own expectations about future earnings had changed.

In fact, an investor had reasons to believe the contrary.

Having so dealt with the insider dealing charge brought by Fyffes, Ms Justice Laffoy then turned to the issue of the "fundamental incongruity" in Fyffes's position.

By this she meant that Fyffes had accused Mr Flavin of having had information that was price-sensitive at a time when Fyffes itself had not even considered making a statement to the market that its expectations for the year had changed.

Moreover, Fyffes had let an executive sell shares and granted options to another at the time Mr Flavin had the information the company was now saying was price-sensitive. "The outcome of the price-sensitivity issue obviates the necessity to confront the fundamental incongruity in the plaintiff's position . . . However, it is difficult to see how a statute outlawing, and providing a remedy for insider dealing, could accommodate such a fundamental incongruity. That it could, would seem to be at variance with fairness and justice."

The insider dealing case had two pivotal questions at its core, the first of which - whether the information was price-sensitive - had been answered in DCC's favour.

In relation to the second issue - whether Mr Flavin dealt - the judge found that he had. Mr Flavin and DCC had argued that he had merely acted as a conduit to subsidiary Lotus Green in respect of unsolicited bids.

DCC's huge shareholding in Fyffes was held by a Dutch resident company, Lotus Green, as part of a tax-avoidance scheme that Ms Justice Laffoy said was perfectly legal.

DCC received advice on the structure from PricewaterhouseCoopers (PwC).

Ms Justice Laffoy noted in her judgment that PwC advised "that it would be vital to be able to demonstrate that effective management and control of Lotus Green was in the Netherlands . . . and it was emphasised that great care would have to be taken to ensure that the company was not de facto controlled from Ireland".

Ms Justice Laffoy found that in fact Mr Flavin controlled the process that led to DCC and Lotus Green selling shares in Fyffes for €106 million.

At one point in her judgment, she referred to the "absurdity" of the position adopted by the defendants, that the decision was made by Lotus Green.

She also found that: "The only reasonable inference which can be drawn from the evidence is that Mr Flavin acted with the tacit, if not express, approval of the board of DCC. "

Lotus Green had no other business other than managing the shareholding in Fyffes.

The profit made on the share sales was €85 million. The tax structure involving Lotus Green meant no tax was paid on the profit made.

Mr Flavin said yesterday it was the belief of the DCC board that the ruling did not have tax consequences for DCC.