RNSW’s show-cause notice to ATC triggers industry-wide alarm
Trevor Marshallsea
ANZ News
Prominent industry figures have expressed alarm over Racing NSW’s (RNSW) show-cause notice against the Australian Turf Club (ATC), with some perceiving an attempt to revive the sale of Rosehill, and one fearing a bid by RNSW to seize total control of the sport in the state, in a Hong Kong-style scenario.
Thoroughbred Breeders NSW president Hamish Esplin said the move illustrated the sport was “at a crucial juncture” some ten years in the making, and which highlighted the need for industry stakeholders to make submissions to the state government’s imminent review into the Thoroughbred Racing Act.
Four months after ATC members voted down the controversial push to sell Rosehill for property development worth an estimated $5 billion, RNSW on Friday issued the notice to the ATC to show it cause why an administrator should not be appointed to replace the club’s board.
Reports in Sydney newspapers said the notice was served owing to concerns over the club’s financial situation.
The notice was served one day after Ben Bayot and Natalie Hewson resigned from the ATC board on Thursday evening, and four days after the club sacked its chief executive Matt Galanos.
Bayot and Hewson’s departures leave four directors on the ATC board: Tim Hale SC, the chairman appointed after Peter McGauran’s resignation from that post in July in the wake of the botched initial attempt to sell Rosehill; vice-chair Caroline Searcy, plus directors David McGrath and Annette English. Steve McMahon is interim CEO.
Racing and breeding figures contacted by ANZ expressed confidence the ATC would successfully show an administrator should not be appointed - a position barrister Hale, a member of the club’s property and infrastructure committee, appeared to support in a statement on Friday after the show-cause notice was served by Peter V’landys’ RNSW.
“The ATC will cooperate with this process and work with Racing NSW to maintain the Club’s ongoing financial position and sustainability,” Hale said.
“The process will help our long-term viability, but I'd like to emphasise that the ATC remains asset-rich, resilient, and strong.”
News of the show-cause notice sent shockwaves through the industry on the weekend, and was a key point of discussions among racegoers at Randwick on Saturday.
Sydney’s biggest trainer, Chris Waller, responded with an impassioned call for clarity from RNSW.
“We are all in the same industry,” he told the Sydney Morning Herald. “The ATC put on a great show 52 weeks of the year and, yes, they can do some things better, but they need some support.
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“And everybody knows that the funding model has changed, and they don’t get as much money, and Racing NSW gets a lot of money now. Everybody knows that, so that needs to be publicly addressed.”
The timing of the notice raised eyebrows, not only coming a day after two ATC board resignations and five months after the Rosehill sale was rejected by club members, but also on the eve of day one of Randwick’s Everest carnival, and with the NSW parliament’s review of the Thoroughbred Racing Act to begin next month.
However, that review, prompted by the Rosehill sale attempt, will not investigate funding distribution from RNSW to clubs, or that the regulator operates independent of government - caveats detailed in the review’s terms of reference.
But while some industry figures contacted by ANZ suspected political overtones in the show-cause move, some at least felt that on the financial side, the ATC was in a sound enough position to repel any attempt to appoint an administrator.
The club reportedly has a $30 million debt due for repayment to the Commonwealth Bank by October, 2026.
It also owes RNSW $145 million - but that is in the form of a non-interest accruing loan which is only repayable if the club sells a major asset.
Some industry stakeholders fear that if an administrator is appointed - which would take away the right for members to make decisions on the club by way of a vote - it might order the sale of Rosehill. One consequence of that would be forcing the ATC paying RNSW back the $145 million.
In its 2023-24 annual report, the club listed net assets of $303 million.
Experienced and respected breeder Brian Nutt, owner of the Hunter Valley’s Attunga Stud and a man well versed in racing operation as a former vice-president of Scone Race Club, said it was “not a fait accompli” that the ATC would go into administration.
Saying he was “very passionate about the industry but very concerned about the direction in which it is heading”, Nutt said it would be unfair to place the ATC into administration when its board had only weeks ago undergone significant change, with Hale and Searcy taking up their positions on July 21.
“The ATC has just been issued with the show-cause notice, to which it has to respond,” Nutt told ANZ News. “I have no doubt that those four directors will cooperate with the show cause notice and have a very strong defence.
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“One has to consider, the ATC is very much asset-rich. I think to place a club into administration when it is asset-rich, and when there is a changing of the guard to one that has very little time to improve what they’ve basically inherited from the last couple of years - and I refer specifically to the botched sale of Rosehill - whilst the intervention of the regulator is not unexpected, I’m very confident the show cause notice will be met to the regulator’s satisfaction.
“The club can show how asset-rich they are, show part of a strategic plan that would include some partial sale of existing assets.”
Nutt added: “It seems to me the crux of the matter is the $30 million loan to the Commonwealth Bank, because the loan of $145 million to the regulator … the agreement has always been that they are non-interest bearing loans and would only be called in if the ATC sold significant assets.”
The Attunga owner said while he was “concerned that this show-cause notice has happened”, he was optimistic the ATC could ward off administration.
“It would be very difficult to prove any negligence of governance in this very short period after the departure of McGauran and prior governance, which Bayot and Hewson were part of,” he said.
Nutt said he suspected a move to revive the sale of Rosehill was involved in the show-cause notice.
