Letters 'ought to have been discovered'

Watching the legal profession putting the screws on witnesses on behalf of their clients can occasionally be uncomfortable to watch.

Yesterday, however, Mr Michael Cush SC, for DCC plc, was complaining about the actions of Arthur Cox, solicitors for Fyffes. The issue arose in relation to letters that came to light late last week.

He said that the letters "manifestly ought to have been discovered" during the discovery process that preceded the trial and "must always have been seen" as appropriate to the case.

Prior to the case, thousands of pages of documents were exchanged in response to specific categories of request. Mr Cush said Fyffes was saying the letters did not fall within the documents covered by a particular discovery request, category 13, but he believed they came under the provisions of two others, categories seven and eight.

An affidavit by Mr Conor McDonnell, of Arthur Cox, sworn yesterday morning, recounted how the letters were shown to him during the discovery process last year and he had agreed with the view expressed that they were not encompassed by category 13.

Mr Paul Gallagher SC, for Fyffes, said his side had not been put on notice that points in relation to categories seven and eight were to be made.

He contested the documents were not covered by seven and eight and said that, once the issue of the letters had arisen last week, he had been immediately instructed to say that Fyffes would produce the documents.

There had been a bona fides attempt to deal with the matter.

Ms Justice Mary Laffoy agreed with Mr Gallagher in relation to the issue of bona fides. However, she found the letters were covered by category eight.

She made the comment that, in relation to a core issue - whether information available to Mr Jim Flavin of DCC in February 2000 was price sensitive - there was a "fairly tight compact body of primary facts".

The letters that have now emerged contain a response from the former Fyffes chairman, Mr Neil McCann, to a disgruntled shareholder in the wake of Fyffes's profit warning of March 20th, 2000. The case has heard lots of evidence regarding the timing of the warning and whether it might have been made earlier.

The letter, Mr Cush said, downplays the importance of trading in November and December 1999 and places the uplift that Fyffes was hoping for or expecting in fiscal year 2000 in late January/ early February, rather than early January as had been suggested by some witnesses.

The failure of the uplift to arrive contributed to the decision to issue the warning.

The trial is not about whether Fyffes should have issued its profit warning earlier in 2000. However, DCC wishes to argue that the fact that the company did not issue such a statement until March 20th, 2000, corroborates its argument that the information Mr Flavin had in February 2000 was not price sensitive.

The precise time in January where the uplift was to occur can be seen as relevant to this issue.

DCC wants to argue that Fyffes's timing was spot on and that Fyffes didn't decide it couldn't make its half-year figures until the week beginning March 6th, 2000.

It wants to argue that the information Mr Flavin had in January 2000 concerning trading in November and December 1999 was not considered vital to Fyffe's prospects for the year and that's why it didn't lead to an earlier profit warning.

The management accounts for November and December 1999, received by Mr Flavin on two dates in January, nevertheless painted an unhappy picture.

The company was budgeting to make a profit of €84 million in fiscal year 2000.

In November 1999, the first month of fiscal year 2000, Fyffes lost €2.6 million.

Its budget drafted in October 1999 envisaged a €300,000 profit in November. The previous year Fyffes had made €6.7 million in November.

In December, the company lost €1.3 million, compared to a budget figure of breakeven, and a prior year profit of €3.3 million.

The December accounts were posted out on January 25th, 2000. The narrative accompanying the accounts said January was forecast to result in a profit of €1.3 million, compared to a budget figure of €5 million, and the prior year's profit of €6.3 million.

Price-sensitive information is confidential information which, if it became known, would be likely to materially alter a share price. A company has to issue a timely trading statement if it alters its expectations for the year.

The two issues can be related but are not identical. The months ahead will hear hours of evidence concerning both.