Australian Turf Club Ltd v Racing NSW (No 2)

This case is about whether Racing NSW (RNSW) has validly used its power under the Thoroughbred Racing Act 1996 (NSW) to appoint Mr Morgan Kelly as the administrator of the Australian Turf Club Limited (the ATC).

The ATC is the plaintiff. It says Mr Kelly's appointment by RNSW, the first defendant, is invalid so that it is nothing more than a blank piece of paper with no effect. Mr Kelly, the second defendant, has entered a submitting appearance, which means he has played no part in this case and will comply with whatever the Court decides.

It is important to understand from the outset that this case is what lawyers call an administrative law challenge. The issues for the Court concern whether RNSW validly appointed Mr Kelly: did it have the legal power and, if so, did it make the appointment in the way the law says that kind of power must be exercised?

This case is not about whether RNSW should have appointed Mr Kelly. That would require to Court to consider the merits of RNSW's decision: were RNSW's reasons for appointing Mr Kelly right or wrong? The Court expresses no view on that question and leaves it to be debated among the many people in this state who are interested in horse racing.

For the reasons which follow, the Court has decided that Mr Kelly's appointment is invalid. Those reasons may be summarised as:

Mr S Robertson of Senior Counsel appeared with Mr P Afshar of Counsel and Mr M Pulsford of Counsel for the ATC. Mr M Henry of Senior Counsel appeared with Mr O Jones of Senior Counsel and Ms K Woodforde of Counsel for RNSW.

To reflect the various arguments advanced by the ATC, the structure of this judgment is:

The case was conducted by reference to the applicable legislation and a series of documents. It is clear from those documents – and RNSW accepted at the hearing before me - that RNSW’s actions were the result of concerns it held about what it considered to be the ATC’s poor financial position and ineffective corporate governance. That characterisation is essential to the Court’s conclusions.

On 19 September 2025, the chief executive of RNSW sent an email to the chairman of the ATC which included:

The email attached the show cause notice which included:

The notice was 15 pages long and divided into three sections. The first section set out what was described as the background and the “unprecedented platform for commercial success provided to the ATC” by RNSW. The second section set out “concerns in respect of the financial status of the ATC, and the inaction and lack of strategy in respect of the platform for commercial success that it was provided and other financial matters”. The third section set out “the concerns in respect of the breakdown in Corporate Governance”.

By letter dated 24 October 2025, the ATC submitted its response to the notice. In relation to the issue of the ATC’s solvency, the response included:

The response concluded:

It will be necessary to set out some extracts from the KordaMentha report (KM report) later in these reasons.

On 12 December 2025, there was a meeting of what was described in the relevant minutes as a meeting of the “Board of Racing NSW”. Because issues of corporate and natural personality are relevant to the construction of the Act, I observe, with respect, that the reference to a “board” of RNSW is technically a misnomer. The Act does not provide for a board. Strictly speaking, what occurred was a meeting of RNSW, being the chief executive and seven other appointed members (see s 6(1) of the Act set out in [22] below).

The meeting on 12 December 2025 began with a meeting between representatives of the ATC and the members of RNSW. After the ATC representatives had left, the minutes of that meeting record:

RNSW met again on 14 December 2025. The minutes of that meeting include:

In a letter dated 15 December 2025 to the chairman of ATC from the chairman of RNSW, RNSW set out its reasons for the appointment. The Court infers this letter is the letter referred to as a draft in the minutes reproduced in the preceding paragraph. Because of the arguments raised by the parties, it is necessary to set out these substantial extracts from the reasons:

The ATC commenced these proceedings by a summons filed on 15 December 2025. Mr Kelly’s purported appointment was stayed on 16 December 2025 by Justice Slattery. On 19 December 2025, I extended that stay until the final determination of these proceedings: Australian Turf Club Ltd v Racing NSW [2025] NSWSC 1604.

By an amended summons dated 12 February 2026, the ATC seeks this final substantive relief:

By an order which I made on 12 February 2026, the ATC’s entitlement to the relief sought in prayers 5 and 6 is to be determined separately from and after the determination of all other issues in the proceedings. The ATC will be given an opportunity to consider whether it still presses for that relief in the light of these reasons.

