PwC: Melbourne Rebels ‘trading insolvent’ for five years

Rugby Australia will discuss the Melbourne Rebels’ future at its annual meeting on Monday as records reveal how bad things are at the cash-strapped club.

Sam Talakai of the Rebels is tackled during the round eight Super Rugby Pacific match between Melbourne Rebels and Highlanders at AAMI Park on April 13, in Melbourne. Picture: Photo by Josh Chadwick/Getty Images

The Melbourne Rebels’ future is hanging by a thread as a report found the rugby club “may have traded while insolvent” for five years.

A 111-page report by administrators PwC found the club had overpaid players and back office employees and failed to get enough money from memberships and sponsorships resulting in more than $20 million debts.

The former board members of the club, including Georgia Widdup, daughter of ex Qantas chair Leigh Clifford, have offered creditors 15 cents in the dollar to keep the club going.

They want to move the team to Tarneit in Melbourne’s west and have threatened to sue Rugby Australia (RA).

Rugby Australia will discuss the Rebels’ future at its annual meeting on Monday, with sources claiming that they were looking to cut the team and field an 11-side Super Rugby competition next year.

Sam Talakai in action for the Rebels. Picture: Getty Images

PwC administrator Stephen Longley’s report states the Rebels had an “excessive cost structure”, including “employee costs and player wages”.

“The Company may have traded while insolvent since 31 December 2018,” he wrote.

He added there was a “potential claim” against the Rebels’ directors “for potentially breaching their director duties and/or failing to prevent the company from incurring new debts while the Company was insolvent of up to $16.9m.”

Trading while insolvent means that you cannot pay your debts when they are due – similar to a homeowner not having enough money to meet their mortgage repayments.

The Australian Securities and Investments Commission warns there “are serious penalties for allowing your company to trade while insolvent.”

Mr Longley recommended a deal put forward by the former Rebels board and backed by a proposed $20 to $30 million investment from a consortium Mr Clifford has organised.

That would provide creditors, including the Australian Taxation Office and Victorian Government, with 15 cents in the dollar, compared to 9 cents in the dollar if it was put in liquidation.

Georgia Widdup.

Tim North.

The Rebels creditors, including Rugby Australia, the Australian Taxation Office, and the Victorian Government, will vote on the deal at a meeting on Friday, May 3.

Ms Widdup said on Thursday that Rugby Australia had been “unconscionable”.

“RA made a range of representations to us over many years regarding funding that it would provide. We relied on these representations, but RA did not honour these commitments,’’ Ms Widdup said.

“We have consistently said that when the Administration period is completed we will be

issuing proceedings against RA and the RA directors personally in relation to these

representations.

“Our preparations for these cases are well advanced and we have a high

level of confidence in them.’’

The Rebels directors, which also include prominent Tim North, KC, businessman Paul Docherty and forensic accountant Owain Stone, have been hit with Director Penalty Notices.

They are personally liable as “joint and several” debtors for a $7.8 million tax debt, meaning that if one can’t pay the debt falls on the other board members.

Mr North owns a $20 million property in Melbourne.

The Rebels have continued playing this season while in administration. Their women’s side played against Fiji this month. Picture: Getty Images

The ATO has declined to comment on specific cases, however, it has been cracking down on unpaid tax after giving businesses more time to pay following the Covid-19 pandemic credit crunch.

“The ATO has now returned to business-as-usual debt recovery operations,” the ATO said in response to general questions this week.

“We have increased our use of firmer debt collection actions, including director penalty notices and disclosure of business tax debts, although some actions still remain below pre-Covid levels.”

Victorian Sports Minister Steve Dimopoulos said: “ The Victorian Government supports Rugby Union remaining in our state and expects Rugby Australia to commit to a team at the elite level of the sport in Victoria.”

“Rugby Victoria and our elite Rugby Union team, the Melbourne Rebels, have deep community roots.”

Rugby Australia was approached for comment.

Originally published as PwC: Melbourne Rebels ‘trading insolvent’ for five years