Greyhound Racing New South Wales v Leslie (No 2)

[2019] NSWSC 1706

Supreme Court

New South Wales

Medium Neutral Citation:	Greyhound Racing New South Wales v Leslie (No 2) [2019] NSWSC 1706
Hearing dates:	29 November 2019
Decision date:	02 December 2019
Jurisdiction:	Equity
Before:	Robb J
Decision:	See par 30 for proposed orders – parties to provide comments in writing
Catchwords:	ASSOCIATIONS AND CLUBS — Racing clubs and associations — Validity of appointment of an administrator under s 24(1)(j) of the Greyhound Racing Act 2017 (NSW) — Interlocutory regime pending determination of validity of appointment – Dispute as to appropriate orders – Proposed orders
Legislation Cited:	Betting and Racing Act 1998 (NSW) Greyhound Racing Act 2017 (NSW)
Cases Cited:	Greyhound Racing New South Wales v Leslie [2019] NSWSC 1591
Category:	Procedural and other rulings
Parties:	Greyhound Racing New South Wales (plaintiff) Noel Leslie (first defendant) John Anthony Primmer (second defendant) Allan Thomas Shiells (third defendant) Sandra Fernandes (fourth defendant) Craig Harley McKenzie (fifth defendant) Daniel John Norris (sixth defendant) Geoffrey William Thompson (seventh defendant) Kelly Joy McCrea (eighth defendant) Katrina Novak (ninth defendant) Grant Carroll (tenth defendant) Dapto Agricultural and Horticultural Society Limited (eleventh defendant)
Representation:	Counsel: S Robertson/A Brown (plaintiff) R Yezerski/R Pietriche (first to ninth defendants) E Finnane (tenth defendant)   Solicitors: Pryor Tzannes & Wallis (plaintiff) Automic Group (first to ninth defendants) Uther Webster & Evans (tenth defendant) Unrepresented (eleventh defendant)
File Number(s):	2019/350717

Judgment

1. On 15 November 2019, I delivered judgment on an interlocutory application in these proceedings: Greyhound Racing New South Wales v Leslie [2019] NSWSC 1591.

2. I required the parties to consider the reasons, to consult and if possible to agree short minutes of order to give effect to the reasons.

3. As it has happened, the parties were unable to agree and prepared three competing sets of draft short minutes of order to reflect their respective interests in accordance with their reading of the reasons given by the Court.

4. The parties were given the opportunity to make further submissions as to the appropriate form of the Court's orders at a hearing on 29 November 2019.

5. The parties advised the Court that, on that same day, the Expedition List Judge had made an order expediting these proceedings, and stood the proceedings over to Wednesday 4 December 2019 for the purpose of making appropriate case management orders.

6. At the request of the parties, I made an order that Mr Carroll and the Society be removed as the second and third plaintiffs and added to the proceedings as the tenth and eleventh defendants respectively.

7. The directors and the CEO have filed a cross summons by which they seek orders on behalf of the Society setting aside the appointment of the administrator by Greyhound Racing.

8. Greyhound Racing informed the Court that it wished to apply for leave to amend its summons to seek a declaration that the cessation by the Society of the activity of greyhound racing at any time before 26 June 2020 would be a repudiation of a contract made between the Society and Greyhound Racing. It was agreed that the application for leave should be deferred and made to the Expedition List Judge so that His Honour could deal with that issue in the light of other matters relevant to the expedition and preparation of these proceedings for hearing.

9. The competing versions of the draft short minutes of order reflected the different perspectives of the parties and the unusual features of the appointment of Mr Carroll as administrator of the Society in this case.

10. As I observed in the primary judgment, the power of Greyhound Racing to appoint an administrator of a greyhound racing club is exceptional in that the grounds upon which the power may be exercised, the purposes to be achieved by the appointment, and the consequences of the appointment being made are not identified in the Greyhound Racing Act 2017 (NSW) (the Act).