The parts of the Act relevant to these proceedings are:

The principles which the Court must apply in construing the Act were not in dispute. A convenient summary, which I respectfully adopt, appears in the judgment of the plurality in Palmanova Pty Ltd v Commonwealth of Australia [2025] HCA 35; (2025) 99 ALJR 1362 (footnotes omitted):

These provisions of the Interpretation Act 1987 (NSW) (IA) are also relevant:

The parties were agreed that for any act of RNSW to be legally valid, it had to be done in the exercise of one its statutory functions. RNSW submitted it had made the appointment in the exercise of two of its statutory functions. The first was that conferred by s 13(1)(b) of the Act, “to control, supervise and regulate horse racing in the State”. The second was submitted to be s 11 of the Act, which provides that it “it is the duty of each appointed member of Racing NSW to act in the public interest and in the interests of the horse racing industry as a whole in New South Wales”. It will therefore be necessary to construe both of these provisions.

Before embarking on the task of construction, it is convenient to refer to the only other decision to which the Court was referred in which the Act was considered. That is the decision of Bergin J (as her Honour then was) in Racing New South Wales v Sydney Turf Club & Ors [2005] NSWSC 426, which concerned the ability of RNSW to regulate race clubs entering into agreements for the broadcasting of races. Her Honour’s decision led to amendments to the Act which are not presently relevant.

ATC drew attention to these parts of her Honour’s decision:

It was not suggested that I am bound by her Honour’s decision. Nevertheless, I accept the ATC’s submission that, as might be expected of a judge of her Honour’s skill and experience, the decision demonstrates that care must be taken to attend to the precise terms of the Act. Particular emphasis was laid on her Honour’s observation (at [101]) that there was “an important distinction” between “horse racing” and “horse racing industry” in the Act. As will be apparent from what follows, in my respectful opinion a similarly important distinction to that drawn by her Honour is to be made because section 13(1)(b) specifies RNSW’s function as being “to control, supervise and regulate horse racing in the State” and not being “to control, supervise and regulate race clubs in the State” (emphases added).

Returning to s 11 of the Act, RNSW’s argument depended upon the extended definitions of “exercise” and “function”. Section 3 of the Act provides two extended definitions: that “exercise a function includes perform a duty” and “function includes power, authority or duty”. It was submitted that s 11 imposed a duty on the members of RNSW and therefore upon RNSW. That duty was, by reason of the extended definitions, one that fell within s 14(1) of the Act, which should be read “Racing NSW has power to do all things that may be necessary or convenient to be done for or in connection with the exercise [including performing a duty] of its functions [including powers, authorities or duties]”. RNSW submitted that the appointment (which RNSW had decided was in the public interest and in the interests of the horse racing industry as a whole in New South Wales) was in performance of the duty under s 11 such that the appointment under s 14(2)(g) was authorised by s 14(1) as one of RNSW’s functions.

The Court accepts the ATC’s submission that, for the following reasons, upon the proper construction of the Act, the appointment could not be characterised as being in the exercise of a function derived from the duty imposed by s 11.

The Court does not accept RNSW’s construction of ss 11 and 14 because it fails to take account of the fact that RNSW is a distinct legal person from the appointed members who are the subject of the duty in s 11. The duty in s 11 is conferred on “each appointed member”. It is a discrete and several duty on each constituent member of RNSW which cannot be conflated to then become the duty of the separate legal person RNSW.

The Court’s conclusion is supported not only by the clear language of s 11, but also by the context in which s 11 appears in the scheme of the Act and its legislative history.

While it may be accepted that ss 11, 13 and 14 all fall within that part of the Act described as “Part 2 Racing NSW”, there is a logical sequence in the early sections of that part. Section 4 establishes RNSW as “a body corporate with the corporate name of Racing New South Wales”. It is a separate legal person.

Section 6 goes on to specify the membership of RNSW providing that it is “to consist of the chief executive and seven other members appointed by the Minister from time to time”. The chief executive and those other seven members are separate legal persons from RNSW, but when they meet as such they are RNSW. So much is apparent, for example, from s 19(2) of the Act, which provides that “the quorum for a meeting of Racing NSW is a majority of the appointed members of Racing NSW as constituted for the time being”. I have already observed (see [15] above) there is no statutory provision for a “board” of Racing NSW because when its constituent members meet together as the members they are, in fact and law, RNSW.

Sections 6 to 12 of the Act are all concerned with the members of RNSW, such as their terms of office, remuneration and personal liability, and including to vest liability for acts done by them “done in good faith for the purpose of executing this Act” in RNSW. That provision is premised upon the separate legal personality of the members and RNSW.

Sections 13 identifies the functions of RNSW and ss 14, 14AA, 14A and 14B are all concerned with the exercise of those functions by RNSW, before the part returns to a number of provisions concerned with the members of RNSW in related matters. In short, ss 13 and 14 relate expressly to RNSW, whereas s 11 imposes an individual duty upon each appointed member of RNSW. The clear terms of s 11 do not permit the collectivisation of the constituent members of RNSW so that a duty imposed upon each of them is to be understood as a duty imposed upon the separate legal person RNSW.

