Availability of insight is central issue

Mr Michael Cush SC, counsel for DCC, put forward some propositions concerning price-sensitive information yesterday.

He said the task for the court was to assess how the market would have reacted on certain dates if particular information had become available in the particular context that then existed.

These dates are the dates in February 2000 when DCC traded in Fyffes shares.

The allegedly price-sensitive information was contained in the Fyffes management accounts for November and December 2000, which were given to DCC's chief executive, Mr Jim Flavin, in his capacity as non-executive director of Fyffes, on dates in January 2000.

Mr Cush said there were three categories of information that needed to be considered. These were the information already in the marketplace in February 2000; the allegedly price-sensitive information; and information of which the market remained unaware, and which was not contained in the allegedly price-sensitive material.

This latter point would seem to encompass information or insight that would be available to Mr Flavin by way of his deep knowledge of the Fyffes business, but was not contained in the accounts that are alleged to have been price-sensitive.

In other words, you can't throw all the insight available to Mr Flavin into the pot when deciding how the market might have reacted to the particular, allegedly price-sensitive information he had in his possession.

In the cross-examination of Mr Jim Tolan, corporate development director of Fyffes, the issue of whether Fyffes believed in early 2000 that it would make increased profits in that year was returned to.

If the company did believe that, then how could it argue that company accounts for November and December 1999 which were available to Mr Flavin painted such a dire picture of Fyffes' prospects for the year?

Mr Cush said the picture painted in the two documents was not as bleak as the picture outlined to the board on December 9th, when it decided to issue an outlook statement for 2000 that expressed a belief there would be further growth.

Mr Tolan did not agree, saying the information available in January 2000 was more solid. He said the statement issued in December 1999 was an honest one. The outlook statement for 2000 was issued on December 14th, 1999, when Fyffes was only a few weeks into its financial year. It was too early to call the year. Fyffes was still hopeful of making up the losses that had by then occurred, he said.

Mr Cush read a number of analysts' reports from the period prior to the controversial DCC trades, to make the point that the market knew that Fyffes was experiencing trading difficulties.

Mr Tolan said some analysts might have raised the difficulties that existed in the banana market, but they did not have precise figures. When Mr Tolan said the analysts had an understanding that trading might be difficult, but they had not changed their predictions that Fyffes would produce year-on-year profit growth in 2000, Mr Cush countered that this was because the market did not consider that Fyffes' difficulties in the first quarter were significant.

Yet the information Mr Flavin had, and which it is now being alleged was price-sensitive, concerned trading in the first quarter, Mr Cush said.

And so it went. Overall, the case is illustrating the pressure that exists on plcs to produce year-on-year growth. The market did not know that €19 million of the profits Fyffes made in the year to end October 1999 came from non-recurring items.

Nor did it know that during 1999 the critical British banana business had contributed €16 million less in profits than the previous year, with €13 million of this shortfall in the second half of the year. Yet the company produced a "realistic and attainable budget" in October 1999 for the production of an increased profit of €84 million in the 2000 year.

By the time the board was issuing its December 1999 outlook statement, the figures were already €9 million behind the previous year. By end January the company was €14 million behind the previous year's first quarter. In February, DCC traded.

The case has moved to a courtroom in Bow Street. Ms Justice Mary Laffoy has said that if there is no let-up in the accumulation of documentation, she will have to move to Croke Park.