Who's suing whom: Writs against Geest claim pounds 48m damages
Monday 10 August 1998
The writs were issued by the purchasers, a joint venture between Dublin- based Fyffes and the Windward Islands Banana Development and Exporting Company (Wibdeco) via their solicitors S J Berwin.
Geest claimed that the writs may be a response to its own legal action it launched against Fyffes last December concerning the same deal.
Geest's lawyers are Baker & Mackenzie.
The latest lawsuits represent an escalation in the dispute between Geest and Fyffes over the pounds 147.5m sale in January 1996 of Geest's banana interests and two transport ships to the joint venture. Fyffes subsequently sold the main part of Geest's former banana business, a 2,800 hectare farm in Costa Rica, for $14m.
Carl McCann, deputy chairman of Fyffes, and Bernard Cornibert, managing director of Wibdeco in the UK, issued a joint statement last Thursday along with their writs: "This has been a considered decision, following a detailed review of information which was not available to us at the time of the acquisition, and which revealed a couple of skeletons".
The first writ demands pounds 33.7m in damages. The writ alleges that Geest had not disclosed the existence of soil surveys showing that the Costa Rican Banana Farm could not sustain its rate of production. The writ also claims that Geest had not carried the consequences of these surveys through into its balance sheet.
"Accordingly, the value of the Farm was significantly over-stated - by US$56.5 million - in Geest's accounts; we have been advised that this was in breach of company law and accountancy practice," the writ claims.
Secondly, Fyffes and Wibdeco allege that Geest and its financial advisers, Morgan Grenfell, had told them that "another purchaser was in the frame at a comparable price. They had maintained that representation even when specifically challenged."
This price had effectively set the eventual sale price, the joint venture parties said. "In fact, as Geest's lawyers have effectively admitted in correspondence, the competing offer was in headline terms pounds 14.5 million lower", they added.
Geest hit back with its own statement on Thursday. Geest said it had launched its own writ against the joint venture last December over a financing agreement for the two transport ships which had formed part of the 1996 deal.
The financing agreement required that Fyffes made certain payments into an escrow account, and Geest claimed the joint venture had ceased to do so. Geets's legal claim is due to be heard in court on 23 September.
Ian Menzies-Gow, Geest's chairman, commented: "We have made a valid claim against Fyffes for reneging on an earlier agreement with regard to payments into an escrow account. Given Fyffes had already made payments into this account, it is odd that they have now made a U-turn."
"Indeed, not only have they U-turned, but we have received claims relating to a deal with took place some 21/2years ago. Why have they only now found problems with this deal?"
Mr Menzies-Gow continued: "Whatever their reasons, they can expect a vigorous response to their claims which are mischievous at best and ill- conceived at worst."
Geest made a number of other points in its statement. The company said that "the joint venture's claim in July 1997 was received two days before the warranty period ran out on a transaction that took place 18 months before."
Also, "Fyffes disposed of the banana plantation assets on 1 March 1996, within two months of acquiring the business, but only made a claim relating to this business some 16 months after the dipsosal."
The staement added: "In December 1996, on settlement of an outstanding issue relating to working capital, Fyffes's deputy chairman specifically stated that, excepting the ships, there were no other issues to be resolved with Geest."
The statement concluded that "the audited accounts for the newly-purchased banana business were approved and signed-off by the directors of the joint venture in April 1997, including the now disputed values for the plantation assets. Geest's request nearly a year ago for further information to support the joint venture's claim remains unanswered."
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