The legislative history of s 11 also supports this conclusion.

It is necessary at this point to introduce the October 1995 “Final Report of the Review of Thoroughbred Racing in New South Wales” undertaken by Mr Ian Temby QC (Temby Report). There was no dispute that the Temby Report is an extrinsic material to which the Court may have regard under s 34 of the IA.

Mr Temby QC was commissioned to undertake these tasks:

At the time the Temby Report was commissioned, racing in Australia was governed by the ARR. The ARR, taking as their model the original Jockey Club set up in England in about 1750 at Newmarket, set up what was known as the principal club system. The Australian Jockey Club (AJC) was the principal club under the ARR for both New South Wales and the Australian Capital Territory. As the principal club, the AJC, putting it broadly, regulated and managed racing as well as itself being a race club. Therefore, the AJC was both the regulator and an entity which it regulated. This was said to create a “conflict, or the potential for conflict, between the AJC’s interests as a race club and its duty to control and manage thoroughbred racing in the best interests of the industry as a whole” (Temby Report p 18).

Mr Temby QC posed the issue before him as:

He ultimately recommended (Temby Report p 23) that a “new governing body take over all principal club functions from the AJC and have responsibility for integrity assurance and strategic development of racing throughout New South Wales”. He suggested that body be called the “New South Wales Thoroughbred Racing Council” (TRC). It ultimately came into existence as the AJC Principal Club (AJCPC). The AJCPC is the predecessor of RNSW.

Mr Temby QC wrote (Temby Report p 24) of the new governing body that it “will not be a mere club or committee and should not be described as such. It is to have prime responsibility for thoroughbred racing throughout the state”. He then wrote in a section headed “Representatives or nominees?”:

The AJCPC was brought into existence by the AJC Principal Club Act 1996 (NSW). The AJCPC was to consist of 11 members, being four nominated by the AJC, two nominated by the Sydney Turf Club (the predecessor of the present STC) and other members nominated by other entities, together with the chief executive. Sections 11, 12, 13 and 14 of the Principal Club Act are substantially in the same form as the same provisions in the Act as it stands today. However, s 11 of the Principal Club Act provided that it was “the duty of each nominated member of the AJCPC to act in the public interest and in the interests of the horse racing industry as a whole (rather than in the interests of the body that nominated the member)”. When read with the Temby Report’s recommendation, the construction that the duty under s 11 is imposed on each nominated member (which reflects the plain language) is confirmed. It was enacted to ensure that nominated members would set aside the interests of those who nominated them and act in the public interest and in the interests of the horse racing industry as a whole.

The Principal Club Act is now known as the Act. The Thoroughbred Racing Amendment Act 2008 (NSW) brought the system of members nominated by the AJC and others to an end and replaced them with members nominated for appointment by an appointments panel and appointed by the relevant minister. Section 11 was amended by that legislation to take account of that change in the appointment of members to its present form of “it is the duty of each appointed member of Racing NSW to act in the public interest and in the interests of the horse racing industry as a whole in New South Wales”. That change is consistent with, and does not derogate from, the history of the provision as being directed to the natural persons who constitute RNSW as opposed to RNSW itself as a separate legal person.

The horse racing industry and some of its participants are, from time to time, described in the media and elsewhere as “colourful”. That may explain why the Temby Report includes some colourful turns of phrase. One of these (Temby Report p 19) became a convenient shorthand way in the course of argument to illustrate the issue that lies at the heart of this case. That issue is how far the powers of RNSW extend into the operations and affairs of a race club. Mr Temby QC, when referring to the framing of race programmes as being an activity undertaken by race clubs, considered that the possibility of that role being taken away from race clubs would have this effect: “A cynic would say that that leaves the clubs with little to do but staff the turnstiles and keep the pies hot and the beer cold”.

References to pies and beer in the ATC’s case were, as I understood them, intended to describe in a colourful way those areas beyond the statutory purview of RNSW. The ATC’s fundamental submission was that, along with the pies and beer, the matters set out in the reasons (the ATC’s financial position and corporate governance) did not fall within section 13(1)(b) of the Act as properly construed. That submission invited close consideration of the definition of “horse racing” under the Act.

For its part, RNSW pointed to the objects of the ATC under its constitution:

RNSW therefore submitted that because the entire raison d'être of the ATC was horse racing, almost every aspect of the affairs and management of the ATC fell within RNSW’s function to “control, supervise and regulate horse racing in the State”. In the course of argument, I came to refer to this as the “maximalist position”. Mr Henry SC submitted that “everything that the ATC does has to do with racing, in the sense that it is in connection with it”, while accepting that there may be some limits on RNSW’s power such as, for example, dictating prices for food and drink (Tcpt, 23 February 2026, p 160(39)).

