High Court of Ireland Decisions

Judgment Title: Fyffes Plc v DCC Plc & Ors

Neutral Citation: [2005] IEHC 477


High Court Record Number: 2002 1183P

Date of Delivery: 21 December 2005

Court: High Court

A. a declaration that the sale by the first and second named defendants of in excess of 31 million ordinary shares in the plaintiff between 3rd February, 2000 and 15th February, 2000 constituted an unlawful dealing within the meaning of Part V of the Companies Act 1990 (the Act of 1990);
B. an order pursuant to section 109(1)(b) of the Act of 1990 requiring the defendants and each of them to account to the plaintiff for any profit accruing to the defendants from those sales;
C. an account in equity of all profit accruing to the defendants or each or either of them from those sales; and
D. damages and/or compensation for breach of fiduciary duty on behalf of the third named defendant.

“Sales of €122.0 million are €10.1 million below budget and €1.7 million lower than last year.
Losses of €2.6 million are €2.3 million worse than budget, and €4.1 worse than last year, and are due primarily to weaker Banana prices.”

“The loss for the month was €2.7 million compared to a budget profit of €1.2 million, and last years profit of €2.8 million, was due to weaker banana pricing in the UK and European markets, low market value for licence, and the weaker exchange rate of the Euro vis a vis the US Dollar.
Prices for UK multiple customers have been consistently below prior years for many months now, but the November/December prices are also well below the budget levels. 130,000 boxes of Suriname fruit were diverted to Portugal to ease the pressure on the market.”

“The accounts do not include any Capespan figures as we are looking at the possibility of treating the November and December losses as preacquisition, under the matching concept, since they relate largely to the completion of the previous season.

The loss for the month of €1.6 million compares to a budget loss of €1.2 million due mainly to a disimprovement in the Sterling / Euro rate from budget. There is very little sales in November (€9 million) and December, and the loss is all overhead.”

“The banana market has improved a little in December although the UK was affected by snow this week. December losses are still expected to be €1.6 million which would be €1.6 million worse than budget, and €4.9 million worse than last year.

Cumulative losses at end December are expected to be €4.2 million which is €3.9 million worse than budget, and €9 million worse than last year.”

“There is some optimism that the banana market will improve from January due to cutbacks in production by the major producers. This should not in theory impact on the EU Market but it is expected to improve sentiment.”

Total sales of €149 million were €11.3 million lower than budget due to the non consolidation of Capespan and €6.1 lower than last year due to lower UK produce throughput and the disposal of Swithenbanks.

Net Profit:
The pre goodwill loss for the month is €1.3 million compared to a breakeven budget and last year’s profit of €3.3 million, bringing the cumulative pre goodwill loss to €4 million compared to last year’s profit of €4.8 million. This can be analysed as follows:-

MONTH CUMULATIVE
Variance on Variance on

Profit/Loss

Budget

Last Year

Profit/Loss

Budget

Last Year

Bananas

(2.6)

(2.1)

(4.2)

(5.0)

(5.6)

(9.4)

Partners

1.2

(0.2)

(0.2)

1.5

(0.4)

0.1

Produce

0.5

(0.2)

0.4

0.2

1.1

Other

0.2

(0.1)

(0.2)

0.3

(0.2)

(0.1)

Capespan

-

1.2

-

-

2.4

-

Group Exps

(0.8)

(0.1)

(0.2)

(1.4)

(0.1)

(0.2)

W.O. Fruit

(0.2)

0.2

(0.3)

0.2

(0.3)

Interest

0.4

0.1

(0.2)

0.7

0.2

(0.2)

Total:

(1.3)

(1.3)

(4.6)

(4.0)

(3.7)

8.9

“The commencement date for the consolidation is under review as we are looking at the possibility of treating the November/December losses as pre acquisition under the matching concept as they relate largely to the completion of the previous season.

The Capespan loss for November/December is €3 million compared to a budget of €2.5 million. The variance is due mainly to lower volumes.”

“December showed very little improvement in market prices or sentiment with a multiple price war effecting an already over supplied market. The UK result was very disappointing even after the diversion of fruit to Europe.

Urgent contract renegotiations are required with ACP suppliers to correct the imbalance in the supply/demand curve which occurs in November/December in the absence of autumnal natural disasters.

The European market has improved quickly in January with prices at budget levels going into February but the UK market continues to be affected by competitors seeking to increase their multiple market share.”

“Current forecast is for a profit of €1.3 million compared to a budget of €5 million and €6.3 million last year. The shortfall is mainly due to weaker UK banana pricing.”

“Fyffes plc, the leading European fresh produce company, today launches worldoffruit.com. This new venture is developing an Internet portal for the fresh produce industry including FruitXchange, a business-to-business (B2B) on-line trading system.

worldoffruit.com will combine B2B on-line trading with trade news, views and other services. Through this dedicated industry website, businesses will have access to on-line trading and other services which will add value to their operations. Additional investor partners will be sought around the world from inside and outside the industry to fully develop worldoffruit.com as the leading industry-wide portal.”

“… substantial potential in the context of the revolutionary impact that electronic trading is having on business.”

“The launch of the Group’s e-commerce initiative worldoffruit.com, has received a very positive reaction from within the produce industry and looks set to dramatically change the way in which fresh fruit and vegetables are traded across the globe. We can expect to see significant developments in this company throughout the coming year.”

“The trading environment in the early part of the current financial year has been difficult. In particular, market conditions in the last two months of calendar 1999 were significantly below expectations. The usual recovery in the first month of calendar 2000 has been slower than anticipated, particularly because of the continuing weakness of the Euro against the dollar. As a result, we expect that the performance for the first half of the year, on a like for like basis, will be below that achieved during the same period last year. Present trading is slightly improved but, at this stage, it is too early to predict whether the shortfall can be recovered in the second half.

Despite the exceptional market conditions so far this year, we remain confident about the future prospects of the fresh produce sector and of the Fyffes business in particular. The Group’s strategy remains the active pursuit of further opportunities for consolidation in our industry.”

“The Group is willing to consider investing up to EUR 100 million over the next two years in alliances and joint ventures with key participants in other sectors for the purpose of developing internet marketplaces for their industries.”

“… information which has not been made public of a precise nature relating to one or several issuers of transferable securities or to one or several transferable securities, which, if it were made public, would be likely to have a significant effect on the price of the transferable security or securities in question.”, and

(b) “transferable securities” which is defined as including various categories of securities, including shares when –
“… admitted to trading on a market which is regulated and supervised by authorities recognised by public bodies, operates regularly and is accessible directly or indirectly to the public.”

possesses inside information from taking advantage of that information with full knowledge of the facts by acquiring or disposing of for his own account or for the account of a third party, either directly or indirectly, transferable securities of the issuer or issuers to which the information relates.”

2. Where the person referred to in paragraph 1 is a company or other type of legal person, the prohibition laid down in that paragraph shall apply to the natural persons who take part in the decision to carry out the transaction for the account of the legal person concerned.”

“Each Member State shall prohibit any person subject to the prohibition laid down in article 2 who possesses inside information from:

“Each Member State shall also impose the prohibition provided for in article 2 on any person other than those referred to in that article who with full knowledge of the facts possesses inside information, the direct or indirect source of which could not be other than a person referred to in article 2.”

“It shall not be lawful for a person who is, or at any time in the preceding 6 months has been, connected with a company to deal in any securities of that company if by reason of his so being, or having been, connected with that company he is in possession of information that is not generally available, but, if it were, would be likely materially to affect the price of those securities.”

“… a person in accordance with whose directions or instructions the directors of a company are accustomed to act … unless the directors are accustomed so to act by reason only that they do so on advice given by him in a professional capacity.”

“… (whether as principal or agent) acquiring, disposing of, subscribing for or underwriting the securities, or making or offering to make, or inducing or attempting to induce a person to make or to offer to make, an agreement –

“(a) … shares … issued or proposed to be issued, whether in the State or otherwise, for which dealing facilities are, or are to be, provided by a recognised stock exchange.”

“Where a person is in possession of any such information as is mentioned in sub-section (1) or (2) that if generally available would be likely materially to affect the price of securities but is not precluded by either of those sub-sections from dealing in those securities, it shall not be lawful for him to deal in those securities if he has received the information, directly or indirectly, from another person and is aware, or ought reasonably to be aware, of facts or circumstances by virtue of which that other person is then himself precluded by sub-section (1) or (2) from dealing in those securities.”

“It shall not be lawful for a person at any time when he is precluded by sub-section (1), (2) or (3) from dealing in any securities, to cause or procure any other person to deal in those securities.”

“It shall not be lawful for a person, at any time when he is precluded by sub-section (1), (2) or (3) from dealing in any securities by reason of his being in possession of any information, to communicate that information to any other person if he knows, or ought reasonably to know, that the other person will make use of the information for the purpose of dealing, or causing or procuring another person to deal, in those securities.”; and

“Without prejudice to sub-section (3), but subject to sub-sections (7) and (8), it shall not be lawful for a company to deal in any securities at any time when any officer of that company is precluded by sub-section (1), (2) or (3) from dealing in those securities.”

“This section does not preclude a person from dealing in securities, or rights or interests in securities, of a company if –

“A person shall not deal on behalf of another person if he has reasonable cause to believe or ought to conclude that the deal would be unlawful, within the meaning of s. 108.”

“Where a person deals in or causes or procures another person to deal in securities in a manner declared unlawful by section 108 or communicates information in any such manner, that person shall, without prejudice to any other cause of action which may lie against him, be liable –

“Observance of continuing obligations is essential to the maintenance of an orderly market in securities and to ensure that all users of the market have simultaneous access to the same information.”

“A company must notify the Company Announcements Office without delay of any major new developments in its sphere of activity which are not public knowledge which may:

“A company must notify the Company Announcements Office without delay of all relevant information which is not public knowledge concerning a change:

which, if made public, would be likely to lead to substantial movement in the price of listed securities.”

“A company must take all reasonable care to ensure that any statement or forecast or any other information it notifies to, or makes available through, the Companies Announcements Officer is not misleading, false or deceptive and does not omit anything likely to affect the import of such statement, forecast or other information.”

“(b) any period when there exists any matter which constitutes unpublished price sensitive information in relation to the company’s securities (whether or not the director has knowledge of such matter) and the proposed dealing would (if permitted) take place after the time when it has become reasonably probable that an announcement will be required in relation to the matter; or
(c) any period when the person responsible for the clearance otherwise has reason to believe that the proposed dealing is in breach of this code.”

and, without prejudice to the generality of the above, it should be considered whether any unpublished information regarding transactions require to be notified to the Company Announcements Office in accordance with chapter 10 or chapter 11 of the listing rules and unpublished information of the kind referred to in the paragraphs of the listing rules set out below is price-sensitive: 9.1 and 9.2: general obligation of disclosure …”

“No dealings in any securities may be affected by or on behalf of the company or any other member of its group at a time when, under the provisions of the Model Code, a director of the company would be prohibited from dealing in its securities, unless such dealings are entered into:

(a) Mr. Flavin was a shadow director of Lotus Green and, as such, an officer of Lotus Green and he was precluded from dealing by virtue of s. 108(1), and
(b) DCC was a shadow director and thus an officer of Lotus Green and it was precluded from dealing by virtue of s. 108(3).
The defendants denied that DCC was precluded from dealing by virtue of
s. 108(3). Further, the defendants denied that either Mr. Flavin or DCC was a shadow director of Lotus Green.

(a) Lotus Green held, or should be treated as having held, the DCC Group stake in Fyffes as an agent for DCC and S&L or
(b) Lotus Green and DCC/S&L should, as a matter of law, be treated as a single entity for the purposes of Part V.
In either case, it was asserted, Lotus Green was subject to the same restrictions in relation to dealing as DCC and thus precluded from dealing. The defendant denied each of those propositions in relation to Lotus Green.

(i) the decision of the DCC Group to hive off its stake in Fyffes' to Lotus Green but not to transfer the legal title from DCC and S&L to Lotus Green;
(ii) the line of defence adopted by the defendants that DCC and S&L made no profit from the Share Sales; and
(iii) the stance the defendants adopted in relation to the proper construction of s. 109(1)(b).

“… the Member States’ obligations arising from a directive to achieve the result envisaged by the directive and their duty under article 5 of the Treaty to take all appropriate measures, whether general or particular, to ensure the fulfilment of that obligation, is binding on all the authorities of Member States including, for matters within their jurisdiction, the courts. It follows that, in applying national law, whether the provisions in question were adopted before or after the directive, the national court called upon to interpret it is required to do so, as far as possible, in the light of the wording and the purpose of the directive in order to achieve the result pursued by the latter and thereby comply with the third paragraph of article 189 of the Treaty.”

