INDEPENDENT PRICING AND REGULATORY TRIBUNAL REVIEW OF THE REGISTERED CLUBS INDUSTRY IN NSW

Dr M Keating AC - Chairman Mr J Cox, Tribunal Member

Held at the offices of IPART,

1 Market Street, Sydney

.7/5/08 1

Transcript produced by Merrill Legal Solutions

1 THE CHAIRMAN: I would like to begin by welcoming you 2 all and thanking you for coming. I think most of you know 3 us at the top end of the table here, but for the record I am 4 Michael Keating and I'm the chairman of IPART. Next to 5 me is Jim Cox, the Tribunal's CEO and full time member, 6 and Jennifer Vincent who is helping with this review. 7 8 We have been conducting this review under section 9 of the 9 IPART Act, and the background of this is that the Premier 10 of NSW asked the Tribunal to look at the role and 11 performance of the registered clubs industry in NSW. 12 13 As I am sure you are all aware, the Tribunal has gathered 14 information for the review over quite a long period now 15 and in a number of different ways. We started with an 16 issues paper last year, and submissions were sought and 17 received. We have had four roundtables and now this 18 one today. They were held in Sydney and in regional 19 centres. 20 21 The Tribunal Secretariat and its consultant also undertook 22 more detailed case studies of a subset of registered clubs 23 and had numerous meetings with other stakeholders. So 24 all of this has provided a great deal of information to the 25 Tribunal, and I think it has enhanced our understanding of 26 the clubs industry enormously. So I would like to thank 27 all of you who have assisted us so far in providing 28 information through submissions and in meetings. We 29 are grateful for your efforts in informing us about the 30 role and performance of registered clubs. 31 32 As you will be aware, the terms of reference for this review 33 cover clubs' social contributions, their financial 34 performance, corporate governance and regulatory 35 issues. As we have said before, this review is not revisiting 36 government policy on smoking bans, poker machine 37 tax rates or alcohol or gambling harm minimisation. 38 They are all part of the environment within which clubs 39 and their competitors must operate. 40 41 Nor is the review examining issues or allegations 42 specific to any particular club. I hope therefore there is 43 no need to remind participants today that they should 44 address their comments to the terms of reference which are 45 aimed at facilitating recommendations that will assist the 46 clubs industry as a whole and do not relate to what goes 47 on in particular. .7/5/08 2 Transcript produced by Merrill Legal Solutions

1 So the purpose of today is for us, the Tribunal, to seek more 2 information through structured discussion, and we want 3 to focus on some specific issues which have arisen from 4 the draft report and the submissions we have received on 5 it. We are not attempting comprehensive coverage of all 6 areas of the terms of reference; rather today we want to 7 focus on areas where in the light of the responses we have 8 received to the draft report, we think there needs to be some 9 further discussion on the best way forward. There are 10 large areas in the draft report which seem to be accepted 11 on the basis of the submissions, so we will move to those 12 areas where there will be perhaps a bit more discussion. 13 14 After we have carefully considered your comments and 15 all of the submissions received, the Tribunal will develop 16 its recommendations and make its final report to the 17 Minister for Gaming and Racing by the end of June. That 18 is fairly soon and it has been a long process. 19 20 I would now like to outline the process for this 21 roundtable today before we actually get into the real 22 business. The program today will first consider corporate 23 governance issues, particularly in regard to training 24 directors, and to board and voting restrictions. A related 25 issue is how directors deal with offers of amalgamation, 26 which we will deal with immediately after the governance 27 issues and training. 28 29 After the break we will discuss financial performance 30 reporting and the role of the proposed Club Viability Panel 31 before moving to the question of how the social costs as 32 well as the benefits of clubs can be managed within the 33 framework of a management plan that is an important 34 product of this review. Lastly, we want to consider a 35 handful of other regulatory matters. 36 37 We have circulated in advance a document setting out 38 the questions we want to focus on in each of these areas. 39 I assume you have all got that and we will try to follow 40 the order of topics set out in that document. For each 41 topic the Secretariat will give a short introduction. I will 42 then invite participants, you people sitting here around 43 the table, to provide any further pertinent comment on 44 the issues that have been raised. I would ask you to keep 45 those comments brief or we will never get through them. 46 You do not necessarily have to comment on every issue. 47 It depends whether you have got something to say on .7/5/08 3 Transcript produced by Merrill Legal Solutions

1 it. Before concluding I will invite questions and comments 2 from other people who are attending in the back of the 3 room. 4 5 As you will have observed, the hearing is being 6 transcribed, so I would ask you to please identify yourself 7 and your organisation before speaking. As the transcribers 8 remind me, it also helps if you speak loudly. I would like 9 to hand over to Jennifer who will introduce the discussion 10 on corporate governance. 11 12 MS VINCENT: There is one small housekeeping matter 13 before we start. There's not quite enough microphones to 14 go around, so if you could share them when it is your 15 turn to speak and please turn them on. 16 17 In terms of training issues, in its draft report IPART 18 recommended that directors be required to undertake 19 ongoing professional development training as a way of 20 improving their skill sets. IPART considers that this 21 requirement should only apply to directors of clubs with 22 gaming machine revenue greater than $1 million a year. 23 However, in its submission to the draft report, 24 ClubsNSW considered that all club directors should be 25 required to undertake ongoing professional development training. 26 27 The question we are discussing today is given the size 28 and scope of the operation for clubs with gaming 29 machine revenue of less than $1 million a year, should 30 directors of these clubs be required to undertake ongoing 31 professional development training? 32 33 The other area we are interested in in terms of 34 training is the model for professional development 35 training. In its draft report IPART favoured a model that 36 emphasised flexibility. For example, a director will be 37 able to determine the content and frequency of his or her 38 training. Stakeholder feedback was mixed. In relation to 39 training content, ClubsNSW thought that some content 40 should be compulsory. In terms of training frequency, a 41 submission thought that directors shouldn't be able to 42 determine the frequency, and said that there should be a 43 certain number of training units for directors to 44 undertake each year. 45 46 We are interested in finding out what people think 47 about should directors be able to determine the content of .7/5/08 4 Transcript produced by Merrill Legal Solutions

1 their ongoing professional development training. 2 Alternatively, should there be compulsory content for 3 directors to undertake on either an ongoing or one-off 4 basis. If so, in what areas? Should directors be able to 5 determine the frequency of their ongoing professional 6 development training? Alternatively, should there be a 7 minimum level of training that directors are required to 8 undertake each year; for example, five hours each year? 9 10 THE CHAIRMAN: ClubsNSW? 11 12 MR COSTELLO: Certainly this is one of the issues that 13 IPART has had to deal with which highlights the diversity 14 of the clubs industry, the uniqueness of the clubs 15 industry. We have clubs that are extremely small, with 16 low revenue, no employees in many cases, right up to the 17 largest clubs, such as Panthers. 18 19 The issue of training for club directors is, I know, of concern 20 for the industry as well as government. Apart from the 21 position that we put forward, certainly we think that any 22 training that directors should be required to undertake 23 has got to be scaleable. There is not much point 24 in having a director of a very, very small club with a 25 limited, if any, gaming operations, having to take on 26 courses that would equate to achieving university 27 qualifications. So any training that needs to be 28 considered certainly needs to be scaleable, and scaleable 29 to the size of the clubs and the needs of the club as well. 30 31 We are also very mindful of the costs that this might 32 impose on clubs. We are currently working, as part of the 33 development of our new website, on some online training. 34 Some clubs have problems with both time and distance. It 35 is not unusual for club members in western NSW and 36 south-western NSW to travel six to eight hours for a 37 meeting, let alone for a training session, so we are hoping 38 to be able to do some of the training online, at low cost, 39 and also eliminate a lot of the travelling time that is 40 needed. 41 42 I mentioned that training should be scaleable and on 43 an as-needed basis, but we do certainly reinforce that 44 there are a couple of areas that I think need to be 45 fundamental to any training in the future, the first one 46 being what we call the director foundation, that is 47 understanding your basic responsibilities as a director, .7/5/08 5 Transcript produced by Merrill Legal Solutions

1 your capability to work with others, your understanding 2 of your responsibilities as a director, your statutory 3 responsibilities in the areas of legislation, and so on. 4 So that certainly is an important one, as is we think 5 pre-nomination procedures, so the directors have an 6 opportunity to understand the responsibilities before they 7 actually nominate for the board. There is not much point 8 in somebody nominating for the board, being elected and 9 then not being comfortable with the responsibilities. And 10 also finance for the directors is one area of training that 11 club directors should be required to undertake. 12 13 We have multi-million dollar businesses being run by 14 volunteers in some cases as well, and I think IPART have 15 and will continue to give consideration to that unique 16 blend of people who are giving their time willingly for 17 their clubs, not really having the time to undertake 18 training, but nevertheless realising that there are 19 responsibilities. So there should be some fundamentals 20 that everybody should do. There's a number of other 21 courses. The list would be endless, really. 22 23 Maximising investment opportunities - more and more clubs 24 these days are having development opportunities put in 25 front of them and need to understand the potential as well 26 as the risks in that regard. Everybody has to have a 27 responsibility for gaming management and gaming 28 machines; security and cash management; occupational 29 health and safety; public liability issues as well as the safety 30 of staff and patrons with cash and what have you. So it is 31 important for directors to have a fundamental understanding 32 of their responsibilities, but also enough flexibility to 33 accommodate the uniqueness and the size of the club and 34 also the needs of the club in terms of the training. 35 36 THE CHAIRMAN: Do others want to come in on this? 37 38 MR TRIGGS: Mr Chairman, from what I understood the 39 only people who disagreed with the IPART finding of 40 director training was RSL Clubs NSW. As far as our 41 sub-branch is concerned, we agree with the IPART 42 recommendation that director training only apply to clubs 43 with more than $1 million a year gaming revenue. If the 44 training regime is too onerous, small clubs could have 45 difficulty in attracting busy, competent directors. This 46 could cause some clubs to fail. 47 .7/5/08 6 Transcript produced by Merrill Legal Solutions

1 The skills required for a small club, as previously mentioned, 2 are quite different to a large club and skill levels should 3 be graded to match the size and complexity of 4 the club operation. We believe managers should also 5 undertake professional training, more so than directors, as 6 the club boards rely on them for advice and information. 7 8 MR CARROLL: Graeme Carroll, RSL & Services Clubs 9 Association. Like ClubsNSW, we supported the extension 10 of the training of clubs under the $1 million threshold. At 11 the end of the day, although it is an additional imposition 12 on those clubs in terms of financial resources, the fact 13 remains that those clubs have the same responsibilities 14 under the Corporations Law as do clubs that are up at the 15 top end of the tree and we would certainly also agree with 16 the concept that it does need to be scaleable. Certainly 17 there are differences between the smaller clubs and the 18 larger clubs, but there needs to be a base level of 19 training for those directors, as well as those above the $1 20 million threshold. 21 22 MR ROSENBERG: Alan Rosenberg from NSW Bowls 23 Association. We represent over 600 clubs - that's quite a big 24 lump of the clubs in New South Wales - but ours vary. I 25 suppose 90 per cent of our clubs would fall in the smaller 26 category, run by volunteers, but our main thing is we're 27 trying to protect a sport and, of course, the difficulties that 28 we have every time a club falls over is we lose players in our 29 game. We do support what ClubsNSW have said as far as 30 directors having some fundamental training. We believe 31 that's essential. We try to do certain things ourselves. We 32 have club health checks and we do have our own club 33 advisory council, but I think it is important that some 34 basic knowledge is imparted to these directors, although it 35 is very, very difficult in some of these very small clubs that 36 are institutions, particularly in country areas, where they 37 might only have 30 or 40 members and we have to try and 38 find directors out of that lot. It is very difficult. As has 39 been said, they sometimes have a long way to travel and we 40 have to come up with better ways. I'm sure with either 41 Internet or correspondence we can work out some way. I 42 think they should have some more assistance in training 43 and have some basic knowledge of how to run a club. 44 45 MR MASSARIA: Rocky Massaria from the Bowlers Club of 46 New South Wales. I believe that the training aspects need to 47 be undertaken by both directors and, as has already been .7/5/08 7 Transcript produced by Merrill Legal Solutions

