CIVIL WAR HURTING KARTING

A simmering war between Karting Australia and Karting NSW is doing the rounds of the courts. AUTO ACTION’s Andrew Clarke reports.

At the moment, Karting NSW is landing the body blows and has left Karting Australia facing bills in excess of $1.5m (ignoring its own legal costs) after its behaviour was declared unconscionable in the original hearing last year.

The dispute centres around the expulsion of Karting NSW as an ordinary member of Karting Australia in January 2019, which meant the principal sum of three loans from the AKA Track Development Fund were immediately due, along with the interest that was not normally applied to the loans. 

A statement by Karting NSW Chair, Paul Brennan, indicated that legal fees so far on the case had exceeded $700,000 and comes about following the concerns of Karting NSW in 2018 when it was ‘seeking greater transparency and improved governance and standards on the part of Karting Australia and its officers’. It appears these concerns led to its expulsion. 

In the Headnote of its citation on the Appeal, the Court said: “Karting NSW was expelled as an ordinary member of Karting Australia on 21 January 2019, which Karting Australia relied upon as an event of default under the three loans. By the time of the hearing below [21 August 2021], the principal sum of the first two loans had been repaid by Karting NSW. The primary judge held that the accelerated payment provisions of the loan agreements were a penalty and therefore unenforceable.

“Australian Karting Association Ltd (Karting Australia) appealed from a decision of Adamson J dismissing its claim against Karting (New South Wales) Incorporated (Karting NSW) to recover principal and interest on three loans and upholding Karting NSW’s cross claim for unpaid distributions to Karting NSW as a beneficiary of a trust totalling $616,065.06 as at 31 December 2018.”

The cross claim argument centred on distributions from Karting Australia to Karting NSW, which the latter alleged were not paid and the former said were not due. 

The Court held that by its actions, Karting Australia acknowledged the dues were payable by crediting distributions to “Karting NSW’s loan account from 2005 to 2012 and acknowledging the debt owing to Karting NSW in its audited accounts”. 

The Appeal was dismissed, and the appellant (Karting Australia) was ordered to pay the respondent’s costs of the Appeal. 

In the original judgment by The Hon Justice Christine Adamson, she said:

“Karting Australia obviously regarded Karting NSW as a troublemaking dissenter and appeared to want to make an example of it to other Ordinary Members so that others would not follow. Karting Australia’s desire to ostracise and punish Karting NSW so as to deter others can be inferred from… Karting Australia’s letter of 17 September 2018.

“By expelling Karting NSW as an Ordinary Member (whether the expulsion was valid or not), Karting Australia was using its powers to get rid of the one voice which was challenging its legal errors.

“By persistently misrepresenting the legal position to Karting NSW, Karting Australia behaved in a manner which I am satisfied was unconscionable.”

To read the full judgement of the Court of Appeal, Supreme Court, New South Wales, follow this link: https://www.caselaw.nsw.gov.au/decision/183594207088e3c15cbc7680?fbclid=IwAR2UYshSVA8M5zhvSmPlRPvGeuE4LifW99Kxia5DtRFaQC0AV-tiouQIy8U 

The original judgement is at https://www.caselaw.nsw.gov.au/decision/17b7c1dde54cea47ee867be0 if you want some juicy reading. 

Motorsport Australia has yet to respond to the outcome of the court cases and the future of the Karting Australia Board which clearly must be causing it some concern.