Smiles Inclusive takes founder Mike Timoney to court

Written on the 17 April 2019 by Business News Australia

Smiles Inclusive takes founder Mike Timoney to court

Divided dental company Smiles Inclusive (ASX: SIL) has commenced legal proceedings against beleaguered founder Mike Timoney (pictured) alleging serious misconduct and breaches of the law.

The action follows the substantial completion of an interim investigation into the conduct of the ousted former CEO who remains on the board along with former chair David Herlihy. 

The latter claims he resigned in late March protesting "ongoing abuse of good governance by the renegade directors".

The company has rejected Herlihy's claim and is seeking to remove both him and Timoney from the board, while the pair have also launched their attempt to remove new figures on the board including recently appointed chair David Usasz.

These competing agendas are scheduled to go head-to-head in an extraordinary general meeting (EGM) on 22 May to determine the board's fate.

In a joint statement released this morning, Herlihy and Timoney remained staunch against the board which has laid charges, reiterating their opposition to alleged "renegade" tactics.

"I resigned in protest at poor governance by the renegades," says Herlihy. 

"Following earlier unsuccessful trheats, the latest desperate tactic by the renegades is simply yet another attempt at intimidation designed to avert an EGM. We are not stopping."


"The renegades, using shareholders money, are out of control."


In the meantime Smiles Inclusive's leadership have had a tough time getting a hold of Timoney to discuss issues of importance, including details around a mobile dental clinic joint venture that has effectively collapsed

In its release yesterday, the group said it had written to Timoney to express its concerns about a number of specific matters and request a meeting with him on almost three days notice.

"Mr Timoney's lawyers responded saying that in light of the seriousness of the allegations they considered that it was unreasonable and inappropriate to require Mr Timoney to attend a meeting with this amount of notice," the company said in an announcement yesterday afternoon.

"Accordingly, the company has today commenced proceedings in the Supreme Court of Queensland in relation to unlawful payments and transactions procured by Mr Timoney.

"Mr David Herlihy, who was Chair of the Board during all relevant periods, has also been named as a defendant for his role approving the payments and transactions."

The company is seeking to recover losses from Timoney and his related parties, as well as Herlihy.

Court documents claim Timoney appropriated funds totaling $79,878 for his own alleged benefit between January 2017 and December 2018, predominantly for travel which Smiles Inclusive claims was for personal reasons, along with other transactions this year. 

Another defendant is Pink Diamond, an events management company whose sole director was Timoney's son James until February last year, followed by Timoney's wife Ildi Sanda Redak. This company allegedly invoiced Smiles Inclusive almost $200,000 for different events which Smiles alleges included mark-ups.

"Mr Timoney and Mr Herlihy will remain directors of the company unless they resign, are removed by shareholders, are banned from managing corporations by ASIC or a court, or otherwise vacate office under the Corporations Act 2001 (Cth) or the company's constitution," the group said in the ASX announcement.

In a written response given to Business News Australia, Timoney described the proceedings as "another attempt to avoid the ballot box", implying the board seeks to avoid holding a shareholder vote to remove certain directors.

"It is a further example of 1980s governance, a continuation of bully boy tactics and the threat issued by [Smiles Inclusive lawyer] Oliver Talbot on behalf of the renegade directors should I requisition an EGM," he said.

"Nothing will stop the EGM taking place on 22nd May 2019. We are focused on refreshing the board with proven business executives that the renegade directors have denied Smiles Inclusive shareholders the right to vote for."

However, a spokesperson from Smiles Inclusive told Business News Australia a notice of meeting was sent to shareholders today for the EGM to take place as planned. 

Timoney says none of the allegations are true, and regarding the notice of three days he claims the company contacted him on 5:30pm on a Friday requesting a meeting at 11am on the Monday.

"We wrote to them and we just said 'happy to answer your allegations. Could you please provide us with the documentation you obviously have and we'll happily meet up with you and discuss it?'," he claims.


"They're just pulling every trick they can to try and avoid going to the vote."


Timoney says his support from major shareholders and his own 16.7 per cent shareholding give him the confidence he will have enough support at the EGM.

"The theme is it's about bad corporate governance. At no stage have I suggested that I want to go back as the CEO I just don't want cronyism and people put in positions or kept in positions without talent or merit," he says.

He is also critical of the appointment of Tony McCormack as CEO, noting the executive's long-term friendship with chair David Usasz.

"He was brought in to write a report and to this date the company's never received the report, and then without any executive search or any consultation with the board, he was put into the CEO position," says Timoney. 

Shares in the Gold Coast-based company have plummeted over the past 12 months since listing on the ASX, with massive cuts to profit forecasts and a statutory loss of at least $500,000 expected this financial year.

This compares to the IPO prospectus' pro forma NPAT forecast of $5.8 million for FY18, and claims in August that NPAT would be at least $6 million in the current financial year.

Australian Aged Dental Care, which trades as Australian Mobile Dental Care and is one of Smiles Inclusive's partners in the Smiles OnSite joint venture, plans to pursue damages against the company over alleged profit loss to the tune of around $20 million. 

The disgruntled partner has also lodged proceedings against Smiles Inclusive with the Fair Work Commission over jobs that were lost following the joint venture. 

Related Stories: Sidelined JV partners weigh in on Smiles Inclusive board stoush

Smiles Inclusive all frowns as board decay sets in

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