1 mentioned by the gentleman here, as far as management 2 goes; it needs to be well structured, it needs to be, I believe, 3 compulsory. The only way that the industry can move 4 forward is if we have a uniform understanding of where 5 the industry is striving to go. ClubsNSW, obviously, would 6 be responsible for oversighting the requirements for 7 directors, but in terms of management, you've got the Club 8 Managers' Association, which also holds quite in-depth 9 training courses and actively encourages a lot of its 10 members to undertake training. To retain their 11 accreditation as club managers, they're required, over a 12 period of two years, to accumulate a certain number of 13 unit points and I believe also that something along those 14 lines should also be in place for directors as well, if they're 15 going to look after multi-million dollar organisations, 16 irrespective of whether it's the big companies or big clubs 17 or the smaller clubs as well. 18 19 THE CHAIRMAN: I'd like to perhaps come at it a slightly 20 different way. I think for the most part, there's a 21 recognition that we want people with adequate skills and 22 to get those skills, they should have to have the training. 23 We also have got a fair amount of agreement, I think, on 24 the prospect that it should be scaleable, according to the 25 size of the club. 26 27 The issue I want to raise is whether we should have some 28 flexibility with regard to the skills that the individual 29 already has, perhaps in a former life. In this case, I refer 30 to my own personal experience, which may not be 31 representative. I've got experience of two clubs. You’ve 32 got experience of vastly more, so you'll tell me whether 33 it is representative. I lived in a small country town, 34 where another member of the club that I was a member 35 of was the chairman of a major 10 company, one of the 10 36 biggest companies in Australia, and was on the board of 37 another one, but, like me, plays golf and we wanted him to 38 be on the golf committee. I don't think we would have had 39 any chance of getting him on that golf committee if we'd 40 said he had to go off to one of your training courses. 41 That is no disrespect to your training course, but he's the 42 chairman of a major 10 company and he's been asked to 43 be on the board of a country town golf course. 44 45 Generally in skills training there's what they call 46 prior recognition, a recognition of prior learning. We've 47 played around in our recommendations, I suppose, with .7/5/08 8 Transcript produced by Merrill Legal Solutions

1 something that was trying to approach that. We put the 2 emphasis on the individual, perhaps making an assessment 3 of recognition of prior learning. Perhaps that is too light 4 handed for the regulatory framework, but it does seem to me 5 quite important that if we're to get - we don't have to go 6 to the chairman of a top 10 company - but you can imagine 7 just the local bank manager might feel why should he have 8 to do a course in financial management to be on the golf 9 club committee. We're just losing talented people if we 10 make these obligations too onerous, especially if they're 11 not considered to be necessary in the first place. Are there 12 ways that we could approach it where we had scope for 13 recognition of prior learning, sign people off that way? 14 15 MR COSTELLO: Chairman, may I respond. David Costello, 16 ClubsNSW. I think it is a given that prior learning should 17 be recognised. Anybody that has either qualifications or 18 experience in an area should, by way of perhaps a 19 self-accreditation process, have those skills recognised. 20 21 Something else that IPART might consider is given that we 22 have somewhere between 12,000 and 14,000 directors of 23 clubs in New South Wales, that not all members of the 24 board be required to undertake some training, particularly 25 in the area of financial management, but certainly you'd 26 encourage it and it is absolutely critical for everybody to 27 be contributing to the direction of the club, so certainly 28 prior learning must be recognised, there's absolutely no 29 doubt about that. 30 31 Could I just make one point. The whole purpose of the 32 IPART review of the club industry is to set a path for the 33 future, and as hard as it is to actually advocate that the 34 whole of industry, the whole of the directors, should do 35 some form of training, we're interested in the future, not 36 the past, and given the difficulties the clubs face at the 37 moment and will continue to face in the future, it is 38 important that we put a line in the sand and ensure that 39 there's better access to training for directors. 40 41 MR CONROY: David Conroy. New South Wales Bowlers 42 Club. I'd just like to support what David said there. We've 43 tried at our board to get a mix of skill sets. I know it's 44 not always easy for the smaller club to attract people with 45 prior qualifications. We have two chartered accountants 46 and an IR expert on the board, which is extremely helpful, 47 and until recently we even had a lawyer, which was helpful .7/5/08 9 Transcript produced by Merrill Legal Solutions

1 for some free advice there on occasions. I think if you 2 had some sort of a model that said - I think financial 3 expertise is crucial to the proper governance, corporate 4 governance, and running of a club. I think it should be 5 encouraged by IPART to try and say to clubs, say to boards, 6 try and get that mix of skill sets, seek people that do 7 have financial expertise, can read a balance sheet, can 8 look at a set of numbers and interpret them. Whether you 9 can come up with a model that covers all that, I don't 10 know, but certainly that's what we try to achieve. 11 12 MR NEWELL: Peter Newell, ClubsNSW, Chairman. One 13 other point I would make is that since the IPART review 14 began, the club landscape has changed enormously in the 15 last 12 months or so, so I don't know whether you rate 16 industry knowledge as part of the skill set, but it is also, 17 we believe, critical that directors not be cocooned away 18 somewhere, particularly in the more far-flung regional 19 areas, and not have any knowledge of the prevailing 20 issues in the industry, and as I said, they can change in very, 21 very short-term. That's not skill learning as such, but it is 22 exposure to industry issues that directors should be aware 23 of and if that can be brought together - it has the same 24 tyranny of distance problems and other things, but it can 25 also be, to a lesser extent, addressed electronically 26 which we do with various circulars and newsletters, 27 et cetera, but it is still an allied issue, I believe. 28 29 MR COSTELLO: Chairman, can I make one final point. 30 This issue is not one we're looking at in isolation. Many of 31 the things that are put forward by IPART today need to be 32 regarded as a package. While we're looking at training 33 for directors, we're also looking at reviews of constitutions 34 and who can actually be elected to a board, we're also 35 looking at a club viability panel. So they are a package 36 of things really that will assist. We don't have a silver 37 bullet with one of these issues. 38 39 THE CHAIRMAN: There is one other question that you 40 didn't raise that has been raised by at least one respondent, 41 and that is should club managers be required to undertake 42 professional development training. I think it is fair to say 43 that in our previous hearings, managers have been very 44 well represented and directors rather less represented. 45 What's the reaction to that? We've already had Mr Triggs 46 say there should be others. 47 .7/5/08 10 Transcript produced by Merrill Legal Solutions

1 MR NEWELL: We would recommend that. We recognise 2 that the Club Managers' Association has training models. We 3 would particularly emphasise entry into the industry, that 4 there be some basic requirements in that area. Club 5 managers move around, and as they do, they gain lots of 6 experience, but for new starters in the industry, and I think 7 the CMA would support us in this, there should be some 8 basic entry level requirements before somebody takes 9 up a position as a manager of a registered club in New 10 South Wales. 11 12 MR COSTELLO: Chairman, ClubsNSW certainly support 13 the paper put forward by the Club Managers' Association. 14 They have put it forward on a couple of occasions over the 15 last few years to two different ministers, and that is the 16 introduction of a club secretaries course that before you 17 could actually commence as a CEO, you would need to 18 undertake this - we have a similar model with the hotel 19 licensees model - so we certainly support that, but we also 20 need to bear in mind that there are more clubs without 21 managers in New South Wales than there are with, and as 22 such, I would hope that IPART might give some 23 consideration - certainly ClubsNSW would be working with 24 the CMA to do this - to encourage more part-time managers. 25 Small clubs in particular can't afford, nor do they need, a 26 full-time club manager, but they could certainly do with 27 one or two days a week to help them manage their business 28 as they want to. So we need to find ways that retiring 29 people, who don't want to do five days a week any more, 30 but are happy to do one or two days a week, would come 31 back and contribute back to the club industry in that regard. 32 Likewise, there are plenty of talented managers out there 33 that could handle two clubs a week on a two or three day a 34 week basis to help clubs get themselves some professional 35 management, and certainly the prior learning exercise 36 applies to club managers. We have some very experienced 37 people who have learnt at the university of life, really, 38 their skills. We're not talking about those people having 39 to undergo an entry level training session. 40 41 MR TURNBULL: Peter Turnbull of the Leagues Clubs 42 Association. David stole my thunder there on the club 43 secretaries course, which the CMAA have submitted as a 44 second-stage process, which is mooted as being mandatory 45 in respect of people who are in the industry or intend to 46 perform the duties of and responsibilities of a secretary, 47 manager or licensee. It's a firm belief of the Leagues .7/5/08 11 Transcript produced by Merrill Legal Solutions

1 Clubs Association that education is critical to the future 2 of our industry and applies to directors and managers 3 alike. 4 5 Again going back to what ClubsNSW has mentioned in 6 respect to director training, I think with the smaller 7 clubs, we need to adopt a scaleable approach to what 8 education should be afforded club managers, part-time 9 managers, or smaller clubs with lower-level managers, but 10 it should be written into full-time contracts that - the 11 education component should be written into the 12 employment agreement, it should be incentivated. It is in 13 the club's best interest to put that into their employment 14 agreements to actively promote their education. It is a 15 win-win and it is an attractive part of a salary package 16 being given a commitment that they'll receive a certain 17 level of education. 18 19 As Rocky mentioned before, with the Club Managers' 20 Association, the activation of points for attendance at 21 certain courses, industry conferences, industry meetings, 22 that is a great model because it does encourage the ongoing 23 participation and those managers will keep up to date 24 with the industry trends that Peter Newell alluded to to 25 keep the boards advised, so it is a win-win for everybody. 26 27 THE CHAIRMAN: Unless there is more on this, 28 Jennifer, we'll go to amalgamation. 29 30 MS VINCENT: We've got corporate governance, board and 31 voting restrictions. In its draft report, IPART considered 32 that constitutional restrictions on board and voting 33 eligibility reduced the likelihood of boards operating 34 effectively. For example, board restrictions meant that 35 candidates with desired skill sets might be unable to stand 36 for election and voting restrictions could disenfranchise a 37 significant proportion of members, leading to members 38 being less engaged with their club's affairs and less likely 39 to scrutinise their board's performance. As such, IPART 40 recommended that clubs be encouraged to remove 41 constitutional restrictions on board and voting eligibility. 42 IPART considered that government could assist this 43 process by amending the Registered Clubs Act 1976 to 44 include a provision defining the core features of the 45 various types of clubs. Members could then vote to have 46 the core club features provision apply to their club in 47 exchange for removing their constitutional restrictions. .7/5/08 12 Transcript produced by Merrill Legal Solutions

1 There was some stakeholder feedback supporting this 2 recommendation. On the other hand, ClubsNSW 3 expressed concern that these changes wouldn't have the 4 desired effect. As an alternative, ClubsNSW proposed that 5 the Registered Clubs Act 1976 be amended to require that 6 at least 25 per cent of a club's members be entitled to full 7 board and voting rights, including the right to vote on all 8 ordinary or special resolutions and the right to be elected 9 to the board. 10 11 The question for today is what is the best way to 12 enlarge the pool of available directors for clubs without 13 compromising clubs' special qualities? 14 15 MR COSTELLO: I'm happy to kick off. Mr Chairman, this 16 is another one of those issues where there is probably as 17 many opinions as there are people in this room about the 18 best way to approach this issue. We put forward a model 19 for discussion that I guess draws on the Cooperatives Act 20 but also draws on recent legislation introduced by the 21 government to allow 25 per cent plus 1 to be a suitable 22 voting number for constitutional changes to certain classes 23 of clubs. But we also must concede it is not a perfect 24 solution. There are many different segments in the 25 industry and they all have different needs. RSL and 26 services clubs are different to rugby league and sporting 27 clubs, are different to bowls clubs, are different to workers 28 clubs and those sorts of things. In saying that we 29 felt that enshrining the core objectives in legislation 30 wouldn't go far enough, we certainly believe that there's 31 no better way to do that than to allow a majority of the 32 board to be those representing the core objectives of the 33 club. We would hate to lose the direction that RSL and 34 services clubs have developed over many, many years 35 and sporting clubs as well. So in a simple way, simply 36 allowing a majority of representative core objectives to be 37 on the board is a starting point. Having said that, we 38 know the government is keen, and others too for that 39 matter, to encourage more and more floor members, 40 representing the great majority of the revenue that comes 41 into a club, to have a greater participation, and I think 42 that certainly can be done. 43 44 The question is what's the best way to enlarge the pool. 45 This might seem rather perverse, but one of the ways 46 in which you can possibly do that is to give some strong 47 recommendations, or even a mandate, to size of boards. .7/5/08 13 Transcript produced by Merrill Legal Solutions

