REG - Tanfield Group PLC - Snorkel Legal Proceedings Update

TanfieldAnnouncement

31/01/2022 07:00

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RNS Number : 0454A  Tanfield Group PLC  31 January 2022

The information contained within this announcement is deemed by the Company to
constitute inside information under the Market Abuse Regulation (EU) No.
596/2014. Upon the publication of this announcement via a Regulatory
Information Service ("RIS"), this inside information is now considered to be
in the public domain

 

 

Tanfield Group Plc

("Tanfield" or the "Company")

 

Snorkel Legal Proceedings Update

 

 

The Board of Tanfield (the "Board") is pleased to update the market on its
investment in Snorkel International Holdings LLC ("Snorkel"), the aerial work
platform business.

 

Investment Background

 

·    Tanfield is a 49% shareholder in the equity of Snorkel following the
joint venture between the Company and Xtreme Manufacturing LLC ("Xtreme") (the
"Contemplated Transaction"), a company owned by Don Ahern of Ahern Rentals
Inc, relating to Snorkel, in October 2013.

 

·    The Snorkel investment is valued at £19.1m.  The outcome of the US
and UK Proceedings referenced below could have an impact on this valuation.

 

·    On 22 October 2019, the Company announced that it had received a
Summons and Complaint, filed in Nevada (the "US Proceedings") by subsidiaries
of Xtreme, relating to the Contemplated Transaction.

 

·    On 24 October 2019, the Company announced it had become necessary to
issue and serve a claim in the English High Court against Ward Hadaway (the
"UK Proceedings"), the solicitor acting for the Company at the time of the
Contemplated Transaction, in order to fully protect the Company's rights
pending the outcome of the US Proceedings.

 

·    On 26 February 2021, Ward Hadaway were granted permission to join
Foulston Siefkin LLP ("Foulston Siefkin"), Tanfield's US based law firm who
were retained in 2013 to draft the documents governed by US law relating to
the Contemplated Transaction, into the UK Proceedings in order to bring an
additional claim for contribution or indemnity against them.

 

Highlights

 

·    Due to the ongoing deficiency in the production of documents by
Snorkel in the US Proceedings still not being fully resolved, it has once
again become necessary to delay the trial.  At present, it is expected that
the trial window will not begin until August 2022 at the earliest.

 

·    As a result of Ward Hadaway joining Foulston Siefkin into the UK
Proceedings the Company, after taking advice, has recently amended its own
claim in the UK Proceedings to include Foulston Siefkin as a second defendant,
in order to ensure its position in those proceedings are fully protected.
This has had no impact on the trial date for the UK Proceeding which remains
set for November 2022.

 

US Proceedings

 

On 22 October 2019, the Company announced it had received a Summons and
Complaint in relation to the US Proceedings, regarding the purported call
option notice announced by the Company in November 2018, in which Snorkel and
Xtreme continued in their attempt to take ownership of Tanfield's 49%
investment in Snorkel for nil consideration, having not paid any consideration
to Tanfield for Xtreme's acquisition of the initial 51% of the joint
venture.  It is purported by Snorkel / Xtreme that no consideration is due to
Tanfield before they can compel the Company to transfer its remaining 49%
investment in Snorkel to them.  The Board notes that Snorkel / Xtreme make
this claim despite declaring in various K-1 US tax declarations that Tanfield,
via its subsidiary HBWP Inc, contributed properties with a net fair market
value of around $45.5m to Snorkel International Holdings LLC in October
2013.  The Board continues to believe that the contractual agreements require
that the preferred interest (valued at £19.1m) is paid prior to, or in
conjunction with, a call option notice.

 

On 30 March 2020, the Company announced that despite ongoing attempts to
resolve the dispute amicably, Snorkel and Xtreme filed a motion in favour of
their claims and against claims brought by Tanfield, without a trial (the
"Motion").  The Board vehemently disagreed with the Motion and believed that
it was without merit and subsequently, on 3 April 2020, the Company announced
that the judge took the Motion under advisement and the court determined that
there appear to be genuine issues of material fact pertaining to the contract,
its terms, and its execution and therefore the Motion brought by Snorkel and
Xtreme was denied.

 

As announced on 26 January 2021 and 20 May 2021, the parties had been
producing documents as part of the ongoing discovery process but despite the
Board's best efforts to keep procedural matters to the agreed timetable, there
had been delays relating to the production of documents by Snorkel / Xtreme.
Despite receiving assurances that all requested document productions would be
forthcoming, there remain deficiencies in the production of documents.
Consequently, it has recently became necessary to again move back the trial
window.  At present, it is expected that the trial window will not begin
until August 2022 at the earliest.

 

As announced on 24 August 2021, subpoenas were issued to third parties in an
attempt to obtain some of the missing documents by other means, which has
yielded some success.  The Board continue to press for the remaining
deficient document production to be fully completed so that the parties can
proceed without further delay through the remaining stages of the
proceedings.    As a result, the work to investigate historic margins,
which includes ensuring all related party transactions have taken place at an
arm's length basis, as previously reported on 24 August 2021, are ongoing.

