Melbourne Rebels sue Rugby Australia for $30 million and seek return of club

The directors of defunct rugby union club Melbourne Rebels are seeking $30 million from Rugby Australia as part of a damages claim launched in the Federal Court over the demise of the club.

The directors also want the court to return control of the Rebels to them, so the team can continue to play in the Super Rugby Pacific competition, according to a statement of claim released to the media.

Businessman Leigh Clifford (right), who wanted to save the Melbourne Rebels, and Rugby Australia CEO Phil Waugh, who shut down the club in May.Credit: Artwork: Bethany Rae. Photos: Getty Images, Eddie Jim

The statement of claim includes allegations Rugby Australia broke several company laws.

A Rugby Australia spokesperson said it would not be able to provide a response until it had read the statement of claim.

Rugby Australia closed down the club in May amid a fiery and unsuccessful mediation process with the directors of the club.

It had been placed in administration owing its creditors $23 million, including $11.5 million to the Australian Taxation Office. The ATO had, before the club’s administration, notified the directors they would be held personally financially liable for the debts.

The administrators found the club had been trading while insolvent since at least 2018.

The Rebels directors have been seeking to rebirth the club. In May, Leigh Clifford, a business magnate and father of Rebels director Georgia Widdup, was brought in to lead a private equity consortium that promised to pump $30 million into the club and keep it alive beyond 2025.

The consortium has claimed to be on the way to raising that sum, though Rugby Australia chair Daniel Herbert was scathing of the consortium’s rescue plan, describing it as “embryonic”. The directors have previously warned that a lack of support for the deal would result in legal action.

In a statement released on Wednesday, Rebels directors said they had no trust or confidence in the board or management of Rugby Australia.

“Their conduct needs to be both exposed and explained. RA have had many months to explain their actions and have failed to do so,” the directors said.

“The Rebels directors believe that the simple reason for this is that there is no defence to their conduct.”

Rugby Australia is itself in a parlous financial position. The sport revealed in April it posted a $9.2 million loss in 2023. If the Rebels are successful in their court action, it could drain what is left of the governing body’s $80 million loan secured in November. Rugby Australia reported it had spent $50 million of it in April.

Part of the laws Rugby Australia are accused of breaching include its handling of the financial problems besetting teams in the competition and unfairly preferenced the financial needs of other clubs, most notably the NSW Waratahs. The directors also allege that Rugby Australia is obliged to indemnify the directors for the tax debts accrued by the club which are now assigned as personal debts to the directors.

In April, Rugby Australia claimed it had fulfilled all of its contractual obligations to the club, and accused the Rebels’ directors of misusing tax funds it had sent to the club.

The statement of claim also quoted a cache of emails they say proves that Rugby Australia was responsible for securing funding for the club. The directors allege Rugby Australia chairman Daniel Herbert sent one such email to then-Rebels chairman Paul Docherty.

“The RA board have had several discussions post the meeting and empathetic to the various issues we, as a game, collectively face. In short, the game cannot afford itself if we continue to operate in the same way we currently do and hoping it will change in the future is not a strategy which sits well with anyone,” Herbert allegedly wrote on December 26, a little over a month before the club entered administration.

The directors said they wanted an independent person to review the dispute.

Rebels players Filipo Daugunu and Lachie Anderson at the club’s final match whistle in June.Credit: Getty Images

“The Rebels are a member of Rugby Australia and had a legal expectation that they would not only be treated fairly but that they would be treated equally to other members,” they said.

“Amongst other things, the Rebels will assert that Rugby Australia has breached various sections of the Corporations Act, has unlawfully oppressed the Rebels and is obliged to indemnify the Rebels for liabilities to the Australian Taxation Office (as well as other broader employment liabilities) incurred when Rebels players were playing for Rugby Australia teams.”

The directors are also seeking an urgent order granting them the right to inspect Rugby Australia’s books, including documents relating to loans and accounting processes, to determine whether Rugby Australia had breached its fiduciary duties and to what extent.

“The constitution requires that the assets of Rugby Australia be applied for the benefit of all members,” the directors said in their statement.

“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).”

The directors allege that when Rugby Australia secured the $80 million loan – which has a reported interest rate of about 10 per cent – to prop up the league, it chose to support its clubs only in NSW and the ACT, and not the Rebels.

“The Rugby Australia board and executives don’t seem to understand that Rugby Australia is a union of members. The Rugby Australia board has a legal obligation to act in the interest of all members, they do not have the ability (or legal right) to pick and choose the clubs and/or states they wish to survive and those that they wish to destroy.”

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