1 We've got boards that are 13 to 15 people on a board. That 2 means there's a lot of people in clubs that have an interest 3 in their club. You can have a much, much smaller board 4 and still allow those people to have an interest in their 5 board by creating house committees, to still have them 6 involved and working with the directors. That obviously 7 increases the number of people who are available 8 to contest board elections. Certainly pre-nomination - I 9 mentioned it earlier - the pre-nomination procedures, 10 certainly distinguishes those that are really interested in 11 being on the board and those that didn't quite understand 12 their responsibilities, so we're saying that perhaps out of 13 the 12,000 or 14,000 directors, there should be some 14 reduction in board numbers, working towards quality, 15 not quantity, on a board, and that also creates a knock-on 16 effect of making training easier to achieve as well. 17 Instead of training 15 people on a board, if we're training 18 seven or nine, or if somebody else is training seven or 19 nine, it makes it a little bit easier, but I certainly 20 concede that there will be a variety of different opinions, 21 as we've already seen in the submissions, on this issue. 22 23 THE CHAIRMAN: Can I just ask for a bit of clarification, 24 I think. As I understand it, our objective is to enlarge 25 the pool of talent whilst still, if you like, safeguarding 26 any special qualities of a club. One that comes most 27 readily to mind is an RSL club that has a particular 28 history, and so on, which they want to protect. What I'm 29 not quite clear on is how your proposal achieves that, 30 that twin objective of enlarging the pool whilst still 31 protecting the special features which have been inherited 32 by, say, an RSL club. 33 34 MR COSTELLO: In clubs that are registered under the 35 Cooperatives Act, they have a 40 per cent plus 1 who can 36 actually contest board elections, can instigate constitutional 37 changes or vote on constitutional changes. We recognise 38 that what we put forward would create some fairly 39 significant difficulties for the future. If a club hasn’t got 40 that 25 per cent plus 1 at the moment, how do you actually 41 get them there in the future and who actually can be 42 eligible to be on the board, and that is why I've 43 suggested that perhaps a simpler way would be to allow 44 a majority of the core objectives of the club to be 45 maintained on the board. Just yesterday I was presented 46 with an example, the relationship between an amalgamated 47 golf and RSL club, where a particular RSL club has spent .7/5/08 14 Transcript produced by Merrill Legal Solutions

1 something like $8 million on the development of a golf club 2 that it has amalgamated with and has said we simply can't 3 spend any more. Now the very significant number of voting 4 members from the golf club have now removed a number of 5 members of the board from that. If that continued down the 6 track, then clearly a golf club would be in charge of an 7 RSL club and there are plenty of other examples, Chairman, 8 about why it is important that the core objectives of the 9 clubs are maintained but we still do allow more flexibility 10 for what we call the floor members, the general members 11 of the club, to at least have the opportunity to contest a 12 board election. 13 14 MR NEWELL: Chairman, we see there are two issues 15 here. One is maintaining the core objects, however that 16 may be achieved, either by legislation, by voting of the 17 members, whatever is necessary, but hand in hand with 18 that, unless the directors who directly represent those 19 core objectives have a majority, there needs to be another 20 way, and I don't pretend to have that, to protect the 21 funding that is directed towards maintaining those core 22 objectives. A football club is probably a very good 23 example. They can have the best core objectives in the 24 world to pursue a goal, but if a board is elected that is not 25 prepared to adhere to those objectives from a funding 26 point of view, it defeats the purpose. It's very difficult to 27 legislate funding provisions, I would imagine, but it is 28 the key to it. 29 30 MR CARROLL: Graeme Carroll. RSL and Services Clubs. 31 The issue for us is directly related to the fact that we have a 32 dwindling pool of directors from the RSL sub-branches in 33 many cases. The proposal to restrict the number of 34 directors is certainly a step in the right direction, we 35 feel, because there are many clubs out there that have got 36 10, 12, 14 directors on the board. If you only had to find 37 seven of those each year, that certainly increases the 38 available pool from those who are currently there, but the 39 fact is it's not going to help us in five or 10 years' time. 40 We're to the point where there are many clubs, as we 41 explained before, who have difficulty now finding enough 42 directors from the RSL sub-branch to sit on the board and 43 simply to have a majority of those elected to a board still 44 doesn't overcome that problem, as we see it, which is why 45 we were supporting the concept of having those core 46 objectives enshrined in some sort of legislation, or 47 whatever, but we do agree it's a very complex issue and it .7/5/08 15 Transcript produced by Merrill Legal Solutions

1 needs a lot of consideration to get the balance right. 2 3 MR ROWE: Mr Chairman, my name is Don Rowe. I'm state 4 president of the New South Wales RSL. We're very much 5 aware of the problem that a number of our clubs are having 6 because their constitution states that they have to have so 7 many members of the league on the board. One of the things 8 that we actually find interesting is that agreements do work. 9 A number of the properties which have been owned by the 10 RSL sub-branch and have been sold and before they were 11 sold, the club had been providing services to the RSL 12 members, like providing breakfast at the Anzac Day services 13 and a number of those core functions which the league has 14 done. On the sales, we entered into what we call a service 15 agreement between the purchaser of the club, the building, 16 and the sub-branch, and they seem to have worked very 17 well with those clubs that continue to uphold the Anzac Day 18 traditions; they make them available to the sub-branch to 19 conduct their business. The agreement is such that the 20 club's required to carry out its core business, if you like, 21 which it had done to its members, whether it's bowling 22 or RSL or golf, or whatever. But what we've done seems 23 to have worked very well and those clubs have adhered 24 to those agreements they've made with the sub-branch. 25 26 MR CARROLL: I might just add there Don has raised a 27 good point, that those deeds of accommodation, et cetera, 28 to this point, have worked well because the sub-branch 29 members are still in control of the licensed club, but that, 30 unfortunately, is not going to continue into the future as 31 the numbers dwindle and we don't have those sub-branch 32 members to fill those positions, which is why we need to 33 go that next step now to enshrine some of these other 34 objectives into the legislation, for instance. 35 36 THE CHAIRMAN: Can I just push you a bit further. You 37 supported the IPART draft recommendation. Now that 38 you've seen ClubsNSW's alternative, have you got a 39 preference between the two? 40 41 MR CARROLL: I think it might come down to a combination 42 of the two, with a bit of thought. Peter has made a very 43 good point about the fact that you need to be able to 44 carry forward the funding requirements of some of those 45 core objectives and it may be that a combination of these 46 two elements are needed to actually bring it to a proper 47 finality. .7/5/08 16 Transcript produced by Merrill Legal Solutions

1 The other point that we've considered also is the 2 concept of paid directors. It has worked in other states, 3 we understand, and is something that's been considered at 4 various forums that I've been in over the past two or three 5 years. 6 7 THE CHAIRMAN: It might be most difficult for very 8 small clubs that are struggling to have paid directors. 9 10 MR CARROLL: It may be, but it may be something that 11 could be introduced for larger clubs who cannot find the 12 right talent pool to be on the board. 13 14 MR MATTHEWS: Glenn Matthews from Panthers. We've 15 actually got both those examples and I think Graeme might 16 be right in terms of a combination of both. On one hand, 17 we have a constitution that protects, I guess, the funding 18 for Rugby League, which states that the majority - we have 19 actually 14 on our total board, but nine out of those 14 20 must come from the football club, if you like, so you're 21 covered, in terms of the funding, by the sheer weight on 22 the board. On the other side of the coin, in terms of 23 protecting the reason for being in the core values, we 24 amalgamated with an RSL club, which is Macquarie RSL, 25 and we entered into a memorandum of understanding, and 26 I take what you say there, Graeme. In our case, there isn’t 27 a majority of RSL club members there, but I guess culturally 28 and in our good faith, we think we do a pretty good job in 29 fulfilling what we promised we would. In saying that, we 30 have no problems in those things being legislated because 31 there are an important part of the club in that community. 32 So it might be a combination of both. 33 34 MR COSTELLO: Nobody appears, including ourselves, to 35 have embraced this yet. While I suggested a reduction in 36 the board numbers might help, Graeme made the point 37 that 10 years down the track that mightn't matter. No-one 38 has considered the needs of amalgamated clubs, and there 39 is no better example than Panthers of that. Certainly 40 Panthers have got 12 or 13 clubs that are part of the 41 Panthers family. So we do need to consider the needs of 42 amalgamated clubs. I think you had three or four 43 representatives from those. 44 45 MR MATTHEWS: Yes, our constitution has five with a 46 maximum of two from any one side, so you just can't have 47 five from one particular region, they can only have a .7/5/08 17 Transcript produced by Merrill Legal Solutions

1 maximum of two, so you get representation from three 2 other regions. 3 4 MR COSTELLO: So consideration for reduction in 5 numbers must also take into account the growing number 6 of clubs that are seeking and part of amalgamations. 7 8 MR TRIGGS: Obviously, being an RSL, we are in a different 9 situation to Leagues Clubs, for example, but I would like 10 to take issue with Graeme on this business of not enough 11 directors available. I wrote to the state secretary of the 12 RSL some six months ago and suggested that if they had a 13 problem with that, they could make changes to the rules to 14 allow the RSL sub-branch to nominate non-RSL people to 15 the board. That way they would be getting a better class 16 of director, maybe, and it would also solve the problem of, 17 in some areas, a shortage of directors. 18 19 When you are saying that the RSLs are dwindling in 20 numbers, it is close to 200,000. It’s quite a pool. We 21 agree with the core activity approach of IPART, but we 22 believe that any reduction in voting restrictions, if any, 23 be phased in over a period of time in order to avoid 24 unforeseen problems. If you were suddenly wiped out 25 overnight, you'd have no idea of what could happen. I 26 think there is a period of adjustment needed. I am 27 anticipating further discussion on the core activity on 28 Viability Panel later on. I think the Viability Panel 29 should have greater scope than has previously been 30 discussed. So our remarks on this would carry on to the 31 Viability Panel. 32 33 A copy of the letter that I sent to the state secretary 34 was forwarded to Graeme Carroll who has chosen to 35 ignore it apparently, but essentially the RSL wants to 36 retain control because they built and financed the clubs in 37 the first place. They want to ensure that the clubs carry 38 out the objectives of the RSL and protect Australia's 39 heritage. 40 41 In our situation we are dealing with what they call social 42 members. Social members of the club essentially are 43 social members because the law says they have to be if 44 they want to use the facilities. They used to be call guests. 45 Woolworths call them customers. There is a considerable 46 difference, because the RSL is an all volunteer charitable 47 organisation. They are an organisation with a mission to .7/5/08 18 Transcript produced by Merrill Legal Solutions

1 protect and honour Australia's heritage and traditions, and 2 we are not a rampaging commercial entrepreneur. So that 3 the situation between RSL clubs and Leagues Clubs, and 4 what have you, is totally different and we have different 5 objectives, different purposes. 6 7 So we see that the Viability Panel, as we can explain 8 later on in accordance with your agenda, should be a most 9 important part of the clubs in the future, because the Act 10 is wide open for manipulation and all sorts of things, and 11 the Viability Panel can sort that out, but we will come to 12 that later. 13 14 THE CHAIRMAN: Yes. 15 16 MR GARDINER: David Gardiner from Wagga RSL Club. 17 I'm the president down there. I have thought about this a 18 fair bit and we moved down the track several years ago in 19 progressively getting the restrictions out of our constitution. 20 I think this year is our first year we are voting and 21 there will not be any restrictions on the board. We found 22 this to be very successful with the total support of the 23 sub-branch. I think in the future, this is the way to go. 24 I think you have to remove those constitutional restrictions 25 so that you get a better type of director. Years ago when 26 you had a look at these things, the people down at the 27 bottom bar who drank the most got on the board. Now 28 we approach it more professionally. We found it very 29 successful, and we certainly hope we can go forward from 30 there. I think this is where the industry is going. I 31 totally agree with Graeme Carroll and his concepts. 32 33 THE CHAIRMAN: I can appreciate that if the sub-branches 34 are happy to surrender that degree of control that is a way 35 to fix the problem, but I think the reality we are facing 36 at IPART is that there will be at least some clubs, not 37 necessarily just RSL sub-branches, who want to maintain 38 some sort of guarantee over preserving the core objectives, 39 and indeed the funding of those core objectives, as 40 Mr Newell reminded us. It is easy if people sign up to the 41 situation you have created at the Wagga RSL, but I'm not 42 sure that is the case everywhere. We have to try to deal 43 with it where the Wagga solution is not accepted. 44 45 MR GARDINER: If I may add one thing I did leave out? We 46 carried out a survey of the younger generation of the club. 47 We were thinking about taking the name "RSL" away from the .7/5/08 19 Transcript produced by Merrill Legal Solutions

