Australian Turf Club Ltd v Racing NSW

Representation: Counsel: S Robertson SC/P Afshar/M Pulsford (Plaintiff)
O Jones SC (Defendant)
Solicitors: Johnson Winter Slattery (Plaintiff)
Yeldham Price O'Brien Lusk (Defendant)

File Number(s): 2025/486733

Publication restriction: Nil

EX TEMPORE JUDGMENT (REVISED)

Summary

1. Two minutes' walk from this court complex is Sydney's Hyde Park. A colonist standing on this site 215 years ago looking south would have had an uninterrupted view of the Hyde Park racetrack, where Sydney's first official horse race was run in October 1810. Shortly before the race week, Governor Macquarie passed regulations prohibiting "gaming, drunkenness, swearing, quarrelling, fighting or boxing taking place on or near the race ground". Hospitality did not play the integral part in racing that it does today, because the sale of "any wine, liquor, or beer" was also prohibited (State Library of NSW, Dictionary of Sydney, online ed, accessed 19 December 2025).

2. This short historical introduction serves to orient the present dispute in its historical and cultural context in two respects. First, racing has been central to Australian life since the earliest days of European settlement. It has been, and continues to be, a matter of great public interest in both the colloquial and legal sense. Second, in this country, regulation by government has been the inevitable companion of racing.

3. The plaintiff, Australian Turf Club Ltd, owns and operates four major racecourses and a bowling club in this city. It was represented by Mr S Robertson of Senior Counsel, with Mr P Afshar of Counsel and Mr M Pulsford of Counsel. The first defendant, Racing NSW, is the regulator of racing in this state in accordance with the Thoroughbred Racing Act 1996 (NSW). It was represented by Mr O Jones of Senior Counsel.

4. The Club is a "race club" registered as such by Racing NSW under the Act. On 15 December 2025, Racing NSW informed the Club that Racing NSW had appointed the second defendant, Mr Morgan Kelly, as administrator to "conduct the affairs" of the Club pursuant to s 14(2)(g) of the Act. While he has been served with these proceedings, there has not yet been an appearance for Mr Kelly. The other parties' expectation is that he will in due course file a submitting appearance.

5. By its summons filed later on 15 December 2025, the Club challenges the validity of Mr Kelly's appointment.

6. Mr Kelly's purported appointment was stayed on 16 December 2025 by Justice Slattery sitting as duty judge to give a short period of time for the parties to prepare for a hearing on whether the stay should be continued on an interlocutory basis pending a final hearing. It is that dispute which I have heard yesterday and this morning. Justice Slattery's stay was up to 3pm yesterday. At the outset of the hearing I extended the stay until further order for the purposes of the hearing.

7. For the reasons which follow, the Court will continue the stay until the final determination of the summons.

Matters not in dispute

8. There were five matters not in dispute.

9. Racing NSW accepted that the summons raises a serious question to be tried, such that whether or not the stay should be continued turned on the balance of convenience. Subject to what I record in [9(2)] below, there were no submissions addressed to the strength of the Club's case at the final hearing.

10. The Club's case is in the nature of an administrative law challenge: it contends that on the proper construction of the Act, Mr Kelly's purported appointment was beyond Racing NSW's power and will also rely on arguments about improper purpose and irrelevant considerations. This means that neither at this interlocutory hearing nor at the final hearing is the Court concerned with the merits of the decision to make the purported appointment.

11. The Court is able to offer the parties a final hearing in the Expedition List on 19 and 20 February 2026.

12. Racing NSW has rejected as inadequate these undertaking****s proffered by the Club as a condition of the extension of the stay:

“1. The u****sual undertaking as to damages.

2. An undertaking [b****usiness undertaking] not to do any of the following without the written consent of Racing NSW or leave of the Court:

(a) not to enter into, terminate or materially amend any contract other than in the ordinary and proper course of its business.

(b) terminate, appoint or materially alter the terms of employment of any member of the senior management of the Plaintiff.”

5. For the purposes of assessing the balance of convenience, the focus of the Court's attention should be on the period between now and the final hearing. Allowing a short time for the delivery of a judgment, the argument was conducted on the basis that the Court was concerned with the period from now until the end of February 2026 (a period of nine weeks).

Balance of convenience - preliminary matters

9. Before turning to the arguments, three preliminary points should be made.

10. Notwithstanding the short time available for preparation, the evidence and the parties' submissions were detailed. I intend no disrespect to their industry by confining these reasons to the matters which I considered to be dispositive. That is a necessity born of both urgency and the fact that it is the afternoon of the last day of term.