For the reasons which follow, the Court rejects RNSW’s submission as not reflecting either the text or context of s 13(1)(b) of the Act.

Both “horse racing" and "race club” are defined terms in the Act. A legislative choice was made. That choice was to give RNSW the function of controlling, supervising and regulating “horse racing” and not “race clubs”. In my respectful opinion, as a matter of construction that choice must be respected and given effect. The construction advanced by RNSW would render that choice irrelevant.

Section 3(1) of the Act defines “horse racing” to mean: “The racing of galloping horses as referred to in the Australian Rules of Racing”. The same sub-section defines “Rules of Racing” to mean “The rules for the time being governing and relating to horse racing under the control of Racing NSW (being an amalgamation of the Australian Rules of Racing and the local rules of racing of Racing NSW, together with regulations made under those Rules)”.

It follows from those definitions that RNSW’s function under s 13(1)(b) is “to control, supervise and regulate [the racing of galloping horses as referred to in the Australian Rules of Racing] in the State”. This draws attention to the fact that the legislature has made a particular activity the subject of RNSW’s function under s 13(1)(b). It has not used a relational term. For example, it has not given RNSW the function “to control, supervise and regulate any matter relating to or connected with horse racing in the State”. If it had, then Mr Henry SC’s submission recorded in [49] above may have had more force. Section 13(1)(b) does not require the relationship between two or more things to be considered. The universe of what RNSW can “control, supervise and regulate” in NSW is “the racing of galloping horses as referred to in the” ARR (emphasis added).

I readily accept that it would be neither commercially sensible nor consistent with the purpose of an act establishing a body “to control thoroughbred horse racing” in New South Wales to read “referred to” in the definition of “horse racing” in a narrow fashion. The Court had before it the ARR as at 1 August 1996 and at 1 February 2023. It would not be a purposive approach to construction to confine the “racing of galloping horses” to what happens on the track from the moment the starter starts the race until the last horse crosses the finishing line.

In my respectful opinion, the effect of “as referred to” is to identify the universe of what is to be considered “the racing of galloping horses” as any matter or thing referred to in the ARR. “Horse racing” is not defined in the ARR. “Race” is defined to include “each division of a divided race”. However, there can be no doubt that the ARR are intended to govern the competitive racing of galloping horses.

When the contents of the 1996 ARR are considered, what I have called the “universe” is a large one. So much is apparent from the subject headings in them, which include:

The 2023 ARR cover substantially similar topics, expanded in some areas presumably to deal with more modern problems and developments.

It follows that, in my respectful opinion, any activity, subject matter or role referred to in the ARR falls within “the racing of galloping horses as referred to in the Australian Rules of Racing” and therefore within the meaning of “horse racing” which RNSW has the function under s 13(1)(b) of the Act to “control, supervise and regulate” in NSW.

Before applying the Court’s conclusion as to the construction of s 13(1)(b) to the facts of the present case, there are four additional observations to be made in relation to the issue of construction.

First, Mr Henry SC admitted of the possibility that on his client’s case, by analogy with the obligation of directors to consider the interests of creditors when a company is nearing insolvency, a club not otherwise within the scope of s 13(1)(b) could come within the section if it was at risk of insolvency because of the effect the insolvency of a club might have on “horse racing”. I reject that construction because it is an invitation to uncertainty. The Court should avoid a construction that could lead to such uncertainty and it is, in any event, not supported by the language of the definition of “horse racing”. By anchoring the definition in the ARR, the legislature has laid down an objective criterion, even allowing for grey on the outer edges, for identifying what I have referred to as the “universe”. This provides a much more certain way of answering what is or is not “horse racing” under the Act.

Second, RNSW sought to meet the observation that section 13(1)(b) referred to “horse racing” and not “race clubs” by drawing attention to the various references to race clubs in subsections 14(2(b),(c), (e), (f), (g), (n), (s) and (t). That is, with respect, an impermissible backwards way of reasoning. It would not be in accordance with the words and structure of ss 13 and 14 of the Act to seek to expand or define RNSW’s functions by reference to the powers in section 14(2). In other words, it is not a proper approach to construction to argue that because RNSW has a specific power under s 14(2), that power must fall within a particular function under s 13(1) through the medium of s 14(1).