1 club, but the survey overwhelmingly supported the 2 retaining of "RSL". I hope that continues as well. While 3 that sort of concept is around, I think the core 4 objectives of the RSL will be maintained. 5 6 THE CHAIRMAN: If there are no further interventions on 7 this one, I think the proposal we have in front of us is 8 that we should go away and think of an amalgam of our 9 original suggestion and ClubsNSW proposals, and we will 10 bear in mind also the funding point to see if we can come 11 up with something afresh again. 12 13 That might be something we would like to take up with 14 one or two of you when we have thought about it. We 15 might want to have a bit more conversation about that. 16 There will be some other issues I think that will come out 17 of today's proceedings that apply also. 18 19 MS VINCENT: In its draft report IPART recommended the 20 development of a guide to amalgamation for clubs, an idea 21 which has met with considerable support. IPART also 22 considered that clubs should be encouraged to consider 23 amalgamating before their situation deteriorates too far. 24 In some cases, members may be willing to consider 25 amalgamation but directors are less inclined to do so, and 26 therefore IPART recommended that a club should be 27 required to inform its members when a formal 28 amalgamation offer is presented to the club. 29 30 However, ClubsNSW has argued that IPART's 31 recommendation that boards be required to advise 32 members of formal amalgamation offers will impede 33 rather than promote amalgamation. The question is at 34 what point should information about amalgamation 35 offers be disclosed to members? 36 37 MR TURNBULL: Peter Turnbull, Leagues Clubs 38 Association. In the preface leading into this particular 39 question, it nodes that clubs should be encouraged to 40 consider amalgamating before their situation deteriorates 41 too far. I believe that the mooted Club Viability Panel 42 would be a great barometer gauging the Viability Panel, 43 but not in an advisory capacity, but give it the mechanisms 44 to come in and determine when that situation is 45 approaching, so that members can be advised if there has 46 been an informal approach from another club. 47 .7/5/08 20 Transcript produced by Merrill Legal Solutions

1 In the IPART draft report there was the scenario and 2 mention was made that sometimes directors are "not 3 willing to give up their blazers" and that would take over 4 the responsibilities of those directors who are elected with 5 the best intentions, but however, for whatever reason, may 6 not decide to inform members that there has been an offer 7 and then the future of the club is jeopardised. 8 9 THE CHAIRMAN: To make sure I understand you correctly, 10 you are saying that the onus for ensuring the members are 11 informed, the trigger point, should be the Club Viability Panel? 12 13 MR TURNBULL: Yes, in its present structure and I concede 14 it is on the agenda. Looking at the mechanism and the 15 structure of that Club Viability Panel, if it is operational, 16 and to the terms of the reference given in the first draft 17 report, the expertise on that panel would be certainly 18 able to give an independent opinion as to when the future 19 financial sustainability of that club would be threatened. 20 I think with that knowledge they should then, whether 21 it is through the OLGR or the CLAGR, be able to 22 enact that process to take place to advise the members. 23 24 MR COSTELLO: Could I ask a question on the question? 25 When we say at what point should information about 26 amalgamation offers be disclosed to members, who are 27 you wanting to disclose to: the club who has some 28 viability issues, advising their members, or the club that 29 has been asked to consider amalgamating with the club 30 with viability issues? Are you saying both clubs? 31 32 THE CHAIRMAN: That is a good question. I think 33 what we had in mind is the club that needs, if you like, to 34 amalgamate, hence the phrase about people not being 35 willing to give up their blazers. I assume the takeover 36 club doesn't feel threatened in any way. 37 38 MR COSTELLO: There are risks there too, but in a 39 commercial world forcing clubs to notify before they have 40 actually done much would be called commercial-in- 41 confidence and could actually jeopardise an amalgamation 42 if there was too early a disclosure about some discussions 43 that may have been taking place, irrespective of whether it 44 is the child club or the parent club. I hate those terms but 45 that is what they are called. There are other ways, I think. If 46 there has been amalgamation discussions, perhaps a club 47 could be required to report in their annual report that .7/5/08 21 Transcript produced by Merrill Legal Solutions

1 they had embraced amalgamation discussions but for the 2 following reasons decided that they would not pursue those. 3 4 On something Peter mentioned a few moments ago - and 5 I think IPART has a fantastic opportunity to encourage 6 clubs to do this, to look at their viability and encourage 7 amalgamations rather than let the club die and the 8 community facilities go by the wayside because of 9 stubbornness at a board or management level or both. But 10 to disclose upfront is fraught with danger and could 11 certainly discourage amalgamations. I also am aware of 12 some clubs that have been asked to amalgamate, and 13 have briefly considered the matter, but not paid much 14 attention to it, and 12 months later they closed. Well, I 15 know that's what IPART is trying to protect, so certainly 16 there should be a responsibility on the directors of the 17 club, if they have had some discussions about 18 amalgamations, to report it after the event to their members 19 and also outline their reasons why they have not, but we 20 have got to work harder on clubs understanding their 21 viability and encouraging them to maintain or consider a 22 good amalgamation if it means preserving the identity of 23 their club in conjunction with another club. There are 24 some very good examples across the state. 25 26 THE CHAIRMAN: David, I take your point that there 27 can be some preliminary discussions which are not really 28 very conclusive about anything, and it would not be 29 helpful to disclose that sort of thing too early. I guess on 30 the other hand, waiting 12 months for the annual report 31 might be too late. 32 33 MR COSTELLO: In the interim there is adequate protection 34 within the Registered Clubs Act that if an amalgamation is 35 to proceed before it can actually do that, members of both 36 clubs need to receive an information package on it, the 37 club needs to enter into a memorandum of understanding 38 disclosing what it will do with the assets or objectives of 39 the club. Then members get a chance to vote on that. So 40 there is adequate transparency at that point. 41 42 I guess IPART maybe trying to protect against those that 43 get an amalgamation offer but never disclose or perhaps 44 never consider it properly. I understand what you are 45 saying about the length of time before an annual report 46 came out, but if a club had a responsibility at law to 47 disclose their reasons why they did not consider an .7/5/08 22 Transcript produced by Merrill Legal Solutions

1 amalgamation, that gives the members an opportunity to 2 make a decision at election time. 3 4 MR COX: I guess we have covered a fair bit of it. I think 5 our concern was that at some stage the members ought to 6 know and, if necessary, have their opinion taken into 7 account when, say, the issue might be the future viability 8 of the club and its future existence. I am wondering if 9 there is another mechanism that we could think about that 10 protects the club members from, if you like, the 11 unwillingness of their directors to consider amalgamation? 12 13 MR COSTELLO: I concede it is a difficult area, Mr Cox. 14 There would not be an amalgamation taking place without 15 the bar talk being rife about that sort of thing. Members 16 have adequate opportunity to write to the board and ask 17 them if they have considered the amalgamation 18 opportunities that have been put forward to them, and 19 there are adequate provisions within the Corporations 20 Law and the Registered Clubs Act that if the members 21 decide they didn't like that board's decision, they can 22 certainly do something about it by calling an annual 23 general meeting to discuss it. So there is some protection, 24 albeit somewhat veiled, already in. Early disclosure is 25 certainly one that rests in your laps. 26 27 MR TRIGGS: Talking about amalgamations and viability, 28 there's negative viability and positive viability. It could be 29 extremely viable and it can be extremely unviable. We 30 believe it should be somewhat like in the business world 31 where members should be informed of the formal and 32 substantive offer of amalgamation within one month after 33 the board has met and considered the proposal. The board 34 should set out the argument for and against the proposal 35 and any further investigations they might be making. It 36 should be a transparent operation. It should also be a 37 matter for the Viability Panel to decide as it may not be 38 in the public interest. It could be a means of keeping 39 well paid jobs going just to use up the funds available 40 before closing down. This is not the objective of a 41 charitable or not for profit organisation. The money 42 should be go to where it was intended, not siphoned off 43 somewhere else. 44 45 This is a matter that should be dealt with, in our view, by 46 the Viability Panel. Once again we are enlarging 47 its purpose, but looking at the overall picture, it is very .7/5/08 23 Transcript produced by Merrill Legal Solutions

1 hard for a lot of small clubs with a single purpose, like 2 the bowling club, to operate as a stand-alone club. The 3 time to merge or amalgamate or join with another group is 4 when you have got funds and you are in a viable position 5 to do it. 6 7 It is quite obvious, looking down the track, where your 8 club is going. It could be in the future that we will have 9 club that has been outlined, maybe an RSL club, a bowling 10 club and a tennis club, all under the one umbrella. That 11 may be the way it works. It works in business where 12 you have a variety of companies put together and their 13 strengths complement each other. So we are concerned 14 that clubs which were set up for a core purpose in the first 15 place might get wafted off by a management group in 16 control, and when I say "management", I mean the overall 17 thing; I'm not referring necessarily to the general 18 manager, or something like that, but the group which you 19 often find in a club has control, and the direction they 20 might want to take the club is not necessarily the 21 direction of the public interest or the interest of that 22 particular sport or activity. 23 24 MR CARROLL: ClubsNSW raised this issue earlier. It is of 25 some concern to me. Are we only talking about the child 26 club in this situation, because throughout the course of 27 this review we have heard about a number of 28 amalgamations that have failed through dragging the main 29 club down. Maybe there needs to be consideration given to 30 a mechanism that allows the members of the parent club to 31 also be alerted to the fact that there is an amalgamation 32 offer in progress, because it may well be that those 33 members, having hindsight and seeing other similar 34 amalgamations fail, would vote against it themselves. 35 36 THE CHAIRMAN: I think we very much agree with that. 37 The point here, though, was that we have always assumed 38 that at some point the members of the parent club will get 39 to vote if amalgamation goes anywhere. Whereas upon 40 the child club side, they don't get to vote because it didn't 41 go anywhere. That is the distinction here. 42 43 We certainly accept your point that both parent club 44 members and child club members are meant to be protected, 45 and that eventually comes through a vote, but the problem, 46 what we are referring to here, is whether the child club 47 members ever get to vote because the proposal falls over. .7/5/08 24 Transcript produced by Merrill Legal Solutions

1 MR NEWELL: I guess there is an allied issue with this in 2 that if a situation exists where not only a recalcitrant 3 board does not warm to a proper motion on it, but if the 4 members don't want to know about it as well, not 5 necessarily formally but probably in smaller clubs, and yet 6 it is as clear as the nose on your face to anybody such as 7 a Club Viability Panel that something should happen with 8 this. Is there a mechanism to trigger that something 9 should happen, or whether that club through both 10 members and board collapses when there is a perfectly 11 viable alternative? I guess it is a legislation issue as much 12 as anything. 13 14 THE CHAIRMAN: We will come to the Club Viability 15 Panel after we have had a coffee break. I will foreshadow 16 now that this issue will probably be pursued a bit further 17 after the coffee break. We have some reservations, as you 18 will have seen in our report, that a Club Viability Panel 19 should be able to, in effect, take over a club. 20 21 MR COSTELLO: I share that view. 22 23 THE CHAIRMAN: At the end of the day it is for the club 24 board and its members to consider its future, not for some 25 external body. That would be our position. 26 27 I would like to summarise this discussion on 28 amalgamations. I think we would like to think further 29 about whether it is possible to define some point at which 30 members should be advised in what I will call for the 31 moment a child club. I accept entirely it can be too early 32 and it may be it is impossible to define something as 33 robust, which isn't too early, but is as earlier than the 34 annual report after it's all over. So we will think about 35 whether that is possible. 36 37 I think also I would like to think more about the 38 suggestion from Peter Turnbull about a possible role for 39 the Club Viability Panel, not in, if you like, demanding 40 something but acting as a warning trigger point in this 41 context. Maybe something could be done there. We will 42 take a break. 43 44 SHORT ADJOURNMENT 45 46 THE CHAIRMAN: I think we might get started again. 47 We're up to financial reporting. Jennifer, do you want to .7/5/08 25 Transcript produced by Merrill Legal Solutions

