A former chairman of the Irish Stock Exchange, who is now the senior non-executive director of Fyffes, has told the High Court he believed information circulated in January 2000 to all Fyffes directors, including DCC chief executive Mr Jim Flavin, was price-sensitive and confidential and, furthermore, if released to the market, would have adversely affected Fyffes share price.
Mr Gerry Scanlan said he did not, in February 2000, consider himself free to deal in his 10,000 shares in Fyffes.
When he attended a board meeting on February 28th, 2000, he believed Fyffes would have "serious difficulty" in reaching its budget targets for that fiscal year and believed those targets were "out of sight". He could not say whether he formed that view on the basis of the January information alone or if his view was also influenced by information circulated to directors prior to the February 28th meeting.
He agreed that information which he received in early January 2000 - Fyffes' management accounts for November 1999 - painted a picture consistent with information he was given at a December 9th, 1999, board meeting about the company's trading. He said there was a "further adverse variance" but this was "nothing undue and nothing to get excited about".
Mr Scanlan also said he understood that Fyffes shareholders would perceive from both an outlook statement by Fyffes of December 14th, 1999, predicting that 2000 would be a year of growth, and from a Fyffes chairman's statement to the same effect, dated January 31st 1999, that there was no change as of the end of January in the company's expectations for 2000.
He agreed there was a history in Fyffes of the overall budget being achieved despite being involved in a volatile business.
Mr Scanlan, also a former chairman of AIB, was giving evidence on the 26th day of proceedings in which Fyffes alleges DCC and Mr Flavin breached "insider-dealing" provisions of the Companies Acts in the €106 million sale of shares in Fyffes over three days in February 2000. The defendants - DCC, Mr Flavin and two DCC subsidiaries - deny the claims.
In evidence yesterday, Mr Scanlan told Mr Brian Murray SC, for Fyffes, that he and Mr Flavin, as members of the Fyffes Compensation Committee, had on January 25th, 2000, approved a list of people to whom share options could be issued. There was a sense of urgency as the options had to be issued before January 26th, 2000.
Mr Scanlan also said that, having studied board papers in advance of a board meeting on February 28th, 2000, and after hearing a presentation from management on the trading performance, he had concluded the likelihood of Fyffes achieving its budget for the first half of the fiscal year 2000 was non-existent. His view was based on actual results for November, December and January and on figures for the second quarter of 2000. The hoped-for turnaround in the UK market had not happened and there was no mom-entum for improvement that would generate the levels of business hoped for.
He said the budget for the year had set profit targets of between €32 million and €33 million to be achieved in the second quarter (February to April, 2000). The best second-quarter performance in preceding years was about €20-€22 million and it was his view there was no possibility to achieve the turnaround necessary to get anywhere near the projected figures.
Cross-examined by Mr Kevin Feeney SC, for DCC, Mr Scanlan agreed that, as a non-executive director of a company, he would expect issues about the company's performance or any changes in expectation for that performance to be brought to the attention of directors.
His expectations for Fyffes performance in the fiscal year 2000 (beginning November 1999) changed when he saw the December trading statement. He was not sure exactly when he saw the statement. He was also not sure if his view changed due to the information in it alone or was due to a combination of the information in it and in a board pack prepared for the February 28th board meeting. He would assume company executives would be able to glean the same information from the December trading statement as he had.
Fyffes chief executive, Mr David McCann, told the February 28th board meeting he hoped the company could match its 1999 half-year performance and that he also hoped for a positive outcome from legal cases Fyffes was then involved in to help meet its financial targets.
Mr Scanlan said it was his view it would be very difficult to attain the 2000 half-year target.
However, he had also believed in 1997 that Fyffes would not meet its half-year targets and he and Mr Flavin had advised in 1997 that a trading statement should be issued, which was done. That had led to a fall in the Fyffes share price and, in the event, the company had met its targets.
Against that background, he believed in February 2000 that the management, which had a history of getting things right, should have time to review the situation and the figures. In that context, he believed the timing of a trading statement on March 20th 2000 was appropriate.
He could not recall if he had discussed the trading figures with Fyffes executives prior to February 28th but he would have had regular phone conversations with the chairman, Mr Carl McCann. He recalled that Mr McCann had been "very exercised" about the sale by DCC of part of its Fyffes stake on February 3rd, 2000, and had said: "Jim can't do this."
The sale of the DCC stake was a big topic of discussion among directors and on the fringes of board meetings. He could not recall what directors were involved in such discussions. He was aware lawyers were involved.
Mr Scanlan could not recall any formal board discussion before June 2000 about whether Mr Flavin had price-sensitive information at the time of the share sales.
The case resumes on Tuesday before Ms Justice Laffoy.
