Australian Turf Club Ltd v Racing NSW

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).

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.

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.

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.

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

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.

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

There were five matters not in dispute.

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

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.

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.

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.

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.

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.

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.

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].

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).

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.

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”:

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:

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:

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.

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.

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

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.

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.

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.