1 continue. 2 3 MS VINCENT: In its draft report, IPART recommended 4 that a standard format for financial management accounts 5 should be prescribed for clubs with gaming machine 6 revenue less than $5 million per annum. IPART also 7 recommended that, depending on size, clubs would submit 8 some measures annually to the Club Viability Panel. While 9 all clubs would be required to submit EBITDARD as a 10 percentage of revenue, only those with gaming machine 11 revenue less than $5 million per year would be required to 12 submit a more detailed set of measures. 13 14 The two reporting schemes have different purposes. 15 EBITDARD would be used as an initial indicator of 16 possible financial stress and as a trigger for an offer of 17 further assessment and possibly assistance, while the more 18 detailed measures would be used to support production and 19 distribution of benchmarks to give smaller clubs access to 20 information to monitor and assess their own performance. 21 22 ClubsNSW suggested in its submission that all clubs 23 should be required to adhere to a standard financial 24 reporting format and to submit financial measures for use 25 in benchmarking. IPART did not consider it necessary to 26 require clubs with gaming machine revenue greater than 5 27 million per annum to comply with standardised financial 28 reporting and detailed performance benchmarking because 29 the size and scope of their operations would generally mean 30 that they already have a detailed set of accounts, either 31 currently use or have access to a commercial benchmarking 32 service, should be sufficiently resourced to be able to 33 monitor and assess their financial position and 34 performance. Additionally, these larger clubs would still 35 be required to submit EBITDARD as an initial indicator of 36 financial distress and would be eligible for an offer of 37 further assessment and possibly assistance. 38 39 The question, once we've got to the end of that long 40 preamble, is given those considerations, what are the 41 benefits and costs of requiring clubs with gaming machine 42 revenue greater than $5 million a year to comply with a 43 standard format for financial management accounts and 44 to submit more detailed financial performance measures 45 for inclusion in the benchmarking process? 46 47 MR COSTELLO: Mr Chairman, I'm happy to open up. Just a .7/5/08 26 Transcript produced by Merrill Legal Solutions

1 couple of simple points to start off on this complicated 2 issue, I guess, in terms of the costs. Converting over 3 from one set of accounts to another, I think, is a good 4 example of that. My friend from KPMG might be able to 5 speak a little bit further on it. When we had to embrace 6 international financial reporting standards, we certainly 7 noticed about a 15 to 20 per cent increase in our accounts 8 for the additional work in the first year, but they 9 certainly dropped back down to the same level the next 10 year after that, so there will be a spike in costs initially. 11 What exactly that percentage is, that experience is the 12 only guide that we have to that. 13 14 In terms of the benefits, we're talking earlier about 15 training and certainly if we're having consistency in 16 training and we're doing financial management training, 17 it's much, much better to be training on consistent 18 accounts that clubs of all sizes certainly would have. My 19 earlier comments about the future of the industry being 20 important; having a consistent set of accounts certainly 21 gives us a starting point for easier understanding of 22 accounts into the future for all, be it government, be it 23 clubs, be it auditors, and auditors themselves, I think, 24 would obviously be compelled to follow a particular 25 format of accounts, whereas at the moment, every club's 26 accounts are certainly different. It must make it very hard 27 for consultants, and certainly the OLGR to look at an 28 annual report and try and understand it. So I think there's 29 certainly some benefits, there's no doubt about it. There 30 will be some initial cost. We need to also bear in mind 31 our responsibilities to the corporations legislation, where 32 they require accounts in a certain format as well, and I 33 presume we're talking about the detailed sets of accounts, 34 rather than, I guess, the headline reporting that occurs 35 under the Corporations Law. 36 37 THE CHAIRMAN: I don't think there's any disagreement 38 that clubs of all sizes need to maintain accounts. 39 40 MR COSTELLO: No, it's the format. 41 42 THE CHAIRMAN: Yes. I think what we had in mind 43 was the bigger clubs already, typically - I can't say always 44 - but my understanding of the evidence that was in front 45 of us, If I recall it correctly, was that most of the bigger 46 clubs were involved in benchmarking already, in which 47 case we didn't see the need to mandate it. .7/5/08 27 Transcript produced by Merrill Legal Solutions

1 MR COSTELLO: Mr Chairman, if I could just refer back to 2 the socioeconomic impact study done by the Allen 3 Consulting Group, in particular the section dealing with 4 profitable versus non-profitable clubs. In 2007, of the clubs 5 that were in the 5 to 10 million revenue band, only 58.7 per 6 cent of those clubs were profitable, and that left you with 7 19.6 marginally profitable and 21.7 being non-profitable. 8 Clubs in the 10 million band support your point to a 9 certain extent. 77.1 per cent of clubs were profitable and 10 14.6 were marginally profitable and 8.3 per cent of those 11 size clubs being non-profitable and, of course, we have 12 much larger clubs on top of that as well, but they're not 13 immune from the pressures of the industry. As a matter 14 of fact, they're probably suffering the greatest strain and 15 stress, as a group, at the moment on the back of the 16 increase in taxes and those sorts of things. 17 18 THE CHAIRMAN: I was aware of their relative profitability 19 and so on. The issue here for us to consider is - they've 20 got adequate information. You and I might not like the 21 story that that information is telling some of them, that is 22 that they're not very profitable, but the reason why they're 23 not very profitable is not because they don't know, they 24 do know and they've got adequate information, and 25 therefore do we need to, if you like, mandate regulatory 26 requirements on them of an information kind? 27 28 MR COSTELLO: One of the other things that we're 29 considering - it might only be minor in the scheme of 30 things - you have management transferring between 31 different sized clubs, going from one format of financial 32 reporting to another format of financial reporting. The 33 consulting industry does very well out of the top end of 34 town providing advice to clubs on a whole range of 35 different areas, and I would see that that would continue 36 into the future. This is not an absolute die in the ditch issue, 37 but if we're looking for consistency across the whole of 38 the industry, I think perhaps to presume that every club 39 in the state, particularly the larger ones, have all that 40 information in front of them, certainly they do. What they 41 do with it is another matter. And I'm not so sure how 42 many clubs are actually students of EBITDA, or EBITDARD 43 for that matter as well, as an efficiency measure. 44 45 THE CHAIRMAN: I think we can agree it is not a die in 46 the ditch issue, but would others like to come in on this? 47 .7/5/08 28 Transcript produced by Merrill Legal Solutions

1 MR CONROY: Mr Chairman, I'm not so sure that the 2 financial reporting is that inconsistent. I mean, most clubs 3 that I know use industry-based packages or accounting 4 packages, and those mostly provide for the standard 5 balance sheet, P&L account, bar trading account, poker 6 machine trading account and if the club has other divisional 7 areas, trading accounts for those areas. That is what is 8 presented at our board meeting. We use a well-known 9 package called ClubLine and we're quite happy with that. 10 Our gaming revenues are below 5 million, so if you're 11 trying to adopt a standard format, we're caught under this 12 - I'm not sure where you got 5 million from, but we're 13 caught, we're under that, so we'd be then forced to adopt, 14 is that what you're saying, a standard format? 15 16 THE CHAIRMAN: Yes. 17 18 MR CONROY: Whereas I'm quite happy, as the president 19 of the board and a chartered accountant, that we're well 20 served in terms of the financial information that's being 21 thrown up to the board. 22 23 MR TRIGGS: Ken Triggs. Auburn RSL sub-branch. The 24 problem, as the gentleman from KPMG will obviously 25 confirm, with accounts is it is garbage in, garbage out. If 26 the initial entries aren't made in a fashion to give you the 27 reporting that you want, such as your benchmarking guides 28 and things, it's going to be a hell of a job digging it out later. 29 So we agree there be a standard format for financial 30 management accounts and all clubs should comply. 31 This is particularly applicable to the viability panel 32 because if they're going to be making judgments on 33 viability, they're going to need standardised margins and 34 accounts that are comparable. There's no point having 35 accounts that are all different. 36 37 A less onerous method of gathering viability and 38 benchmarking information is for the club accountant to use 39 a standardised method of presenting audited information 40 based on existing accounting standards and using present 41 accounting computer programs that provide the required 42 viability and benchmarking information. If this is done on 43 a monthly basis by the accountant, it takes a considerable 44 load off the treasurer and the secretary and gives an 45 accurate monthly and timely analysis of the financial 46 position. It's too late 12 to 15 months down the track to 47 find out that you've had a bad year and it's getting worse. .7/5/08 29 Transcript produced by Merrill Legal Solutions

1 At the end of every month, our treasurer takes our 2 dockets, chequebook, et cetera, to the accountant, where 3 they're entered into the computer and a monthly report 4 printed out for our monthly committee meeting. This 5 practice has been used successfully by the Auburn RSL 6 sub-branch for some time. Most clubs are required to have 7 their accounts audited by qualified accountants and doing 8 them monthly in the computer does not add greatly to the 9 cost and it is worth it. The cut-off points, as pointed 10 out, for reporting are normally arbitrary and only a rough 11 guide and we believe that all clubs should use the same 12 reporting format so that proper comparisons can be made. 13 14 MR MATTHEWS: Glenn Matthews from Panthers. Our 15 position/my position is I would support IPART's views in 16 terms of this section, that it shouldn't be mandatory or 17 regulated that we need to comply. We have the 18 management capabilities to do our own benchmarking 19 and we actually have audited accounts and I just ask the 20 question to what end because again it leads into the next 21 question in terms of the Club Viability Panel and again I 22 support the views of IPART that the Club Viability Panel 23 shouldn't be a supervisory panel. It is there to provide 24 assistance and not to set up another layer of bureaucracy. 25 At the end of the day, it's the responsibility of directors of 26 clubs to ensure the future of those clubs. 27 28 MR CONROY: Mr Chairman, can I just point out we're 29 talking about management accounts here, not audited 30 accounts, monthly management accounts. They're not 31 audited. That's what you were addressing, isn't it? 32 33 THE CHAIRMAN: Yes. 34 35 MR COOPER: Can I make a point. I have to refresh my 36 memory of the report, but there were some mechanisms in 37 place that clubs can provide their accounts and if they're 38 deemed to be in an acceptable format, then I don't think 39 that they will necessarily have to comply with the 40 standard format. If they can demonstrate that they go to 41 enough detail to understand their financial position, they 42 should continue to do that, and it wouldn't be mandatory 43 for them to move across to another format. 44 45 THE CHAIRMAN: I need to refresh my memory of the 46 detail of the report too, but my recollection of what we're 47 on about here is we want to get accounts that allow .7/5/08 30 Transcript produced by Merrill Legal Solutions

1 benchmarking and the reason why we had a threshold of 5 2 million, or 5.5, or whatever, is not the point. The real 3 point is for small clubs, we think that to achieve that 4 benchmark information, they might need 5 a bit more direction than the larger clubs, 6 which were already doing that, and that's our assessment 7 of the situation. 8 9 MR COSTELLO: Mr Chairman, one comment from me. 10 We're really talking about presentation of accounts, we're 11 not talking about changing accounting practices in that 12 regard, we're only talking about presentation of accounts, 13 and auditors present things in different ways. They still 14 finish up with the same result, but they just format them 15 differently. 16 17 Chairman, you mentioned a benchmarking measure. 18 Certainly not only the benchmarking but all the efficiency 19 measurements that have been recommended by you in 20 other sections would automatically be produced under a 21 different presentation of accounts, so the clubs have got in 22 front of them, and granted a lot of the major clubs are doing 23 that already, but they've got in front of them some indicators 24 that say we have a problem or we don't have a problem. 25 26 THE CHAIRMAN: I meant benchmarking in the broad 27 sense, against various norms. I do emphasise we have 28 picked on one figure as a trigger, if I can put it that way, 29 and that's just as a trigger and that's a signal. I think 30 we've probably got what we can on that. We might 31 move to the Club Viability Panel. 32 33 MS VINCENT: In its draft report, IPART recommended 34 the establishment of a Club Viability Panel, whose main 35 purpose would be to assist clubs to identify the early 36 warning signs of financial distress and to provide ongoing 37 advice and support to clubs to improve their financial viability. 38 39 Whilst there is a general consensus concerning the need for 40 a body of this nature, stakeholders have expressed 41 differing views on its powers and functions. For instance, 42 ClubsNSW has suggested that the Club Viability Panel 43 should conduct an audit of all clubs to determine which 44 clubs should be encouraged to consider amalgamation. The 45 Leagues Clubs Association has also submitted that if the 46 panel's role is merely advisory, its likelihood of success is 47 lower. On the other hand, the RSL and Services Clubs .7/5/08 31 Transcript produced by Merrill Legal Solutions

