Fyffes was concerned about whether DCC was required to seek the approval of the Fyffes chairman for a scheme under which DCC transferred its shareholding in Fyffes in 1995 to an off-shore DCC subsidiary, the High Court heard yesterday.

DCC chief executive, Mr Jim Flavin, had told Mr Carl McCann of Fyffes that the purpose of the transfer was to avoid tax in the event of a sale of DCC's stake and Fyffes chairman's approval was never sought or granted.

Mr Carl McCann, now chairman of Fyffes, also told the court that Mr Flavin had "made a strong pitch" to be appointed vice-chairman of Fyffes in 1995, at which time Mr Carl McCann was nominated to succeed Mr Neil McCann as chairman.

Mr Flavin had suggested that DCC would consider its position as shareholders in Fyffes if he was not appointed. However, Mr Flavin was not appointed vice-chairman.

Mr Carl McCann yesterday began his evidence on the 20th day of proceedings by Fyffes against DCC, Mr Flavin and two wholly-owned DCC subsidiaries - S&L Investments Limited and Lotus Green Limited. Fyffes claims the sale of the DCC shareholding in Fyffes on three dates in February 2000 was organised by Mr Flavin and DCC in breach of insider dealing provisions of the Companies' Act.

The defendants deny the claims and plead the sales were properly organised by Lotus Green. They also deny possession of price-sensitive information at the time of the sales.

Yesterday, Mr Carl McCann said Fyffes (then FII plc) had in 1981 sold 25 per cent of its existing shares to new institutional shareholders. This was arranged by DCC, headed by Mr Flavin, and DCC was introduced to Fyffes by KPMG. DCC acquired a shareholding in Fyffes of about 9 per cent at that time.

Mr Flavin was appointed to the Fyffes board as the DCC nominee and remained on the board until February 2000. He came to board meetings well-prepared, and perhaps briefed by others, and demonstrated his expertise on many issues, including corporate finance and insider trading.

When the opportunity arose, he sought greater involvement by DCC in Fyffes' affairs.

When DCC became a public company in 1994, it went from being a shareholder to, in the very broadest sense, a competitor, Mr McCann said. Its relationship with Fyffes became more complex. It was never clear whether DCC was a holder or a seller or even a buyer of Fyffes shares and, with hindsight, it was all of those possibilities until it sold its stake in Fyffes in February 2000.

In an interview with Business and Finance magazine in May 1994, Mr Flavin had described his company's relationship with Fyffes as "excellent".

He had said they were on the board and "we are not passive partners".

Mr Flavin said he first became aware in 1995 of a possible transfer by DCC of its shareholding to a DCC subsidiary. In May 1995, Mr Flavin had casually mentioned over a lunch that he was considering transferring DCC's shareholding into an offshore company to avoid tax on a subsequent share sale if it ever arose.

Mr McCann said he had sent a note about this to Mr Neil McCann and to another Fyffes director, Mr Denis Bergin. In the note, Mr McCann said that transfer implies a "technical change" and it could require the chairman's consent and disclosure, which would be "self-defeating" to the Stock Exchange.

The note stated that perhaps Mr Flavin should seek the chairman's permission for such a change.

Mr McCann said Mr Flavin had told him that he had been advised the arrangement "had worth" and perhaps the McCanns should do the same thing. Mr McCann said he took advice on that suggestion, but was advised that such a scheme had no benefit for the McCanns.

On June 19th, 1995, he said Mr Flavin had phoned him seeking a waiver of any requirement to inform the chairman of the transfer of the DCC shareholding to the Dutch company. He said Mr Flavin had said he was advised there was no requirement to inform Fyffes.

Mr McCann said Fyffes felt the transaction might require Mr Flavin to inform the chairman in advance and possibly notify the Stock Exchange.

Fyffes took legal advice and got an initial opinion that there was an obligation to notify both Fyffes and the Stock Exchange.

He wrote to Mr Flavin to that effect on June 23rd, 1995.

A subsequent memorandum by Mr Neil McCann on the matter stated that Mr Flavin felt Mr Carl McCann was being difficult and that Mr Flavin had taken advice and had said the matter could not wait and was going ahead.

Mr Flavin confirmed to Mr Neil McCann that he, Mr Flavin, did not need to advise Mr McCann formally. Mr Neil McCann had said it would be helpful if a solicitor for DCC wrote to Fyffes' solicitors confirming everything was in order.

Another document recorded that a solicitor consulted by DCC had said he "technically" thought the solicitor consulted by Fyffes on the matter was correct, but he also thought DCC would go ahead.

Mr Carl McCann said the matter was not resolved and had faded away. No authorisation from Mr Neil McCann for the transfer of the DCC shareholding to Lotus Green was sought or granted.

Mr McCann also said there was ongoing disagreement between Fyffes and Mr Flavin over the issue of Mr Flavin's independence as a director of Fyffes. This had arisen in the 1980s and continued until the Fyffes board decided on December 22nd, 1999 that Mr Flavin could not be considered independent, given DCC's involvement in Fyffes and Mr Flavin's position with DCC.

Documents from the 1980s referred to Mr Flavin telling Mr Carl McCann that he had arranged for the Fyffes share price to rise on two consecutive days.

Mr Carl McCann had reported that to Mr Neil McCann.

Mr McCann said it was clear there were instances when Mr Flavin put the interests of DCC before those of Fyffes.

Mr McCann said he shared the Fyffes chairman's view that DCC came within the spirit of the Stock Exchange's Model Code in relation to dealings in Fyffes shares.

Around the time DCC was becoming a plc in late 1993, Mr Neil McCann had written to Mr Flavin, suggesting Fyffes might be interested in acquiring a 20 per cent holding in DCC.

Mr Flavin had replied that DCC favoured having smaller stakeholders rather than one big holder.

There was later an agreement that Fyffes would not buy the stake in question if DCC did not increase its holding in Fyffes.

In further evidence, Mr McCann told Mr Gallagher he denied a suggestion by lawyers for DCC that Fyffes had sought to control the sale of DCC's shareholding in Fyffes. He said Fyffes' concern was that any disposal of the shareholding should comply with the rules of the Stock Exchange.

There was also a concern about DCC acquiring "creeping control" of Fyffes and that, if DCC shares were sold, they could go to a Fyffes competitor.

Asked about alleged price sensitive information distributed to Fyffes directors in January 2000, Mr McCann said he believed information made available to the directors on January 26th was more detailed than information given to the Fyffes board on December 9th, 1999.

The case continues today before Ms Justice Laffoy.