It follows that s 14 cannot be called in aid to construe the functions in s 13(1). In my respectful opinion, on the proper construction of ss 13 and 14, the correct approach for present purposes is to ask two questions:

Third, in reaching my conclusion as to the construction of s 13(1)(b), I have not overlooked s 13(2) of the Act, which includes that “the functions of Racing NSW are not limited by the Australian Rules of Racing”. I make two observations:

Fourth, it is necessary to return to the pies and beer. In its submissions, especially in relation to s 13(1)(b), the ATC placed heavy emphasis on a distinction drawn by Mr Temby QC in support of the proposition that the Parliament did not intend to remove “pure race club functions” (pies and beer but, relevantly for present purposes, financial matters and corporate governance of the race club) from race clubs. This is what Mr Temby QC wrote (Temby Report p 19):

It will be noted that Mr Temby QC, in the passage which I have just set out, draws two distinctions. The first is between “integrity assurance functions” and “industry functions”. The second distinction (in the second paragraph quoted) is further to divide “industry functions” into “pure race club functions” and “general industry responsibilities”. These quoted paragraphs assist in understanding the Temby Report’s recommendation concerning the new regulatory body to be established (Temby Report p 23 (emphasis in original)):

It may be accepted that, applying the taxonomy in his report, Mr Temby QC intended that the new governing body should have all the principal club functions of the then AJC, together with integrity assurance functions and general industry responsibilities, in distinction to “pure race club functions”.

While the ATC’s reliance on the Temby Report is understandable, it is not as helpful to the ATC’s case as the ATC sought to make out. That is because it takes the Court away from the basic task of interpreting the words of s 13(1)(b) by inviting an attempt to define “integrity assurance functions”, “general industry responsibilities” and “pure race club functions”. At various times during the hearing, the argument ran both ways. It was put that the matters relied upon for the appointment in the reasons, being the ATC’s finances and corporate governance, were “pure race club functions” and therefore fell outside s 13(1)(b). Alternatively, it seemed to be suggested that because those matters were not “integrity assurance functions” or “general industry responsibilities” they had to be “pure race club functions” and therefore outside the relevant function of RNSW.

In approaching my task, I have sought to bear firmly in mind that the role of the Court is to interpret the words in s 13(1)(b) by applying the definition of “horse racing” in s 3(1) of the Act. That has led the Court to the conclusion set out in [58] above.

There was no dispute between the parties that having given the reasons, the validity of the appointment was to be considered by reference to the reasons. Furthermore, Mr Henry SC accepted that, with the exception of a reference to safety regulations which had an “indirect connection” to horse racing, the reasons made no reference to the racing of galloping horses, but concerned issues about the finances and corporate governance of the ATC (Tcpt, 23 February 2026, pp 165(29) and 182(16)).

Applying the construction of ss 11 and 13(1)(b) which the Court has determined [see [30] and [58] above], the reasons demonstrate that RNSW did not make the appointment in exercise of its function under section 13(1)(b) of the Act. That is because the finances and corporate governance of the ATC do not fall within the definition of the “racing of galloping horses as referred to in the Australian Rules of Racing” which RNSW controls, supervises and regulates in NSW.

In reaching this conclusion, I have not overlooked that rule 13 of the ARR confers on RNSW:

Nothing in the reasons supports the conclusion that there was a connection between the appointment and the exercise of the power in ARR rule 13.

In summary, the result of the Court’s conclusion is that the appointment is invalid and of no effect because it is not referable to any of its functions under the Act relied upon by RNSW in support of the appointment.

The ATC submitted that if the Court came to the conclusion which it has, the Court would be satisfied that the appointment was made for an improper purpose, involved a misunderstanding of the applicable law or was legally unreasonable. For present purposes it is sufficient, and the Court finds, that the decision to make the appointment “is infected by jurisdictional error, being a misunderstanding of the applicable law”: LPDT v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs & Anor [2024] HCA 12; (2024) 280 CLR 321 at [3].

It follows from this conclusion that the ATC is entitled to the relief sought by prayer 3 of the amended summons. If it is still pressed by the ATC, the Court will hear the parties as to whether the injunction sought in prayer 4 of the amended summons is required.

This outcome is sufficient to dispose of the proceedings. However, in deference to the parties’ arguments and against the possibility of the matter going further, I will next set out, as briefly as is appropriately possible, the Court’s conclusions on the other arguments raised by the ATC.

The ATC submitted that the reasons disclosed two errors which were material and legally unreasonable in the sense required by the authorities.

The first these concerned what was described in the reasons as “discretionary financial support”. For ease of reference, I will set out the relevant parts of the reasons again

In relation to the so called discretionary funds, the ATC accepted that RNSW was not under a private law duty to pay those amounts of money (Tcpt, 23 February 2026, p 216 (1)).