1 Association expressed concern about a potential extra 2 layer of bureaucracy and expressed the view that reforms 3 to director training should be able to achieve the same 4 desired effect as the introduction of the Club Viability 5 Panel. 6 7 The first question we're asking today is what do you 8 consider to be a fair balance between responsibility of the 9 directors of a club and the responsibility of the Club 10 Viability Panel? Secondly, are there any further areas 11 that you think the Club Viability Panel should have 12 additional responsibility in order to increase its 13 effectiveness? 14 15 MR COSTELLO: I'm more than happy to kick off. 16 Mr Chairman, I have to say I'm really concerned about 17 where the Club Viability Panel is going. We're going to 18 need a bigger bureaucracy than Treasury to run this at the 19 moment. There's five areas now where the viability panel 20 is being asked to play a role. One is viability and that's 21 certainly where the initial consideration came from. To 22 assist clubs to understand their viability was, I think, 23 the original intention of this. But then there's now a 24 secondary role being considered, and that is to actually 25 bring about some recovery processes, provide assistance to 26 clubs where they are identified as being in an unviable 27 situation, to do an audit of their management accounts, or 28 their audited accounts, to see that they comply, to provide 29 sign-off in regards to those accounts, to make 30 recommendations or make decisions about amalgamations. 31 I really do think that if you want the Club Viability Panel 32 to work, we should crawl first and walk and run a little 33 later. 34 35 The costs alone for collecting data from clubs, and we’ve 36 had some proposals on this already, just for collecting 37 data to at least be able to provide some feedback 38 to clubs about viability, are in excess of $700,000 a year 39 at $500 a club. To provide some ongoing support for 40 those clubs, we're talking about $500 a month for a 41 minimum of 12 months, but it is 24 to 36 months being 42 recommended. I really do think that we need to perhaps 43 simplify our approach to this. Having said that, if you 44 want the viability panel to provide some guide to clubs 45 or some assistance to clubs about their viability, the 46 government needs to mandate the collection of data. It is 47 not going to work unless you mandate the data. The great .7/5/08 32 Transcript produced by Merrill Legal Solutions

1 majority of clubs will not provide the data unless you 2 mandate it. There are certainly some long-term government 3 and industry benefits in terms of capturing better data to 4 understand how the industry is performing, instead of just 5 relying on gaming statistics out of the central monitoring 6 system. So data collection powers need to be mandated. It 7 is extremely expensive to do that, the costs are excessive, 8 and I don't think that we should usurp the role of 9 directors, to be quite honest, in making decisions about 10 their clubs. When I say "we", I mean the viability panel. 11 I think the viability panel's role would certainly bring to 12 a club's attention that they are, using the benchmarking 13 exercise, deteriorating in their viability and to have that 14 club think about the next steps, be it amalgamation or 15 instigating some business recovery practices as well, but 16 I'm really concerned that if we bundle this viability panel 17 with too much responsibility or too many duties, it won't 18 happen, and I think we need to prioritise what we really 19 want out of the Club Viability Panel. 20 21 MR TURNBULL: If I could just firstly qualify a statement 22 that was made in the preamble that the Leagues Clubs 23 Association states that if the role is merely advisory, its 24 likelihood of success is lower. That is in the worst-case 25 scenario that we did approach before in relation to the 26 amalgamation process. If the Club Viability Panel were to 27 proceed and is going to try to detect early warning signs 28 of financials distress, I'd suggest they're going to be 29 very, very busy. The workload that they'll have - the 30 financial performance of clubs, in general, since IPART's 31 initial submissions, as Peter Newell alluded to, the whole 32 landscape has changed and the performance of the club 33 industry overall has deteriorated significantly. In fact, 34 the figures that were generated for gaming turnover - 35 gaming turnover, for the period of March, showed an 36 overall drop across the state, a downturn of an extra 2 per 37 cent, and it has had profound effects on our member clubs 38 and the club industry in general. In fact, I was at an 39 industry forum yesterday and there were predictions that 40 within the next two years, we might see up to 300 clubs 41 disappear off the landscape. 42 43 I agree with ClubsNSW that the whole format and 44 structure of the Club Viability Panel be put in place very 45 carefully because a lot of clubs are going to require that 46 monitoring straightaway to analyse which ones are in 47 financial distress and it's going to have a very broad base .7/5/08 33 Transcript produced by Merrill Legal Solutions

1 of clubs to help in a short period of time. 2 3 MR TRIGGS: I'd like to preface my statement by saying 4 that everybody sitting around this table belongs to a 5 not-for-profit organisation, and as such, we have certain 6 responsibilities. Essentially, that gets back to the fact 7 that we're talking of hundreds of clubs failing in the next 8 two or three or four years. With the economic times that 9 we're moving through, there are possibly a lot of clubs 10 with bigger mortgages than they would like. There are 11 going to be a lot of problems that need to be addressed 12 and which, at present, are not addressed. In other words, 13 what happens to the assets of a failing club when it's 14 failing? Is it allowed to drift along until it's got nothing 15 left except a mortgage that the bank takes, or is there a 16 point at which the public interest says this is a charitable 17 organisation, it should be recognised as such, and when it 18 has served its purpose - it was set up as a charitable 19 organisation - if it can't continue, it should be wound up 20 and the funds put where the public interests are best 21 served. 22 23 The discussion has largely been about supervisory 24 costs, an extra layer of bureaucracy, and that is no doubt 25 true, there is a cost to these things, but there's a much 26 bigger cost allowing failing clubs to fail and fail and 27 fail until they've got nothing left, and we don't feel 28 that's in the public interests. 29 30 Also, we feel with the present system wide open to 31 manipulation, fraud, collusion, and management control 32 of club board elections, it is necessary for the viability 33 panel to have teeth. The viability panel could play an 34 important role in preventing fraud and assisting clubs. If 35 all clubs, particularly RSL clubs, were registered for and 36 according to their core activity, the viability panel could 37 prevent a small controlling management group changing 38 the core activity of a club without good and proper reason 39 for doing so. It also prevents an outside group stacking 40 an AGM, getting control and using the funds and the 41 assets of the club for a totally different purpose. The 42 present system is wide open to manipulation, collusion 43 and fraud. Social members generally have no interest 44 in the management processes of the club and are easily 45 manipulated. They are only members because the law 46 says they must be members to use the club's facilities. 47 They are really just customers. .7/5/08 34 Transcript produced by Merrill Legal Solutions

1 The other area of responsibility of the Viability Panel is to 2 prevent a club management group from asset stripping 3 a club, particularly a failing club. In our submission of 4 2 April we pointed out in some detail the way that the 5 assets could be stripped from failing clubs, be they RSL 6 clubs or other types of clubs, by unscrupulous management. 7 We have all seen enough in the commercial world 8 lately about asset stripping without it happening in this 9 organisation. This can be done by cashing up the assets of 10 a club, surrendering the liquor and gaming licences so 11 that they no longer come under the jurisdiction of 12 government authorities, refunding shareholders or 13 members licences, moving into an office and advising 14 members or shareholders that the club can no longer 15 continue and that their money is refunded. Management 16 could then use the remaining funds for their own purposes. 17 18 To prevent this it would be necessary for the 19 Viability Panel to have the power to wind up a club that is 20 not viable or is unable or not capable of carrying out, or 21 doesn't wish to carry out its core activity and giving the 22 proceeds to charity. In the case of the RSL that charity 23 would be the sub-branch that established the club and set 24 it up and paid for it in the first place, or the RSL 25 benevolent fund. 26 27 After all, registered clubs are not for profit clubs, with 28 charitable and community intent and with a core activity 29 and should not become the play thing of a small commercial 30 group. When their core activity is no longer viable or 31 needed, they should be wound up or amalgamated where 32 that core activity could continue with another group. 33 34 There will probably be a lot of clubs fail over the next few 35 years, and this matter should be addressed. The failed 36 club can continue in another form and this should be 37 a matter for review and decision by the Viability Panel, 38 not by a controlling commercial group of that particular 39 club. 40 41 With reference to core activities of RSL clubs, they are 42 essentially as follows - and they are basically set out in 43 the management agreement that is entered into between 44 the club and the RSL when the sub-branch sells the club to 45 the RSL. I will not read them out; they are 46 straightforward - maintaining the traditions of the RSL, and 47 the RSL clubs by and large do that and have no problem .7/5/08 35 Transcript produced by Merrill Legal Solutions

1 with those things. I will hand this up later, Mr Chairman. 2 I don't want to take up the meeting's time reading them. 3 4 We feel that there has to be protection for the public and, 5 in our case, the RSL. We see the RSL as continuing on 6 for at least the next 100 years and we want to make sure 7 that what we stand for, and the traditions that have been 8 established, continue. That is the reason we have kept or 9 tried to keep control of boards, just to ensure those 10 things happen, and that's why we feel IPART's suggestion 11 for core activity is a good one put into legislation. It 12 can't then be changed at a snap AGM with a stacked 13 meeting and hived off somewhere else. 14 15 So we see a much greater role, an important role, for the 16 Viability Panel. As to its dealing with charitable funds, 17 there should be a means of addressing what is going to 18 happen to these funds when these clubs fail or when they 19 are amalgamated and at what point in time a club that is 20 failing is going to be allowed to fritter aware its funds 21 just keeping the doors open and a few people employed. 22 Thank you, Mr Chairman. 23 24 MR COSTELLO: Mr Chairman, I am really disappointed 25 at the generality of Mr Triggs’ observations about the 26 industry. I have worked in this industry for 42 years. This 27 is not the industry that I know. This is not the industry 28 that the Department of Gaming and Racing, or the Office 29 of Liquor, Gaming and Racing knows as well. 30 31 If Mr Triggs has information about the sort of club that 32 he is describing, then the Office of Liquor, Gaming and 33 Racing is the appropriate place. They have the powers 34 of a royal commission to investigate any club - should 35 they be the club that Mr Triggs is describing, and they do 36 that, they have a big investigative team, well supported 37 by the bureaucracy as well. This is not the role, Ken, of 38 the Club Viability Panel. The OLGR has all the powers 39 they need under the sun to do the sort of investigations. 40 They instigate regularly what they call 35A audits, and 41 any manager will tell you that it takes about two to three 42 weeks to prepare one of these, and they literally turn the 43 club inside out, the OLGR do, in staying on top of these 44 particular issues. 45 46 In terms of the winding up of clubs, ensuring that 47 whatever funds are left flow to appropriate areas, I .7/5/08 36 Transcript produced by Merrill Legal Solutions

1 haven't seen a constitution yet that doesn't make provision 2 in their wind-up procedures for available funds to flow to 3 like organisations or charities. So I don't know what sort 4 of club is being described here, but it is not the industry 5 that I work in, and I am disturbed by the generality of the 6 observations. 7 8 MR CONROY: I am at a bit of a loss there with the Auburn 9 RSL's comments. My understanding of the recommendation 10 concerning a Club Viability Panel is to examine the club's 11 viability in its present state. I think Mr Costello mentioned 12 the Office of Liquor and Gaming, Department of Gaming 13 and Racing, or whatever they call it these days, and I 14 felt that the issues that were raised would have been 15 covered or investigated or would come under their 16 consideration. 17 18 If there were to be a Club Viability Panel, certainly 19 one of the issues that I would see them covering is if 20 there were clubs that they identified that were running at 21 a loss and having difficulties, they could make 22 recommendations concerning amalgamations and try to 23 steer them in the right direction rather than trying to have 24 another bureaucratic office there which is going to be 25 dictating what they do, but I would have thought it 26 would be more of an advisory group who would tell 27 them where they could direct their concerns. 28 29 MR CARROLL: The question that flows from that is if the 30 panel does give advice to a club that it needs to take 31 certain action and it then ignores it, what is the next 32 level it goes to in order to ensure that that club does 33 survive at the end of the day? The club may choose to 34 ignore that advice totally and we are left with a body 35 which is pretty much impotent in the whole equation. 36 That is our major concern. Does IPART have any particular 37 ideas in that regard that we could flesh out? 38 39 THE CHAIRMAN: Perhaps I will take the opportunity to 40 summarise what I think we have heard so far and our 41 position, which is subject to change in the light of 42 today's hearing. 43 44 I get the sense that there has been fairly general agreement 45 that there should be a Club Viability Panel to do 46 what we originally proposed, that is to provide early 47 warning signs of financial distress to boards and club .7/5/08 37 Transcript produced by Merrill Legal Solutions