11. It is a signal factor of this case that neither the Court nor the Society, its directors and the CEO, knows in precise terms what the purpose of the appointment of the administrator was, and what is intended to be achieved. Neither the Court nor the parties other than Greyhound Racing and Mr Carroll will be in a position to know when Mr Carroll's work has been done and when he should either resign or be removed as administrator.

12. It is usual to think that the appointment of an administrator of an organisation is appropriate when there are sound reasons to think that, by reason of the inadequate governance of the organisation, it is committing irregularities or breaches of its duties that justify the summary appointment of an outside administrator to take control of the affairs of the organisation.

13. In the present case, there has been no real suggestion that there are any irregularities or breaches of duty in respect of the manner in which the directors and the CEO have conducted the affairs of the Society, save that the directors resolved that the Society would cease to conduct the greyhound racing activities that it has historically conducted.

14. It is as obvious as it could be that the primary purpose of Greyhound Racing in appointing Mr Carroll as administrator of the Society was to reverse the decision of the directors to cease the conduct of greyhound racing, and, by presently undisclosed means, to attain a state of affairs whereby the decision would be reversed and the Society would continue greyhound racing, I suspect into the indefinite future.

15. Greyhound Racing may have personal rights against the Society that enable it to require the Society to continue greyhound racing, whether that be for a particular period or indefinitely. It appears that this question will be the primary issue to be addressed at the hearing of these proceedings.

16. However, as explained in the primary judgment, the Society has activities other than greyhound racing, and the directors have explored future directions for the Society to take that may or may not be compatible with the continuation of greyhound racing, depending upon financial considerations.

17. One of the matters the subject of dispute at the interlocutory hearing was whether Mr Carroll as administrator should be permitted to control all of the activities of the Society, or whether that control should be divided between Mr Carroll as to greyhound racing activities and the directors and the CEO in respect of all other activities. I was persuaded that, notwithstanding the practical difficulties and opportunities for dispute that could arise out of the division of responsibility for different activities, as the directors and the CEO claimed that Greyhound Racing should not be entitled to use its powers under the Act to interfere with the Society's non-greyhound racing activities, I should make orders that divided the responsibility for the various activities.

18. However, as I recorded in the principal judgment, I realised that the division of responsibility for the different activities was not practically compatible with the division of the control of the Society's funds, income and expenditure, and that it was only realistic for one person to have that control. As the greyhound racing activities appeared to be financially the dominant activity of the Society, I provisionally concluded that Mr Carroll should have control of the Society's finances, and that he should be responsible for receiving the income and paying the expenditure for the activities that remained under the control of the directors and the CEO.

19. That became the subject of dispute at the recent hearing, as it came to light that the Society conducts two bank accounts, one largely related to greyhound racing and the other largely related to the other activities. The suggestion was made by the directors and the CEO that there could be separate control of the two accounts.

20. However, a more significant difficulty that has come to light arises out of the fact that Greyhound Racing and the Society, through the directors and the CEO, are engaged in a legal dispute represented by these proceedings, in which it appears that Greyhound Racing is attempting to establish a number of private rights against the Society. Had Greyhound Racing chosen simply to institute proceedings against the Society, including perhaps a claim for injunctive relief to oblige the Society to continue its greyhound racing activities, Greyhound Racing would have been required to give the usual undertaking as to damages in support of any interlocutory injunction issued by the Court in its favour, and its conduct of the proceedings would have been subject to all of the usual protections afforded by the Court to the parties before it; for example, the restrictions on disclosure found in Practice Note SC Eq 11. Furthermore, the parties could avail themselves in the ordinary course of protections such as client legal privilege.

21. One effect of Greyhound Racing appointing Mr Carroll as administrator of the Society is that Mr Carroll has been trying to gain access to all of the books and records and computer systems and related facilities of the Society in order to perform his role as administrator, and also to conduct an audit or examination of the Society's financial affairs for purposes that have not yet specifically being defined. There is evidence that Mr Carroll has not been able to gain possession of the information that he requires.

22. Perhaps the most difficult issue that has come to light in formulating appropriate orders is the need to ensure that Mr Carroll is not restricted in his ability to perform his duties properly, while also ensuring that the rights of the Society, its directors and CEO are properly preserved.

