Michael.1
Insolvency and related law and policy, and more

Michael Murray is an Australian author and commentator on corporate and personal insolvency law and related issues, in Australia and internationally. He has a strong law and policy background, is independent of any connections, and his views are his own. He gives no legal advice. 

NSW registered clubs (law) in trouble, again

What are described as the “arbitrary powers of the NSW Independent Liquor & Gaming Authority (ILGA)” are the subject of a recent critical comments by Insolvency News Online (INO).[1]  Those powers have also been the subject of comment here,[2] not as to their claimed arbitrary nature, but as to why they exist at all.

They exist only in NSW – which may raise some questions – and date back to 1976, as is apparent from the terms used.

Section 41(1) of the NSW Registered Clubs Act 1976 (there is no subsection (2)), is headed Registered clubs under official management or receivership or in liquidation. It provides that a

“person is not capable of being appointed to act in the capacity of the administrator, the controller of property, the official manager, the receiver or manager, a member of the committee of management, the liquidator or the special manager of a registered club that is a company within the meaning of the Corporations Act 2001 of the Commonwealth or a co-operative registered under the Co-operatives National Law (NSW) or of acting in any such capacity unless the person has been–

(a) appointed to act in that capacity by the Supreme Court, or

(b) approved to act in that capacity by the Authority”.

The “Authority” is ILGA which is established under the NSW Gaming and Liquor Administration Act 2007. This comes under the “Minister for Digital, Minister for Customer Service”, Victor Dominello. The “Supreme Court” refers only to the NSW Supreme Court.

Section 41A follows, providing that where a s 41 appointment has not been made but the governing body of the club has, “in the opinion of the Authority, ceased to be effective as a governing body, the Authority may appoint a person to administer the affairs of the club”. That person, “has, to the exclusion of any other person or body of persons, the functions of the club’s governing body” until a s 41 appointment is made or the Authority orders otherwise, whichever first occurs.

These requirements seem to be unique to NSW in Australia and given their language and reference only to the NSW Supreme Court and to “official manager”, their 1976 beginnings are apparent.  They have been the subject of a series of unfortunate cases[3] leading to or despite the Authority’s GL4004 – Guideline 9 which gives more than detailed guidance on how to comply with the section.

As I wrote in 2018[4]

“registered clubs all over the country get into financial trouble, sometimes requiring the formal insolvency processes under the Corporations Act to secure their position, and potential recovery, and often urgently.

Only in NSW is there a barrier to promptly accessing those processes”.

I referred to an article – Getting into the club – calling for the provisions to be repealed,[5] following an earlier similar call.[6]

According to INO, “administrators” were appointed to a club without s 41 having been complied with.  They resigned.  According to the ILGA, a temporary administrator has been appointed by the Authority, under s 41A.[7]

Is this regime needed, or is there something in the state of NSW that calls for it?

The Authority no doubt otherwise performs a useful role, in NSW, but liquidators are appointed to a range of complex regulated industries, are regulated by ASIC and the Federal and Supreme Courts, and others, and an overlay of the Authority does not seem to be justified.  No other states have this requirement.

Even in circumstances of a co-operative where the appointed administrator does not necessarily need to be a registered liquidator, the Registrar has the oversight of the person being appointed: s 383 Co-operatives National Law.

Then there is s 21 of the NSW Gaming Machines Act 2001 and its purported restriction on the sale of gaming machine entitlements, and their forfeiture to the Authority, but, as to the latter, thankfully, only “if a liquidator has been appointed …”.[8]

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[1] https://insolvencynewsonline.com.au/ilga-investigates-club-over-24-hour-appointment/

[2] NSW Registered Clubs – insolvency law change required | Murrays Legal Commentary

[3] Under whose authority? How recent court cases affect clubs entering voluntary administration, Club Life, August 2018, p 22, Simon Sawday.

[4] Footnote 2

[5] Getting into the club: s 41 of the Registered Clubs Act as a barrier to timely external administration appointments, (2018) 19(6&7) INSLB 134 Nicola Cosgrove and David Turner, Assured Legal Solutions.

[6] NSW Clubs Legislative challenges for Insolvency Practitioners – Worrells Solvency & Forensic Accountants

[7] Sydney Portugal Community Club placed in administration by ILGA – Liquor & Gaming NSW

[8] Footnote 6.

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