1 members through their boards, probably to provide advice 2 and support to clubs, how they might improve their 3 financial viability. We put that within in the context 4 where the clubs wanted that advice. 5 6 It has been put to us by Mr Costello that that is only going 7 to work if the Club Viability Panel has access to the 8 information. I think we agree with that. Whether we made 9 that clear enough or not, the intention was that everybody 10 would produce EBITDARD, the Club Viability Panel would 11 automatically get the EBITDARD, they would get accounts 12 sufficient so that they could follow up, so, yes, we agree 13 that the Club Viability Panel has to have the information 14 in order to fulfil the duty of early warning and advice. 15 16 The question really that has been posed today is how 17 much further, if at all, the Club Viability Panel should go. 18 That was really in response to our reading in some 19 submissions that some people thought it was desirable 20 that the Club Viability Panel go further, that it have a role 21 in, if you like, acting as an active broker in 22 amalgamations, for example. 23 24 I think what I have heard today, and it is certainly 25 our position, is that with some exceptions most people 26 think that the role of the Club Viability Panel should be 27 advisory, that at the end of the day the responsibility 28 lies with club boards and if necessary through members in 29 total, through the calling of an annual general meeting. 30 That may mean that there should be provision that the 31 members are informed of the views of the Club Viability 32 Panel in the instance that the board isn't taking action 33 speedily enough. We raised that issue specifically in 34 relation to amalgamations. That came up earlier as to 35 whether there was a role for the Club Viability Panel in 36 that. I would like to just come back to that in a minute. 37 38 The general thrust of our position, as IPART, has been 39 that the nature of a community-based group, and indeed 40 the corporate sector, the general nature of this community- 41 based group, is that they should be self-governing 42 at the end of the day. They are not community- 43 based if they are not self-governing, so that it is one thing 44 for a Club Viability Panel to give advice on; it is a quite a 45 different thing for a Club Viability Panel to take over 46 responsibility. As Mr Costello puts it, if there is a view 47 that in some way the body is operating improperly, or .7/5/08 38 Transcript produced by Merrill Legal Solutions

1 illegally, then that should be picked up elsewhere rather 2 than by the Club Viability body, which is an advisory body 3 which in the end has to persuade rather than order. So that 4 is our position. As far as I know, that's the position of the 5 majority of participants around the table. 6 7 I certainly take the point that there is going to be 8 quite a big workload, on your forecast. I guess at the end 9 of the day all of us have to prioritise from time to time, 10 and so will this body. In a big flood you prioritise in a 11 different way to a small flood, if I can put it that way, 12 if you are running emergency services. So they will need 13 to prioritise and focus on the most significant cases which 14 are at most risk. In terms of follow-up advice, and so on, 15 I think they should give warnings fairly quickly, but if 16 they are going to get more involved they will have to 17 prioritise. 18 19 The issue I am interested in is, just pursuing it a tad 20 further, whether the Club Viability Panel - how far 21 members should be informed of its advice as distinct 22 from the board and at what point, including on the issue 23 of amalgamations. Are there any views on that? 24 25 MR COSTELLO: Certainly getting one set of accounts 26 each year is a good start. If out of the data that was 27 collected it shows that there were 50 clubs that were in 28 the dangerous situation of actually closing and they 29 weren't paying attention to their accounts, certainly a 30 letter would go to the club. It could also be posted on the 31 file with the OLGR. That said, the Viability Panel have 32 said "We just wanted to remind you that your accounts 33 are saying that you are bordering on insolvency. The 34 responsibility of the directors are this, this and this. 35 Have you considered amalgamation as a means of 36 continuing the club into the future", with some follow-up 37 within three months to see exactly what the club had 38 done about that, what the board had done about that. 39 40 I am thinking aloud at the moment. If there had been no 41 action, they could be required to provide that same 42 information three months down the track to that Viability 43 Panel where they were required to do some benchmarking 44 at that point. At that point, if nothing had been done there 45 could be a trigger, a requirement, to take the issue to the 46 members for their consideration as well. 47 .7/5/08 39 Transcript produced by Merrill Legal Solutions

1 Parallel with that, I think, is an absolute 2 responsibility on the part of ourselves, the other industry 3 associations, the Club Managers Association, the Bowls 4 Association, to educate on an ongoing basis and highlight 5 all the good examples of amalgamations and good 6 constitutions and good board structures and good results 7 that are occurring, and encourage clubs to head down the 8 amalgamation path as opposed to making a die in the 9 ditch exercise. So a lot of things have to happen in 10 conjunction with the Viability Panel with education on an 11 ongoing basis to highlight things that are happening in 12 the industry. There could be a trigger after 90 days, if that 13 information that came back from the Viability Panel 14 showed no improvement or no attempt to improve the 15 financial situation of the club. 16 17 In many cases, the club might throw its hands in the air 18 and say, "We don't know what to do", and obviously at 19 that point, after receipt of the first letter, there is perhaps 20 an opportunity for us to provide some guidance, the 21 Viability Panel, about the sorts of things that can be 22 done. 23 24 THE CHAIRMAN: It would always at the end of the 25 day be a matter for the club itself as to whether it took 26 that advice. 27 28 MR COSTELLO: Absolutely. Again, I guess everybody 29 will want to know that they have seen and heeded the 30 advice, and if they have made a decision to continue, 31 knowing that they are trading insolvent, they continue at 32 their own peril, including the possibility of losing their 33 own homes if they do that. 34 35 THE CHAIRMAN: They may not be trading insolvent 36 but that is why they have decided not to take the advice 37 yet. Thanks for that. Does anyone else want to comment 38 on this trigger? 39 40 MR TRIGGS: Could I make a point? I have got no 41 intention of putting detail into that. I could, but this is 42 not the place or the time. 43 44 MR COSTELLO: Exactly. 45 46 MR TRIGGS: I will point out that the gaming and racing 47 investigative branch has limited resources and limited .7/5/08 40 Transcript produced by Merrill Legal Solutions

1 finance. Therefore, what they can do is limited. What I 2 am talking about may be beyond the way you see the 3 Viability Panel, and that wouldn't surprise me. Maybe 4 you could in your recommendations to the minister suggest 5 that that could be a further matter that could be taken up 6 by government in whatever branch that might be. It may 7 be outside the realm of IPART, but I feel that it is a matter 8 that should be addressed and it is very easy to put meat on 9 the bones of that decision. 10 11 THE CHAIRMAN: It probably is outside the realms of 12 IPART. Secondly, I think the evidence has to be produced 13 that there is a problem of a significant scale beyond what 14 the Office of Liquor Gaming and Racing will deal with. 15 They are the people where the evidence should go. 16 17 As I said, I think I have stated the consensus view that we 18 have come to on this issue. As I said, the area that is in 19 doubt in my mind is the issue of what the Viability Panel 20 might tell or deem that members should know beyond 21 boards and at what point. Thank you, David Costello, 22 for your suggestions and we will think further about that. 23 If anybody else has a point on this, seeing the question 24 was somewhat sprung on you, we would be happy 25 for you to get back to us in the next week or so. We are 26 getting close to the wire, though. 27 28 MR COSTELLO: Mr Chairman, at the moment if OLGR 29 conducts an investigation into a club, and it is a serious 30 investigation, they write a letter to the chairman - 31 correct me if I am wrong, David - and there is also a 32 responsibility in some circumstances to print that letter 33 in a public area of the club, be it on the notice board or 34 in a club magazine. 35 36 MR GREENHOUSE: I think that is right, but I don't have 37 the detail. There are some notification requirements for 38 members of clubs, but I don't have the details. 39 40 MR COSTELLO: I suggested that because that may well 41 be what you are thinking about. 42 43 THE CHAIRMAN: I think we might now go to our last 44 set of issues which is the social contribution of the 45 registered clubs industry - benefits and costs. 46 47 MS VINCENT: The terms of reference for this review did .7/5/08 41 Transcript produced by Merrill Legal Solutions

1 not ask IPART to assess the costs of the clubs industry. 2 However, as part of the framework for the review, the 3 Tribunal wanted to satisfy itself that the clubs' social 4 contribution justifies the level of government support that 5 they receive. 6 7 On balance, the Tribunal felt that the clubs 8 industry's social contribution does justify its current 9 level of support, and justifies development of 10 recommendations through this review that will assist the 11 clubs industry to flourish. 12 13 However, stakeholders have brought other evidence to the 14 Tribunal's attention suggesting that greater access to 15 gaming machines leads to a higher level of gaming machine 16 expenditure per capita and have argued that this in turn 17 results in a higher incidence of problem gambling. 18 19 Nevertheless, the Tribunal continues to be of the view 20 expressed in the 2004 report "Gambling: Promoting a 21 Culture of Responsibility" that it is appropriate to 22 continue to seek a balance between the majority of those 23 in the community who participate in gambling as an 24 enjoyable and harmless pastime, and those for whom 25 gambling causes significant problems. 26 27 This stakeholder feedback has raised the important issue 28 of how clubs' harm minimisation responsibilities ought 29 to be incorporated into the review's framework for a 30 management plan. 31 32 The question is how do you think the issue of 33 minimising the social costs associated with some of the 34 activities of clubs could be dealt with in the proposed 35 clubs charter or framework for a management plan? 36 37 MS PETERS: Alison Peters from NCOSS. I think the views 38 of NCOSS are well known to those around the table. We 39 don't always see eye to eye on some of these issues. I 40 think, however, it's fair to say that one of NCOSS's major 41 concerns is that while we accept that the majority of 42 people don't have gambling problems, nor do they have 43 alcohol or drinking problems, nor any other problem, the 44 problem for us is that the consequences for those that do 45 are significant, and they are significant not just for those 46 individuals but for their families, their friends, their 47 neighbourhoods, occasionally their workmates in some .7/5/08 42 Transcript produced by Merrill Legal Solutions

1 rather well-publicised and significant cases. So there is 2 an issue for us there. 3 4 We are also aware that where there are other factors 5 involved - for example, the person might be unemployed or 6 they might have some other issues - the consequences sort 7 of have an exponential effect, and again it's services in 8 the community that we represent who are picking up the 9 pieces for those particular individuals. 10 11 We therefore believe very strongly that while there 12 may well be social benefits - and we don't dispute that - 13 that where there are social costs, even though not for the 14 majority of club users or members, however you wish to 15 describe them, then we think there is an obligation on 16 clubs to work in conjunction with government and the 17 community sector to minimise and to eliminate the 18 adverse impact of those activities. 19 20 We see that this actually starts with research. We actually 21 need to get a handle on things because we can quite often 22 trade arguments across the table about well, this problem 23 gambling exists here, and doesn't exist here, and so forth, 24 we do think we need to get some clear research, we need 25 to get research, not just about the extent of the problem 26 and who is affected, but quite frankly in terms of harm 27 minimisation, what works and what doesn't. We have 28 some very clear ideas about that, as I'm sure do others 29 around the table. They may not be the same. How about 30 we get some research to deal with it? 31 32 We also think that it is really important that there be a 33 comprehensive system of measurement of social 34 contributions by clubs, and that this be mandatory. We 35 think clubs should be proud of the contribution they make 36 to their local communities. We certainly don't want to add 37 to any burden, but we do think it will allow a clearer 38 assessment of what potential costs may be and how we 39 can jointly work together to address those particular costs 40 in the local areas that clubs operate within. 41 42 THE CHAIRMAN: Thank you. 43 44 MR NEWELL: Mr Chairman, if I may follow. I am 45 extremely pleased to hear her refer to proper research before 46 anything is decided here, and to determine in a unified 47 way, if you like, on what works and what doesn't work. I .7/5/08 43 Transcript produced by Merrill Legal Solutions

