DCC chief executive Jim Flavin will begin his evidence today in the long-running action by Fyffes alleging insider dealing recording the €106 million sale of the DCC stake in the fruit company in February 2000.
The last witness on behalf of Fyffes gave evidence yesterday and the defence opens this morning with Mr Flavin as the first witness for the DCC side. It is likely his testimony and cross-examination will last several days.
The action, which opened in December, enters its 39th day today and is expected to run for several weeks more. Fyffes called 15 witnesses on its behalf, including chairman, Carl McCann, chief executive, David McCann, and several experts from Ireland, the US and the UK.
In its proceedings against DCC, Mr Flavin and two DCC subsidiaries, Fyffes claims the sale of the DCC stake in the fruit distributor over three days in February 2000 breached insider dealing provisions of the Companies Act 1990. The sale yielded profits of €85 million for DCC, and Fyffes claims it is entitled to that amount.
The defendants deny the claims and plead the share sales were properly organised by the Dutch-based DCC subsidiary, Lotus Green Limited. They also deny possession of price-sensitive information at the time of the share sales.
At the outset of yesterday's hearing, Ms Justice Laffoy upheld a claim by Fyffes that certain documents sought by DCC in the case were subject to legal advice privilege. Those documents related to correspondence between Fyffes and its lawyers over how it should respond to complaints by a former stockbroker and a substantial shareholder in Fyffes, Tom Cunningham, regarding the issuing by Fyffes of a profit warning on March 20th, 2000.
However, the judge also ruled that a draft response from Fyffes to Mr Cunningham was not a privileged document and should be made available to DCC.
The case then proceeded with Paul Gallagher SC, for Fyffes, informing the judge that his side had intended to call the retired Fyffes chairman, Neil McCann, to give evidence. However, Mr McCann (80) was not well and medical reports had been given to the defence regarding his condition, counsel said.
In light of those medical reports, Kevin Feeney SC, for DCC, on the express instructions of the DCC defendants, had taken the view it would not be appropriate to cross-examine Mr McCann and, in those circumstances, the Fyffes side was not calling Mr McCann as a witness, Mr Gallagher said.
He added that his side appreciated the approach adopted by DCC in this regard. He said Mr McCann's witness statement would now not be part of the evidence in the case.
Ms Justice Laffoy said that, having read the medical reports, she believed the approach adopted by DCC was appropriate.
Padraic O'Connor, an economist and former managing director of NCB group, was then called as the last witness for Fyffes.
He had prepared a report on the sale of the Fyffes shares in which he concluded that information available to the Fyffes board in January 2000, including Mr Flavin, was price sensitive in that, if it was generally available to the market, it was likely to have affected the Fyffes share price. The information related to the Fyffes trading performance for the first quarter of the fiscal year 2000 (beginning November 1999).
In his report, Mr O'Connor said nobody in possession of that information should have dealt in the company's shares. He said he would expect that a director who had such detailed information from inside the company would instinctively feel disbarred from dealing in the shares.
If the January 2000 information had become known to the market, he believed it would have shocked the market and led to a sharp fall in the Fyffes share price. He also believed that, if the information was known to the market at the time of the sale of the first tranche of the DCC stake on February 3rd, 2000, that sale could not have taken place. It would have been "totally impossible" to sell the shares, he believed.
Cross-examined by Mr Feeney, for DCC, Mr O'Connor agreed he was an economist and had never worked as a trader. He also agreed he was not told, when asked to address issues in the case for Fyffes, to confine himself to the documents that allegedly constituted the price-sensitive information - November management accounts and a December 1999 trading report, the latter including a forecast for January 2000.
He agreed that when Fyffes issued a profit warning on March 20th, 2000, the company had more information then than was available in January 2000. However, it was his view that Fyffes had enough information in January 2000 to have serious doubt about whether it could meet its half-year targets. The information showed it was some €15 million behind the same quarter for 1999.
A decision on when to issue a trading statement or profit warning was a matter of judgment for a company.
He also agreed that if a company's management has an expectation that its half or full-year targets will not be met, that expectation should be put before the board.
The case continues today.