11. In considering the balance of convenience, Mr Robertson SC sought to frame some of his submissions by reference to what he contended was the proper construction of Racing NSW's functions under the Act. There was force in Mr Jones SC's answer that this was to introduce into the balance of convenience arguments about the strength of the Club's case when Racing NSW accepted there was a serious question to be tried. I accept that submission. I have reached my decision on facts which do not require the Court to take any view on the strength of the legal arguments which the Club will present at the final hearing.

12. The balance of convenience is to be assessed taking into account the undertakings.

Why the balance of convenience favours the Club

10. There are four matters which, after considering the evidence and when taken together, have persuaded the Court that the balance of convenience favours the continuation of the stay until the final determination of the summons. In the next section of these reasons I will explain why those matters are not outweighed by the matters advanced by Racing NSW.

11. First, it is for a short period, especially taking into account the Christmas and New Year break. I have not overlooked that over this nine week period there will be two race meets each week at the Club's tracks. However, there is no persuasive evidence that the Club will not be able to hold those events properly and safely as opposed to if Mr Kelly were in control. While there was evidence of inadequacy in the Club's capital expenditure budget, there is no evidence which would allow the Court to conclude that those capital matters would be able to attended to by Mr Kelly any better or faster than the Club, if it be the fact (about which the Court makes no finding) that immediate attention is required.

12. Second, the Club is a company limited by guarantee under Corporations Law. Three of its four directors have been duly elected by the members. The fourth has been appointed under a different mechanism. The Club has been unable to fill board vacancies because it has acquiesced in a "caretaker convention" demanded by Racing NSW, whose authority to impose such a convention is far from clear. In the absence of compelling reasons otherwise, there is a real public interest in allowing the Club to continue to be operated by those who have been democratically put in place to do so.

13. Third, and related to the previous point, the evidence is clear that the directors have been taking steps to address concerns raised by Racing NSW. I accept that Racing NSW has concluded that those steps are variously inadequate, ineffectual and perhaps even incompetent. Whether that assessment is correct is not a matter for the Court. However, again in the absence of compelling reasons otherwise, they should not be interrupted from those efforts by the appointment of Mr Kelly.

14. There is no evidence that what the directors are doing will have deleterious effects on the Club in the next nine weeks or that Mr Kelly's appointment will bring substantial immediate benefit to the Club. To the extent there may be (and the Court makes no finding) justifiable concerns about the directors’ commercial conduct, for present purposes they are adequately ameliorated by the business undertaking. Furthermore, there is no evidence of what Mr Kelly in fact proposes to do or for how long he will be appointed. The evidence is that he will report to a committee whose members are yet to be identified or appointed.

15. Fourth, the Club has a fully drawn $30,000,000 cash advance facility from the Commonwealth Bank of Australia. It falls due for repayment in October 2026 and is guaranteed by Racing NSW. Its terms were in evidence. The appointment of a receiver would constitute an event of default giving various enforcement rights to the Bank, including to declare all amounts under the facility immediately due and payable. While there is no evidence about what the Bank might do, commercial common sense supports the conclusion that an event of default should not be allowed to occur where the circumstances giving rise to that default (in this case Mr Kelly's purported appointment) have been accepted by the parties to be properly contestable.

Racing NSW's contentions

16. An important theme in Racing NSW's submissions was that in considering the balance of convenience, weight should be given to the fact that it was a regulator exercising statutory power in the public interest and that after a careful process it had decided to appoint Mr Kelly. It was accepted that this was only a factor in the balancing exercising. Refence was made to the exceptional circumstances test for the interim stay of the decision of an industrial tribunal, but Racing NSW did not suggest that was the test in the present case: see National Road Transport Association Ltd v Road Safety Remuneration Tribunal [2016] FCAFC 56 at [16] to [18].

17. However, even accepting Racing NSW's status to be a factor, in my respectful opinion it is at least matched by the public interest in ensuring that the power of the state, in this case conferred on Racing NSW under the Act, is lawfully exercised. This is particularly the case when those powers are exercised in relation to an organisation that itself carries on an activity for the benefit of a large section of the public, comprising both the members of the Club and the general members of the public who enjoy attending racing at the Club's courses. While I do not suggest exact equivalence, Racing NSW's submission on this point was akin to the now defunct American doctrine of “Chevron deference” by the courts to specialist administrative bodies: Loper Bright Enterprises v Raimondo 603 US 369 (2024).