23. It would obviously be problematic for Greyhound Racing to gain advantages in the litigation that would be denied to it as an ordinary litigant by the device of appointing an administrator who becomes entitled to access to all the books and records and other information of the Society, in circumstances where he might pass that information on to Greyhound Racing to be used for its benefit.

24. There is no positive reason for the Court to believe that Mr Carroll will conduct his administration in a manner that inappropriately impinges upon the legitimate interests of the other parties. One problem is that the objective of Mr Carroll's appointment as administrator is not known, and in fairness to him, there is no clear delineation of the powers or restrictions imposed upon him.

25. Furthermore, Mr Carroll is not an independent administrator, but he is an employee of Greyhound Racing, and in the absence of binding restrictions would presumably be subject to the usual obligations of employees to comply with directions given by their employer.

26. It is in these circumstances that I presently propose to make the orders that I set out below. The parties will find that I have drawn selectively from the competing draft short minutes of order as seemed appropriate to me.

27. As some aspects of the orders that I propose have not been the subject of submissions, and some orders are novel so far as these proceedings are concerned, as a result of my attempt to deal appropriately with problems that have come to light, I will give the parties an opportunity to provide further written submissions in response to the proposed orders. I will return to this issue below.

28. Following my statement of the proposed orders, I will make a number of further comments concerning the reasons for particular orders, which will be best understood after those orders have been set out.

29. The orders that I propose at this stage to make are as set out in the following paragraph.

30. The Court:

1. Notes that the following orders are made on the basis of the usual undertaking as to damages given to the Court by the plaintiff (Greyhound Racing) by its counsel.

2. Notes for more abundant precaution the agreement of Greyhound Racing given to the Court by its counsel that the undertaking noted in Order 1 extends both to the consequences of the actions of Greyhound Racing and the actions of the tenth defendant (the Administrator) in relation to the appointment by Greyhound Racing of the Administrator as the administrator of the eleventh defendant (the Society) and the implementation of these orders.

3. Notes that the following orders are made on the basis of the usual undertaking as to damages given to the Court by the Society by the counsel for the first to eighth defendants, being the members of the board of directors (the Directors) of the Society.

4. Notes that the Court has been informed by the Directors by their counsel that they have as the members of the board of directors of the Society formally resolved on behalf of the Society to give the undertaking noted in Order 3.

5. Notes that the Court has been informed by Greyhound Racing and the Administrator by their counsel that Greyhound Racing and the Administrator acknowledge that the appointment by Greyhound Racing of the Administrator as administrator of the Society did not have the legal effect of excluding the power of the Directors to make the resolution noted in Order 4.

6. Notes that for the purpose of these orders “greyhound activities” means:

1. the conduct by the Society of meetings for racing between greyhounds in competitive pursuit of an artificial lure activated by mechanical means, and includes:

1. a greyhound trial or training race, and

2. racing in a test of speed of a greyhound or greyhound competing separately;

2. the use of all of the assets and facilities of the Society, including without limitation the Society’s real property, personal property, employees, contractors, funds, computing and communication facilities, and books and records, reasonably necessary or incidental to the activity described in par (a), including without limitation:

1. greyhound trials,

2. kennel cleaning,

3. cleaning of greyhound facilities,

4. administration of greyhound activities,

5. track preparation,

6. track maintenance,

7. attending to greyhound facility presentation,

8. the conduct of race day events,

9. the provision to patrons of all facilities appropriate for their enjoyment of race day events,

10. cleaning following race day events,

11. the employment and supervision of all employees reasonably required to implement or perform any of these listed activities, and

12. entering into contracts with and supervising of all third-party contractors reasonably required to implement or perform any of these listed activities;

3. the receipt of all income by and the making of all expenditure for the Society arising out of or reasonably incidental to the activities described in pars (a) and (b); and

4. any other activity of the Society that the Administrator considers is reasonably incidental to the activities described in pars (a) and (b) of which the Administrator has given the ninth defendant (the CEO) two days’ notice in writing and in respect of which the CEO has not within a further two days given the Administrator notice in writing that the inclusion of that activity within greyhound activities is disputed.