However it was submitted that those funds had previously been provided consistent with the duty imposed on the constituent members of RNSW “to act in the public interest and in the interests of the horse racing industry as a whole in New South Wales”. The ATC submitted that, if that was correct, it would be unlawful for RNSW to withdraw its discretionary support without the members of RNSW concluding that it was in the interests of the racing industry as a whole to do so. The essential submission was that RNSW had wrongly assumed that there was no relevant legal limitation on its withdrawal of support and wrongly thought that the support it identified in its reasons was wholly discretionary.

The Court accepts RNSW’s submission that the reasons do not disclose any assumption or thinking of the kind alleged by the ATC on this point. The relevant conclusion disclosed by the reasons was that the ATC relied “on racing RNSW guarantees and discretionary financial support to maintain solvency”. Furthermore, RNSW had concluded that insofar as “discretionary financial support” was part of the “unprecedented platform for commercial success that has been provided by” RNSW, the suggestion that ATC had failed to take advantage of it had not been answered satisfactorily. The correctness or otherwise of those conclusions is a matter for the merits and beyond these proceedings. However, critically for present purposes, and contrary to the ATC’s submissions, the reasons do not disclose that any such assumption had been made. This contention by the ATC fails.

The second error relates to how the reasons disclose RNSW treated the KM report. Again, for convenience, I will reproduce the relevant parts of the reasons:

The ATC submitted that this was an error which went to the heart of the reasons. The ATC referred to these parts of the KM report:

In its terms, it is clear that the treatment of the KM report in the reasons set out in [82] above is wrong because the KM report took into account other possibilities which did not involve RNSW extending its guarantee of the ATC’s debt facilities.

In response to this argument, RNSW drew attention to the three options set out in paragraph 1.1.7 of the KM report (see [83] above). RNSW accepted that options (b) and (c) did not involve an assumption that RNSW would extend its guarantee of ATC’s debt facilities. However, RNSW submitted that by the time of the decision to make the appointment and produce the reasons, options (b) and (c) had fallen away. RNSW drew attention to various factual matters in support of that proposition.

For the purposes of considering RNSW’s argument, I will assume in its favour that as a matter of fact its submission is correct, namely that at the time of the decision to make the appointment, options (b) and (c) (which did not require the RNSW guarantee) had fallen away. However, making that assumption, the Court accepts the ATC’s submission that the Court must assess the decision to make the appointment by reference to the reasons, even if the decisionmaker did not have a duty to give the reasons.

In Tauleahi v Minister for Immigration and Border Protection [2016] FCAFC 177; (2016) 246 FCR 146, Full Court of the Federal Court of Australia said:

In CVV 16 v Minister for Home Affairs [2019] FCA 1890, Mortimer J (as her Honour then was) said:

The passage to which her Honour refers from the Hight Court’s judgment in Plaintiff M 64/2015 v The Minister for Immigration and Border Protection [2015] HCA 50; 258 CLR 173 is (footnotes omitted):

In my respectful opinion, the reasons are “a fulsome and apparently exhaustive account of the matters that” RNSW considered relevant to its decision to make the appointment. RNSW’s own minutes (see [17] above) described them as “setting out the detailed reasons for the appointment of an administrator”. In reaching this conclusion, I have not overlooked that the chapeau to the list of conclusions in the reasons states that “the particular conclusions that contributed to Racing NSW determining to appoint an administrator to conduct the affairs of the ATC included, but are not limited to, the following conclusions” (emphasis added). The effect of the authorities to which I have referred is not that RNSW is, by reason of having voluntarily proffered the reasons, in effect “bound” by them. The authorities support the conclusion that a voluntary provision of comprehensive reasons enables the Court more confidently to find, as a matter of fact, that those are the reasons for which a particular decision was made.

In the context of that fact finding exercise, the qualification expressed in the reasons which I have quoted in the preceding paragraph leaves open the possibility that a decisionmaker such as RNSW could seek to prove by evidence that there were other conclusions which had led to the relevant decision. However, RNSW has not produced any such evidence. Therefore, there is no evidence that RNSW had the state of mind which reflected the explanation or understanding which I have set out in [85] above that options (b) and (c) were no longer available to the ATC. Notwithstanding the qualification to which I have referred, in the absence of any evidence from RNSW, and to the extent it is necessary, the Court finds that the only matters upon which RNSW relied in its decision to make the appointment are the matters set out in the reasons.

