Judgment: DCC chief executive Jim Flavin did "deal" in Fyffes shares in relation to the February 2000 €106 million sale of the DCC stake in fruit distributor Fyffes, but he did not do so unlawfully, the High Court ruled yesterday.

In her judgment dismissing the claim by Fyffes of insider dealing by Mr Flavin and DCC, Ms Justice Laffoy found that Mr Flavin had "controlled the whole process" relating to the sale of the DCC stake in Fyffes.

However, the judge held, there was "a fundamental incongruity" between Fyffes's conduct in early 2000 and its claim that Mr Flavin had price-sensitive information (trading reports for November and December 1999 indicating negative performance) at a time that would have affected the Fyffes's share price had it been available to the stock market.

She noted Fyffes had permitted a director to sell shares in January 2000 and that Fyffes's then chairman, Neil McCann, had written to a disgruntled shareholder in May 2000 responding to issues about the timing of a profit warning issued by Fyffes on March 20th, 2000.

Mr McCann had written that Fyffes was satisfied an earlier profit warning "would not have been merited based on the performance in November and December [ 1999]". There was "a glaring contradiction" between that sentence and the Fyffes case against DCC, the judge said.

On an objective analysis of the evidence, what was being said and done by Fyffes executives did not reveal an awareness by them on February 3rd, 2000, the day of the first DCC share sale, that the information in the November and December trading reports was price-sensitive, she said.

There was "no objective evidence" that Fyffes had concerns Mr Flavin was in possession of price-sensitive information at that time.

The judge also ruled that Fyffes had failed to establish any breach of fiduciary duty by Mr Flavin as a non-executive director of Fyffes. In light of that finding, Fyffes was also not entitled to compensation for the share dealings, she said. On the basis of those conclusions, the judge dismissed the Fyffes claim against DCC. Legal costs are expected to exceed €18 million.

Fyffes had brought the proceedings seeking some €85 million compensation for the share deals which, the company claimed, breached insider dealing provisions of the Companies Acts.

The action was against DCC plc and DCC subsidiary S&L Investments, of DCC House, Stillorgan, Co Dublin; Mr Flavin, of Shankill, Co Dublin, and Lotus Green Ltd, of Fitzwilton House, Wilton Place, Dublin, a subsidiary of DCC to which beneficial ownership of the Fyffes stake was transferred in 1995.

Ms Justice Laffoy noted the evidence was that the DCC group "hived off" its shareholding in Fyffes to Lotus to avoid payment of capital gains tax on any subsequent sale. The case arose from a series of transactions between February 3rd and 14th, 2000 during which 31.2 million shares, amounting to 87 per cent of DCC's shareholding in Fyffes, were disposed of by DCC.

Ms Justice Laffoy found Mr Flavin, who was at the time of the first share sale also a non-executive director of Fyffes, had dealt in the shares in February 2000 as an agent of the DCC group. She also ruled DCC, S&L Investments Ltd and Lotus Green Limited dealt in the shares as principals.

However, because of her finding that Mr Flavin was not in possession of price-sensitive information about Fyffes on the dates of the sales, the judge ruled the dealing was not unlawful and, therefore, no civil liability arose.

She said recorded conversations between stockbrokers and between stockbrokers and Mr Flavin at that time gave "a unique, reliable insight" into how the first sale occurred. The judge said it was clear there was agreement on who the buyer or buyers were and on the number, type and price of shares sold.

She found Mr Flavin assumed total control on the sale and that he acted with the tacit, if not express approval, of the DCC board.

She held Mr Flavin caused and procured the dealing which resulted in the share sales. She also found the board of Lotus did not function independently of DCC and Mr Flavin in deciding on the disposal in Fyffes.

On the second issue, whether Mr Flavin in his capacity as non-executive director of Fyffes, had price-sensitive information on Fyffes' trading performance at the time of the share sales, the judge said that an investor would not take the view that negative news about Fyffes' performance in the first quarter of 2000 indicated a lowering of expectations about its earnings that would substantially impact on Fyffes' share price.