DCC believes Fyffes dealings 'entirely lawful'

DCC told the Irish Stock Exchange that controversial share dealings in Fyffes in February 2000 were "entirely lawful and proper", the High Court heard yesterday. Fyffes has claimed the €106 million deals were unlawful and were organised by DCC and/or its chief executive Mr Jim Flavin, who allegedly had "price-sensitive" information on Fyffes.

In a letter to the exchange in July 2003, DCC also complained that the procedures adopted by the exchange when reporting to the Director of Public Prosecutions (DPP) on the deals were "lacking in natural justice" in that DCC was not made aware of the report before it was sent to the DPP.

DCC also complained that the legal proceedings initiated by Fyffes regarding the share deals were unjustified and inconsistent with Fyffes' own position.

It said that the statements and actions of Fyffes, its directors and senior management in January and February 2000 clearly demonstrated they did not believe Fyffes or its officers had price-sensitive information at that time, "regardless of anything they have said or alleged since in order to seek financial gain from DCC".

If Fyffes did believe such information was price-sensitive, then Fyffes itself had acted in breach of the stock exchange code and rules by not issuing a statement to the market and by permitting some directors to deal in shares in spring 2000, it was submitted.

Details of DCC's position regarding the share deals were outlined in documents read in court yesterday on the fifth day of proceedings by Fyffes against DCC plc; S&L Investments, of DCC House, Stillorgan, Co Dublin; Mr Flavin, of Shankill, Co Dublin; and Lotus Green Ltd, of Fitzwilton House, Wilton Place, Dublin, a subsidiary of DCC which owned 10 per cent of Fyffes.

Fyffes claims the defendants had price-sensitive and confidential information regarding Fyffes trading performance at the time of the share deals on dates from February 3rd to February 14th, 2000. It claims the deals were organised by Mr Flavin and constitute unlawful "insider deals" in breach of provisions of the Companies Act 1990.

The defendants deny those claims and plead that Lotus Green dealt in the shares and that Mr Flavin had no involvement other than passing on to Lotus Green unsolicited bids for the shares.

During his continuing opening of the case on behalf of Fyffes, Mr Paul Gallagher, SC, yesterday read a series of letters exchanged between solicitors for Fyffes and DCC during 2001 regarding the DCC share sale.

In letters from William Fry, solicitors for the DCC defendants, it was repeatedly stated that neither Mr Flavin nor DCC were involved in the deals, that the deals were conducted by Lotus Green and that no price-sensitive information was known to Mr Flavin prior to the share sales.

Letters from Arthur Cox, solicitors for Fyffes, expressed dissatisfaction with those replies and made repeated requests for further information.

Mr Gallagher also read a submission by the DCC board to the stock exchange entitled "Dealings by Lotus Green Limited in shares in Fyffes plc in February 2000".

In that submission, it was stated that Lotus Green had accepted an unsolicited offer from Davy Stockbrokers (on behalf of clients of both Davy and Goodbody Stockbrokers) for some 17.9 million shares in Fyffes on February 3rd, 2000, at €3.20 a share. It said Lotus Green also accepted unsolicited offers from Goodbody on behalf of clients for eight million shares at €3.60 a share on February 8th, 2000 and, on February 14th, 2000, accepted offers for some 5.27 million shares at €3.90 a share.

Each transaction was publicly announced to the stock exchange and press and, under the listing rules of the Irish Stock Exchange, Lotus Green's publicly listed parent company, DCC, was required to make the announcements.

DCC submitted the offers to buy the Fyffes stock were received at the height of the dotcom boom at a time when the market had been "carried away" with dotcom euphoria, a euphoria that extended to Fyffes which had just launched its worldoffruit.com venture.

DCC said that the Fyffes share register showed reductions for February 2000 in the registered shareholdings of seven listed directors of Fyffes Group Ireland Limited.

Under the "model code" of the stock exchange, the chairman of Fyffes could not have given the required clearance for any dealings by those executives if the company was in possession of price-sensitive information, it said.

If Fyffes had such price-sensitive information, it would have had to make a public announcement without delay under the stock exchange listing rules, DCC argued. Fyffes had made no such announcement at the time of the share sales.

DCC said that executive directors and other senior Fyffes executives had made extensive investor presentations to institutions immediately before and after the share sale of February 3rd, 2000. Those presentations had concentrated on worldoffruit.com and were a key factor in causing the unprecedented demand for Fyffes shares.

In those presentations, there would have been a particular duty of care on Fyffes to inform the market of any price-sensitive information given that Fyffes itself was encouraging a significant sale of its shares, DCC submitted. No such statement was made.

Mr Gallagher said Fyffes rejected the DCC account of how the deals were done and would be calling experts to show the information available to Mr Flavin was price sensitive.

They also rejected the defence claim that the worldoffruit.com performance was the dominant influence on the Fyffes share price in March 2000. The significant factor, he said, was the market's perception of Fyffes core business, which experienced difficulties from November 1999.

The case continues today before Ms Justice Laffoy.