Documents' significance 'would have been clear'

Analysis: Fyffes' David McCann says information would have had a negative impact on price if it had been published

Yesterday there was renewed discussion at the Fyffes/DCC trial as to whether a statement to the market from a plc should be accurate.

It is an indication of the type of issues which the trial is raising, that the answer to such a question could not be a simple yes.

In the case Fyffes is taking against Mr Jim Flavin, DCC, Fyffes is alleging that two documents given to Mr Flavin in his role as non-executive director of Fyffes in the two months preceding February 2000, constituted price sensitive information that should have prohibited him from dealing. DCC sold Fyffes shares worth €106 million in February 2000.

Responding to a question from Mr Kevin Feeney SC, for the defendants, on Tuesday, Fyffes chief executive Mr David McCann said he believed that if the documents had come into the hands of The Irish Times and had been published, this would have had a negative effect on the Fyffes share price.

This is the case in a nutshell and illustrates the key decision that will have to eventually be made by Ms Justice Mary Laffoy.

The documents at issue are of a few pages each. One is the November management accounts issued to directors in December 1999, and the other is the December management accounts, issued in late January 2000. The share sales by DCC began on February 3rd, 2000.

The documents showed depressing outturns or forecasts for November and December 1999 and January 2000. Mr McCann said the November outturn was the worst in Fyffes history and the November/ December figures combined were the worst outturn for a two-month period in the company's history.

For a man such as Mr Flavin, who had spent two decades on the Fyffes board, the import of the figures would have been very clear, Mr McCann said.

However Mr Feeney put it to Mr McCann that the documents, if they had come into the public domain, could not have had the effect Mr McCann was saying they would have.

This is because Fyffes issued its preliminary results for the year to end October 1999 on December 14th, 1999. With the results Fyffes issued an outlook statement for the coming year, stating it expected the year to be one of "further growth".

Mr Feeney said this statement was the considered view of the company's top executives at the time and was a view arrived at a time when the executives essentially had all the information that it is now being alleged was price sensitive.

In other words, the view was announced by the company taking into account the difficult trading in November and December. This would have been known to the market, and even if the November and December documents came into the public domain, the market would know that the company's outlook statement had been made after the negative November and December data had been taken into account.

Mr McCann did not agree. He said the information in the two documents could only be interpreted as meaning that Fyffes was "in serious trouble". However this did not mean Fyffes had put incorrect information into the market, he said.

"Could your non-executive directors believe what you said?" (in the outlook statement), asked Mr Feeney.

"The non-executive directors could accept the judgment we exercised," Mr McCann replied. He said the company felt it was too early, in December 1999 to make a statement as to its concerns for 2000.

The non-executive directors "would have known that the outlook statement did not reflect the situation then in existence".

The market, Mr McCann said, was "entitled to regard the statement as no more or no less than the formal statement from the company" in exercising its judgment.

The market would expect that not all information is revealed by a company.

Mr McCann said that if the two documents had become publicly available they would have been new facts available to the market, and new negative facts. This would have affected the share price. Fyffes would have been forced to clarify its position, he said.

If this assessment by Mr McCann is taken by Ms Justice Laffoy to be a correct assessment, it has serious implications for Mr Flavin.