(1) Applying ordinary canons of statutory construction, what do the provisions of Part V which create civil liability require the plaintiff to prove in relation to knowledge and intention to use to advantage to establish civil liability?
(2) Is the outcome any different if one interprets Part V in the light of the wording and purpose of the Directive in order to achieve the result pursued by the Directive?
(3) Does the fact that most of the same activities declared unlawful in Part V which give rise to civil liability also give rise to criminal liability vary the outcome?

(i) where a person deals in securities in a manner declared unlawful by s. 108,
(ii) where a person causes or procures another to deal in securities in a manner declared unlawful by s. 108, or
(iii) where a person communicates information in a manner declared unlawful by s. 108.

“In such a case, the court must fashion a special rule of attribution for the particular substantive rule. This is always a matter of interpretation: given that it was intended to apply to a company, how was it intended to apply? Whose act (or knowledge, or state of mind) was for this purpose intended to count as the act etc. of the company? One finds the answer to this question by applying the usual canons of interpretation, taking into account the language of the rule (if it is a statute) and its content and policy.”

“The policy of s. 20 of the 1988 Act is to compel, in fast-moving markets, the immediate disclosure of the identity of persons who become substantial security holders and public issuers. Notice must be given as soon as that person knows that he has become a substantial security holder. In the case of a corporate security holder, what rule should be implied as to the person whose knowledge for this purpose is to count as the knowledge of the company? Surely the person who, with the authority of the company, acquired the relevant interest. Otherwise the policy of the Act would be defeated. Companies would be able to allow employees to acquire interests on their behalf which made them substantial security holders but would not have to report them until the board or someone else in senior management got to know about it. This would put a premium on the board paying as little attention as possible to what its investment managers were doing.”

(i) a non-connected person (a person not precluded from dealing by virtue of sub-s. (1) or sub-s. (2)) has price-sensitive information in relation to the company,
(ii) that person, the tippee, has received information, directly or indirectly from another person whom I will call the source, and
(iii) the tippee is aware, or ought reasonably to be aware, of facts and circumstances by virtue of which the source is then himself precluded from dealing under sub-s. (1) or sub-s. (2).

(i) Section 107, in defining dealing, makes it clear that a person may deal as principal or agent. Section 107 does not identify the proscribed activity. That is done in s. 108.
(ii) The only provisions of s. 108 which proscribe activity which come into play on the case made by the plaintiff on the facts are sub-ss. (1), (4) and (6). A finding could be made that Mr. Flavin engaged in activity which was unlawful under sub-s. (1), but a finding could not be made that any of the corporate defendants contravened that sub-section, because it only applies to natural persons. A finding could be made that Mr. Flavin engaged in activity which was unlawful under sub-s. (4). A finding could be made that any of the corporate defendants engaged in activity declared unlawful by sub-s. (6), if Mr. Flavin was an officer, as defined, of the corporate defendant subject, in the case of DCC and S&L, to those corporate defendants not being able to avail of the defence contained in sub-s. (9).

(v) inducing another person to offer to make an agreement to dispose of them, and
(vi) inducing another person to offer to make an agreement to acquire them.

“It is not permissible, in my view, to make the word ‘inducing’ synonymous with ‘causing’, when one is seeking to determine whether one person has induced another to enter into an agreement, whether that other is a real person or a company. It seems to me that it is not a proper use of the word ‘induce’ to say that the directors of the company induced the corporation, meaning the soulless entity to enter into a contract when they pass a resolution that the corporation enter into a contract. I am not prepared to uphold Mr. Porter’s submission. Nor do I think that, on the evidence, it could be held that the defendant induced the other directors to join in the resolution for the sale of the shares in Meriton. There was a dearth of evidence from which one could conclude that any director induced another to join in the resolution. The whole of the evidence indicated that the four directors were actively – it may have been equally – involved in the overall transaction, which resulted in 44% of the shares in Kimberley being disposed of, and which required a disposal of Meriton’s shares in Kimberley.”

“The word ‘deals’, in relation to securities, is a word in constant use and its meaning is not in doubt. It would, in my view, in any event, even if there were no definition, include all the circumstances in fact set out in the definition of ‘dealing with securities’ in section 4, but the addition of the words ‘directly or indirectly’ shows a clear intention, in my view, to cover every involvement by a director … in a transaction with securities which can be said, as a matter of ordinary English, to be a dealing in those securities.”

“When a charge under section 75A involves the assertion that the defendant dealt in the shares of A company by participating in the disposal by B company of its shares in A company, then if the defendant, as a director of B company, is shown to have participated in a resolution of the board of B company to sell the shares, that, in my view, can be treated as evidence, to be considered with all of the other evidence, on the question of whether there has been a dealing or not by that director. In this case, the defendant, on the evidence, was active in arranging and bringing about the ultimate transaction involving 44 per cent of the shares in Kimberley, and which necessitated a resolution by the board of Meriton to sell most of its holdings in Kimberley. He was a party to the resolution by which Meriton agreed to sell a substantial part of its holding in Kimberley and he executed the agreement under which Meriton … agreed to sell the shares … . In my opinion, the evidence amply supported the conclusion that the defendant dealt ‘indirectly’ in those shares of Kimberley which Meriton owned.”

“4-66. An agent who remains within the parameters set out in section 108(9) by merely executing a transaction without any deeper involvement is known as an ‘execution-only’ agent. Such an agent will normally be exempt from liability for insider dealing should it eventually turn out to be the case that the principal was an insider dealer …
4-68. Where an agent is more than a mere ‘execution-only’ agent, the agent cannot invoke section 108(9) as a defence as that sub-section is only available to execution-only agents.”

“Whereas insider dealing involves taking advantage of inside information; whereas the mere fact that market makers, bodies authorised to act as contrepartie, or stockbrokers with inside information confine themselves, in the first two cases, to pursuing their normal business of buying or selling securities or, in the last, to carrying out an order should not in itself be deemed to constitute use of such inside information …”

“A trustee in English law is not an agent for his beneficiary. He contracts in his own name, with a right of indemnity against the beneficiary for the liabilities he has incurred. Of course the law will not allow a beneficiary to sue to enforce obligations in respect of which the trustee would have a cross-claim for indemnity. But this is a procedural bar, based upon avoiding circularity of action. On the other hand, if a beneficiary who has granted a lease to a nominee for himself were to convey the freehold, the trustee’s liabilities under the lease would become enforceable and he would be dependent on the value of his claim for indemnity against the beneficiary. The prospect of this happening means that one cannot say that a lease from an owner to his nominee requires no ‘meeting of minds’; the nominee is incurring what may be real obligations and cannot be regarded as a mere puppet.”

“The plaintiff was set up solely for the purpose of acting as a bare trustee of lands, and it is not in dispute that it never had any beneficial interest in those lands. Both under the terms of the declaration of trust, and indeed on general principles, it was bound to act in accordance with all lawful instructions given by the partnerships, who were beneficially entitled to the various lands. However, that does not mean that as trustee the plaintiff has no rights in relation to the lands, or documentation dealing with the lands, independently of the beneficiaries. It is acknowledged in this case that, as far as the world at large was concerned, the plaintiff was the owner of various properties. It signed contracts to purchase and sell properties, it borrowed money for the purpose of completing sales and it undertook obligations with vendors or purchasers of the properties. As far as third parties dealing with the plaintiff were concerned, obligations were owed to them by the plaintiff, and they owed obligations to the plaintiff. For example, the primary obligation to repay monies borrowed from the bank was that of the plaintiff, as was the obligation to discharge stamp duties on the transactions which it carried out. No doubt it was fully indemnified financially by the partnerships, but in many instances it would still retain its primary liability to third parties. In law, the plaintiff, as a trustee, must be considered as a separate legal entity from the partnerships which were the beneficiaries of the trusts.”

“The position of the plaintiff is undoubtedly that it must obey all lawful instructions from the partnerships, but I would emphasise the word ‘lawful’. A trustee is not bound to comply with unlawful or fraudulent instructions from its beneficiary, and while I am not for a moment suggesting that any unlawful or fraudulent instructions have actually been given in the present case, the right of a trustee to inquire as to the lawfulness of its instructions and to determine for itself whether it ought to carry out those instructions cannot be questioned.”

“To procure means to produce by endeavour. You procure a thing by setting out to see that it happens and taking appropriate steps to produce that happening.”

(a) Mr. Flavin, whom it was alleged was precluded from dealing by virtue of s. 108(1), was an officer of Lotus Green, being a shadow director thereof, and
(b) DCC, which it was alleged was precluded from dealing by virtue of s. 108(3), was also a shadow director.

“(1) The definition of a shadow director is to be construed in the normal way to give effect to the parliamentary intention ascertainable from the mischief to be dealt with and the words used. In particular, the purpose of the Act is the protection of the public and as the definition is used in other legislative contexts it should not be strictly construed because it also has quasi-penal consequences in the context of the 1986 Act. …
(2) The purpose of the legislation is to identify those, other than professional advisers, with real influence in the corporate affairs of the company. But it is not necessary that such influence should be exercised over the whole field of its corporate activities. …
(3) Whether any particular communication from the alleged shadow director, whether by words or conduct, is to be classified as a direction or instruction must be objectively ascertained by the court in the light of all the evidence. In that connection I do not accept that it is necessary to prove the understanding or expectation of either giver or receiver. In many, if not most, cases it will suffice to prove the communication and its consequence. Evidence of such understanding or expectation may be relevant but it cannot be conclusive. Certainly the label attached by either or both parties then or thereafter cannot be more than a factor in considering whether the communication came within the statutory description of direction or instruction.
(4) Non-professional advice may come within that statutory description. The proviso excepting advice given in a professional capacity appears to assume that advice generally is or may be included. Moreover, the concepts of ‘direction’ and ‘instruction’ do not exclude the concept of ‘advice’ for all three share the common feature of ‘guidance’.
(5) It will, no doubt, be sufficient to show that in the face of ‘directions or instructions’ from the alleged shadow director the properly appointed directors or some of them cast themselves in a subservient role or surrendered to their respective discretions. But I do not consider that it is necessary to do so in all cases. Such a requirement would be to put a gloss on the statutory requirement that the board are ‘accustomed to act in accordance with’ such directions or instructions. It appears to me that Judge Cooke, in looking for the additional ingredient of a subservient role or the surrender of discretion by the board, imposed a qualification beyond that justified by the statutory language.”

“The legislation is unequivocal: the real directors must act in accordance with the ‘directions or instructions’ of the shadow director. The statutory words must be given their natural and unstrained meaning … . For a person to be found to be a shadow director of a company, he or she must ‘direct or instruct’ the real directors as to how they act i.e. how they exercise their powers as directors and to that extent the real directors must be subservient to the ‘shadow’ … .”

“Section 27 … plainly requires a shadow director to issue ‘directions or instructions’: ‘advice’ is not part of the primary requirement; all that s. 27 says on ‘advice’ is that such, given in a professional capacity, is insufficient to render its maker a shadow director. The significance of the professional advice exception can be grasped by accepting that a professional adviser does not direct or instruct a company on what it should do: he advises the company on what he perceives, in his professional judgment, to be the best course of action. The legislature clearly intended to preclude such ‘advice’ from being construed, as a result of judicial gymnastics of the sort seen in the judgment of Morritt L.J., a reckonable ‘direction or instruction’ for the purposes of …
s. 27.”

“… if the board were accustomed to act on the directions or instructions of Mr. Hopkins it is not necessary to demonstrate that their action was mechanical rather than considered.”

“From this welter of conflicting decisions, the following principles may be extracted with some hesitation:
(1) The rule in Salomon’s case is still the law. The company and its shareholders are separate legal entities and the courts normally cannot infer from the degree of control exercised by the shareholder a relationship of principal and agent or beneficiary and trustee between the shareholders and the company.
(2) The courts, however, will not permit the statutory privilege of incorporation to be used for a fraudulent, illegal or improper purpose. Where it is so misused, the court may treat the company thus incorporated as identical with its promoters.
(3) In certain cases, where no actual misuse of the privilege of incorporation is involved, the courts may nonetheless infer the existence of an agency or a trust if to do otherwise would lead to injustice or facilitate the avoidance of tax liability.
(4) In the case of a group of companies, the court may sometimes treat the group as one entity, particularly where to do otherwise would have unjust consequences for outsiders dealing with companies in the group.
(5) The rule in Salomon’s case does not prevent the court from looking at the individual members of the company in order to determine its character and status and where it legally resides.”

