Rebel shareholders win right to bring former Smiles Inclusive bosses to court for questioning

The calamitous $91m decay of an ASX-listed Gold Coast dental chain is set to be picked apart in the Federal Court, thanks to a stunning legal precedent. Here’s what it means

The calamitous $91m decay of an ASX-listed Gold Coast dental chain is set to be picked apart in the Federal Court, thanks to a stunning legal precedent.

Six former directors and executives of Smiles Inclusive, and its subsidiary Totally Smiles, have been summoned to appear in court after ASIC granted a public examination by two shareholders.

Dentists John Camacho and Arthur Walsh, who were among scores of dentists who sold their practices to Smiles and then reinvested much of the proceeds back into the company, say their quest to get to the bottom of the company’s decay would “leave no stone unturned”.

Those summoned include former chairman David Usasz, former directors Peter Evans and Peter Fuller, former CFO Emma Corcoran, former CEO Tony McCormack and another former CEO, Michelle Aquilina.

Former Smiles Inclusive chairman David Usasz.

Former director Dr Peter Fuller.

There are no allegations of wrongdoing by those called to appear in court.

The proceeding will allow the dentists to ask questions about what happened behind the scenes as Smiles Inclusive plummeted from hero to zero in a few short years.

The former Burleigh Heads-based company, once valued at $60m, suffered a disastrous two and a half years listed on the ASX where the share price plummeted from $1 to as low as 3.4c.

It listed in 2018 after raising $35m, with initial major investors including Federal MP Stuart Robert.

Although the IPO was an oversubscribed success story, Smiles swiftly fell victim to board infighting, the departure of key executives, profit downgrades and a crippling debt burden.

Among the company’s many troubles was court action by ASIC, lawsuits,suspension from the ASX, the sudden death of a dentist and a fine for administering radiation without a licence – and that was before Covid-19 arrived and shut down practices.

Former Totally Smiles CEO Michelle Aquilina.

Shareholder Dr John Camacho.

Smiles couldn’t repay debts of $19.1m owed to NAB, and went into administration in late 2020 owing dentists and joint-venture partners $47m.

It entered a deed of company arrangement with Exit Solutions in June 2021 and creditors voted to place its wholly owned subsidiary, Totally Smiles, into liquidation.

Totally Smiles had debts over $91m when it collapsed, with Deloitte liquidator Tim Heenan finding possible insolvent trading and unfair preference payments.

Genesis Capital took control of the flailing company and formed General Dental Holdings, which continues to trade as Totally Smiles and operates a relatively modest nine practices.

The examination was granted in the wake of a High Court decision, in the case of Walton v Arrium, which has effectively widened the powers of courts to compel company directors to appear for examination by private parties – including shareholders and creditors.

The directors have been summonsed to the Federal Court.

Dr Camacho, who sold two practices to Smiles Inclusive before its 2018 listing, and reinvested 40 per cent of proceeds back into the firm, said the examination would help him build a case for recovering funds from “a range of parties via multiple avenues”.

He said the pair intended to file more summonses for examination and that he intended to probe those summonsed on numerous issues including the Smiles IPO, continuous disclosure, possible insolvent trading, loan documents, audits and the role and independence of key advisers.

Dr Walsh said further summonses would go to bankers, stockbrokers, professional advisers and other former Smiles Officers.

“We will leave no stone unturned.”

The public examination is scheduled for June 5-9.