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18-346MR ASIC commences Federal Court action against former directors of Tennis Australia
The Australian Securities and Investments Commission (ASIC) has issued civil penalty proceedings in the Federal Court of Australia against former Tennis Australia Limited directors, Harold Charles Mitchell, of Melbourne, and Stephen James Healy, of Northbridge, New South Wales.
ASIC's case relates to a decision made in 2013 by the Tennis Australia board to award the domestic television broadcast rights for the Australian Open tournament to the Seven Network for a 5-year period without a competitive tender process.
ASIC alleges that both Mr Mitchell and Mr Healy:
- withheld material information from the Tennis Australia board when it made its decision to award the domestic broadcast rights
- failed to ensure that the board was fully informed about the value of the rights, the interest of parties other than the Seven Network in acquiring those rights and the best method of marketing them
- failed to advise the board that Tennis Australia was likely to obtain better terms by putting the rights out to competitive tender
- failed to ensure that a sub-committee, that had been appointed by the board to advise it about the granting of the rights, carried out its functions.
In relation to Mr Mitchell alone, ASIC also alleges that he:
- passed on to the Seven Network confidential information about the interest of its competitors in acquiring the rights
- passed on to Seven Network confidential information about the views and negotiating position of Tennis Australia’s management and board about the granting of the rights
- downplayed to the Tennis Australia board the interests of parties other than the Seven Network in acquiring the rights
- failed to inform the Tennis Australia board about the concerns that the Seven Network had over the interest of Network Ten in acquiring the rights, and
- encouraged the Tennis Australia board to conclude an agreement with the Seven Network instead of putting the rights out to competitve tender.
ASIC is seeking declarations that Mr Mitchell contravened sections 180(1), 182(1) and 183(1) of the Act and that Mr Healy contravened section 180(1) of the Act. ASIC also seeks that pecuniary penalties be ordered against Mr Mitchell and Mr Healy and that both be disqualified from managing corporations.
ASIC will be making no further comment at this time.
Tennis Australia is a public company limited by guarantee and is the governing body of tennis in Australia. The members of Tennis Australia are the six state and two territory tennis associations.
Tennis Australia receives revenue from, among other sources, the sale of its television rights and grants made by Commonwealth and State agencies. Tennis Australia uses that revenue for, among other things, the development of tennis within Australia and for distribution to the state and territory tennis associations.
Mr Healy was appointed a director of Tennis Australia on 27 October 2008 and resigned on 10 April 2017. Between 25 October 2010 and 10 April 2017, Mr Healy was the President of Tennis Australia.
Mr Mitchell was a director of Tennis Australia between 27 October 2008 and 26 October 2015 reappointed on 23 December 2015. On 29 October 2018, Tennis Australia announced Mr Mitchell’s retirement from the board.. Between 25 October 2010 and 26 October 2015 and then again from 23 December 2015 to his retirement, Mr Mitchell was the Vice President of Tennis Australia.
In March 2018, Tennis Australia—after the expiration of a four-month exclusive negotiation period with the Seven Network—awarded the broadcast rights for the Australian Open for 2020 to 2024 to the Nine Network.
The maximum pecuniary penalty that may be ordered against a person for a single contravention of sections 180, 182, or 183 of the Corporations Act is $200,000.
A case management hearing is scheduled before Justice Beach in the Federal Court at 9.30am on 30 November 2018.
Editor's note 2:
On 30 November 2018, the Court listed the matter for a further case management hearing on 18 April 2019.
Editor's note 3:
On 28 February 2019, the Court varied, by consent, the orders it made on 30 November 2018 and relisted the matter for a further case management hearing to be held on 17 May 2019.
Editor's note 4:
On 17 May 2019, the Court listed the matter for trial to commence on 4
November 2019. A further Case Management Hearing has been listed for 30 August 2019.
Editor's note 5:
The trial will commence on 4 November 2019 in the Federal Court, Melbourne.