“So, in the present case, one can – and, in my opinion, should – say that the subsidiaries were acting as the alter ego, or alternatively as the agents (it scarcely matters which), of [the parent company]: then the original corporate entity emphasised by Salomon yields to the group entity. Derogatory words like ‘façade’ have been used to describe this result, but this can be misleading because, as we have seen, the ‘realities’ doctrine has been applied in favour of an enterprise as well as against it.”

“After reviewing the foregoing, and many other cases, the only conclusion I can reach is this: while the principle laid down in Salomon v. A. Salomon & Co. Ltd., supra, is and continues to be a fundamental feature of Canadian law, there are instances in which the court can and should lift the corporate veil, but whether it does so depends upon the facts in each particular case. Moreover, the fact that the court does lift the corporate veil for a specific purpose in no way destroys the recognition of the corporation as an independent and autonomous entity for all other purposes.”

“It seems to me to be well established from these as well as from other authorities … that a court may, if the justice of the case so requires, treat two or more related companies as a single entity so that the business notionally carried on by one will be regarded as the business of the group, or another member of the group, if this conforms to the economic and commercial realities of the situation. It would, in my view, be very hard to find a clearer case than the present one for the application of this principle. I appreciate that Crumlin Investments is a property-owning not a trading company but it is clear that the creation of the new company and the conveyance to it of the freehold interest in a unit in the shopping centre were means of carrying out the commercial plans of the Dunne family in the centre. The enterprise had a twofold aspect (a) the creation of a new retail outlet for the Dunnes Stores Group in the shopping centre and (b) the enhancement of the rents in the centre as a whole which the creation of such an outlet would hopefully produce. To treat the two companies as a single economic entity seems to me to accord fully with the realities of the situation. Not to do so would involve considerable injustice to the plaintiffs as their rights under the covenant might be defeated by the mere technical device of the creation of a company with a £2 issued capital which had no real independent life of its own. If it is established that the covenant is breached there should in my opinion be an injunction against both defendants.”

“However, the fact that the corporate veil may be lifted in the sense that the acts of one corporate body may be treated as those of another is now well established within this jurisdiction. It is clear from the decisions in Power Supermarkets Limited v. Crumlin Investments Limited … and the decision in the State (Thomas McInerney & Co. Ltd.) v. Dublin County Council [1985] 1 I.L.R.M. 513. In the latter case Carroll J. laid down the following principle at p. 518:
‘In my opinion the corporate veil is not a device to be raised and lowered at the option of the parent company or group. The arm which lifts the corporate veil must always be that of justice. If justice requires, as it did in the DHN case, the courts will not be slow to treat a group of subsidiary companies and their parent company as one.’
In addition to the broad requirement of justice, it is clear that in both of the cited cases the allegation was that the affairs of associated companies were being carried on in such a manner that the decisions of one body corporate were dominated by the other so that there was no reality in the distinction between them. These two ingredients are required, first, the factual identification of the acts of one body corporate with those of another and secondly, the requirement that justice would be served only if the court ignores the distinction between the separate corporate entities.”

“However, apart from the distinctions which may be drawn between this and other cases, the crucial feature of Power Supermarkets Limited v. Crumlin Investments Limited is that Costello J. did not purport to question the authority of Salomon v. Salomon and Company [1897] AC 22. Indeed no reference was made to that case in the course of his judgment nor, as far as I am aware, the argument on which it was based. Again it is clear from the judgment in Rex Pet Foods Limited v. Lamb Brothers (Ireland) Limited (Unreported, High Court, Costello J. 5th December, 1985) that Costello J. had not intended in Power Supermarkets Limited v. Crumlin Investments Limited to lay down any revolutionary principle of law.”

“It is not surprising that in many cases such as Holdsworth …, Scottish Co-operative …, …, the wording of a particular statute or contract has been held to justify the treatment of parent and subsidiary as one unit, at least for some purposes. The relevant parts of the judgments in the DHN case … must, we think, likewise be regarded as decisions on the relevant statutory provisions for compensation, even though these parts were somewhat broadly expressed, and the correctness of the decision was doubted by the House of Lords in Woolfson v. Strathclyde Regional Council 1978 SLT 159 …”

“As [counsel for the defendants] submitted, save in cases which turn on the wording of particular statutes or contracts, the court is not free to disregard the principle of Salomon v. A. Salomon and Company Limited … merely because it considers that justice so requires. Our law, for better or worse, recognises the creation of subsidiary companies which though in one sense the creatures of their parent companies, will nevertheless under the general law fall to be treated as separate legal entities with all the rights and liabilities which would normally attach to separate legal entities.”

“… we do not accept as a matter of law that the court is entitled to lift the corporate veil as against a defendant company which is the member of a corporate group merely because the corporate structure has been used so as to ensure that the legal liability (if any) in respect of particular future activities of the group (and correspondingly the risk of enforcement of that liability) will fall on another member of the group rather than the defendant company. Whether or not this is desirable, the right to use a corporate structure in this manner is inherent in our corporate law. [Counsel for the plaintiff] urged on us that the purpose of the operation was in substance that Cape would have the practical benefit of the group’s asbestos trade in the United States of America without the risks of tortious liability. This may be so. However, in our judgment, Cape was in law entitled to organise the group’s affairs in that manner and … to expect that the court would apply the principle of Salomon v. A. Salomon and Company Limited … in the ordinary way.”

“Of course a subsidiary company may be dependent upon its parent company as regards control, finance and operations. But none of that prevents it from being a separate legal entity. The whole concept of limited liability is to enable some part of a person’s affairs to be placed in a separate compartment. What is important is that having decided to carry out a business transaction by way of a particular legal entity, such transaction remains solely the legal and financial concern of that entity. There must, for example, be no suggestion that the benefit of a transaction will be taken by one company and the liabilities under the same transaction borne by another. It is legitimate for individual transactions to be carried out through the medium of a limited liability company. What is not legitimate is for the person in charge to pick and choose which companies shall obtain the benefit of a transaction, only when that transaction has been completed or is under way.”

“In deciding whether a company is present in a foreign country by a subsidiary, which is itself present in that country, the court is entitled, indeed bound, to investigate the relationship between the parent and the subsidiary. In particular, that relationship may be relevant in determining whether the subsidiary was acting as the parent’s agent and, if so, on what terms.”

(a) an evidential basis exists for finding that, as regards the holding and disposal of the shares, to borrow the terminology used by Murphy J. in the Lac Minerals Limited case, there was a factual identification of the acts of Lotus Green and DCC; and
(b) not to so treat the companies would allow the DCC Group to evade its obligations under Part V.
In relation to the point at (a), the plaintiff argued that the companies in the
DCC Group could have, but did not in fact, arrange their affairs so as to ensure
that factual identification did not take place. In relation to the point at (b), the
plaintiff did not and, on the evidence could not, assert that the purpose of the
incorporation of Lotus Green and the hiving off of the shares to it was to avoid
liability under Part V. The sole objective was to mitigate the tax liability of
the DCC Group. However, the reality of the situation is that by defending the
plaintiff’s statutory claim on the basis that DCC made no profit from
the sale of the shares, if DCC was precluded from dealing by virtue
of s. 108(6) and Lotus Green was not, the DCC Group would effectively evade
liability under s. 109, if the profit generated by Lotus Green on the Share Sales
were not treated as the profit of DCC. To recognise this reality is to give a
purposive meaning to Part V in the light of the Directive.

(a) deal, so that a contravention of s. 108(1) occurred, if the plaintiff has established the overriding issue, or
(b) cause or procure another to deal, so that a contravention of s. 108(4) arose, if the plaintiff has established the overriding issue?

(a) did Lotus Green act as agent of DCC and S&L, or should it be treated as having so acted, in relation to the holding and disposal of the shares, or,
(b) should Lotus Green with DCC, and Lotus Green with S&L, each be treated as a single entity in relation to the holding of the shares, the sales thereof, and the profits generated by the sales for the purpose of meeting the liability of DCC and S&L to account under s. 109.

“… To require some intermediately high degree of probability would, in my opinion, introduce a vague and uncertain element, just as if, for example, negligence were required to be proved in certain cases to the level of gross negligence. …

In any event, it is difficult to put forward a rational and cogent reason for singling out civil cases of fraud for this higher degree of proof. It is of course to be said that a finding of fraud usually carries with it a high degree of moral condemnation which may have serious consequences for the person so condemned. But similar consequences may follow from a finding against a defendant in other types of civil proceedings. …

I am unable therefore to discern, in principle or in practice, any rational or cogent reason why fraud in civil cases would require a higher degree of proof than is required for the proof of other issues in civil claims. …

Proof of fraud is frequently not so much a matter of establishing primary facts as of raising an inference from the facts admitted or proved. The required inference must, of course, not be drawn lightly or without due regard to all the relevant circumstances, including the consequences of a finding of fraud. But that finding should not be shirked because it is not a conclusion of absolute certainty. If the court is satisfied, on balancing the possible inferences open on the facts, that fraud is the rational and cogent conclusion to be drawn, it should so find.”

“But the civil standard is flexible, so that the degree of probability required is proportionate to the nature and gravity of the issue. Where personal liberty is at stake, for example, the court will require a high degree of probability before it will be satisfied as to the facts justifying detention; and the requirement will not be much lower in matters affecting livelihood and professional reputation, or where there is a charge of fraud or moral turpitude. Lord Scarman has indeed said that the choice between the two standards is largely a matter of words …”

(a) Kyran McLaughlin, a senior executive in Davy, whom it was contended was a critical witness in relation to the dealing issue and whose involvement will be outlined later, and
(b) two of the non-executive directors of DCC, the chairman, Mr. Spain, and Mr. Gallagher, and two of the Dutch directors of Lotus Green, Gerard Jansen Venneboer and Henri Roskam, in relation what was characterised as Mr. Flavin’s direct and controlling involvement in the share deals.

“If a prima facie case is made out, capable of being displaced, and if the party against whom it is established might by calling particular witnesses and producing particular evidence displace that prima facie case, and he omits to adduce that evidence, then the inference fairly arises, as a matter of inference for the jury and not as a matter of legal presumption, that the absence of that evidence is to be accounted for by the fact that even if it were adduced it would not disprove the prima facie case. But that always presupposes that a prima facie case has been established; and unless we can see our way clearly to the conclusion that a prima facie case has been established, the omission to call witnesses who might have been called on the part of the defendant amounts to nothing.”

“In our legal system generally, the silence of one party in face of the other party’s evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence. Thus, depending on the circumstances, a prima facie case may become a strong or even an overwhelming case. But, if the silent party’s failure to give evidence (or to give the necessary evidence) can be credibly explained, even if not entirely justified, the effect of his silence in favour of the other party, may be either reduced or nullified.”

“From this line of authority I derive the following principles in the context of the present case:
(1) In certain circumstances the court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action.
(2) If a court is willing to draw such inferences they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call witnesses.
(3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue.
(4) If the reason for the witness’s absence or silence satisfies the court, then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.”

“An admission by an agent is admissible against his or her principal if it was made: (1) at a time when the agency existed; (2) in the course of a communication which the agent was expressly or impliedly authorised by the principal to make; and (3) the communication was with a third party and not with the principal himself or herself.”