There can be no doubt that a very significant part of the ATC’s response to the notice was the KM report. The reasons themselves recognize that “the ATC Board relied heavily on advice from KordaMentha”. Reading the reasons as a whole, and mindful that the Court should not be over-zealous to find error, the Court also has no doubt that the statement in the reasons that “absent that assumption, the ultimate conclusions expressed in the report cannot be sustained” is a very important conclusion for the purposes of the decision. RNSW’s conclusion that the ATC’s “reliance [on the KM report] was misplaced” is one of the conclusions expressly identified in the reasons when they state: “in light of the conclusions above, Racing NSW has formed the following views”. It is those views which individually or jointly in any combination RNSW asserted justified the appointment.

The Court accepts the ATC’s submission that the error is of sufficient magnitude for the purpose of the decision to make the appointment that it does not enable the decision to satisfy the “qualitative assessment” that the unreasonableness ground of judicial review invites: Martinus Rail Pty Ltd v Cube RE Services (No 2) Pty Ltd [2025] NSWCA 49 at [75] per Payne JA (Gleeson JA and Griffiths AJA agreeing). The error undermines RNSW’s decision to make the appointment.

I am also satisfied that it is a jurisdictional error because it was plainly “material to the decision that was made in fact, in the sense that there is a realistic possibility that the decision that was made in fact could have been different if the error had not occurred”: LPDT at [7]. I reach this conclusion bearing in mind that the threshold of materiality is not a demanding or onerous one. I do not consider the possibility of a different outcome to be fanciful or improbable. RNSW’s dismissal of the KM report meant that RNSW dismissed the KM report’s conclusion that the ATC was solvent. The exclusion of the KM report was critical to RNSW’s decision. That criticality is sufficient to meet the not demanding or onerous threshold for materiality: see LPDT at [14].

The ATC advanced three further alternative bases in support of the proposition that the appointment was not authorised by s 14(2)(g) of the Act:

This aspect of the argument produced one measure of agreement between the parties (Tcpt, 23 February 2026, p 218(8)). This was that, as matter of necessary implication, s 14(2)(g) had to be construed as a power to “appoint an administrator to conduct the affairs of a race club to the exclusion of its directors” (emphasis added).

A critical point in the ATC’s argument on the first and second alternative bases was that the corporations legislation contemplated that the affairs of a company would be vested in directors or otherwise in accordance with the company’s constitution or an external administer who owed their duties to the company. It was submitted that if s 14(2)(g) applied to companies, the affairs of the company could be conducted by a person who owed their duties to strangers to the company, being the racing industry as a whole and potentially to RNSW. The Court does not accept that submission.

As RNSW submitted in the course of argument, it is inevitable that the administrator, as the person appointed to administer the affairs of a race club incorporated under the CA, would be a person “[acting] in a position of a director” and therefore be a director for the purposes of the CA (see the definition in paragraph (b) of the definition of “director” in s 9 of the CA). As such, the administrator would be required to act in the best interests of the company. In the absence of a statutory provision in the Act otherwise, the administrator would not be the agent, or obliged to act in accordance with the instructions of, RNSW. Given the outcome of these proceedings, it is not necessary for the Court to consider (and it was not addressed upon) the question of whether and, if so, how RNSW had the power to create the sub-committee referred to in the second part of its resolution to make the appointment (see [16] above) and what the authority of such a sub-committee might be in relation to the administrator to provide “oversight” to the administrator.

So understood, the affairs of the ATC, assuming the appointment was otherwise valid, would continue to be operated by a director who owed their duties to the ATC. A deflection of corporate duty of the kind identified by the ATC would not arise.

The ATC submitted that s 14(2)(g) was, at the time of its original enactment as part of the Principal Club Act, and continues to be required to be interpreted (notwithstanding the demise of the Corporations Law) in accordance with s 5 of the Corporations (New South Wales) Act 1990 (NSW):

So much may be accepted. However, the ATC submitted, that by reason of the matter referred to in paragraph [97] above, in order not to be interpreted as “amending or repealing, or otherwise altering the effect or operation of” the Corporations Law on its commencement (a provision continuing by reference to the Corporations (Ancillary Provisions) Act 2001 (NSW)), s 14(2)(g) had to be interpreted as not applying to companies. However, because the Court does not accept the premise referred to in [97] above, s 14(2)(g) does not, on its proper construction, “amend or repeal, or otherwise alter the effect or operation of” the Corporations Law or the CA.