7. Orders until further order that the Directors and the CEO by themselves their servants and agents be restrained from interfering with the conduct by the Administrator of:

1. the greyhound activities of the Society pursuant to his appointment as administrator of the Society by Greyhound Racing; and

2. all other activities of the Society carried on or permitted by the Society on Thursdays, provided those activities are generally of the same nature as the activities that have been carried on by the Society on Thursdays before the date of these Orders.

8. Orders until further order that Greyhound Racing and the Administrator by themselves their servants and agents be restrained from interfering with the conduct by the Directors and the CEO in accordance with their respective authorities under the Constitution of the Society of all activities of the Society that are not activities described in Order 7, provided those activities are generally of the same nature as the activities that have been carried on by the Society before the date of these Orders.

9. Orders until further order that the Administrator have control of all funds, income and expenditure of the Society for the purpose of the conduct by the Society of the activities described in orders 7 and 8 and any other financial matter provided for in these Orders.

10. Orders until further order that the Administrator cause:

1. all proper debts incurred by the Society through the conduct of the activities described in order 8; and

2. the legal fees incurred by the Directors and the CEO;

3. to be paid in accordance with their terms:

4. upon delivery of proof by the Directors or the CEO to the Administrator that they are proper and authentic debts of the Society or legal fees incurred by the Directors and the CEO; and

5. upon provision of any explanation reasonably requested by the Administrator; provided that

6. compliance with this Order shall not be a personal liability of the Administrator and payments shall only be required to be made out of the funds of the Society under the control of the Administrator.

11. Orders until further order that the Administrator cause proper and complete accounts to be prepared and kept in a manner reasonably satisfactory to the Directors and the CEO of the conduct by the Administrator of the activities described in Order 7 and the financial dealings of the Society under the control of the Administrator in accordance with Orders 9 and 10.

12. Orders until further order that the Administrator facilitate the Directors and the CEO having unfettered electronic access to all accounts of the Society for the purpose of perusing all transactions effected by the Administrator through those accounts, but without the Directors and the CEO having any authority to implement transactions on behalf of the Society.

13. Orders until further order that Greyhound Racing and the Administrator, to the extent of their respective powers, by themselves their servants and agents be restrained from:

1. causing the Society to enter into any transaction other than in the ordinary course of its business and affairs;

2. causing the Society to enter into any transaction which:

1. imposes on the Society a payment obligation exceeding $20,000, or

2. has a term of longer than three months, or, if longer than three months, cannot be terminated at will by the Society without liability,

unless

3. 14 days’ notice in writing has been given to the Directors and the CEO, or

4. the Directors or the CEO consent in writing, or

5. the leave of the Court is given;

3. causing the Society to enter into any agreement or arrangement with Greyhound Racing that would oblige the Society to conduct any greyhound activities at any time after Order 7 ceases to have effect;

4. causing the Society to extend its racecourse licence under the Betting and Racing Act 1998 (NSW) or its registration as a racing club under the Greyhound Racing Act 2017 (NSW), except to the extent that it may be necessary to do so to enable the Administrator to carry on on behalf of the Society the activities described in Order 7;

5. causing the Society to accept new members in accordance with its constitution;

6. causing the Society to convene any general meeting of the members of the Society; or

7. purporting to amend the Constitution of the Society.

14. Orders until further order that the Directors and the CEO, to the extent of their respective powers, by themselves their servants and agents be restrained from:

1. causing the Society to enter into any transaction other than in the ordinary course of its business and affairs; or

2. causing the Society to enter into any transaction which:

1. imposes on the Society a payment obligation exceeding $20,000, or

1. has a term of longer than three months, or, if longer than three months, cannot be terminated at will by the Society without liability,

unless:

3. 14 days’ notice in writing has been given to Greyhound Racing and the Administrator, or

4. Greyhound Racing or the Administrator consents in writing, or

5. the leave of the Court is given.