(ii) the Davy dealing room and Mr. Flavin, who was in DCC House in Dublin, and
(iii) Mr. Diepenhorst, who was in Amsterdam, and the Davy dealing room,

(1) The first call between Mr. Ashmore and Mr. Godfrey was initiated by Mr. Ashmore following on instructions from Mr. Barrett to make contact with Mr. Godfrey in relation to forming a joint bid for the shares. Mr. Ashmore’s evidence was that this call took place in the early afternoon of 3rd February, some time between mid-day and 2 p.m. However, the probability is that it took place around 15.00.
The whole tenor of the conversation between the brokers is consistent with the proposition that what they were about at that juncture was endeavouring to put together a bid for the entire shareholding of the DCC Group in Fyffes. They discussed the size of the bid and its timing. A figure of 34 million shares was mentioned, but no distinction was made at that juncture between ordinary shares and preference shares. The figure was mentioned in the context of the brokers trying to reach a consensus as to what they would tell their institutional clients. Mr. Ashmore suggested that they should be told that the bid would not “leave an overhang”, but Mr. Godfrey seems to have been somewhat diffident about achieving a bid for more than 20 million shares. It is clear that they envisaged that it would take time to put the bid together. One does not get any sense that they were optimistic that that they would be able to put a bid together that afternoon. In fact Mr. Ashmore seemed to derive some comfort from the fact that the wof.com road show would be in London on the following day and in the United States during the following week. Mr. Godfrey appears to have been more concerned about timing, in the sense of making some bid in the short term, by the next day at the latest. Mr. Ashmore disclosed that Goodbody had orders or commitments for about 10 million shares and Mr. Godfrey indicated that Davy had commitments for “about the same”.
On the question of price, when, early on in the conversation, Mr. Godfrey asked what figure Goodbody was at, Mr. Ashmore responded that they were talking about a price of €3.20. Later in the conversation, when trying to reach consensus as to what they would tell their institutional clients, it was agreed that they would say that they would present a bid “to DCC”, which might or might not be accepted, at circa €3.20 “as an indication”.
At the outset, Mr. Ashmore told Mr. Godfrey that he had been told by Mr. Barrett that “the economics is being split … on the buy and sell side”. Later, Mr. Ashmore made it clear that he was operating on the assumption that the rate of commission was 0.25%. Mr. Godfrey did not demur.
The matter was left on the basis that each would make a list of their institutional client buyers. It is not clear to me that they had reached any consensus about putting forward a bid at that stage. However, I infer from the evidence that there was considerable interaction between Mr. Flavin and Mr. McLaughlin and Mr. Barrett in the period of about three quarters of an hour which intervened between the end of that call and the commencement of the second call. The telephone records suggest that Mr. Flavin spoke to Mr. Barrett for about ten minutes in a call which commenced at 15.14. This was followed immediately by a call from Mr. Flavin to Mr. McLaughlin. At 15.37 Mr. Barrett called Mr. Flavin. The progress which had been made is discernible in the second call.
(2) The second call was between Mr. Godfrey and Mr. Flavin. The telephone records suggest that it commenced at 15.44 and lasted almost six minutes. It was initiated by Mr. Godfrey. Mr. Flavin’s evidence was that he was slightly surprised to hear from Mr. Godfrey; he had been expecting a call from Mr. McLaughlin, because he had been speaking to Mr. McLaughlin on the telephone shortly before.
After the usual pleasantries, Mr. Godfrey told Mr. Flavin that he had been asked by Mr. McLaughlin to contact Mr. Flavin to “reconfirm really we’re firm” for ten million ordinary shares at €3.20, but could not give certainty beyond that. Mr. Flavin’s evidence was that Mr. McLaughlin had already indicated to him that he was likely to be in a position to make such an offer. Mr. Flavin’s response to Mr. Godfrey, in effect, was a query as to what the position would be if “we”, obviously meaning the DCC Group, wanted “to do the lot”, but he was not saying that they did want to or would. However, he did add that he had just been on the telephone to Mr. Barrett who sounded more optimistic about being able to. Mr. Flavin’s evidence was that, in referring to Mr. Barrett, he had effectively become a conduit; he was not trying to engender competition. After observing that optimism was one thing but deliverability was another, Mr. Godfrey posed the question: what are you going out and selling? Mr. Flavin’s response was that, as he had already explained to Mr. McLaughlin, it was either the entire holding or exactly half the holding and, if half, the preference shares had to be included. Mr. Flavin’s evidence was that around lunchtime that day, or immediately after lunch, he learned from Mr. O’Dwyer that that had to be the approach for tax reasons. From the evidence of the contacts between DCC and PwC that afternoon, I infer that the tax advice was received from PwC at around 15.00 and it was probably passed on by Mr. O'Dwyer to Mr. Flavin shortly thereafter.
There followed exchanges between Mr. Godfrey and Mr. Flavin in relation to the inclusion of the preference shares. From Mr. Godfrey’s perspective their inclusion was a problem – nobody wanted them. Mr. Flavin countered that they were ordinary shares except that there was an 11% premium. Mr. Flavin’s evidence was that he had been furnished with a document, which the evidence indicates was prepared by Mr. Scholefield and which I infer was also considered by Mr. O'Dwyer, which showed that the preference shares had a yield pick-up or enhanced dividend of the order of 11 cents per share. Mr. Flavin admitted, while testifying, that he was trying to get a higher price than €3.20 per share for the preference shares during the course of this call. Mr. Godfrey proposed a solution: that the preference shares would be converted into ordinary shares at the end of the month and Davy could take late delivery of them.
Exchanges in the course of this call gave rise to considerable controversy as to whether Mr. Flavin had received a bid from Davy on the previous day and whether Mr. Godfrey made a bid at the beginning of the call. Mr. Godfrey asserted that Mr. Flavin had received a bid from Davy for the entire block of stock the previous day. Mr. Flavin interjected to the effect that it was “at a crazy price”. Mr. Godfrey reiterated his assertion. As I have already recounted, Mr. Flavin’s evidence was that what had occurred on the previous day was not that Mr. McLaughlin had made a bid but that he was expressing confidence that he could put together an offer for the entire holding at €3 per share. Mr. Godfrey further stated that he had just given Mr. Flavin a further bid, a firm bid, referring to the bid for 10 million shares at €3.20 per share.
Mr. Flavin then said that they would consider a bid for the entire holding at €3.20 or a bid for exactly half the holding. He informed Mr. Godfrey that Mr. Barrett had been on the telephone during the course of the call. He was aware that Goodbody personnel were going to call Mr. Godfrey. He invited Mr. Godfrey to come back to him with “a joint decision”. When Mr. Godfrey expressed a concern that the matter might “go totally out of control”, Mr. Flavin assured Mr. Godfrey that Mr. Barrett was absolutely firm and that there was no difficulty buying that afternoon at the level of 17 million shares and “splitting it down the middle”, which Mr. Flavin testified meant splitting the shares between Davy and Goodbody. Mr. Flavin stated that “because of the logistics” and “things” he had to do, he would appreciate hearing from Davy and Goodbody. The matter was left on the basis that Mr. Godfrey would telephone Goodbody.

(3) In fact, the third call was a call initiated by Mr. Ashmore to Mr. Godfrey. The upshot of that conversation was that it was agreed that there would be a joint bid for half the holding, including the preference shares, but on the basis that the preference shares would be converted into ordinary shares and there would be late delivery of them. It was implicit that the offer price was to be €3.20. The offer was going to be “on a half and half basis”. It was agreed that Mr. Godfrey would make the offer to Mr. Flavin.

(4) That agreement led to the fourth call from Mr. Godfrey to Mr. Flavin. The telephone records indicate that that call commenced at 15.55 and lasted about three minutes. The message immediately conveyed to Mr. Flavin by Mr. Godfrey was that Goodbody was prepared to bid for half of half of the holding. Mr. Flavin queried whether there was to be a mix of ordinary and preference shares. From the exchanges that followed I infer that Mr. Flavin only abandoned his attempt to get a premium for the preference shares during this call. Once again, Mr. Godfrey suggested that the preference shares be converted and that the buyers, Davy and Goodbody, would take delivery of ordinary stock. Mr. Flavin then raised the question whether Goodbody understood that there would be late delivery, which, in their case, would amount to late delivery of in excess of 2.3 million shares. He pointed out to Mr. Godfrey that he was “acting for both firms”. Mr. Godfrey’s response was that he would make one call, to which Mr. Flavin’s riposte was that he thought that there was a firm bid for half the holding. The matter was left on the basis that Mr. Godfrey would ring Goodbody and would revert to Mr. Flavin “in two seconds”.

(5) The fifth call was a short call from Mr. Godfrey to Mr. Ashmore, in which Mr. Ashmore confirmed that he was standing over his order for 8.9 million shares approximately at €3.20, adding that, if Mr. Godfrey wanted to “do some more”, there would be no problem.

(6) As promised, Mr. Godfrey reverted to Mr. Flavin. The sixth call was made at 16.00, the telephone records suggest, and lasted for two minutes. At that stage of the process there was no need for pleasantries or introductory remarks. Mr. Godfrey immediately stated:
“I will bid you for 17,895,697 ordinary shares at three twenty”
Mr. Flavin’s response was that he would come back to Mr. Godfrey as soon as he could. He then elaborated as follows:
“It may, Ronan it may be that you get a call not from me but from a guy from ING Bank in Holland, Tom Diepenhorst, and if it’s not him you can take it that they have authority to give an instruction.”
Mr. Godfrey indicated that that was not a problem. Mr. Flavin then said:
“I have no authority on the matter”.
What appears to have been a laugh on Mr. Flavin’s part is then audible on the tape. Mr. Flavin explained this on the basis that it was a mannerism of his when he was nervous and that he felt discomfiture about only telling Mr. Godfrey that he had no authority at that stage. Mr. Godfrey then queried whether it was the case that Mr. Flavin would have to come back and say he was happy to deal. Mr. Flavin’s response was as follows:
“… if you get a call from ING Bank, they’ll know all about it, you can take instruction from them instead of me.”
He added that the shares were in Holland. Mr. Flavin made three further references to the shares being in Holland:
(a) When Mr. Godfrey referred to delayed delivery, he interjected to say:
“In fact you know doing it won’t be with us at all. It will be entirely between here and Holland. I wouldn’t want any trail of any paper between here and …”
(b) When Mr. Godfrey interjected to say that he would get the settlement details off them, clearly meaning ING Bank, Mr. Flavin responded:
“Exactly, exactly and we’d want everything sent to them, nothing to DCC.”
Mr. Flavin elaborated that Mr. Diepenhorst would fill him in, that “he’s a director of the subsidiary there of ING Bank”.
(c) Mr. Godfrey again mentioned delayed delivery on approximately 4.6 million shares. Mr. Flavin indicated that he knew and understood the position and he added:
“No, he’ll stand over that but just we really want the trail of instruction entirely from Holland to you in correspondence to you there and back.”
In relation to the reference to any “trail of paper”, Mr. Flavin’s evidence was that his concern was to ensure that all of the paperwork should reflect the factual situation which he had just given to Mr. Godfrey, that he had no authority in the matter. His concern was driven by tax considerations.
The call ended by Mr. Flavin saying that he would revert to Mr. Godfrey. Mr. Flavin’s evidence was that it had always been his intention that, if a formal bid was made, he would pass it on to Lotus Green. He passed the bid he had just received from Mr. Godfrey on to Mr. O'Dwyer. The evidence is that there was no discussion between Mr. Flavin and Mr. O'Dwyer as to whether the bid was the best which was achievable.

(7) The seventh call was a call from Mr. Godfrey to Fyffes seeking to speak to Mr. Carl McCann, who was unavailable.

(8) The eighth call was initiated by Mr. Flavin and it is of significance that it occurred before Mr. Godfrey received a call from Mr. Diepenhorst. The telephone records suggest that it commenced about 16.11 and lasted for about three minutes. Mr. Flavin told Mr. Godfrey that he was about to put a call through to Mr. Neil McCann, adding that he, Mr. McCann, was entitled to have a view as to “who … is coming in …”. Mr. Godfrey’s response was that they were “mostly institutional”. After further questions, the only further information which Mr. Flavin elicited was that the in-comers were mainly institutional, mainly new and mainly international. Mr. Godfrey then mentioned that he was going to ring Mr. Carl McCann. Mr. Flavin objected strenuously to this course, pointing out that it was a “private transaction between Davys and DCC”. When Mr. Godfrey queried whether Mr. Flavin was suggesting that he should not talk to Fyffes, who were also clients of Davy, Mr. Flavin responded:
“Absolutely, absolutely, I mean you have no authority to talk to them in relation to any transaction that DCC is contemplating, none whatsoever … .”
The matter was left on the basis that Mr. Flavin would ring Mr. Neil McCann and then call Mr. Godfrey back.
The telephone records indicate that Mr. Flavin telephone Mr. Neil McCann at 16.17 and the call lasted about ten minutes. I will return to this call later in my analysis of the evidence.

(9) The ninth call was a call to Mr. Godfrey from Mr. Ashmore who was enquiring about the up to date position. The content of the call suggests that it was made around 16.30. Mr. Godfrey informed Mr. Ashmore that he, an obvious reference to Mr. Flavin, had “technically still not dealt”. However, he assured Mr. Ashmore that it was “effectively 99 point 999 but effectively he has not said dealt”. Mr. Ashmore explored whether Mr. Flavin would “do any more”, but Mr. Godfrey disabused him of the notion that he would, stating – “… as far as he’s concerned the half is dealt now or is about to deal.”