The ATC also referred to the requirement in s 198A of the CA that “the business of a company is to be managed by or under the direction of the directors”, unless the company was under external administration under the CA. In the latter case, the directors were prohibited from performing or exercising their office (see s 198G of the CA). However, when it is understood that the administrator appointed under s 14(2)(g) must satisfy the definition of a director, there is no derogation from s 198A. Furthermore, company law is well familiar with constitutions whereby there is a governing director in whom all the powers of conducting the affairs of the company are vested, with there being other directors who lack those powers. That is no different from an administrator appointed under the Act, with the other directors of the race club unable to exercise their powers (but not prohibited, for example, from challenging the appointment of the administrator).

For the foregoing reasons, the first alternative contention by the ATC fails.

The ATC submitted that essentially for the reasons it advanced in relation to the first alternative argument, the Court should conclude that s 14(2)(g) of the Act, if it applies to companies, is inoperative by reason of s 109 of the Constitution. Having rejected the reasons advanced in relation to the first alternative argument, the same result follows in relation to the constitutional inconsistency advanced by the ATC.

The test for inconsistency was summarised by the plurality in Work Health Authority v Outback Ballooning Ltd & Anor [2019] HCA 2; (2019) 266 CLR 428 (footnotes omitted):

Insofar as the ATC submitted there was a direct inconsistency, for the reasons set out in paragraphs [98] above that submission is rejected.

Insofar as it was suggested that there was indirect consistency, the Court accepts the ATC’s submission that the subject matters of the CA and the Act are quite different. The CA governs companies, including setting out when a company can be placed into external administration under the control of an administrator. The Act governs horse racing and, in connection with that, race clubs. The two pieces of legislation deal with quite different subject matters such that there is no indirect inconsistency in relation to how RNSW can appoint an administrator to a race club in the exercise of a function identified in s 13(1) of the Act.

That construction is fortified when it is recalled that s 5E(1) of the CA provides that “the Corporations legislation is not intended to exclude or limit the concurrent operation or any law of a State or Territory”. For the reasons already given, there is also no “direct inconsistency” between the CA and the Act that would negate the application of s 5E (see s 5E(4)).

The ATC relied on s 6 of the Merger Act:

It was submitted that the “mandatory corporate governance provisions” included:

By reference to that mandatory provision of the ATC’s constitution, the ATC submitted that s 14(2)(g) and the Merger Act could not “stand or live together” (Commissioner of Police (NSW) v Eaton (2013) 252 CLR 1 at [48]).

RNSW answered these submissions by referring to s 40 of Merger Act:

RNSW also drew attention to the second reading speech for the bill which became the Merger Act, in which the Parliamentary Secretary said:

The ATC submissions particularly relied upon the suggestion advanced by RNSW that the duty in s 11 of the Act upon each member of RNSW “to act in the public interest and the interests of the horse racing industry as a whole in New South Wales” exemplified how the two acts could not live together. This was because, on that construction, it was argued RNSW could appoint an administrator to the ATC whenever RNSW thought it was in the interests of the racing industry as a whole irrespective of what the directors of the ATC thought was in the best interests of the ATC. The Court has rejected that construction of s 11.

In my respectful opinion, the two acts can stand or live together when it is understood, as the Court has concluded, that the power to appoint an administrator under s 14(2)(g) can only be exercised in connection with the functions specified in section 13(1) of the Act. As a matter of construction, those functions comprehend “the conduct of racing activities by or on behalf of” the STC, so as to engage s 40 of the Merger Act. That construction is supported by the second reading speech, which makes clear that the Merger Act was not intended to take the STC out of the regulatory regime for the conduct of horse racing created by the Act.

For these reasons, the ATC’s third alternative argument fails.

Quite apart from these proceedings going further, the evidence suggests that this judgment will not end the disagreements between RNSW and the ATC. Horse racing is a very substantial part of the NSW economy. It directly employs many people and indirectly supports the jobs of those who provide the numerous services on which the industry depends. For even more people in this state, horse racing is a source of much interest, pleasure and recreation.

Horse racing is undertaken by the race clubs. They are important institutions in their local communities. However, horse racing must be independently regulated and developed as an industry of statewide significance. That regulation and development is the core business of RNSW.

This case has highlighted that RNSW's power to appoint an administrator is a drastic one which can have a very real impact on hundreds, if not thousands, of people. It represents a decisive intrusion into the affairs of a race club, in this case a very substantial one, which is run by a board whose majority is democratically elected by its members, and which otherwise operates in accordance with the well-developed body of law that applies to companies.

Section 14(2)(g) of the Act is expressed in the simplest of terms. In some contexts that is desirable in a legislative provision. However, it is not in the interests of RNSW or the race clubs for there to be room for doubt about critical matters such as:

These issues are not necessarily straightforward. I respectfully suggest that they merit careful attention on the part of all those involved in this important industry and including, if thought necessary, amendment of the Act.

The orders of the Court are: