Royal Croquet Club made legal threat against Adelaide City Council over its disastrous China expansion

THE team behind the Royal Croquet Club’s financially crippling Chinese expansion threatened to sue Adelaide City Council and former state government for damages.

Coopers were among South Australian companies represented at the Royal Adelaide Club but lost thousands of dollars from the financial failure of the event.

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THE team behind the Royal Croquet Club’s financially disastrous expansion to a Chinese beer festival threatened to sue Adelaide City Council and the former state government for damages, claiming they were deceived over the event’s financial viability.

But they later backed down after the lawyer acting for the council, Lord Mayor Martin Haese, councillor David Slama and former trade minister Martin Hamilton-Smith said they “categorically denied” responsibility for the rebranded Royal Adelaide Club’s financial problems and warned no further assistance would be forthcoming unless they withdrew the accusations.

The RAC also claimed the former Labor government and council had ignored pleas for diplomatic help for company directors who had their passports confiscated and had faced “physical threats” and potential detention in China over the mounting debt crisis, according to a November 24, 2016 letter.

The legal threat was issued three months after the Qingdao International Beer Festival which former RAC and RCC directors Tom Skipper and Stuart Duckworth had publicly blamed as a major factor in the multimillion-dollar financial crisis that ultimately led to the liquidation of their event-related business interests.

Former Royal Adelaide Club and Royal Croquet Club directors Tom Skipper and Stuart Duckworth lost millions on the failed China expansion.

Iles Selley lawyer Matthew Selley wrote that the RAC, whose business partners included Adelaide-based Australian Trade Alliance, was approached by Mr Slama in December 2015 to participate in the festival, which was backed with $660,000 in State Government and $60,000 in council funding.

“RAC assumed that the State Government and the ACC had determined, based on their relationships with Qingdao and other factors, that the Festival was a safe investment with real commercial opportunity given the considerable size of the grants,” he wrote.

“In many instances our client would obtain information about the Festival exclusively via the Trade Minister, Lord Mayor or Cr Slama.”

He said the RAC had made clear on “numerous occasions” its concern about the lack of information on attendance numbers at the proposed festival site.

“The RAC was led to believe that no less than 50,000 people would attend the RAC site each day, and this formed the basis for site procurement, due diligence, staff, stock and developments thereafter,” he said.

“Recognising that these figures might be over-estimated, our client budgeted for a worst-case scenario of 7200 people per day ... In fact the number of attendees at the Festival was only 4 per cent of budget, or 830 attendees per day.

“The estimates preferred by Qingdao and echoed by Cr Slama were so dramatically misleading...It is difficult to accept they were made on reasonable grounds.”

The DJ stage at the Royal Adelaide Club which was touted as an opportunity to sell Adelaide and SA to Chinese investors but instead financially crippled directors behind the event.

He said his client incurred $250,000 in import taxes but that RAC was advised by Mr Slama and Mr Haese on “multiple occasions” that the Qingdao Government would waive charges.

“One of our client’s international associates was obliged to contribute over $390,000 at short notice in the face of demands by Chinese authorities who had confiscated passports of a number of our client’s directors and threatened open-ended detention,” he wrote, adding his client owed $1.5 million to creditors.

Mr Selley said the event was a “financial disaster” for his client which wanted a line of credit to allow its directors to conduct their businesses without “financial strain”.

“If a suitable resolution cannot be reached within 14 days, our client will be left with no alternative but to commence legal proceedings against ACC (if not also the State) seeking damages for the misleading and deceptive conduct in relation to the commercial viability of the festival and our client’s exemption from import taxes,” he wrote.

Entrance to the VIP area of the Royal Adelaide Club at the Qingdao International Beer Festival

Norman Waterhouse partner Stephen Williams responded six days later denying his clients had misled the RAC.

“Your letter, while asserting misleading conduct or representations on the part of our clients, fails to specify any particular instances of conduct or representations by any of them which form the basis of any such assertion,” he said.

“Our clients encouraging your client to participate in the Festival cannot possibly constitute misleading conduct on the part of our clients.

“Equally, our clients providing financial support to yours in relation to the Festival againt does not constitute conduct or representations, express or implied, that would support or justify action against them.”

“Our clients are well aware that your client was cautioned as to the viability of its participation in the Festival by more than one party. We understand that your client failed to obtain the sponsorship it required, yet still persisted with its involvement.”

Mr Selley wrote to Mr Williams on December 16, 2016 advising his client withdrew the allegations.

Lord Major Martin Haese said that he and councillor David Slama provided support to the RAC team but that the event was a private venture.

Mr Haese told The Advertiser the RAC was a commercial and private venture undertaken at the risk of the operators.

“The city council in the lead up to that event, myself and councillor David Slama most notably, provided support whenever we could appropriately do so, and it’s clearly unfortunate the venture did not succeed,” he said.

Mr Hamilton-Smith said the RAC was a private venture.

“The success or failure of the venture was completely up to them (RAC),” he said. “Any venture going into China they do so at their own risk.”

Mr Skipper said he was no longer involved in the business and did not “take the lead” in the legal matter and Mr Duckworth did not respond for comment.

ATA’s Justin McCarthy said the event was a “highly disappointing” outcome for a year’s work for an event “we were asked to put on.”

“I think we made 12 trips to China to set it up. we lost an incredible amount of money,” he said.

The Advertiser sought comment from Mr Slama.