(10) The tenth call was a further call from Mr. Ashmore to Mr. Godfrey. What seems to have provoked this call was that a Goodbody client, who, according to Mr. Ashmore, had already got a bid in with Goodbody, had been offered Fyffes stock at €3.20 by a member of the Davy dealing team. Mr. Godfrey said to Mr. Ashmore:
“The story is until such time as I get a call from your man, nobody has dealt.”
In the overall context of the evidence, the ninth and tenth calls would appear to have taken place between 16.15 and 16.40.

(11) The eleventh call was a call from Mr. Diepenhorst to Mr. Godfrey. This call commenced at 16.40, Mr. O'Dwyer having already telephoned Mr. Diepenhorst at about 16.30. Mr. Diepenhorst introduced himself as follows:
“This is Tom Diepenhorst … from Lotus Green in Amsterdam …”
This was the first mention of Lotus Green. Mr. Diepenhorst did not give any further elaboration or explain his role in any way. Mr. Godfrey indicated that he was expecting the call. Mr. Diepenhorst’s evidence was that he was expecting Mr. Godfrey to make an offer but his recollection is that there was silence at Mr. Godfrey’s end. While there was no obvious silence on the tape, I accept Mr. Diepenhorst’s evidence that, in his perception, there was a small pause. His evidence was that he had never dealt with a broker in such a large deal before and he was unsure whether Mr. Godfrey would make the offer to him or he should mention what he had been informed was the offer. Accordingly, Mr. Diepenhorst said that he confirmed the transaction. Mr. Diepenhorst continued:
“We sell to you, we being Lotus Green in Amsterdam … we confirm the data … that is 17,895,697 ordinary shares in Fyffes at a price of 3 point 20 cents.”
Mr. Godfrey confirmed that that was correct. Mr. Diepenhorst queried whether he was aware there would be late delivery. Mr. Godfrey confirmed that he was and Mr. Diepenhorst indicated that it related to a block of 4,621,901 ordinary shares. Mr. Godfrey confirmed that there would be late delivery by about a month but indicated that he did not require that noted in the written confirmation, which he sought either by email or fax. Mr. Godfrey then gave Mr. Diepenhorst his fax number. That effectively was the end of the call.

(12) The twelfth call was a call initiated by Mr. Godfrey and was to Mr. Flavin. Mr. Godfrey confirmed that Mr. Diepenhorst had been in touch with him and that Davy was putting the transaction through. As has been mentioned earlier, the contract note recorded that the first sale was executed at 16.43. Mr. Flavin queried whether Mr. Godfrey had talked to Goodbody. Mr. Flavin stated that he had just been talking to Mr. Barrett and that he had checked with him that Mr. Diepenhorst’s call to Davy would be sufficient. There followed some exchanges as to how the transaction would be split between Davy and Goodbody administratively, and it is manifest from the tape that Mr. Flavin had some concern about the arrangements. When Mr. Godfrey tried to assure him that there was not an issue, Mr. Flavin interjected and stated:
“… in fairness we, we have appointed you jointly now, so long as it is a joint, a joint placing.”
Mr. Flavin testified that in that remark he had used extremely clumsy language. He did not intend his observations to convey that the DCC Group requested Davy and Goodbody to place the shares. All he was doing was checking that Mr. Godfrey was representing both Goodbody and Davy. Mr. Flavin indicated to Mr. Godfrey that there would be a stock exchange announcement when he had got confirmation that the transaction was done. Mr. Godfrey confirmed it was done and that that was the reason he was calling Mr. Flavin.

(13) The final call was from Mr. Godfrey to Mr. Ashmore advising that the transaction had been dealt and that Davy would deliver 8,947,848 shares to Goodbody, settlement to be in five days time with delayed delivery as agreed. Mr. Godfrey stated that Davy would remit half the commission to Goodbody when they got paid. There followed exchanges about the rate of commission, which I am satisfied were just banter.

“… that offers for all or part of the Company’s shareholding in Fyffes in excess of €3.00 per share should be given serious consideration as it affords the Company the opportunity to realise the significant appreciation in the valuation of Fyffes since it was acquired in August, 1995.”

“The mandate was to cover a period of weeks and … it was set to ensure that the board had come to a firm benchmark number, not as a discount to anything but just as a firm benchmark number, being a price and that price would pertain … until the next board meeting. It was just purely to ensure that we did not have to be sitting down again having numerous board meetings.”

“A sale shortly after the first sale of the shares in Fyffes by Lotus Green will also be eligible to the participation exemption where, after the first transaction, more than 5% is retained and the facts as described in the ruling have not changed. It is even likely that the participation exemption is also applicable in case the shareholding (following the first transactions) falls below 5% and shortly following the first transactions, additional shares are sold in terms of a clearly documented plan to sell the shareholding in trances (sic) for commercial reasons (i.e. do not want to flood the market).”

“The Directors resolved to accept offers of €3.00 or higher for all or part of the Company’s shareholding in Fyffes Plc. The Directors considered that in order to avoid market saturation a disposal in tranches may be appropriate. It was further resolved that any one of [the four named directors] be authorised to accept such an offer on behalf of the Company, such authority to be valid until the date of the next Board meeting, scheduled for 30 March, 2000.”

It was Mr. Flavin who chose to entertain approaches from Davy and Goodbody. It was he who facilitated the unique partnership of Davy and Goodbody to make the joint bid, which came in the sixth call. It was he who chose to pass the joint bid to Mr. O'Dwyer, who, in turn, passed it to Mr. Diepenhorst. No consideration was given at the board meeting on 3rd February by the directors of Lotus Green to who the buyer might be. At one level that is not surprising ,given the nature of the product for sale: shares in a listed company. However, it seems to me that a question put by counsel for the plaintiff to Mr. O'Dwyer in cross-examination pinpoints the reality of the situation. If an investment bank located in Holland had telephoned Mr. Roskam and offered to buy the entire block of shares at more than €3.00 per share on 3rd February, could Mr. Roskam have sold them, Mr. O'Dwyer was asked. Theoretically, he could, Mr. O'Dwyer responded but he rightly pointed out that that was a hypothetical situation. The reality was that no prospective purchaser was going to approach any of the Dutch directors of Lotus Green because the beneficial ownership of Lotus Green in the shares was not a matter of public knowledge. The only offers which were going to come to Lotus Green were offers which Mr. Flavin chose to pass on.

At the board meeting on 3rd February no consideration was given to how many shares would be sold, if the entire holding was not being sold. No consideration was given to the implications from a commercial or from a taxation point of view of selling part only of the holding. In relation to the taxation implications of a partial sale, this was addressed after the board meeting by Mr. O'Dwyer and he passed on the advice obtained from PwC to Mr. Flavin, who took the advice on board and acted in accordance with it. That he did so, in my view, cannot be construed as a decision by Lotus Green as to the number of shares which would be sold. That decision was made by Mr. Flavin in stipulating to Mr. McLaughlin first and, subsequently, to Mr. Godfrey what was for sale, the entire or half, to include the preference shares, and in choosing to pass the offer to acquire half of the holding to Mr. O'Dwyer.

In relation to the type of shares to be sold, while it is clear that the board meeting was apprised of the details of the holding, including the fact that some of the shares were ordinary shares and some were preference shares, the directors gave no consideration to the financial, commercial or taxation implications of selling ordinary shares as opposed to preference shares or vice versa. They gave no consideration to whether the preference shares might attract a premium. They gave no consideration to the possibility that the preference shares might have to be converted into ordinary shares. In my view, it was not within the competence of Mr. O'Dwyer, as the sole ‘A’ director of Lotus Green, to make a decision which would alter an asset of Lotus Green to the extent that the conversion of the preference shares into ordinary shares would have entailed. The decision as to the type of shares agreed to be sold was not made by Lotus Green. It was made by Mr. Flavin on the basis of the taxation advice. When the taxation advice was revised, the decision to retain the preference shares was made by Mr. O'Dwyer. In doing so, in my view, he was acting as chief financial officer of DCC – prudently it may be added, given the revised tax advice and given that the settlement date was going to be brought forward.

It is when one considers how the price at which the shares were to be sold was arrived at that the absurdity of the defendants’ position that Lotus Green, and not Mr. Flavin, brought about the first sale becomes apparent. On the morning of 3rd February the board resolved to accept offers of €3.00 or higher for all or part of the holding. I believe that what was agreed was that this resolution was to be valid for one month. The share price closed at €3.32 the previous afternoon. It is true that it had fallen back to €3.20 by close of trading on that day (3rd February) but over the next month it exceeded €3.20 on close of trading on every day, peaking at €3.98 on 18th February. The form of resolution passed by the board on the morning of 3rd February made sense in the context of the underlying objective, the mitigation of tax, because, prima facie, it was evidence of a decision to sell made by Lotus Green in Holland. Incorporating, as it did, a degree of elasticity in relation to price was also convenient, because of the various commitments of the members of the board. However, it made no sense in commercial terms. The shareholders of DCC would have a genuine ground for grievance if Lotus Green had accepted the first offer that came in at €3.00 or higher after the resolution was passed, whether for all or part of the shares, given that the board had adopted no measures for evaluating an offer, in terms of price, whether by reference to the market price or otherwise, at the time it would come. The reality is that it was never intended that the board of Lotus Green would have to make a value judgment when an offer was passed on to its nominee, whether Mr. Diepenhorst or another director, as to whether it was appropriate to accept the offer having regard to the price being offered for the shares and prevailing market conditions. I have no doubt that it was understood by all involved that, if an offer was passed on, it could be assumed that the price was acceptable to DCC.

In relation to late delivery, and its subsequent abandonment, my observations at (b) and (c) above apply.

“I was seeking clarification as to who are these proposed investors at that stage, who were the proposed investors that were coming in to take up these shares. I was about to put in a phone call to Neil McCann and I wanted to know, to inform him .. I had several phone calls with Neil McCann at this stage that day about the likelihood of a transaction. Now that it was almost certain that a transaction was going to be [consummated], that was my belief at the time, and I believed it was very likely that Lotus Green was going to accept it, .. I wanted not only to be the first to tell him about the actual transaction but I knew he would be interested, correctly he would be interested, as to the .. type of investors coming in and I sought clarification on that.”

(2) one ordinary share of IR£1 to DCC Nominees Ltd. (Nominees), which, by a declaration of trust dated 26th May, 1995, declared that it held that share in trust for Marjove.

(a) that all general meetings of the company should be held in the Netherlands;
(b) that all directors’ meetings should be held in the Netherlands;
(c) that the company should have ‘A’ directors and ‘B’ directors;
(d) that only persons residing in the Netherlands should be appointed ‘B’ directors;
(e) that a majority in number of all directors should at all times be ‘B’ directors;
(f) that no act, contract or transaction should be binding on the company unless approved or authorised by at least one ‘A’ director and one ‘B’ director acting together;
(g) that the seal of the company should include the words “The Netherlands” and should be kept and used only in the Netherlands;
(h) that the head office of the company should be situated in the Netherlands; and
(i) that all books and records of the company, except those required by law to be kept at the registered office of the company, should be kept at its head office.

(1) Marjove, a company incorporated in the State, which was to have a share capital divided into 76 “A” ordinary shares and 24 “B” ordinary shares, the shares ranking pari passu in all respects, including voting rights, save that the “A” shares would be entitled to repayment only at par on a winding-up, leaving the other assets of the company available to the holders of the “B” shares on winding-up.
(2) An Irish company in the DCC Group, DCC Properties Limited (Properties), which was to acquire the “A” ordinary shares in Marjove.
(3) A Dutch company in the DCC Group, BV, which was to acquire the “B” ordinary shares in Marjove.
(4) Lotus Green, an Irish registered company, which initially was resident in Ireland for tax purposes and was to be a wholly-owned subsidiary of Marjove.

(1) As a result of the series of meetings held on 26th May, 1995 –

(2) On 30th June, 1995, the Dutch tax authorities gave clearance for a participation exemption for Lotus Green in relation to its proposed shareholding in Fyffes,
(3) On 9th August, 1995, two share purchase agreements (the Agreements) were executed in favour of Lotus Green: one by DCC for the sale of the entirety of its holding of ordinary and preference shares in Fyffes at the price of IR£30,412,110.68; and the other by S&L for the entirety of its holding of ordinary shares in Fyffes at the price of IR£8,050,875.00.
(4) Marjove was voluntarily wound up on 20th August, 1995 and its shareholding in Lotus Green was distributed in specie to BV.
(5) As has been stated earlier, on 25th August, 1995, the articles of association of Lotus Green were amended to effect the transfer of its residence to Holland.

(i) the term of the loan was fifteen years,
(ii) the loan was interest-free for the first year of the term, with the parties to agree each subsequent year whether, and at what rate, interest would apply thereafter,
(iii) the purpose of the loan was to finance the purchase of the shares, and
(iv) the loan was repayable at the end of the term, or earlier in certain circumstances, including the disposal by Lotus Green of all its assets for cash.

(a) The minutes of a board meeting of Lotus Green held on 12th December, 1996, as approved at the next meeting, which was on 17th April, 1997, recorded that at the December meeting Mr. O’Dwyer had proposed and it was resolved that an interim dividend of NLG2,990,000 be paid to the parent (BV) on 20th December, 1996. In fact, the payment of a dividend had not been an agenda item for the December meeting and it had not been discussed at the December meeting. It was acknowledged by Mr. O’Dwyer that that was the case. The intra-Company dividend item was not on the agenda through error and it was not on the agenda of the board meeting of BV, which was held in Amsterdam on the same day, by error. When the error was discovered, the position was rectified by agreement of the board.
(b) The plaintiff cited two instances in which it was alleged that the approved and signed minutes of the board meeting did not reflect what actually occurred at the meeting, where the item of business in issue was a revision of bank mandates, the meetings having been held on 10th December, 1997 and 16th December, 1999. Mr. O’Dwyer did not accept that this happened. It if did, in my view, it is not of any significance in the context of the issues in these proceedings. The bank accounts in question were only one facet of the banking arrangements of the DCC Group. The corporate and commercial reality was that, like any other subsidiary in a group of companies, Lotus Green was going to have to fall in line with the requirements of the bankers of the DCC Group and the strictures of good corporate governance of the Group as a whole.

(a) the structuring of Lotus Green in such a manner that an ‘A’ director had effectively a right of veto in relation to board decisions, when coupled with the appointment of the chief financial officer of DCC as sole ‘A’ director;
(b) the manner in which the election to take the scrip dividend occurred in March, 1998; and
(c) the manner in which the shares came to be sold in February, 2000, which I have already dealt with at O. above.

“Whether predicated on traditional fiduciary concepts … or on the ‘special facts’ doctrine, … the Rule is based in policy on the justifiable expectation of the securities marketplace that all investors trading on impersonal exchanges have relatively equal access to material information.”

“The dominant congressional purposes underlying the Securities Exchange Act of 1934 were to promote free and open securities markets and to protect the investing public from suffering inequities in trading including, specifically, inequities that follow from trading that has been stimulated by the publication of false or misleading corporate information releases.”

“An insider is not, of course, always foreclosed from investing in his own company merely because he may be more familiar with company operations than are outside investors. An insider’s duty to disclose information or his duty to abstain from dealing in his company’s security arises only in ‘those situations which are essentially extraordinary in nature and which are reasonably certain to have a substantial effect on the market price of the security if [the extraordinary situation is] disclosed’.”

“Thus, material facts include not only information disclosing the earnings and distributions of a company but also those facts which affect the probable future of the company and those which may affect the desire of investors to buy, sell or hold the company’s securities.”

“In each case, then, whether facts are material within Rule 10(b)-5 when the facts relate to a particular event and are undisclosed by those persons who are knowledgeable thereof will depend at any given time upon a balancing of both the indicated probability that the event will occur and the anticipated magnitude of the event in light of the totality of the company activity.”

“Before insiders may act upon material information, such information must have been effectively disclosed in a manner sufficient to insure its availability to the investing public.”

“… where the news is of a sort which is not readily translatable into investment action, insiders may not take advantage of their advance opportunity to evaluate the information by acting immediately upon dissemination.”

“The question of materiality, it is universally agreed, is an objective one, involving the significance of an omitted or misrepresented fact to a reasonable investor. Variations in the formulation of a general test of materiality occur in the articulation of just how significant a fact must be or, put another way, how certain it must be that the fact would affect a reasonable investor’s judgment.”

“The general standard of materiality that we think best comports with the policies of Rule 14(a)-9 is as follows: An omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote. … It does not require proof of a substantial likelihood that disclosure of the omitted fact would have caused the reasonable investor to change his vote. What the standard does contemplate is a showing of a substantial likelihood that, under all the circumstances, the omitted fact would have assumed actual significance in the deliberations of the reasonable shareholder. Put another way, there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.”

“The role of the materiality requirement is not to ‘attribute to investors a child-like simplicity, an inability to grasp the probabilistic significance of negotiations,’ … but to filter out essentially useless information that a reasonable investor would not consider significant, even as part of a larger ‘mix’ of factors to consider in making his investment decision. TSC Industries ...”

“As we clarify today, materiality depends on the significance the reasonable investor would place on the withheld or misrepresented information. The fact-specific inquiry we endorse here is consistent with the approach a number of courts have taken in assessing the materiality of merger negotiations.”

“The section provides that the information may well materially affect the price. It may be that what is a material price increase in one case may not necessarily be a material price increase in another case. It all depends on the share and the circumstances obtaining at the time.

However, the standard by which materiality is to be judged is whether the information on the particular share is such as would influence the ordinary reasonable investor in deciding whether or not to buy or whether or not to sell that share. A movement in price which would not influence such an investor, may be termed immaterial. Price is, after all, to a large extent determined by what investors do. If generally available, it is the impact of the information on the ordinary reasonable investor, and thus on price, which has to be judged in an insider dealing case …

The test is an objective one.”

“Whether it is material will be looked at objectively from the view of a ‘reasonable investor’ but this begs the question of who is this ‘reasonable investor’. Surely, not a person with all the qualifications and knowledge [an expert witness who had testified] had which were derived from specific researches but he can still be one if shorn of those researches he made. On the other hand, it could not be those daily retailers who are out to make a quick profit who generally would not know much and would not bother about the matters or factors which prompt an investor to buy or sell shares and when to do so. In my view that investor should be someone who is in between those two types of persons I have described. He must be, this is the term I would use, an investor who possesses general professional knowledge as opposed to the said daily retailer or a person who has made specific researches.”

“Although it clearly was unpublished in that it was not generally known to those persons who were accustomed to deal in the company’s shares and notably was not known to [the plaintiff], market makers in the shares, the information except for the fact that Mr. Goodman was on the brink of resignation was known to the other members of the board … Finally I am satisfied that all three of the matters listed above would if generally known have been likely materially to affect the price of the company’s shares. The proof of that pudding is in the eating in that when the suspension which followed almost immediately, was lifted the price of the company’s shares was very sharply down.”

“Before dissecting separately each item of allegedly material information, we will lay to rest the SEC’s facile inference that since B&L’s stock dropped 11¾ points on March 16th with an unprecedented volume of 348,000 shares traded, all the information conveyed by Schuman must per se have been material.

The seemingly substantial decline in the value of B&L’s stock on March 16th, was not an uncommon phenomenon in the company’s recent history. B&L’s shares had been generally falling in value since early February, and in the three weeks preceding the interviews, prices had plunged 40 points. …

Several reasons accounted for the general decline, the most prominent being adverse medical reports on the safety of soft contact lenses which were accorded extensive coverage in the Wall Street Journal and other sources of financial news. Moreover, reports abounded that B&L might soon face substantial competition. Leakage in the Soflens shippings vials in early March, and ensuing delays in shipment, likewise received considerable publicity. Smith Barney & Co.’s withdrawal of its ‘buy’ recommendation on B&L in late February further dampened investment ardor with the company’s stock. In short the market was extremely bearish on B&L.”

“But, since the importance of a particular piece of information depends on the context in which it is given, materiality has become one of the most unpredictable and elusive concepts of the federal securities laws.”

“The ‘value’ of the stock traded during the period of non-disclosure of the tipped information (i.e. the price at which the market would have valued the stock if there had been a disclosure) is hypothetical. Expert testimony regarding that ‘value’ may, as the district court found in the present case, be entirely speculative. This has led some courts to conclude that the drop in price of the stock after actual disclosure and after allowing a period of time to elapse for the market to absorb the news may sometimes approximate the drop which would have occurred earlier had the tip been disclosed. … The court below adopted this approach of using post-public disclosure market price as nunc pro tunc evidence of the ‘value’ of the stock during the period of non-disclosure.
Whatever may be the reasonableness of the nunc pro tunc ‘value’ method of calculating damages in other contexts, it has serious vulnerabilities here. It rests on the fundamental assumptions (1) that the tipped information is substantially the same as that later disclosed publicly, and (2) that one can determine how the market would have reacted to the public release of the tipped information at an earlier time by its reaction to that information at a later, proximate time. This theory depends on the parity of the ‘tip’ and the ‘disclosure’. When they differ, the basis of the damage calculation evaporates. One could not reasonably estimate how the public would have reacted to news that the Titanic was near an iceberg from how it reacted to the news that the ship had struck an iceberg and sunk. In the present case, the July 10 tip that preliminary earnings would be released in a week is not comparable to the later release of the estimated earnings figures on July 18. Nor was the July 17 tipped information that there was a good possibility that earnings would be down comparable to the next day’s release of the estimated figures.”

“Finally, the rapid increase in the trading volume and price of P&F stock following the disclosure of the joint venture confirms the conclusion that a reasonable investor would have considered this information to be important in making an investment decision with respect to P&F stock.”

“The argot speaks of such information as ‘price-sensitive’ when what is really meant is price material. The opinion of Queen’s Counsel was too generous to the complaining shareholders if it meant, as some passages in it seem to suggest, that a bare possibility, however remote, could come within ‘likely’. A real or substantial risk is required.”

(i) The information must not be assessed in isolation. It must be assessed in the light of the total mix of information generally available about the company at the relevant date, the date of dealing.
(ii) Once the significance of the information is assessed in that manner, the question for consideration is whether, if it had been generally available on the date of dealing, in the light of its significance the information would have had a substantial or a significant effect on the company’s share price. If so, the effect would have been material. The terms “substantial” and “significant” are relative terms. The assessment of the share price effect must be made having regard to all of the factors which have a bearing on the value of the company’s shares at the date of dealing.
(iii) Both assessments, the assessment of the significance of the information and the assessment of the impact of the information on the share price, must be carried out objectively. The subjective views of the insider are irrelevant. What this means is that the court, in carrying out the assessments, does so from the perspective of the reasonable investor making an investment decision, that is to say, a decision to buy, sell or hold the shares in the company.
(iv) The standard of materiality to be applied is prescribed in s. 108. The question to be addressed is whether it is probable that the impact of the information would have a substantial or significant effect on the share price. In view of the express inclusion in s. 108(1) of the “would be likely” criterion, it would not be appropriate to apply the “substantial likelihood” standard applied by the U.S. Supreme Court in the TSC Industries case.
(v) However, the application of the standard may require the type of balancing exercise recognised in the Texas Gulf Sulphur case – weighing indicated probability against anticipated magnitude in the light of the totality of the company activity.

“We would like to remind issuers that, when assessing whether information needs to be announced, Listing Rules 9.1 or 9.2 do not set a materiality threshold. We are aware that some market practitioners operate under a ‘10% rule’, whereby if a piece of information would move the share price or alter another key figure (such as operating profit) by more than 10%, then an announcement is made.

While such an approach may result in some issuers complying with the requirement of these paragraphs, it is not appropriate for all issuers. Listing Rules 9.1 or 9.2 require an issuer (in conjunction with its advisors) to assess whether the unpublished information in question would bring about ‘a substantial movement in the price of its listed securities’. The level of movement that is ‘substantial’ will vary from issuer to issuer. For example, we would ordinarily expect a FTSE100 company to have a lower threshold than an illiquid small cap with high price volatility.”

“It is considered by market participants that the price of a liquid equity security would be likely to have been materially affected if, had the information been generally available, (and in the absence of any specific announcement, general sectoral influence or market movement), the price of the security would have been less than 95% or more than 105% of the market price on the day(s) on which the dealing(s) occurred.”

(a) the information alleged to be price-sensitive should be substantially the same as the information which gave rise to the share price movement which is proffered as a proxy, and
(b) the market conditions on the date at which the hypothesis is being applied are identical with market conditions on the date on which the supposed proxy event occurred.

“Directors (and connected persons) must not deal in the securities of a listed company where ‘unpublished price sensitive information’ exists as defined by the Model Code, by section 108 of the Irish Companies Act, 1990 and by section 346 of the U.K. Companies Act, 1985.”

(i) what the market knew about Fyffes, its trading and its business, at the dates of the Share Sales, and
(ii) the information contained in the November and December Trading Reports, which was not in the marketplace, in other words the new information contained in those documents.