18. Reduced to its essentials, Racing NSW's case focussed on what was said to be the risk of the Club's insolvency. It is this concern which appears to have prompted the process over many months which led to Mr Kelly's purported appointment.

19. Racing NSW relied heavily upon the Club's audited financial report for the financial year ending 31 July 2025 and signed by the auditor on 19 November 2025. In Note 2(e) to the Club’s accounts, a "material uncertainty" was identified. This was recorded in the auditors’ opinion as something “that may cast significant doubt on the [Club’s] ability to continue as a going concern and, therefore, whether it will realise its assets and discharge its liabilities in the normal course of business, and at the amount stated in the financial report”:

“2(e) Going concern and net current liability

The Company has prepared the financial statements for the year ended 31 July 2025 on a going concern basis, which assumes continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. At 31 July 2025 the Company's current liabilities exceeded its current assets by $8,709,000 (2024: $16,200,000), including revenue received in advance of $26,983,000 (2024: $23,366,000) and the entity is loss making for the period ($2,594,000).

Management has prepared cash flow forecasts that support the Company's ability to continue as a going concern over the coming 12-month period from the date of issuing these financial statements. Key considerations impacting the assumptions used within these forecasts include:

> The Company achieving forecasted trading performance and associated operating cashflows at levels consistent with previous financial years;

> Facility maintenance and associated capital expenditure and cashflows remaining consistent with previous financial years;

> Ongoing compliance with debt covenants in relation to the Commonwealth Bank of Australia financing facility set out in Note 16, such that debt repayments fall due under current contractual terms;

> No material adverse outcome to the third-party claim in relation to a proposed land development at Canterbury Park, contingency disclosed at Note 27;

> No significant change in business operations including the associated measurement and recognition of revenue and expenditure.

Based on these forecasts, the directors consider that the Company will continue as a going concern and be able realise is assets and meet its obligations as and when they fall due over the coming 12-month period from the date these financial statements were authorised for issue.

In addition to the above 12-month cash flow forecast assumptions, Directors have also considered the following matters:

> As referenced at Note 16, the fully drawn $30,000,000 bank facility expires on 10 October 2026. This facility is currently guaranteed by Racing NSW. The Company will seek to refinance this loan prior to its expiry, however at the date of this report there is no binding commitment from the lender to extend the term of the loan facility, or from Racing NSW to continue to provide a guarantee for an extension of the loan facility;

> In the event the loan facility expiring on 10 October 2026 cannot be refinanced either through CBA or an alternate provider, the Directors assume it necessary for property to be sold to repay the loan facility. There is a requirement for member approval prior to the sale of any 'core' property as set out in Note 13. Additionally, there is the requirement for repayment to Racing NSW of an agreed upon amount for the existing interminable loans as set out in Note 27 in certain circumstances including where any asset sale of more than $1,000,000 occurs, unless by other arrangement approved by Racing NSW. This may limit the ability of the Company to address in a timely manner operating cash flow shortfalls or the debt repayment requirement in October 2026, with asset sales;

> Amounts received as TAB distribution revenue from Racing NSW, as set out in Note 6, include a top up payment to ensure consistency in the total amount received each year. It is assumed that Racing NSW will continue to pay the top up amount each month to the base line funding levels consistent with prior years. There is no formal agreement in relation to this arrangement.

Notwithstanding the directors consider the Company can continue as a going concern, the combined effect of the matters summarised in Note 2(e) above represents a material uncertainty that casts significant doubt as to whether the Company will continue as a going concern and therefore that it may be unable to realise its assets and discharge its liabilities in the normal course of business.”

20. For its part, the Club relied on a detailed financial report it had commissioned in response to Racing NSW's concerns from an experienced accountant, Mr Scott Langdon, of Korda Mentha. The Court notes that Mr Langdon’s conclusions were reached after speaking to the Club’s auditor and expressly taking into account the “material discrepancy” identified by the auditor. The executive summary of Mr Langdon’s report included:

“1.1.2 In my opinion, ATC was solvent at 31 August 2025, as it had paid all debts that were due and payable at 31 August 2025.

1.1.3 My analysis has primarily focused on the period to 31 July 2026, as this is the forecast period that is underpinned by the FY26 budget, while the subsequent period forecast amounts to 31 July 2028 are based on CPI increases to ATC's FY26 budget. Focusing my review on the period to 31 July 2026 where forecast assumptions are more granular is appropriate due to "the difficulty involved in predicting the future with sufficient certainty so as to be able to say that what is predicted is true at the time of prediction".

