The actions of Fyffes directors before and after the controversial sale of a 10.2 per cent stake in Fyffes by DCC two years ago are irrelevant to the core issue of insider trading, sources close to the fruit distribution firm have told The Irish Times.

DCC and its chief executive, Mr Jim Flavin, are expected to base a substantial portion of their defence against the claims of insider trading on the actions of the Fyffes chairman, Mr Neil McCann, and other directors during that crucial period in January and February 2000.

In particular, DCC is expected to question why, if Fyffes believed there was price-sensitive information that should have been communicated to the market, the company actively encouraged DCC to sell the balance of its shares after the initial sale of half its holding on February 3rd, 2000.

DCC will also claim that if Fyffes believed there was price-sensitive information, why was its executive director Mr John Ellis given permission by the board to sell 45,000 Fyffes shares on January 26th, 2000 - a week before the first sale of shares by DCC.

DCC will also point to the annual report statement by Mr McCann, dated January 31st, 2000, where he referred to 2000 being "another year of further growth" with no reference made to the difficult trading in the first quarter ending January 2000.

DCC will also ask why, if Fyffes believed there was price-sensitive information the company's directors embarked on a round of institutional presentations before and after the first share sale on February 3rd, 2000, without making that price-sensitive information available to those institutions. But sources close to Fyffes rejected DCC's counter-allegations and said: "Those issues are irrelevant to this action. The core issue is did Jim Flavin have price-sensitive information. He seems not to be disputing that he had information [Fyffes management accounts for November-December 1999], so the question is whether that information is price-sensitive and likely to influence the market. The other core issue is did he influence trading in the shares."

Mr Flavin has said he did not communicate details of Fyffes' financial position to Lotus Green, DCC's Dutch subsidiary that had sole authority over DCC's holding in Fyffes and that approaches from stockbrokers about selling the Fyffes shares were referred directly to Lotus Green.

It is expected that the three Dutch directors of Lotus Green will testify that Mr Flavin did not supply them with price-sensitive information and did not urge them to sell the Fyffes shares. For its part, Fyffes is expected to scrutinise the supposed "arms-length" arrangement between DCC and Lotus Green.

On the sale of shares by Mr Ellis a week before the sale of the first tranche of Fyffes share by DCC, the source close to Fyffes said: "The core issue is not whether other Fyffes directors sold shares. That's irrelevant to this case. It's about Jim Flavin and DCC."

Yesterday, events in the High Court have put into motion the civil action against DCC, Mr Flavin and two DCC subsidiaries, Lotus Green and S&L Investments.

None of the central characters was present, and the proceedings simply involved Fyffes' barrister Mr Paul Gallagher SC obtaining the court's permission to serve a plenary summons and statement of claim against the four defendants. The next phase of the action will probably involve both parties in motions for discovery of documents and this phase is likely to take many months.

Bar a settlement - seen as highly unlikely given the personalised nature of the action by Fyffes and the counter-allegations by DCC - a formal High Court hearing is unlikely before mid-2003 at the earliest.

The civil action hearing could also be delayed if a criminal action results from the Garda Bureau of Fraud Investigation's investigation of the share dealings by DCC. Criminal proceedings would take precedence over a civil action.

Most analysts have refrained from making any substantive comments on the Fyffes/DCC affair and the two brokers involved in selling the shares for DCC, Davy and Goodbody, have made no statement.

Neither is likely to comment given that brokers with the two firms are likely to be called as witnesses when the hearing begins.

Fyffes is being represented in the High Court proceedings by Mr Dermot Gleeson and Mr Paul Gallagher SC.

DCC and Mr Flavin are represented by Mr Michael Collins SC and Mr Michael Cush SC. Arthur Cox is representing Fyffes while William Fry represents DCC and Mr Flavin.