Former Future Care owners serve Smiles Inclusive with statutory demand
10 October 2019, Written by Matt Ogg
Just one day after law firm Holding Redlich confirmed it had agreed to lead a class action process against Smiles Inclusive (ASX: SIL), it has been revealed the struggling dental empire now faces another legal battle.
The former owners of Sydney-based Future Care Dental Group (FCDG), who sold their business to Smiles in December last year for $1.1 million, have served the company with a statutory demand for payment of debt.
Arthur Bushell (pictured) and Christian Perez claim they are still owed $330,000 by the company.
In an affadavit accompanying the demand issued by Holding Redlich on behalf of the pair, Bushell said he believed there was "no genuine dispute about the existence or amount of the debt".
In response, Smiles Inclusive CEO Tony McCormack reiterates the amount claimed in Future Care's demand remains the subject of a legal dispute.
"Smiles Inclusive believes the demand is nothing more than an abuse of legal process to exert commercial pressure on the business," he says.
Discussion papers from 17 April obtained by Business News Australia show Deloitte raised concerns about an emergency liquidity issue at the Gold Coast-based dental group with an expected funding shortfall of $1.5 million by 10 May.
To address this issue, Deloitte noted Smiles would need to explore short term payment deferment levers.
It was around this time that Bushell received word from the Smiles executive claiming there was a dispute about the debt. Since then the ASX-listed group has been burning cash and has initiated a $3.3 million capital raising to stay afloat and execute its turnaround plan.
Perez alleges McCormack wrote to the Smiles board on 18 April asking for the "balance of purchase monies owing to FCMD [Future Care Mobile Dental]" of $330,000 due 21 April be briefly deferred until 1 May.
"Which part of his own words would Mr McCormack describe as misleading or deceptive? We sincerely hope Mr McCormack was not referring to us in his ambiguous press release of Tuesday," Perez says.
This comment refers to Smiles' announcement to the ASX that some parties were "sending misleading and deceptive information to shareholders and issuing media releases which deliberately misrepresent matters relating to the Company and its operations".
"All interested parties should treat these statements with extreme caution," the group said.
"The motivation of these parties is unknown at this time, but all indications are is that their intention is to see the company fail."
Perez says he and Bushell look forward to "collecting half of Smiles net proceeds from the rights issue" and moving on with their lives.
As at 25 September Smiles noted it owed $19 million to National Australia Bank (ASX: NAB).
"We are bitterly disappointed that a public company and its bankers, NAB, should act in such a heartless way," says Bushell, who claims the $330,000 payment will be due by the end of October.
"To Smiles and NAB we were simply collateral damage, roadkill, the easiest guys to dismiss in their hour of mutual desperate need."
Business News Australia
Author: Matt Ogg