Cover image courtesy of The Image Is Everything
The announcement, when it came last Wednesday, surprised precisely no one: Racing NSW was putting the Australian Turf Club into administration, effective immediately.
For those that have followed the attempts by racing’s regulator to assert control over the most valuable race club in the country, this decision seemed a forgone conclusion once Racing NSW won in the Court of Appeal to give them that authority.
But members of the club and the participants whose investment keeps this industry afloat are asking why this had to happen? Many have contacted the steering committee of the Racing Reform Group to voice their concerns about this forced administration.
When Racing NSW first attempted this move in December, they nominated Morgan Kelly of EY as the expert who would oversee the club. Even though the courts initially blocked Racing NSW’s attempt, the ATC hired Mr Kelly as a consultant in April, presumably to appease the regulator and give confidence to the members that the club was open to any expertise that could help it to improve.
Has Mr Kelly unearthed a financial black hole in the intervening months or discovered other major issues that would demand this radical action? Not that members have been told.
Morgan Kelly | Image courtesy of EY Restructuring
The press release from Racing NSW announcing the administration was light on details, but stated: “The Administrator will undertake a comprehensive review of the ATC's operations, financial position and governance arrangements. This review will identify opportunities to improve efficiency, strengthen performance and implement best practice governance and operational standards.”
These seem like worthy aims, after all, what organisation wouldn’t want to improve efficiencies, operational standards or implement the best governance practices?
But, as many people have queried with the RRG, is Racing NSW in a position to sit in judgement on the ATC in these matters? If there was one NSW racing body in need of a thorough review, it may be the organisation based at Druitt Street.
Take efficiency and operational capacity: in April the NSW Auditor General published a damning report on the Racing for the Regions government grants program. This scheme saw the state government commit over $58 million in 2021 to improve infrastructure at country race clubs. From the start Racing NSW took charge: deciding which projects were greenlit, managing the infrastructure builds and, as is their wont, holding onto the money. The initial business case from Racing NSW stated all 14 projects would be completed by September 2024.
However, by the start of this year just six projects have been finished, with four to yet to even start construction. These delays haven’t just meant the industry is waiting for facilities that should have been delivered years ago, but also that costs have blown out and participants have had to pay more than it should for these upgrades, while some projects have been downsized.
On a question of performance, the State Insurance Regulatory Authority (SIRA), which oversees workers compensation schemes, stripped Racing NSW of its ability to manage claims in their own scheme after a series of significant failures in 2022. This was never publicly acknowledged by the board of Racing NSW.
And, as for governance, in October last year NSW Parliament’s powerful Privileges Committee – a bipartisan group with a majority of government members – strongly criticised Racing NSW for writing highly damning letters about people it believed had given confidential evidence to the inquiry into the proposed sale of Rosehill.
The Privileges Committee report stated it was “deeply inappropriate to provide such detailed adverse allegations to the select committee, and it reflects poorly on Racing NSW as an organisation”.
The Labor chair of the Committee stated Racing NSW’s conduct may have deterred potential witnesses from giving evidence for fear of reprisals.
There was no public response from the chair of Racing NSW; instead, a “spokesman” for the organisation was quoted in the media defending its behaviour.
Far from being chastened by the Committee’s finding that Racing NSW’s behaviour had a ‘chilling effect’ on racing participants, the Board has let their CEO sue Vicky Leonard, the publisher and editor of The Thoroughbred Report, for an article that questioned whether his continued tenure, after more than 20 years, was in the best interests of racing.
The board of Racing NSW have also recently signed off on their CEO taking four months long service leave to take the reins at the National Rugby League – a sporting code which competes with racing for the wagering and leisure dollar. Whether this meets best practice governance standards is very much open to debate.
But back to the ATC: as for the appointment of an advisory committee by Racing NSW to “assist and support” Mr Kelly, this is also potentially problematic. The ruling which allowed Racing NSW to put the club into administration also put clear the limits on their powers over the club.
The regulator could not simply take over the ATC: instead, the appointed administrator, Mr Kelly, must exercise independent judgement and act in the best interests of the club.
The board of the ATC remains in place and each director still has a fiduciary duty to that organisation and its members; even for the three club directors who were selected by Racing NSW to serve on the advisory committee. The club continues to be an independent corporation that is governed by its constitution and the Corporations Act.
A legitimate question is whether this five person advisory committee – which also includes two Racing NSW board members – can have any input into decisions about the ATC given stewardship of the club is vested in the administrator (Mr Kelly) who doesn’t answer to Druitt Street. And who are the advisory committee accountable to?
Many further questions need to be answered, including how long will administration last and how quickly will the club be returned to its members and its properly appointed board? Will the election of directors happen as expected in November?
As Mr Kelly now begins his work as administrator, those involved in racing in NSW can consider themselves fortunate that another review is coming to an end.
Brad Hazzard | Image courtesy of ACA NSW
Former NSW Health Minister Brad Hazzard was last year tasked with scrutinising the Thoroughbred Racing Act, which establishes Racing NSW. The RRG remains disappointed the Racing Minister prevented Mr Hazzard from looking at the sport’s funding model and Racing NSW’s relationship to the state government as part of his review.
However, despite these limitations on his scope, we believe Mr Hazzard’s report will be an important first step in reforming the NSW industry so that everyone involved in racing can have confidence in its future. The RRG made a significant submission to the Hazzard review, which called for Racing NSW to be made more accountable, both to the industry and also to the governance standards to which they publicly proclaim.
We call on the government to release the Hazzard review at the earliest opportunity.
The Steering Committee of the Racing Reform Group NSW
Brian Nutt (Secretary)
Julia Ritchie
Helen Sinclair
Arthur Mitchell
Jason Abrahams
Will Johnson
David Walter
