Justin Cameron and the company he co-founded, SurfStitch, today opened a public fight, trading blows over a now-disputed, and allegedly contrived, $20 million deal.
The company, in claims lodged in the District Court of Queensland, alleges “breaches of statutory and fiduciary duties” by Cameron, the former CEO.
Cameron, who has made no public statements since he resigned as CEO in March, today issued a written statement rejecting the allegations.
The claims and counter claims are central to legal proceedings by Coastalcomms, part of the Coastalwatch group, Australia’s largest network of surf cams and surf reports, which also has 10.4% stake in SurfStitch.
Coastalcomms is in dispute with SurStitch over a failed content and software agreement. When Cameron ran SurfStitch, his key push was to create or buy content to drive qualified sales leads to the company’s online store.
Not a lot is known about this deal which left a gaping hole in SurfStitch’s 2016 revenue, but it relates to the granting of a perpetual licence to Coastalcomms for the use the content of SurfStitch and its subsidiaries Garage Entertainment, Rolling Youth and MagicSeaweed.
The deal fell over for reasons not yet revealed and $20.3 million of revenue had to be reversed from the 2016 full year results.
Coastalcomms took SurfStitch to court seeking compensation. The corporate watchdog, ASIC, is also investing the deal.
In the defence amendments and counter-claims filed by SurfStitch in the District Court of Queensland, the company alleges Cameron caused the company to enter into a contract with Coastalcoms for the purpose of “inflating the revenue and profit” of SurfStitch.
The SurfStitch filings claim Coastalcoms and Three Crowns Investments, and their directors Kim Sundell and David Wooldridge, knowingly assisted “alleged breaches of statutory and fiduciary duties” by Cameron.
“Mr Cameron did not inform the board (of directors) of the full nature of the contractual scheme nor that the arrangements were contrived to boost revenue,” SurfStitch says in its claim lodged with the court.
However, Cameron strenuously denies the allegations and says SurfStitch did not put them to him before making the allegations public.
“SurfStitch’s own ASX release admits its allegations have not been proven or considered by the court,” according to a written statement from Cameron.
“SurfStitch makes its allegations in a commercial dispute over whether SurfStitch is liable to pay certain fees. Mr Cameron is not a party to that litigation.”
His statement says SurfStitch has not advised him that it proposes to make any claim against him.
“SurfStitch’s ASX release dated 9 June 2016 indicates the contracts in dispute took effect from 15 March 2016, which was after Mr Cameron left the company,” the statement says.
“Since his departure, there has been considerable speculation about Mr Cameron not speaking publicly. At the time, SurfStitch, through its lawyers, directed Mr Cameron not to give any disclosure in any form to any media outlet.”
Cameron is still a shareholder of SurfStitch.
SurfStitch in August announced a full year loss of $155.35 million. The company is forecasting single digit sales growth for 2017 while it restructures.
The company says the integration of companies acquired over the last year has been slower than anticipated and the benefits lower than expected. The company had been acquiring businesses, pursuing a strategy of buying content to attract customers online.
Potential suitors have been sniffing at the company since Cameron resigned in March. The surf wear retailer was started by Cameron and Lex Pedersen in Sydney’s northern beaches eight years ago.
In March, the company said it understood Cameron was pursuing a potential acquisition in conjunction with private equity. There has been no news on that since.
SurfStitch has since confirmed it’s received a “number” of unsolicited, non-binding and indicative expressions of interest, including one from Coastalwatch, the company behind the latest legal action.
Earlier today, SurfStitch announced it had sold its surfboard subsidiary, Surf Hardware International, acquired 12 months ago for $23.7 million, at a loss to investment company Gowing Bros Ltd for $17 million
SurfStitch shares are currently trading at 18 cents each, a long way from a high of $2.13 a little more than a year ago.