1.1.4 In my opinion, ATC remained solvent at the date of this report and is expected to remain solvent until 31 July 2026 for the following reasons:

a. Based on the cashflow test, ATC is forecast to be able to pay all its debts as and when they become due and payable up to and including 31 July 2026. This opinion is based on ATC's FY26 budget and the supporting cashflow forecast prepared by Management and approved by the Board.

b. ATC's budgeting and reporting process is robust in its approach and is well ingrained in the business.

c. The balance sheet records a substantial net asset balance and standard associated financial ratios do not present solvency concerns.

d. A review of the 22 indicators of insolvency published by the Australian Securities and Investments Commission ('ASIC') supports the view I have formed based on the cashflow test and the balance sheet. These indicators are an updated and expanded set of indicators commonly referenced as the Plymin indicators of insolvency. A summary of whether the indicators are present for ATC is set out below in Table 1.” (footnotes omitted)

21. Mr Langdon identified certain risks to the Club's cashflow. Racing NSW submitted that Mr Langdon's report was of little weight because he had assumed those risks would not eventuate. Those risks relied upon by Racing NSW and the Court's conclusions in relation to them may be summarised as:

22. Financial support from Racing NSW continuing, including what were described as TAB distribution top up payments and its guarantee of the facility.

As to this, the Court accepts that Racing NSW provides financial support to the Club. I accept Mr Robertson SC's submission that "support" may be inapt to the extent it suggests the support is all ex gratia or extraordinary. However, that does not matter for present purposes. It is clear from Racing NSW's case that it says it wishes the Club to prosper and it will continue to provide support if Mr Kelly's appointment is upheld because it says it has the confidence in him which it lacks in the current directors of the Club. There is no evidence that Racing NSW will withdraw its support. On the contrary, given what I have just recorded, the Court readily infers that the Club is not going to withdraw that support in the next nine weeks because if it did so it would, on Racing NSW's case, cause real financial harm to, if not the financial collapse of, the Club and thereby negate what Racing NSW says it intends to achieve by Mr Kelly’s purported appointment.

2. Payment of an $8,000,000 disputed debt to Mirvac.

As to this, the debt is the subject of litigation in this Court which has not yet been given a trial date. Whatever the risk of eventually having to make such a payment, it is irrelevant to what may happen in the next nine weeks.

3. The possibility that the facility will not be renegotiated either with the Bank or some other lender.

As to this, the facility matures in October 2026. There is ample time for it to be renegotiated. Ironically for Racing NSW's case, the only thing which may call the facility into immediate question is if Mr Kelly's purported appointment is allowed to stand for the reasons I have set out in [15] above.

22. In summary, for the purposes of assessing the position of the Club until the end of February 2026, the Court infers from Mr Langdon's report that the prospect of the Club being insolvent in that period is negligible.

23. Furthermore, the Club currently has cash at bank of $29,000,000. There is no evidence that there is any real prospect (or any prospect at all) that there will be calls on those funds other than in the ordinary course of business in the next nine weeks.

24. Finally, Racing NSW challenges the adequacy of the Club's usual undertaking and submits that the directors should offer personal undertakings as to damages.

25. The Court rejects the adequacy submission for two reasons. First, it is falsified by both the Club's current cash position (see [23] above) and the fact that it has substantial non-current assets. Second, looking at the next nine weeks, Racing NSW has not identified any potential harm it might suffer that could be the subject of the undertaking. Nor have I been able to identify any such harm from the evidence.

26. As to the directors providing a personal undertaking as to damages, Racing NSW relied on the decision of Brereton J (as his Honour then was) in IceTV Pty Ltd v Ross [2007] NSWSC 1232. In that case, unlike the case at bar, his Honour was satisfied that the plaintiff company’s undertaking was inadequate. Furthermore, in a commercial setting it is understandable that the directors who have a commercial interest in the outcome may sometimes be called upon to support or replace a company's undertaking with a personal undertaking, especially if control of the company or questions of external administration are in issue. However, in this case the Club’s directors are directors of a company limited by guarantee performing a role for the public benefit of the kind I have identified in [17] above. For these reasons, the Court does not require a personal undertaking as to damages from the directors and finds, on the current evidence, that the Club's usual undertaking is adequate to support the interlocutory relief sought by the Club.

Conclusion

27. Upon the Club by its Counsel giving the usual undertaking and the business undertaking, the stay of Mr Kelly’s purported appointment originally ordered by Slattery J will be extended until the delivery of final judgment on the summons or further order. Subject to any further submissions, the costs of this interlocutory application should follow the event.

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