‘Deceptive conduct’: Rugby Australia to countersue Melbourne Rebels directors

Rugby Australia is preparing to countersue the seven Melbourne Rebels directors, accusing the group of deceiving the peak rugby body from at least 2018 about the former rugby club’s financial position.

A scathing statement released by Rugby Australia on Thursday came a day after the directors of the defunct Super Rugby club launched a damages claim against Rugby Australia in the Federal Court, demanding $30 million from the peak body.

Rugby Australia shut down the Melbourne Rebels after 14 seasons.Credit: Getty Images

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 in April the club had been trading while insolvent since at least 2018. Rugby Australia is now alleging that the body was misled about the club’s financial position, and would not have provided its participation agreement for the Super Rugby Pacific competition if it had known.

In a statement released on Thursday, Rugby Australia claimed, because of this alleged deception, it had lost an excess of $35 million it provided to the club over the years it was operating while insolvent.

The statement added: “RA is preparing a counterclaim against [Melbourne Rebels Rugby Union] MRRU and its directors for misleading and deceptive conduct concerning the financial position of MRRU dating back to 2018. Based on that misleading and deceptive conduct, RA granted MRRU a participation licence for the Super Rugby competition and provided associated funding and payments to MRRU.

Why the Rebels entered into administration

Source: PwC administration report into the Melbourne Rebels

PwC administrator Stephen Longley found the club’s disastrous financial state is likely to result of: 

• “A history of trading losses, exacerbated since 2020 by the negative impact on revenue from the COVID-19 pandemic and reduced funding from RA since that time;
• Insufficient revenue being generated from sources other than RA, such as membership, sponsorship and game-day revenue;
• An increasing expense base, including rising wage costs;
• Lack of readily available alternative funding sources to meet the material net asset shortfall and trading losses; and
• Failure to manage its statutory and lease liabilities.”

“Had RA not been misled or deceived, it would not have provided MRRU with a participation licence and thus not lost in excess of $35 million that was paid to MRRU since at least 1 July 2018. RA believes that the MRRU directors were knowingly concerned in and/or aided and abetted MRRU’s misleading and deceptive conduct.”

The statement added the Rebels directors “never informed” Rugby Australia they had been issued director penalty notices (DPNs) by the tax office over its multimillion-dollar debt. The DPNs made the directors personally liable for the money owed to the ATO.

The statement added: “RA was notified by the [appointed administrators of the Rebels] that the directors of MRRU had received ATO Director Penalty Notices. RA received a garnishee order from the ATO in December 2023.”

A garnishee notice is used by the ATO to recover debt from a third party that is connected to the company or person that owes the Tax Office money. In this case, the Tax Office issued the notice to Rugby Australia after the Rebels defaulted on their payment plan.

After MRRU was placed into administration, RA stepped in to fund all operations of the Melbourne Rebels in 2024, paying player and staff wages, and meeting all associated statutory obligations connected with those payments for the entirety of the 2024 Super Rugby Pacific season.

The Rebels directors called claims by Rugby Australia that it would not have allowed the Melbourne club to continue participation in the competition from 2018 if it had known the extent of its financial situation “complete nonsense”.

“We anticipated in their defence that Rugby Australia would make completely false and self-serving counter-claims about the Rebels,” the directors said in a statement.

“We believe this to be a desperate attempt to deflect attention from the reality of the situation that the RA executive and board have put the sport into.

“The directors added that RA was fully aware of its financial difficulties.

“RA cannot credibly claim ignorance of the Rebels’ financial difficulties, as there is ample evidence, including RA’s own communications, that they were fully informed and engaged with these issues.

“This includes specific references by RA to clubs being in “severe financial distress”, making any claim of surprise implausible.”

The directors said RA benefited from the Rebels being in the competition, including from the media and broadcast deals. “What loss can RA possibly demonstrate on account of the Rebels’ ongoing participation?” they asked.

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