An expressed wish of Fyffes deputy chairman Mr Carl McCann that DCC should withdraw from the fruit distributor was indicative of "a developing hostile attitude" by Fyffes to DCC, according to DCC chief executive Mr Jim Flavin.
Mr Flavin referred to the "hostile attitude" in a letter to the Fyffes chairman Mr Neil McCann in March 1998. The letter was among several opened to the High Court yesterday by Mr Paul Sreenan SC, for Fyffes, in the continuing action in which Fyffes alleges "insider dealing" by DCC and Mr Flavin in share sales totalling €106 million in February 2000.
Mr Sreenan read to the court a number of letters exchanged between Mr Flavin and Mr McCann from March 1998 regarding DCC's decision to opt for shares in Fyffes in lieu of a cash dividend.
In a fax message dated March 3rd, 1998, Mr McCann asked Mr Flavin to write to him seeking permission to accept shares and to also write requesting a waiver covering that transaction from an 1993 agreement between Fyffes and DCC not to increase the DCC shareholding in Fyffes.
Mr Flavin replied on March 6th, 1998, stating the DCC decision to opt for shares did not require permission "or an exchange of correspondence between us" and stating that DCC was not subject to the Irish Stock Exchange Model Code regarding its dealings in Fyffes shares.
Taking dividends in scrip form was exempt from the Model Code in any event, he added. He also said that the scrip dividend did not come within the 1993 agreement.
He added: "We are concerned that the recently expressed wish by Carl that we should withdraw from the company is indicative of a developing hostile attitude by Fyffes to DCC."
He said DCC would live up to the 1993 agreement "subject of course to Fyffes honouring its ongoing understandings and arrangements with DCC".
In his reply of March 20th, Mr Neil McCann said his March 3rd fax was not intended to cause difficulties and expressed the view that DCC came within the "spirit", if not the letter, of the Model Code, because of Mr Flavin's directorship of Fyffes and his pivotal role/directorship of DCC.
He also noted that other directors had followed procedures when taking up the scrip offer and commented that it was "reasonable" to put the request for a waiver from the 1993 agreement on paper.
Mr McCann wrote that he was "puzzled" about Mr Flavin's comments about the "developing hostile attitude".
He said it was true there was "a degree of feeling in Fyffes as a result of the Allied affair". He said that, for some time now, Mr Flavin had made clear that DCC was a seller of its holding in Fyffes, subject to price.
"We have no reason to be upset at such a decision as long as a disposal would take place in an orderly fashion."
He also noted that Mr Flavin had spoken about Fyffes performance being poor and about it having become "an embarrassment" to have to defend Fyffes at important semi-public meetings.
Mr McCann said Mr Flavin had made it clear that DCC was not a long-term player any more. "We felt this was bad for both of us as the market must perceive, to some extent, a serious overhang. We had no great wish to buy the DCC shareholding but we were prepared to try and do it."
On April 30th 1998, Mr Flavin replied stating that he was "authoritatively advised" that DCC did not come within the spirit of the Model Code. He said the decision-making process for the purchase or sale of shares by the DCC group in Fyffes "is not under my control".
He added that he was not even a member of the board of the company that would make any decision on the sale of the DCC shares in Fyffes. However, if it was possible for him to inform Mr McCann on any decision in advance of any dealing, he would do so.
He said he had believed it would have been possible, regarding DCC's intention to dispose of its shareholding, to strike a transaction with appeal for shareholders and the McCann family but this never got off the starting blocks and the opportunity "has probably passed".
He added that DCC was moving towards "the sale direction" largely because it believed its continuing involvement "no longer seems to have appeal for you". They would only sell if the price "fairly reflects the value of Fyffes".
He disagreed that the remarks about Fyffes attributed by Mr McCann to Mr Flavin in the March 20th letter did not reflect his (Mr Flavin's) view of Fyffes and said he had been a consistent defender of Fyffes. This had been difficult in 1997 as the share price had languished, he said. He concluded saying he had respect for Mr McCann's commitment to the business, drive and energy.
"If we are to exit (which is not my preference), I think we should do it with very good grace all around."
In a reply of May 5th, 1998, Mr McCann said he could only repeat that his advice was that DCC came within the spirit of the Model Code via Mr Flavin's directorship of Fyffes and pivotal role/directorship of DCC. Mr McCann said he wanted to put the matter to bed and suggested that perhaps the simplest thing was to ask the stock exchange for its guidance.
He also said he found it hard to accept that Mr Flavin, as chief executive of DCC, "could be in possession of inside information during a closed period or at any other time and yet DCC could trade in Fyffes shares".
In a letter that same day, Mr Flavin wrote to Mr Carl McCann stating he was advised that DCC was not and should not be asked to be bound by the Model Code.
In relation to sales of DCC's existing holding in Fyffes, Mr Flavin said: "I have already advised you that I am not even a member of the board of the company that would make a decision on such a sale of the group's shareholding. However, I believe it is almost certain that I will be informed of any decision of that board in relation to a share sale and I undertake to inform the chairman of any such decision."
