Exploration company TNG Ltd disclosed today that it faces a $2.1 million claim from the Commonwealth of Australia over a 10-year old dispute involving Kanowna Lights NL.
Exploration company TNG Ltd disclosed today that it faces a $2.1 million claim from the Commonwealth of Australia over a 10-year old dispute involving Kanowna Lights NL.
The dispute dates back to 1998, when the then management of TNG entered into unauthorised transactions that were meant to be reversed.
TNG chairman John Barr said the Commonwealth's claim would be vigorously defended.
The company's share price has slumped to 13.5 cents this week, down from 55 cents at which it completed a placement last November.
Full announcement below:
Davis Samuel Update
In the period September to December 1998 management of TNG Ltd (ASX: TNG) was held by interests associated with Davis Samuel Pty Ltd (Davis Samuel). Those nominees committed TNG to a series of transactions involving expenditure totalling $1,526,000. The transactions included the purchase of shares and options in Kanowna Lights NL (the Kanowna Securities).
The Australian Stock Exchange Ltd (ASX) ruled that the transactions required shareholder approval, and shareholders voted against approving the transactions.
In December 1998, TNG entered into a settlement agreement with Davis Samuel and its then defacto Directors which effectively provided for the repayment of the funds expended, and TNG would in turn transfer the Kanowna Securities.
The Commonwealth of Australia (the Commonwealth), in proceedings in the Supreme Court of the Australian Capital Territory, claims that it is entitled to a constructive trust over the Kanowna Securities and in 1999 obtained an injunction preventing TNG from selling or otherwise disposing of them. The Commonwealth has claimed that as constructive trustee, TNG is liable to account for the market value of the shares and interest on that market value.
Subsequently, in 1999 Davis Samuel purported to rescind the settlement agreement.
TNG, as a party to the proceedings instituted by the Commonwealth, has issued cross-claims against Davis Samuel and several other parties including Messrs Endresz, Cain, Forge, Muir and Clark.
There has been a considerable lapse of time since the proceedings were instigated and the current status of the matter has been routinely disclosed in TNG's financial statements since 1999.
The matter has now been listed for trial in Canberra commencing 10 June 2008 for three weeks, with the possibility of an additional five weeks of hearings in August/September.
TNG has retained Perth based solicitors, and Sydney based senior and junior counsel to vigorously defend both the Commonwealth claim; and pursue its cross claims.
TNG has twice previously sought to have the injunction preventing TNG from selling or otherwise disposing of the Kanowna Securities lifted. Both times the Commonwealth gave an undertaking to damages and if the case is decided in TNG's favour that undertaking will also be vigorously pursued.
At a directions hearing on 23 May, TNG sought and obtained a court order that the Commonwealth formally advise TNG of the amount of its claim against TNG. This advice was received in the evening of 30 May, and TNG sought and obtained a trading halt before the market opened on Monday 2 July 2008.
The Commonwealth claims that it is entitled to an amount of $2,146,687.29. This represents a claim of $1,274,400 for the Kanowna Shares and interest thereon since 23 October 2000. The value of the claim for the Kanowna Shares is based on a claimed average price in the short time frame between January and March 2000. This period was immediately prior the bust of the dot com boom. No claim is made in respect to the options which have since expired.
TNG believes that there are a number of substantive arguments against the existence of the constructive trust, and also the amount claimed by the Commonwealth. TNG will vigorously defend the Commonwealth claims however it is not possible to predict the likely outcome of the matter or the timing of an outcome.
Accordingly TNG advises that in the light of this matter (and the significant potential affect both in relation to the claim and the costs of defending the claim) that the Board will be reviewing all planned corporate and exploration activities for 2008/2009.
