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.
· 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.
· Due to an ongoing deficiency in the production of documents by Snorkel in the US Proceedings, it became necessary to move the trial scheduled for later this year to a five-week window that begins 7 March 2022.
· Ward Hadaway has sought to join Foulston Siefkin, the US based law firm who was also retained by the Company in 2013 to draft the documents governed by US law relating to the Contemplated Transaction, into the UK 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. As reported, despite the Board seeking to resolve the dispute amicably, Snorkel and Xtreme, by filing the Summons and Complaint, continued in their attempt to take ownership of Tanfield's 49% investment in Snorkel for an overall nil consideration, having not paid any consideration to Tanfield for Xtreme's acquisition of the initial 51% of the joint venture and purporting that no consideration is due to Tanfield before it can compel the Company to transfer its remaining 49% investment to Snorkel / Xtreme. 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 $45,476,730 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, claiming that there were no genuine issues of material fact (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, after a review and consideration of the record and the contract, 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, the parties had been producing documents as part of the ongoing discovery process and that despite the Board's best efforts to keep procedural matters to the agreed timetable, there had been delays relating to any meaningful productions of documents by Snorkel / Xtreme. As reported, while some progress had been made, despite receiving assurances that further document productions would be forthcoming, there remain deficiencies in the production of documents. Consequently, it became necessary to move the trial scheduled for later this year to a five-week window that begins 7 March 2022.
The Board continue to press for the deficient document production to be suitably completed so that the parties can proceed to the taking of depositions from those involved in the Contemplated Transaction. Due to the passage of time, and past assurances not being met, the Board believes they have exhausted all possible amicable remedies and therefore, should adequate progress not be made soon, they expect the next steps will be to seek the assistance of the court to resolve the deficiency. At this time, it is not expected that such steps would result in a requirement to delay the trial any further.
On 24 October 2019, the Company announced that it had been necessary to issue and serve a claim against Ward Hadaway 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 (or "the Firm") was Tanfield's appointed solicitor in 2013 at the time of the Contemplated Transaction, a position the 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 Firm at that time.
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 wholly or partly unsuccessful in the US Proceedings. If that were to happen, the UK Proceedings are, in summary, that Ward Hadaway were retained to advise and assist the Company in connection with the Contemplated Transaction, in particular the preparation of the Circular and the process of obtaining the required Shareholder and Board approvals before the Contemplated Transaction could be entered into, and that the Firm was negligent and/or acted in breach of contract in carrying out that role, the result of which has led to the Company suffering substantial financial loss.
As reported on 26 January 2021, the parties agreed to amend their respective statements of case. Having done so, Ward Hadaway has subsequently sought to join Foulston Siefkin, Tanfield's US based law firm in 2013, into the UK Proceedings. As a result of this development, the trial that was scheduled for later this year was vacated and, at this stage, it is not yet known when the trial will be re-listed.
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, and such an agreement was entered in to between the parties in 2019.
As Tanfield's US lawyer, and 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.
This week, Foulston Siefkin have applied to the English court seeking a stay of the proceedings until the completion of the related US Proceedings. At present, the outcome of Foulston Siefkin's application for a stay is unknown but, if successful, the UK Proceedings would pause until after the completion of the US Proceedings, at which point the UK Proceedings would resume through to trial. If unsuccessful, the UK Proceedings would continue in parallel with the US Proceedings and a new trial timetable would need to be agreed.
A future stage of the UK Proceedings will be the preparation of expert forensic 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 continue to believe that value to have been 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
WH Ireland Limited - Nominated Advisor / Broker
James Joyce / Lydia Zychowska 020 7220 1666