15. Orders until further order that the Administrator by himself his servants and agents is restrained from providing to Greyhound Racing any information gained by the Administrator as a result of his access to the books and records and computer systems of the Society other than:

1. the opinion of the Administrator that his appointment as administrator should be revoked;

2. that in the opinion of the Administrator the affairs of the Society have not been conducted by the Directors and the CEO in accordance with any law relevant to the proper governance of the Society or that in the opinion of the Administrator the Society may have failed to comply with any statutory obligation imposed upon it by the Act or any regulation made pursuant to the Act, and a written explanation for the Administrator’s formation of the opinion;

3. information provided by the Administrator in the form of a written report after the Administrator has provided the report to the Directors and the CEO and that neither the Directors nor the CEO have objected to the report being given to Greyhound Racing within seven days of being given the report; and

4. information given to Greyhound Racing with the leave of the Court.

16. Orders until further order that save as provided in Order 15 the Administrator keep confidential all of the information gained by the Administrator as a result of his access to the books and records and computer systems of the Society.

17. Orders until further order that the Administrator, the Directors and the CEO do all things reasonably necessary to facilitate the non-exclusive access by the Administrator, the Directors and the CEO to the Society’s books, records (including without limitation, internet banking records), plant and equipment necessary to allow:

1. the Administrator to have control of and conduct the activities of the Society described in Order 7; and

2. the Directors and the CEO to have control of and conduct the activities of the Society described in Order 8,

3. save that the Directors and the CEO may retain and not provide to the Administrator any documents or information for which they claim any privilege on behalf of the Society, provided that the Directors and the CEO notify the Administrator of the claim for privilege in writing within seven days of the decision to make the claim with a brief explanation of the basis of the claim.

18. Orders until further order that the Directors and the CEO give effect to Order 17 by providing to the Administrator as soon as reasonably possible the following so far as they are in their possession, custody or control, save as excluded by Order 17:

1. all books and records of the Society, including electronically stored data;

2. all usernames, passwords, access codes, devices and other things necessary to enable the Administrator to have access to:

1. the electronically stored records of the Society (whether stored on-site or off-site),

2. the security cameras and other security systems of the Society, and

3. any social media accounts of the Society associated with the activities described in Order 7; and

3. the computers of the Society.

19. Orders until further order that if the Administrator causes any copies to be made of the Society's books and records whether or not stored in electronic form the Administrator shall:

1. make a complete list of the information copied and provide the list to the Directors and the CEO within three days;

2. retain the information copied in a manner that will facilitate its return to the Society or its destruction at an appropriate time in the hands of the Administrator;

3. deal with the information only for the purposes permitted by these Orders; and

4. return the information to the Society or destroy it if and when ordered by the Court.

31. As to Order 1, counsel for Greyhound Racing advised the Court at the hearing on 29 November 2019 that he would have to get instructions before he could give the usual undertaking as to damages on behalf of Greyhound Racing, and the receipt of those instructions may depend upon the precise form of the orders to be made.

32. I have noted above that, if Greyhound Racing had applied to the Court for an interlocutory mandatory injunction requiring the Society to continue greyhound racing, the Court would have required the giving of the usual undertaking as to damages as the price for the injunction.

33. If Greyhound Racing declines to give the usual undertaking as to damages, that will have a problematic effect on the appropriateness of all of the orders that I propose. As I observed in the primary judgment, there is an appearance that the Society incurs a loss from its greyhound racing activities, which is a matter contested by Greyhound Racing. If Greyhound Racing did not give the usual undertaking as to damages, as presently advised I would make orders that confined Mr Carroll's entitlement to conduct greyhound racing to using only the funds of the Society that have been and are generated by greyhound racing. That would be problematic because of the underlying disagreement concerning the financial consequences of greyhound racing, and the difficulty in identifying income and expenditures relating to different activities, and the problem of expenditures that relate to multiple activities.

34. I propose Order 2 as I would not expect Mr Carroll to give the usual undertaking as to damages to the Court. I presume that Greyhound Racing has its own arrangements with Mr Carroll, and that it will take responsibility for his actions as administrator.

