Melbourne Rebels launch $30m lawsuit against Rugby Australia after Super Rugby axing

The $30 million court case launched by the Melbourne Rebels against Rugby Australia could threaten the financial future of the game. Find out how inside.

The $30 million court case launched by the Melbourne Rebels against Rugby Australia could threaten the financial future of the game, because the directors are seeking personal damages.

This is a case that goes well beyond whether the Rebels were wrongfully axed from Super Rugby, and means the Rebels’ statement of claim filed in the Federal Court of Australia on Wednesday can cripple the financially-strained RA.

They had to take an $80 million line of credit from Pacific Equity Partners last year to stay afloat – they’ve spent more than $50 million of that loan already – and this legal challenge comes at the worst possible time.

RA is trying to secure a new broadcast deal that will allow them to keep funding the four existing Super teams – NSW Waratahs, Queensland Reds, the Brumbies and Western Force.

But their existing deal with Nine and Stan Sport expires on December 31, and if the court case extends beyond that they won’t be able to deliver a formal plan of what Super Rugby looks like beyond 2025.

The Melbourne Rebels were axed from Super Rugby at the end of last season. Picture: Grant Down/AFP

But perhaps the most costly consideration will be personal damages that could further be sought by Rebels directors.

When the Rebels were axed in May, they were $23 million in debt, including more than $11 million owing to the Australian Tax Office.

But among the points of contention, through documents launched in the Federal Court, will be that the Rebels continued paying players after the 2020 Super Rugby competition had been cancelled due to Covid-19. When the players joined Wallabies camp for up to six months, eventually playing in a reduced Tri Nations tournament with New Zealand and Argentina, the Rebels continued those payments.

They will claim RA should have foot the bill for wages and taxes.

The court documents also suggest they will also attack RA’s bungled attempt to garner between $150-$300 million from private equity under a campaign they called “Project Aurora”, that would give the successful investor 20 per cent ownership of RA’s commercial rights.

Project Aurora was pitched to Super franchises as the method to secure rugby’s long term future, and the franchises signed off on RA’s proposal to seek out a partner in January 2023.

But by September, it had become clear to RA that private equity firms weren’t going to invest the money they sought, saying they were overvaluing their product. That is why they took the $80 million debt facility.

Rugby Australia chair Daniel Herbert and chief Phil Waugh. Picture: Morgan Hancock/Getty Images

The Rebels will claim that between January and September, RA withheld crucial information about the private equity process and interest it was attracting. Essentially, their case will be that they weren’t fully informed that PE firms weren’t interested in rugby’s rights, and if they had been, could have started their own campaign for additional revenue far earlier than September 2023 when the pursuit for PE was finally dumped.

These technical arguments will be crucial to what played out next, and what the financial ramifications for RA may be in this case.

The Rebels went into voluntary administration, and an ensuing audit from PricewaterhouseCoopers said the Rebels had traded insolvent for five years.

That has enormous professional and personal reputational damage for Rebels directors, including Georgia Widdup, Tim North KC, Lyndsey Cattermole, Gary Gray, Owain Stone, Neil Hay and Dominic Shipperley.

If the Rebels win their case against RA, they will be seeking millions of dollars from the governing body to repair this damage.

So the case is much bigger than whether the Rebels can simply re-enter the Super Rugby competition from 2026.

“The conduct of Rugby Australia in destroying the Rebels – the men’s and women’s teams - demonstrates an appalling lack of judgement by the national body,” a Rebels statement said.

“The directors have reserved their right to seek future compensation from RA for personal damages inflicted on them by RA.

“With backing from the Private Equity backed consortium, the Rebels can be back on the field at a new home in Tarneit in Melbourne’s western suburbs as soon as the Court clears the path.”

Georgia Widdup, a Melbourne Rebels board director, has been fighting to save the rugby club.

The significant legal costs from this Rebels challenge – regardless of the financial outcome – will test the immediate resources of RA.

The proceedings have been undertaken by Melbourne Rebels Rugby Union Pty Ltd.

“The Rebels are seeking an urgent order granting the Rebels the right to inspect the Rugby Australia books, including accounting and loan records, to determine whether (and the extent to which) there has been fiduciary and governance failures by Rugby Australia,” their statement said.

“The Constitution requires that the assets of Rugby Australia be applied for the benefit of all members. The Rebels believe that this has not been the case and that there has been unacceptable and unauthorised spending (perhaps best exemplified by the unauthorised and excessive spending at last year’s Rugby World Cup and the subsequent suppression of the Rugby World Cup independent report).

“We want an independent person to decide whether the conduct of Rugby Australia meets the standards required by law – and that will now be a Federal Court Judge.”

Counsel for the Melbourne Rebels includes Philip Crutchfield KC, Harry Forrester, tax specialist Gareth Redenbach and Alexander Di Stefano.

Originally published as Melbourne Rebels launch $30m lawsuit against Rugby Australia after Super Rugby axing