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Court imposes $90,000 penalty on former Tennis Australia director Harold Mitchell

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Justice Beach of the Federal Court of Australia has imposed a pecuniary penalty of $90,000 on the former Tennis Australia Vice President Harold Mitchell for breaching his director’s duties in connection with a 2013 decision by the Tennis Australia Board to award the domestic television broadcast rights for the Australian Open tennis tournament to the Seven Network.

On 31 July 2020, following a five-week trial that concluded in December 2019, the Court found that Mr Mitchell contravened s180(1) of the Corporations Act on three occasions in December 2012.  Further allegations of breaches of s180(1), and alleged breaches of sections 182 and 183 of the Corporations Act, were dismissed by his Honour.

In the judgment on penalty, his Honour noted that he was satisfied that each of the three contraventions by Mr Mitchell was ‘serious’ within the meaning of the Corporations Act, in terms of the departure by Mr Mitchell from the standard of care and diligence required of directors.

His Honour considered various factors relevant to imposing a pecuniary penalty. These included the fact that Tennis Australia did not suffer any harm as a result of the contraventions and the need for general deterrence to ensure that directors do not go ‘off piste or off the reservation’ by acting contrary to the expectations placed upon them.  In light of these and other factors, His Honour made a declaration in respect of each contravention, and imposed pecuniary penalties of $50,000 for the first contravention and $20,000 each for contraventions two and three.

His Honour declined to make any order as to costs, given that both parties had some success in the trial.  Accordingly, ASIC and Mr Mitchell must each bear their own costs of the proceeding.

Download the penalty judgment.

Background

On 16 November 2018, ASIC commenced civil penalty proceedings in the Federal Court of Australia against Mr Mitchell and Mr Stephen Healy, the former Chairman and President of Tennis Australia. The matter was heard in November and December 2019 and the Court handed down its judgment on 31 July 2020. Mr Healy was found not to have breached his director’s duties (20-175MR). Justice Beach handed down his penalty decision in respect of Mr Mitchell on 04 November 2020.

Tennis Australia is the governing body of tennis in Australia. Its members are the six state and two territory tennis associations.

The revenue Tennis Australia receives includes proceeds from the sale of television rights and grants from Commonwealth and State agencies. Tennis Australia primarily uses its revenue for the development of tennis within Australia and to support the state and territory tennis associations.

Mr Mitchell was a director of Tennis Australia from October 2008 to October 2015 and was reappointed in December 2015. Between October 2010 and October 2015, and then again from December 2015 until his retirement in October 2018, Mr Mitchell was the Vice President of Tennis Australia.

Mr Healy was a director of Tennis Australia between October 2008 and April 2017. Between October 2010 and April 2017, he was the President of Tennis Australia.

The decision in 2013 to award the Australian Open tournament domestic broadcast rights to the Seven Network was for the period 2014 to 2019.

In March 2018, Tennis Australia awarded the broadcast rights for the Australian Open for 2020 to 2024 to the Nine Network.

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Regulator Information

Abbreviation: ASIC
Jurisdiction: Australia

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