35. Orders 3 to 5 arise out of my realisation that the Society, rather than its directors and CEO, should be the party who gives the corresponding undertaking as to damages to that which will be required from Greyhound Racing. The directors and the CEO are only involved in these proceedings on behalf of the Society.

36. Order 6 notes a definition of "greyhound activities". I have drawn upon the position taken by the various parties in their draft short minutes of order. I have tried to strike a balance between specificity and flexibility that attempts to cure uncertainties by practical communications rather than to rely primarily on the subjective understanding of Mr Carroll.

37. If the parties cannot cooperate to sensibly resolve any disputes that arise out of the implementation of Order 6(d), then it will be necessary for the Court to resolve the disputes.

38. Orders 7 and 8 implement the principal conclusions reached in the primary judgment. I adhere to the conclusion that the circumstances warrant a division of responsibility between the parties for the activities of the Society, even though that may require some level of common sense and compromise for its convenient execution.

39. I also adhere to my conclusion that only one party should be responsible for the Society's finances, and that that party should be Mr Carroll because greyhound racing is the primary financial pursuit of the Society. Orders 9 to 12 deal with the control of the Society's finances.

40. Proposed Order 10(b) is novel, as it has occurred to me that it is the Society rather than the directors and the CEO who should be financially responsible for the defence of these proceedings. The directors and the CEO should remain entitled to exercise their powers under the Society's constitution as to how its funds should be applied for the purposes of the defence of these proceedings. The propriety of their acts should be a matter between them and the Society's members.

41. It would be wise for all parties to give attention to whether the proposed orders concerning the control of the Society's finances should be further refined to ensure, in particular, the continuing solvency of the Society.

42. The proposed restrictions on the activities of Greyhound Racing and Mr Carroll are set out in Order 13. They are self-explanatory. Nothing should be done by either party pending the determination of these proceedings that has any long-term effect on the obligation of the Society to conduct greyhound racing and the internal governance and constitutional affairs of the Society.

43. The restrictions to be imposed on the directors and the CEO by Order 14 are less expansive, and also self-explanatory. It seemed appropriate to the extent necessary for the restrictions on the parties to be the same.

44. I expect that Orders 15 to 19 will be the most controversial. On the one hand, as the interlocutory regime accepts that Mr Carroll will have a substantial ongoing role in the conduct of the major activity of the Society, he must be given access to all books and records and facilities of the Society necessary for him to be able to perform his duties properly. The state of affairs apparently disclosed by the evidence, whereby Mr Carroll has been running around from pillar to post trying to access the necessary information, simply must cease. Mr Carroll must be able to perform his duties in a convenient and straightforward manner without having perpetually to engage in arguments with the representatives of the Society about what access is necessary for him to perform his duties properly.

45. On the other hand, a concomitant of the resolution of Mr Carroll's access problem, by ensuring that he gains relatively free access, is that there must be clear and precise restrictions and controls on what Mr Carroll may do with the information he gains, particularly in respect of the provision of that information to Greyhound Racing. Hence I have proposed orders 15, 16 and 19. Order 19 has been proposed following my appreciation from the recent affidavit of Mr Michael Garvin that Mr Carroll has attempted to copy or image information in the books and records and computer systems of the Society. I can understand why it may be necessary for Mr Carroll to have convenient access to his own copies of the Society's records, but that access should be subject to clear and strict control.

46. As at present advised, it appears to me that there is a direct relationship between the freedom of Mr Carroll to gain access to the Society's information and the corresponding restrictions on his freedom to deal with that information, particularly in relation to his freedom to provide information to Greyhound Racing, his employer.

47. The parties are invited to provide written comments on the proposed orders to my associate. If the parties are able to agree on improvements to the orders I am likely to accept whatever suggestions are made. In respect of disagreements, the parties should start with the proposed orders and suggest the fewest amendments that will reasonably resolve any perceived inadequacy in the orders. The parties should inform my associate of their positions within two days if that is possible.

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Decision last updated: 04 December 2019