(a) publicly disclosed information in relation to the state of the banana and fresh produce business globally through announcements made by its competitors;
(b) global economic news about banana prices and exchange rate movements;
(c) reports and forecasts of stockbroker analysts; and
(d) media reports.

“For the coming year, operational focus will be directed to optimising those areas in which the Group has particular strengths. In line with the publicly stated intentions of several other companies in the industry, Fyffes will be reducing its overall banana imported volumes in Europe by 10% for calendar 2000, the benefit of which will be weighted towards the second half of the year. In conjunction with this strategy, efficiencies in the Group’s cost structures will continue to be vigorously pursued.”

“Fyffes continues to benefit from strong cash flows and the strongest balance sheet in the international fresh produce sector. These leave it well positioned to develop the business further by organic growth and by sizeable strategic acquisitions.”

“However, following the unveiling of worldoffruit.com, the market is now valuing Fyffes more as an internet proposition than a produce play and short-term trading prospects are being overlooked.”

(1) Actual FY 1999 €’m

(2) Budget FY 2000 €’m

(3) Actual FY 2000 €’m

(4) Variance

(5) Gernon Forecast Actual €’m

(a) Prior Year €’m

(b) Budget €’m

November December January

1.5 3.3 6.3

(0.3) - 5.0

(2.6) (1.3) 1.3

(4.1) (4.6) (5.0)

(2.3) (1.3) (3.7) (3.43) (2.92) 2.54

Total Q1

11.1

4.7

(2.6)

(13.7)

(7.3) (3.81)

Capespan

(2.5)

(3.0)

(2.5)

Capespan Adjustment

(9.8)

December 1999

January 2000

February 2000

March 2000

April 2000

Date

Price €

Date

Price €

Date Price € Date Price € Date Price €

01

1.60

04

1.95

01 3.26 01 3.35 03 2.25

02

1.63

05

1.98

02 3.32 02 3.55 04 2.00

03

1.62

06

1.98

03 3.20 03 3.60 05 1.95

06

1.62

07

1.97

04 3.50 06 3.65 06 1.98

07

1.60

10

2.25

07 3.70 07 3.65 07 1.97

08

1.60

11

2.23

08 3.60 08 3.50 10 2.00

09

1.60

12

2.25

09 3.68 09 3.20 11 2.12

10

1.62

13

2.58

10 3.85 10 3.45 12 2.15

13

1.65

14

2.55

11 3.85 13 3.55 13 2.08

14

1.80

17

2.63

14 3.90 14 3.43 14 2.05

15

1.99

18

2.72

15 3.90 15 3.35 17 1.93

16

2.00

19

2.63

16 3.93 16 3.30 18 1.97

17

2.00

20

2.60

17 3.95 20 2.70 19 1.97

20

2.00

21

2.60

18 3.98 21 2.46 20 2.00

21

1.97

24

2.70

21 3.95 22 2.60 25 1.93

22

1.97

25

2.62

22 3.87 23 2.50 26 1.87

23

1.98

26

2.80

23 3.87 24 2.62 27 1.85

27

2.95

24 3.80 27 2.55 28 1.85

28

3.14

25 3.75 28 2.55

31

3.30

28 3.55 29 2.55

29 3.40 30 2.40

31 2.20

“So the prediction that will come out of this model basically is a prediction as to the value of the information that Mr. Flavin saw in those two documents as it affected the core business of Fyffes. The worldoffruit.com value accounts for the big difference between the actual price and the predicted price in early 2000 and as I indicated earlier, the value of that venture will depend upon the value of the core business. So effectively the value of the information that Mr. Flavin had, had implications for the value of both pieces of Fyffes and this model effectively tells us the impact of that information on the value of the core business, but in my judgment, unambiguously that information had implications for the value of worldoffruit.com and I think that is validated again looking at what happened on March 20th when the profit warning was issued.”

(a) the relative unimportance of the first months of Fyffes’ financial year because of the seasonality of the banana business,
(b) the lack of interpretation by the management,
(c) the absence of forecast earnings revisions for the full year, and
(d) management’s previous excellent track record in forecasting and the precedent of 1997.

(i) A review of contemporaneous broker analyst reports and financial media comment supported his conclusion.
There is no doubt that Professor Taffler adduced convincing evidence that the potential of wof.com was the main driver of the share price increase, a proposition with which the plaintiff’s experts were, in any event, in agreement. The area of disagreement is whether Professor Taffler’s assertion that the underlying fundamentals of Fyffes’ business were being almost totally ignored by the market is correct.

(ii) The co-movement of Fyffes’ share price with the DSII, not the ISEQ, at the relevant time confirmed his assumption that from 14th December, 1999 onwards Fyffes’ stock was being priced as a “dotcom” stock.
It follows from my comments on the use of the DSII as a benchmark, that I do not find the result of the exercise as of any probative value in this case.

(iii) Analyses of trading volumes and price volatility supported his conclusion.
As regards the weekly trading volumes, it is unquestionably the case that the pattern in the first half of calendar year 2000 differed from the pattern in the second half of calendar year 1999. Moreover, the pattern of price volatility unquestionably differed in those two periods. As regards price volatility, insofar as Professor Taffler based his conclusion on Fyffes’ price volatility post 14th December, 1999 being more similar to that of the DSII rather than the ISEQ, I do not consider that a sound basis for the conclusion, because I am not satisfied that the DSII was an appropriate benchmark.

(iv) Estimates of the market value of wof.com supported his conclusion.

The approach adopted by Professor Taffler to split the market value of Fyffes’ shares in February, 2000 between the core business, on the one hand, and the wof.com component, on the other hand, for which he used an equally weighted index of the stock of Fyffes’ main competitors (Dole, Chiquita and Fresh Del Monte) was described as Professor Lehn as being completely inappropriate. Indeed, Professor Taffler acknowledged that the competitors were not perfect proxies for Fyffes’ core business and that the exercise he had carried out was only “very broadly indicative”.

(v) An analysis of the information events that impacted materially on Fyffes’ share price supported his conclusions.
Professor Taffler chronologically tracked the major news events in relation to wof.com against the movement in the share price. In relation to the period from the end of 1999 until the share price peaked on 18th February, 2000, a convincing picture emerged of a causative link between the share price and wof.com. However, the only evidence which Professor Taffler cited to support his contention that the mainly downward trajectory in the share price from 18th February to 30th June, 2000 resembled “the characteristics of a typical “dotcom” stock post-crash” were the comparisons with the DSII and a general statement that the Dow Jones Internet Index peaked on 9th March, 2000 and, after wobbling, the market went into freefall.

Both Professor Fischel and Professor Lehn disagreed with Professor Taffler’s opinion as to the cause of Fyffes’ stock price decline.

Professor Fischel’s view was that, both as a matter of logic as well as a matter of evidence in this case, it was simply inconsistent with what happened in the real world, the real world, as I understand his evidence, being what happened on and after 20th March, 2000 as interpreted by analysts at the time. Indeed, Professor Fischel’s view was that the share price reaction on 20th March, 2000 would have been more adverse but for the positive offsetting factor, the contemporaneous disclosures in relation to Fyffes’ internet venture. However, in relation to the market generally, Professor Fischel testified that in late February and early March, 2000 there was less optimism about the internet sector. There was a beginning of a realisation that the expected demand for the internet was exaggerated, there was tremendous overcapacity, and inflated beliefs about profitability began to turn more negative.

Professor Lehn described the proposition that the fall in Fyffes’ share price on 20th and 21st March, 2000 was the result of the bursting of a speculative bubble as preposterous. He suggested that there was some revisionist history at play; contemporary evidence indicates that people were still reasonably optimistic about the internet and the opportunities for internet businesses as of 20th March, 2000.

In his analysis, Professor Taffler went further than merely identifying a causative link between enthusiasm for the wof.com component of Fyffes’ business and the share price movement. He opined on whether a particular movement was material or otherwise. Having regard to the view I have taken that the DSII was not an appropriate benchmark for Fyffes’ share movement at the relevant time, it follows that I do not accept as being correct Professor Taffler’s characterisation of any actual movement between the end of 1999 and 30th June, 2000 as material or not material, as the case may be, by reference to his operational definition of materiality. In any event, what the court is concerned with is whether there would have been a material share price movement in the hypothetical situation posited in s. 108(1) – that the information contained in the November and December Trading Reports had become generally available. The court is not concerned with the materiality or otherwise of actual share price movements.

(vi) A consideration of market psychology and behaviour pertaining at the relevant time supported his conclusion.
In invoking behavioural economics in this context Professor Taffler asserted that, through operation of “the representativeness heuristic cognitive bias”, Fyffes was transformed by brokers, investors and financial journalists from a fruit importer and distributor into a “dotcom” stock play. Professor Taffler’s conclusion that in February, 2000 investors were not interested in the profitability of Fyffes’ core business was underpinned by his opinion that, because of the state of market psychosis pertaining at the time, the underlying business realities in relation to Fyffes were viewed as irrelevant. Whether this was so is one of the fundamental areas of disagreement between the plaintiff’s experts and the defendants’ experts. The application of discipline of behavioural economics, in my view, in this case is too vague and imprecise to justify weight being attached to it in the resolution of the price-sensitivity issue.

(a) if released, it would cause investors to revise their expectations of the company’s future cash flows; or
(b) if released, it would cause investors to revise their beliefs about the degree to which the company is exposed to market risk.

“The comments at Fyffes’ AGM about difficult trading conditions in one sense came as no surprise. However, the tone of the statement indicated a position worse than we expected and has prompted us to review our forecasts.”

“Therefore, if investors had not already anticipated a level of under-performance close to that indicated in the [November and December Trading Reports], and such under-performance was material, revision of EPS forecasts in response to the release would have been significant.”

“… but what I’m saying to you is we are talking about something which is not a legal document, it is a commercial document. If you are a company, the practical fact of life is that you have to be reasonably sure before you go to the marketplace and stick your head above the parapet and say ‘my expectations have changed’. If you are a director, whatever the impact on price is, if you believe you have information which if put to the market could alter the price materially, I think you have to stop and think very carefully before your trade.”

“It is still too early to say whether worldoffruit.com will carve out a meaningful share of Internet-based trading. As an early mover it has established a competitive advantage and the potential is huge.”

(a) a comparison of the information contained in the November and December Trading Reports and the information contained in the March 2000 Trading Statement, and
(b) a comparison of the market conditions on 3rd, 8th and 14th February, 2000 and market conditions on 20th March, 2000.

“Further to our meeting last evening it is encouraging to note this morning that the share price has stood up but I think, in all our interests, it would be helpful if the remainder of the shares are disposed of, so that they will not be overhanging the market. It is quite an achievement to have disposed of such a volume and get such a good reaction. Hopefully it augers well for the balance.”

Budget 2000 €’000

Actual 2000 €’000

Last Year 1999 €’000

Worldoffruit.com

(635)

(1,326)

-

Fruit business

5,349

(2,559)

11,333

Total to end of January

4,714

(3,885)

11,133

February

8,450

5,700

5,376

March

14,401

15,000

12,263

April

10,317

14,185

3,867

Cumulative – Half year

37,882

31,000

32,639

“While trading had improved during February, the uplift was not continued into March and the forecast produced on 14th March showed a profit of €8.5m compared to a budget of €14.4m. There were two main reasons for this – low banana prices and continuing low volumes of Capespan produce which was affecting both our share of Capespan and throughput in our produce division. This was due to abnormal rains in South Africa and Mozambique.

The further outlook for April was poorer than anticipated with a shortfall on budget of circa €4m.

At this point it became clear that we would be considerably short of last year’s profit figure excluding worldoffruit costs and therefore a decision was made to make the profit statement at the AGM.”

