Financial services firm Austock Group (Austock) has sought legal advice after receiving a letter of demand from the founder of ABC Learning Centres (ABC) over an alleged failed investment.
In the letter to the listed company, former ABC chief executive Edmund Groves alleges that on 27 February 2008 he gave an order to Austock to sell around 5 million company shares at market price. Groves alleges Austock did not execute the order, leaving him suffering multi-million dollar losses.
"The losses claimed by Mr Groves (including consequential losses of $5.5 million on the subsequent sale of his private helicopter and luxury yacht in September 2009) amount to $10 million," an Austock company statement said.
"Austock is seeking external legal advice before responding to the claim. Mr Groves has not yet issued legal proceedings."
According to the company's full year results, Austock, through its Austock Childcare Fund, leased a total of 519 childcare properties to ABC.
In November 2008, ABC was placed in receivership effectively freezing the rights of the funds and threatening the fund's income and capital structure profile.
"In order to meet financing covenants and minimise loss of rental income, properties no longer generating revenue and some non-ABC operating centres were either sold or leased to new tenants," the results said.
Late last month, Austock posted another full-year loss amid difficult market conditions.
The company incurred a net loss after tax of $5.8 million for the year ended June 2010, following a $20.9 million deficit in the prior corresponding period.
Austock's revenue declined 11.3 per cent to $35.5 million.