“When the Rosehill vote was defeated, I don’t think anyone thought that was going to be the end of the story,” he said.
“A lot of participants thought there would be some sort of intervention from the regulator. And it’s probably taken a couple of events to give the regulator the so-called justification to intervene.
“Perhaps the departure of the CEO and subsequent surprise resignations of two directors, in addition to the departure of Peter McGauran, would appear to be - in inverted commas - justification for the regulator to intervene, even though the core directors who are left, Hale, Siercy, McGrath and English are more than capable of taking this club forward.”
Esplin, a lawyer by profession, said if the show-cause notice was a push to refloat the sale of Rosehill, it was doubtful it would succeed.
“Given the timing, it’d be hard to say it [the Rosehill sale] isn’t still on the table, but how that works I don’t know,” Esplin told ANZ.
“But an administrator is subject to fiduciary duties. They can’t just come in and do whatever they like. They still have to act in the interests of the stakeholders.
“In this instance, it would be remarkable for an administrator to come into a registered club, and say, ‘I get to disregard the views of the stakeholders which were only given in a vote three months prior’.”
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Esplin said “that wouldn’t stand up to scrutiny” if appeals were lodged with courts or government.
Of greater concern to Esplin was the show-cause notice handed to the largest club in NSW could be a move towards giving RNSW total control of the sport in the state.
He said this illustrated that racing in NSW, and its entwined breeding industry, was at a “crucial juncture” - highlighting the need of stakeholders to lodge depositions to the parliamentary review of the Thoroughbred Racing Act, which begins taking submissions next month.
“What we are seeing here is a show-cause notice for the only race club in Sydney - asset-rich but cash poor, it says in the media,” Esplin said.
“But what’s the end-game of that show-cause hearing? If the club is placed into administration, what does that mean for the centralisation of power for this sport, except to say it’s going to end up with Racing NSW?
“And this comes at a time when the very Act which empowers Racing NSW is under scrutiny, but not as to whether it should operate independently of the NSW Government.”
Asked to comment on Esplin’s assertions, V’landys said only that RNSW would issue a statement on the show-cause notice on Monday, adding, “Unfortunately, there is a lot of misinformation”.
Esplin categorised the show-cause notice as part of a bigger picture of attempts by RNSW to “exert more dominance over the industry”, saying he and others had warned earlier moves were “the thin edge of the wedge”.
“It started with the unilateral extension of [RNSW] directors’ terms, not once, but twice and then a third time,” he said.
“It came down to a change in the nature of the way that licensed persons such as trainers and vets could operate in the industry.
“It got down to the pulling of bonus structures from breeders, such as when we lost our mares’ bonus.
“It then went to an examination of the genesis of the idea of selling Rosehill.
“That led to a government inquiry into that issue. That inquiry raised numerous issues not only about the way in which the idea of the sale of Rosehill started, and whether it was really an idea instigated by Racing NSW, to a series of recommendations by that same inquiry, which now includes a full scale examination of the very Act which empowers that regulator.”
Esplin added: “This thin edge of the wedge is starting to get thick.
“And the thick part is we will end up with a sport under the sole control of the racing regulator in NSW. That is where this end-game goes, in my view.”
Esplin added that scenario would lead NSW down a wholly unsuitable path in which it would become a racing jurisdiction like Hong Kong.
“It has been said, and I share the view, that there is a very real sense that the sport in NSW is being Hong Kongified, in that you do not have a separation between regulator and the club, and the regulator controls absolutely everything,” he said.
“In Hong Kong, the Hong Kong Jockey Club controls everything, including the marketing and the revenue.
“But there’s a stark difference between Hong Kong and Australia. We have a breeding industry. We’re an industry that starts organically.
“If this sport is headed down a path whereby the racing regulator thinks it can control all the assets of a club, and the biggest club, which it looks like it wants to do … if the end-game of this whole process is to end up with one regulator who controls all the assets in this state, then we are at a very, very sharp precipice.
“And in my personal opinion, there has not been a good enough performance by that regulator to date to justify that outcome.”
Esplin stressed that the parliamentary review of the Thoroughbred Racing Act was an opportunity for stakeholders to express their views on how the sport in the state was run.
He said the Act needed an overhaul partly because having been written in 1996, it did not reflect subsequent innovations affecting industry funding.
“When this Act was written, there was no race fields legislation, no point of consumption tax, no co-mingling of international pools, no internet wagering,” he said.
“So I say, in very stark words, that the opportunity for the industry to say how the sport should be governed is right now, in this parliamentary review into the Act.”
Nutt concurred, noting funding distributor RNSW had become extremely wealthy thanks to innovations in V’landys’ 21-year tenure as CEO such as the 2008 race fields legislation, which makes it an offence to publish NSW race fields unless approved by the regulator, and compels those publishing to pay fees.
“Whilst the regulator will argue the funding model that’s in existence is highly satisfactory, the big difference is that when the original Act was put in place, the regulator didn’t have the function of turning on and turning off the taps,” Nutt said.
“Now it has all that power since race field legislation. I take my hat off to Mr V’landys for getting that through, but all the money that has been contributed by corporate bookmakers goes straight to Racing NSW, and they can do as they see fit with that money.
“And there’s no coincidence why a lot of race clubs throughout NSW - not only the ATC - are struggling, and it’s because of an inadequate funding model where people tend to have to go to Racing NSW cap-in-hand.”
