New twist in Country Road case

CR_250Sacked Country Road chief executive John Cheston tried to mount a management buyout of the fashion chain, the company has alleged.

As reported in Fairfax media outlets, Cheston’s actions were an attempt to ”undermine” the owner, the South African group Woolworths, Country Road said in Federal Court papers. The South African company has no connection with Woolworths in Australia.

Country Road’s defence, filed last week, denies allegations by Cheston of interference and corporate misconduct. Cheston is seeking $6.5 million in compensation after being sacked after only nine weeks in the job.

Country Road claims he was ”guilty of misconduct” and has suffered no damage because he has a new job as chief executive of Webster Holdings.

Cheston’s solicitor, Henry Skene of Arnold Bloch Leibler, said Country Road’s defence was ”selective and inaccurate, and includes allegations that are untrue. The portrayal of Mr Cheston’s conduct is wrong and will not withstand scrutiny,” he said, adding Cheston would ”vigorously contest the allegations”.

Country Road has alleged Cheston first raised the prospect of a management buyout on August 2 during a dinner with a fellow director, Norman Thomson, and the chief financial officer, David Thomas.

He told Thomson Woolworths’ investment ”made no sense” and he would ”initiate a management buyout and would make an offer of $4 per share,” the company alleges. During a drunken conversation with Thomson later that night, Cheston allegedly complained about the management style of Country Road’s former boss Ian Moir, who now heads Woolworths in South Africa.

Cheston allegedly asked Thomson if he would like to make $10 million over four years as part of a new business ”involving the introduction of two new brands into Australia”, to be set up in a year’s time. Moir and the Country Road chairman, Simon Susman, ”confronted” Cheston about his behaviour two days later, the company says.

”Cheston began to cry and told Moir that he had been an idiot, that his behaviour was unacceptable, inappropriate and unprofessional and that it was absolutely wrong for him to have made the comments that he had made,” Country Road alleges.

The meeting was followed by a warning letter the next day in which Moir accused Cheston of making adverse comments about his leadership.

Later Cheston allegedly again floated the idea of Woolworths selling out of Country Road. He was sacked soon after.

The case is to go to mediation before a Federal Court registrar on March 23.

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