DCC set up a Dutch-based subsidiary, Lotus Green, in 1995 to ensure tax savings of more than €8 million on the future disposal of its shareholding in Fyffes plc, the chief financial officer of DCC plc has told the High Court.

Based on the then prevailing market price for Fyffes shares, the potential tax saving of transferring beneficial ownership of the stake to Lotus Green was some £6.4 million or €8.4 million, Fergal O'Dwyer said.

He said DCC had received "critical advice" that all significant decisions regarding Lotus Green's activities had to be taken from 1995 by the board of directors of Lotus Green in the Netherlands and about the importance of demonstrating that the effective management and control of Lotus Green was in the Netherlands.

From then on, the board of DCC did not take any decision about nor give any directions to Lotus Green on its shareholding in Fyffes, he said. "There were times when I or we became obsessive about it but it was foremost in our minds," he said.

Mr O'Dwyer was beginning his evidence on the 50th day of proceedings in which Fyffes alleges "insider dealing" in connection with the €106 million sale of the DCC stake in Fyffes in February 2000.

The action is against DCC, DCC chief executive Mr Jim Flavin and two DCC subsidiaries - S & L Investments and Lotus Green. The defendants have denied the claims and plead the share sales were properly organised by Lotus Green.

Earlier yesterday, after 12 days in the witness box, Mr Flavin concluded his evidence. In re-examination, he told Kevin Feeney SC, for DCC that he believed he would have achieved a higher price had he negotiated the sale of the DCC stake in Fyffes.

He believed he could have achieved a price of €3.30 per share for the first tranche of the shares which were sold on February 3rd 2000 at € 3.20 each.

Mr Flavin also said he did not believe there was any doubt that Fyffes had known that management and control of the DCC stake in Fyffes was transferred in 1995 to a Dutch resident company.

He believed Fyffes was very clear about the purpose of the Dutch company.

Beginning his evidence, Mr O'Dwyer told Michael Cush SC, also for DCC, that he was a chartered accountant who had worked with PricewaterhouseCoopers and KPMG prior to joining the DCC group in 1989.

He co-ordinated the restructuring of the group from 1990 and was appointed to the board of DCC in February 2000. He was the group's chief financial officer, reporting to Mr Flavin.

Mr O'Dwyer said it was for tax reasons that DCC had decided in 1995 to transfer beneficial ownership of its stake in Fyffes to the Lotus Green subsidiary. Tax advice was received in both Ireland and the Netherlands.

In 1995, the Netherlands had a general exemption from capital gains tax (CGT), a participation exemption, he said. Such an exemption was not then available in Ireland or the UK. That situation had changed later and Ireland, the UK and other European countries had since introduced the exemption.

Mr Cush said it had been suggested by Fyffes that there was a certain unreality in having such a valuable asset of DCC's - the stake in Fyffes - controlled by a Dutch subsidiary of DCC.

Mr O'Dwyer said they would have received significant advice, particularly tax advice, at the time. It was a reasonably standard structure for Irish and UK groups with international operations, he said.

Mr Cush said it had also been suggested by Fyffes that the transfer of the beneficial ownership of the Fyffes stake, but not the legal ownership, was indicative of a retention of control by DCC over the Fyffes stake.

Mr O'Dwyer said that was not the case. He said it was foremost in the minds of DCC executives that all key decisions in relation to the Fyffes stake had to be made by the board of Lotus Green.

DCC had received advice that it would save some €300,000 on stamp duty if the Fyffes shares transfer was left at contract stage rather than executing a permanent stock transfer between DCC and Lotus Green. DCC was also advised it was critical for purposes of capital gains tax that the beneficial ownership of the shares pass to Lotus Green.

In the event, Mr O'Dwyer said a consideration on foot of the contract was paid but there was no stock transfer form. This achieved a cash saving of some €500,000.

Mr O'Dwyer said there was also a significant commercial motive for effecting the share transfer in this way. It was felt that registering the transfer of the Fyffes shares to Lotus Green, a Dutch resident company, would potentially place a "for sale" sign on the Fyffes shareholding. It was felt this would create an overhang in the market which would not be good for Fyffes, Lotus Green or the DCC group.

He also said that, up to about April 1998, the minutes of Lotus Green's board meetings were typed up in Amsterdam at ING Trust. However, due mainly to language difficulties, it was decided after a board meeting in April 1998 that the minutes would be typed in Dublin based on notes provided by Mr O'Dwyer.

The case continues today before Ms Justice Laffoy.