(1) As I understand it, Fyffes was a defendant in what has been referred to as the AVM case, which arose out of an intended acquisition in Belgium some years previously and which was being prosecuted in Belgium. Fyffes had lodged the sum of €5m in court to meet the outcome of the case. Provision had been made for this in Fyffes’ accounts for financial year 1999 and was the subject of consideration at the Audit Committee meeting of 9th December, 1999. At that stage it was believed that the case was close to settlement and that there could be a surplus of €2.5m to be refunded to Fyffes. According to Mr. Gernon’s note of 23rd March, the position in February, 2000 was that it was expected that the €2.5m refund would be available as a contribution to profits for April. Fyffes’ auditors had confirmed that it could be “taken to profit”. The position as at the beginning of March, as recorded in Mr. Gernon’s note, was that a refund of only £1m (or €1.3m) was then on offer. The implication from that note and from a contemporaneous note from Mr. Carl McCann to Mr. Gernon, also dated 23rd March, 2000, was that the refund would not be forthcoming before April, if then. The evidence suggests that the outcome of the AVM case was less significant than the outcome of the other pending cases. Mr. David McCann testified that he had not put “as much store” behind it as the other two cases, which, in his mind, were going to “produce value”.
(2) The Geest case arose out of the acquisition in 1996 by a joint venture established by Fyffes and Winward Islands Banana and Development Exporting Company Limited (WIBDECO) of the banana business of Geest Plc. There was provision for the legal costs of these proceedings in Fyffes’ accounts for financial year 1999 and that provision was also the subject of consideration at the Audit Committee meeting on 9th December, 1999. In any event, the case came on for hearing in London on Monday, 28th February, 2000, and it ran until 7th March, 2000, when it settled. A joint stock exchange announcement was made by Fyffes, WIBDECO and Geest Plc announcing the settlement on 8th March, 2000. Although it was not explicitly stated in the announcement, as I understand it, it was settled on the basis of “back to back” as to costs. Mr. Gernon, in his note of 23rd March, 2000, recorded that during the week commencing 6th March the Geest case was terminated with gross costs for Fyffes’ account of Stg£2.5m. The contemporaneous note of Mr. Carl McCann stated that Fyffes had a reasonable expectation of an outcome of Stg£5m from this litigation, which had disappeared. Mr. Gernon’s note recorded that Fyffes’ auditors had advised that the proceeds of this litigation would have to be processed through the profit and loss account, although perhaps disclosed as an exceptional.
(3) The hearing of the case by Fyffes against Seatrade, referred to as the Seatrade case, commenced in London on 12th January, 2000, and ran for four weeks, the hearing finishing on 9th February, 2000. As might have been expected, judgment was reserved. Mr. Gernon recorded in his note of 23rd March, 2000 that the result of the Seatrade case was not expected until just before Easter, although Mr. Carl McCann’s contemporaneous note stated that the decision had been delayed until after Easter. In any event, judgment was given towards the end of May, 2000, and Fyffes was awarded US$7m net of insurance repayment and costs. In fact, the judgment is reported as Fyffes Group v. Templeman [2000] 2 Lloyd’s Report 643.

“The trading performance during the financial year, which commences on 1 November, is subject to significant seasonal variations. November and December are typically among the least profitable months. Indeed, generally, only a small proportion of our budgeted annual profit is achieved in the first quarter. Analysis of first quarter trends and their potential significance for the full year result is made difficult by the fact that the company normally experiences a seasonal improvement in trading in late January/early February when rising consumer demand and seasonal shortages of available fruit lead to increased market prices. It has been our experience over many years that performance in the months of November and December has not proved to be a particularly accurate indicator of likely trading patterns for the remainder of the financial year and a poor performance in those months in the past has not in itself resulted in a shortfall for the first half.

What happened this year was that the seasonal trading improvement in late January/early February was not on the same scale as normally expected, especially in the light of the decline of the Euro against the U.S. dollar.

Our analysis of the relevant data for the period from the beginning of the financial year coupled with the circumstances prevailing at the date of the AGM prompted us to issue the announcement on 20 March, 2000. We are satisfied that the company would not have been in a position to have made a properly informed assessment as to the necessity of such an announcement at an earlier date. In particular, we are satisfied that an earlier announcement would not have been merited based solely on the performance in November and December.”

“The Board of a listed company, on the advice of its executive officers, must carefully and continuously consider whether changes in its financial condition, in the performance of its business or in its expectation as to its performance may be price-sensitive such that, if made public, they would be likely to lead to a substantial movement in the price of its listed securities, and so require disclosure under the Listing Rules. When such changes are under consideration, a listed company should also consult its financial advisers at the earliest possible time.”

“If an insider has any doubt about the legitimacy of dealing while in possession of information gained by reason … of being a connected person … ,then he should not deal. He should not deal because his doubts are in effect telling him that the information may well have a price impact.”

(1) Mr. Flavin was aware that the profits of Fyffes for the last two months to 31st December were behind last year. There is a rider to this in terms that both Mr. Flavin and Mr. Scholefield noted that, although Fyffes had produced good overall profit growth over the last number of years, there had been little evidence during those years of smoothness in terms of the profitability for any one or two month period over the previous year.
(2) Mr. Flavin only had information on the first two months of the year. This information was the same information as was available to him at the time the board of Fyffes approved the preliminary results announcement in December.
(3) The major influence on profitability in Fyffes was banana prices, which were closely followed by industry analysts. This knowledge and trading commentaries from other companies in the sector meant that a reduction in the profitability in the first two months of Fyffes’ then current financial year would not be unexpected by the analysts.
(4) Fyffes’ share price had more or less doubled since it announced the launch of its online trading entity, wof.com. There was a rider that both Mr. Flavin and Mr. Scholefield surmised that the launch had been a major factor in the share price performance.
(5) Mr. Flavin informed Mr. Scholefield that Fyffes had been active in making presentations since the results and therefore the market was likely to be as well informed as he was.
(6) Both Mr. Flavin and Mr. Scholefield noted that any decision in relation to Fyffes’ shareholding was in any event a matter for the board of Lotus Green.

(b) demand for Fyffes’ shares having been satiated by the sale of the DCC Group holding, as Mr. Dobbie suggested, or
(c) an incipient disenchantment with internet stocks or stocks with an internet component, even if temporary (as suggested in an opinion feature entitled “Caution advised for investors in e-commerce” published in the Irish Times on 20th March, 2000, which anticipated that Fyffes’ shareholders would have “perplexed faces” at the AGM later that day because, “after seeing their shares in the doldrums for many years”, they saw them doubling to €4, but, “in line with the temporary slide against IT shares”, they had fallen back to €3.30),

(i) The fact that the market had been told by Fyffes, in the Preliminary Announcement, that going forward it would be focusing on optimising the returns from its core business, that it would be pursuing cost-cutting and addressing the oversupply in the banana market. Of particular relevance is the information that the benefits of its strategy in relation to oversupply would not be felt in the first quarter.
(ii) The fact that, in the Preliminary Announcement, Fyffes had pointed to the possibility of major acquisitions and the fact that its balance sheet indicated that it had the wherewithal to realise such an ambition.
(iii) The fact that Fyffes was announcing progress in the development of the wof.com venture and its potential.
(iv) The fact that analysts recognised, and the media reported on, what was seen as positive prospects for Fyffes: the opportunity to acquire, or merge with, one of its major competitors and the prospect of reaping the rewards of being the first mover in the development of a B2B on-line fresh produce market.
(v) The fact that investor enthusiasm for shares within an internet component was nearing its highpoint and that, by general consensus, this is what was fuelling the rise in Fyffes’ share price.

“The fundamental principle upon which the doctrine of constructive trusts proceeds is, that no person in a fiduciary capacity shall be allowed to retain any advantage gained by him in his character as trustee”.

“It is well established, as a general proposition, that a person who acquires special knowledge or information by virtue of a confidential or fiduciary relationship with another is not free to exploit that knowledge or information for his own personal benefit but must account to his principal for any profits derived therefrom … This, in turn, is merely a corollary of the broader principle, inherent in the nature of the fiduciary relationship, that prohibits a trustee or agent from extracting secret profits from his position of trust.”

“This is because the function of such an action, unlike an ordinary tort or contract case, is not merely to compensate the plaintiff for wrongs committed by the defendant but, as this court declared many years ago …
‘to prevent them, by removing from agents and trustees all inducement to attempt dealing for their own benefit in matters which they have undertaken for others, or to which their agency or trust relates.’”

“Just as a trustee has no right to retain for himself the profits yielded by property placed in his possession but must account to his beneficiaries, a corporate fiduciary, who is entrusted with potentially valuable information, may not appropriate that asset for his own use even though, in so doing, he causes no injury to the corporation. The primary concern, in a case such as this, is not to determine whether the corporation has been damaged but to decide, as between the corporation and the defendants, who has a higher claim to the proceeds derived from the exploitation of the information. In our opinion, there can be no justification for permitting officers and directors, such as the defendants, to retain for themselves profits which, it is alleged, they derived solely from exploiting information gained by virtue of their inside position as corporate officials.”

“This is of course a statement of the law of New York, but entitled to great respect as expounding doctrines of equity which are common to the legal systems of New York and The Bahamas as well as of England. It has been cited in support of the existence of a similar equitable cause of action in English law by Professor Davies in his 6th Edition of Gower and Davies’ Principles of Modern Company Law (1997) at p. 445 and by Mr. Ben Pettet in his recent Company Law (2001) at p. 393. Their Lordships therefore agree with the courts of The Bahamas that such a cause of action is arguable.”

“… if directors make use of information acquired as director for their personal advantage they will breach their fiduciary duties to the company and be liable to account to it for any profits they have made. A great advantage of the civil suit brought by the company for breach of fiduciary duty is that it does not have to show that it has suffered loss as a result of the insider dealing, simply that the insider fiduciaries have made an undisclosed profit.”

“That responsibility [of a trustee] may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort, or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But, on the other hand, strangers are not to be made constructive trustees merely because they act as agents of trustees in transactions within their legal powers, transactions, perhaps, of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees.”

(a) what Mr. Flavin knew, must be imputed or attributed to the corporate defendants; or
(b) because the facts and circumstances were such as to put them on notice of a potential breach of trust in such a manner as to render them liable as constructive trustees.

“For these reasons I have come to the view that, just as there is now a single test of dishonesty for knowing assistance, so ought there be a single test of knowledge for knowing receipt. The recipient’s state of knowledge must be such as to make it unconscionable for him to retain the benefit of the receipt. A test in that form, though it cannot, any more than any other, avoid difficulties of application, ought to avoid those of definition and allocation to which previous categorisations have led.”

“The unlawful purpose in this case was the provision of financial assistance in contravention of section 54 of the 1948 Act. That the purpose of the sale of Maximum to Belmont was to enable Mr. Grosscurth to pay £489,000 to City for the share capital of Belmont was known to all concerned … Williams and City were parties to the agreement and so, in my opinion, are fixed with the character of parties to the conspiracy. Moreover, Mr. James knew perfectly well what the objects of the agreement were. He was a director of both Williams and City. Mr. Harries and Mr. Foley, who also knew the objects of the agreement, were a director and the secretary respectively of City. Mr. Foley was also the secretary of Williams. Their knowledge must, in my opinion, be imputed to the companies of which they were directors and secretary, for an officer of a company must surely be under a duty, if he is aware that a transaction into which his company or a wholly-owned subsidiary is about to enter is illegal or tainted with illegality, to inform the board of that company of the fact. Where an officer is under a duty to make such a disclosure to his company, his knowledge is imputed to the company … .”

“For this purpose the plaintiff must show, first, a disposal of his assets in breach of fiduciary duty: secondly, the beneficial receipt by the defendant of assets which are traceable as representing the assets of the plaintiff; and thirdly, knowledge on the part of the defendant that the assets he received are traceable to a breach of fiduciary duty.”

it is their beneficial owner; but in consequence of the fiduciary character of their duties the directors of a limited company are treated as if they were trustees of those funds of the company which are in their hands or under their control, and if they misapply them they commit a breach of trust … . So, if the directors of a company in breach of their fiduciary duties misapply the funds of their company so that they come into the hands of some stranger to the trust who receives them with knowledge (actual or constructive) of the breach, he cannot conscientiously retain those funds against the company unless he has some better equity. He becomes a constructive trustee for the company of the misapplied funds. This is stated very clearly by Jessel M.R. in Russell v. Wakefield Waterworks Company, where he said:
‘In this court the money of the company is a trust fund, because it is applicable only to the special purposes of the company in the hands of the agents of the company, and it is in that sense a trust fund applicable by them to those special purposes; and a person taking it from them with notice that it is being applied to other purposes cannot in this court say that he is not a constructive trustee.’”

(b) the Belmont Finance and Frederick Inns actual or constructive knowledge test.

(b) DCC and S&L dealt as principals, so they cannot rely on
s. 108(9).
(c) Lotus Green dealt as principal.
(2) Mr. Flavin was not in possession of price-sensitive information at the dates of the Share Sales.
(3) Therefore, the dealing was not unlawful under s. 108 and no civil liability to account arises under s. 109. However, I have concluded that, if the dealing was unlawful so as to give rise to a liability to account under s. 109, it would have been proper to treat the three corporate defendants, DCC, S&L and Lotus Green, as a single entity for the purposes of accounting for the profit accruing from dealing under s. 109. That conclusion is redundant because I have found that the dealing was not unlawful.