 

UK Proceedings

 

On 24 October 2019, the Company announced that it had been necessary to issue
and serve a claim against Ward Hadaway (or "the UK Firm") in order to fully
protect the Company's rights pending the outcome of the US Proceedings and to
ensure the Company could hold Ward Hadaway to account for its role in and/or
advice in relation to the Contemplated Transaction if necessary.

 

Ward Hadaway was Tanfield's appointed solicitor in 2013 at the time of the
Contemplated Transaction, a position the UK Firm held from before the Company
was listed on to the Alternative Investment Market ("AIM") in 2000, through to
it becoming apparent in 2019 that a dispute between the Company and Ward
Hadaway was inevitable.  That dispute, and the subsequent UK Proceedings, was
crystalised as a result of the position taken by Ward Hadaway in opposition to
a proposed standstill agreement that would have fully protected the Company's
rights pending the outcome of the US Proceedings, without the need for a claim
to be brought against the UK Firm at that time.

 

On 26 February 2021, Ward Hadaway were granted permission to join Foulston
Siefkin (the "US Firm"), Tanfield's US based law firm who were retained in
2013 to draft the documents governed by US law relating to the Contemplated
Transaction, into the UK Proceedings in order to bring an additional claim for
contribution and/or indemnity against them.

 

Foulston Siefkin was, from at least 2007, Tanfield's US lawyer until it became
apparent in 2018 that a dispute with Snorkel / Xtreme was going to arise.
Unlike Ward Hadaway, Foulston Siefkin were amenable to agreeing a standstill
agreement that fully protected Tanfield's rights pending the outcome of the US
Proceedings, without the need for a claim to be brought against them at the
time the UK Proceedings commenced.

 

As the principal contracts in the Contemplated Transaction were to be governed
by the laws of the US state of Nevada, Foulston Siefkin were retained by the
Company in connection with all aspects of the Contemplated Transaction
governed by US law.

 

It is claimed by Ward Hadaway that, insofar as Tanfield establish that the
Circular was inaccurate, such an inaccuracy would be the fault of Foulston
Siefkin as the firm responsible for drafting the principal transaction
documents and for not ensuring that the Circular contained an accurate
description of those documents.  Also, insofar as Tanfield establish that the
terms of the principal transaction documents did not mirror the instructions
provided by Tanfield, in respect of the intended terms of those documents,
that as the party responsible for taking instructions from the Company, any
fault would be that of Foulston Siefkin.  Furthermore, it is claimed by Ward
Hadaway that it was the duty of Foulston Siefkin, and not Ward Hadaway, to
provide adequate advice to Tanfield in order to ensure that the Company, its
shareholders and its Board were fully informed and understood what the terms
of the Contemplated Transaction were.

 

 As a result of Ward Hadaway joining Foulston Siefkin into the UK
Proceedings, after taking advice, the Company has recently amended its claim
in the UK Proceedings to include Foulston Siefkin as a second defendant, in
order to ensure its position in those proceedings are fully protected.  This
has had no impact on the trial date for the UK Proceeding which remains set
for November 2022.

 

Whilst the Board vehemently deny the claims made by Snorkel and Xtreme in the
US Proceedings, a major part of the UK Proceedings is premised on the Company
being incorrect in relation to its understanding of the Contemplated
Transaction and the position it has taken in the US Proceedings.  If that
were the case, the UK Proceedings are now that, in summary, Ward Hadaway
and/or Foulston Siefkin were retained to advise and assist the Company in
connection with the Contemplated Transaction, in particular the preparation of
the principal transaction documents, the Circular and the process of obtaining
the required Shareholder and Board approvals before the Contemplated
Transaction could be entered into, and that both firms and/or either firm were
in breach of duty in carrying out that role, the result of which has led to
the Company suffering substantial financial loss.

 

A future stage of the UK Proceedings will be the preparation of expert
accountancy evidence which seeks to value the Snorkel division and assets
which were contributed to the joint venture as part of the Contemplated
Transaction.  The Board note that, in 2014, an appraisal report of the
tangible and intangible assets of Snorkel at the time of the Contemplated
Transaction was prepared for Xtreme, by an independent expert on a fair value
basis, which the Board understand was the basis for the $45.5m net fair market
value that Snorkel / Xtreme declared was contributed by Tanfield, via its
subsidiary HBWP Inc, to Snorkel International Holdings LLC.  This independent
expert report underpins the Board's continued belief that the value of the
Snorkel division at the time of the Contemplated Transaction was substantial.

 

The Board remain hopeful that a positive outcome to either/both the US
Proceedings and UK Proceedings is possible and, so far as it is necessary, the
Company will continue to vigorously defend and advance its position in both
proceedings, whilst continuing to seek advice.

 

Further updates will be provided to Shareholders as and when appropriate.

 

 

 

For further information:

 

Tanfield Group
Plc
020 7220 1666

Daryn
Robinson
 

 

WH Ireland Limited - Nominated Advisor / Broker

James Joyce / Megan
Liddell
020 7220 1666

 

 

 

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