1 note that on the bottom of page 7 in the briefing notes 2 that there is reference to claims that greater access to 3 gaming machines leads to a higher level of gaming 4 machine expenditure per capita, and that some have argued 5 that this in turn results in a higher incidence of problem 6 gambling. We instance, for example, New South Wales and 7 Queensland. There are more poker machines in New South 8 Wales than there are in Queensland, yet our incidence of 9 problem gambling on the latest studies of both governments 10 are not exactly the same, but roughly comparable. So we 11 would certainly challenge that statement. 12 13 We know that the New South Wales Government's G-line 14 inquiries are down substantially. I stand corrected - I 15 think up to 20 per cent year on year. So clubs working 16 with government, and indeed in their own environment 17 through their Club Safe would suggest to us that it is 18 having a positive contribution to this issue. We, perhaps 19 like others around this table, are distressed from time to 20 time by certain research, alleged research, that hits the 21 popular press that we believe does not stand up to 22 scrutiny. 23 24 So to institute a proper research based approach we 25 would support 100 per cent, and we have argued that at 26 both state and federal level, and agree on approaches to 27 this issue which we don't for one minute deny is not 28 there, but on what you say, what works and what doesn't 29 work, to fix the problem in an agreed way and not in a 30 knee-jerk fashion. 31 32 MR COSTELLO: Mr Chairman, in terms of the proposed 33 clubs charter - and I also agree with Alison and many of the 34 points that she made - these are some of the things I know 35 that Peter and Graeme have got some others as well that 36 they think could be included in the charter. Obviously, 37 our commitment to our statutory responsibilities is 38 something that is a starting point and we think that that 39 should be built into the charter, encouraging clubs to do 40 far more than just their statutory responsibilities or 41 their minimum responsibilities; a commitment to staff 42 training in the areas of responsible gambling, over and 43 above what they're doing at the moment; a clear 44 understanding of their responsibilities, both their 45 community responsibilities and their legal 46 responsibilities, certainly can be built into the charter. 47 We also think that clubs could and should commit to an .7/5/08 44 Transcript produced by Merrill Legal Solutions

1 ongoing development of a duty of care focus. That is 2 certainly an issue that is coming up more regularly these 3 days. Clubs should be encouraged, by way of the charter, to 4 grow alternate sources of revenue to reduce their overall 5 dependency on gaming and I think that's a useful starting 6 point, and I won't steel anybody else's thunder in terms of 7 some of the other ideas, but there is much to be done, there’s 8 absolutely no doubt about it, and I think for everybody to 9 go forward and achieve a better result, there needs to be 10 honesty in the debate from all sides. We don't hear much 11 about the fact that in New South Wales, we have 4000 12 machines less than we had a couple of years ago. We don’t 13 hear much about the fact that the government's dependency 14 on gaming, as a percentage of taxation, has been 15 decreasing for the last 10 years and is not the 15 per cent 16 that our critics in other states would have you believe. The 17 15 per cent that others quote interstate is about 3.6 per cent 18 in New South Wales. We need to have truth about that, 19 we need to have truth about the incidence of problem 20 gambling and come up with a consistent measurement tool. 21 Some clubs use the CPGI, the Canadian Problem Gambling 22 Index, others use the SOGS approach as well, the South 23 Oaks Gambling Screen. For governments at all levels, state 24 and federal, to clearly understand that, there needs to be a 25 consistent approach, there's no doubt about it. But in 26 terms of the charter, I think there are five major 27 contributions that clubs can make that I have detailed, and 28 I'm sure there are some more, Mr Chairman. 29 30 MR TURNBULL:Chairman, Graeme Carroll and myself 31 have been made aware of a Victorian Responsible 32 Gambling Code of Conduct and it is a very thorough 33 document. Basically, if I could just read one paragraph to 34 you. It says, "The code is a result of collaboration between 35 all sectors of the gaming industry, the community sector 36 and the government. This approach is a positive way to 37 achieve consistently high standards of practice in 38 responsible gambling and harm minimisation. The code 39 itself is regulatory and promotes responsibility, 40 innovation and responsible gambling best practice." 41 42 I know that our association, and I'm sure Graeme will 43 speak to it as well, feel this is something that we could work 44 together in the state of New South Wales, in conjunction 45 with the key stakeholders, to outline our various 46 obligations and commitments back to the community. 47 .7/5/08 45 Transcript produced by Merrill Legal Solutions

1 THE CHAIRMAN: Can I just say we would like to pick 2 up these suggestions in terms of the club charter and 3 management plan and take them forward, so we'd be 4 pleased to build on this. Let us say our view of the 5 evidence in our report was that while New South Wales 6 have a lot more clubs than other states, it doesn't 7 consistently show a worse gambling problem than other 8 states. Fundamentally, it may be that gambling will occur 9 wherever, it will just take different forms according to 10 what's available, and that seems to be consistent with our 11 reading of the evidence. 12 13 In that case, and perhaps already, but certainly in 14 the future, there's an opportunity with clubs which 15 recognise that they have a social responsibility and a duty 16 of care to their members - perhaps the local publican 17 doesn't feel the same way, or whoever, local bookmaker - 18 there is an opportunity with the clubs to minimise the 19 problem gambling per se, which probably occurs 20 wherever a gambling venue is, and that's what we'd like 21 to do in developing this charter and management plan, 22 provide a catalyst for that. 23 24 MR COX: Can I make one additional comment. I think 25 similar issues also arise in terms of responsible serving 26 of alcohol and you might want to take that on board as 27 well. 28 29 MR TRIGGS: I'd like to raise an aspect that I haven't 30 heard mentioned in recent years. I've got the advantage - 31 or disadvantage - of being a lot older than most. I grew up 32 in the 30s and I was very much aware of the difference 33 between those that were fortunate enough to belong to 34 clubs and the great masses that didn't have that opportunity. 35 I feel that the growth of the club industry in the period 36 from after the war, which was roughly when it started, 37 has been one of the best things that ever happened to our 38 society. Growing up in the 30s, I was fortunate to belong 39 to clubs and it wasn't until I did service in the army for 40 a few years that I realised how privileged I'd been. I've 41 watched the club industry grow and I've been a great 42 supporter of it. My concern is that it doesn't fall into 43 bad times and have things happen to it that shouldn't. 44 45 As far as gambling is concerned, some hundreds of people 46 in the late 1940s had gambling problems; it was the local 47 SP bookie down the pub. You'd have the wives queued .7/5/08 46 Transcript produced by Merrill Legal Solutions

1 up outside the factory waiting to grab the pay packets 2 before the bloke could get down the pub and give it to the 3 SP bookie and come home and we had all sorts of problems 4 with wives demanding that they be given some of the pay 5 packet first and the SP can't do that. 6 7 But I feel that the point that is taken for granted these days 8 is that the clubs have given the public access to facilities 9 they would never have dreamed of before. They can walk 10 into virtual Taj Mahals and enjoy themselves, whereas 11 before, that was just not on. So although we've still got 12 differences in our society between the more financially 13 viable and the less financially viable, there's not the 14 degree of envy and unhappiness that existed before the 15 war - admittedly, there was also a depression - but I feel 16 that with the problems that we've got now, gambling in 17 clubs is one small aspect of gambling, very small - I don't 18 know what percentage it is - but the contribution that the 19 clubs make to the general welfare and lifestyle of people 20 has got to be offset by the few that do go to excess and it 21 shouldn't be looked upon as something that is suddenly 22 upon us because it was with us 60 years ago, it was with 23 us 100 years ago. 24 25 My father was good at throwing heads at two-up and when 26 he was in the Middle East in the first war, they used to 27 cart him into Cairo and Alexandria and back him throwing 28 heads. This has been an Australian tradition and I agree 29 with the minimisation. I don't gamble and I'm sorry for 30 people that are involved in a family that's got gambling 31 problems and I can see that everybody seems to be working 32 for that benefit, for that outcome, but I just wanted to say 33 that it's not all bad. There are a lot of benefits to the 34 society as a whole. The gambler is going to gamble 35 somewhere and with the Internet and everything and 36 casinos all over the place and building more than Vegas, 37 putting up buildings right, left and centre and pulling 38 them down again, gamblers will be catered for and as 39 long as people are educated enough to know when to 40 stop, where to draw the line, that's as much as we can 41 hope for. You'll never rub it out, so to speak. 42 43 THE CHAIRMAN: We might go to the next one. 44 45 MS VINCENT: Lastly we are discussing a group of other 46 regulatory requirements. Submissions to IPART's draft 47 report have identified a variety of regulatory changes that .7/5/08 47 Transcript produced by Merrill Legal Solutions

1 may have the potential to grow the social contributions 2 made by clubs. These were listed in the ClubsNSW 3 submission and included limitations on off-premises 4 catering, club membership size, the ability of contract 5 caterers to serve alcohol, sign-in procedures, the five 6 kilometre rule. 7 8 We'd like to know how will removing or modifying these 9 regulatory requirements grow the social contributions 10 made by clubs in New South Wales and what are the risks 11 associated with making changes to these requirements? 12 13 MR COSTELLO: Mr Chairman, we put these five points 14 forward. If I could just give a brief explanation of each 15 one of those. Limitations on off-premises catering. At 16 the moment, there is a prohibition on clubs being able to 17 provide alcohol or liquor to venues off-site, away from the 18 club, and given that we're all trying to diversify and 19 reduce our dependency on gaming, clubs have great 20 catering facilities and to be able to provide those to 21 supply nursing homes, or hospitals for that matter as 22 well, which is certainly being considered, private 23 functions, those sorts of things, we feel as though it's a 24 piece of regulation that is from another time, and as such, 25 in terms of modernising the regulatory framework, is one 26 that we would ask IPART to have a look at. 27 28 The second point is club membership size. At the moment, 29 for a club to increase its membership numbers, it 30 needs to go to the Licensing Court, soon to be another 31 body, to get permission to do that and then local councils 32 have a role to play in that as well. We feel that that 33 also is from another time and that market conditions or 34 consumer demand should be allowed to play out here, 35 and at the end of the day, a club has restrictions on the 36 number of people it can put into premises, it has 37 limitations in terms of parking spots that actually do 38 control the number of people you can actually put into a 39 club, you have to undergo a fire regulation test regularly 40 to ensure that all the safety measures are in place as well, 41 and for a club to have to apply to increase its popularity, 42 we think it's time that that was seriously looked at. 43 44 In terms of the third point, the ability of contract caterers 45 to serve alcohol, once again, this is an efficiency 46 measure. We have a situation in clubs where we 47 do have contract caterers in small restaurants. The law .7/5/08 48 Transcript produced by Merrill Legal Solutions

1 says at the moment, basically, that the contract caterer 2 can serve the food but we must serve the alcohol, on behalf 3 of the club itself, and clearly for a contract caterer to 4 be able to do both would bring about efficiencies for the 5 club and for the contract caterer as well, notwithstanding 6 the fact that there needs to be a commitment to a 7 responsible service of alcohol, a level of training that is 8 necessary there. 9 10 The last two matters, sign-in procedures and the five 11 kilometre rule, there's been many different suggestions 12 over the years about the inefficiencies that this creates 13 and the cost burden alone. To have a door person in any 14 size club, it would cost you in the vicinity of $50,000 a 15 shift per annum, plus the on-costs, and most clubs would 16 have two shifts per day, some clubs have two entry points, 17 so clearly the cost of compliance is growing all of the 18 time. So to simplify, certainly not eliminate, our 19 responsibilities in the area of sign-in procedures is 20 another area where we think efficiencies can be created 21 whilst still maintaining our responsibilities and creating 22 that point of difference between clubs and hotels, who 23 don't have that same requirement. 24 25 The five kilometre rule. There's been a lot of comment 26 on this over a long period of time. The government 27 has sought, during the course of last year, to make some 28 minor changes to the regulations. We think it is time to 29 have a closer look at that, are there ways in which we can 30 simplify that - there are some good models interstate as 31 well, which others may talk about as well - but certainly 32 we put forward those five areas, Mr Chairman, as, once 33 again, as I said, modernising the regulatory framework, 34 bringing about some efficiencies, reducing compliance 35 costs whilst not reducing our responsibilities in that 36 particular area, and certainly the end result of that, I 37 think, will be a flow-on of benefits to the communities in 38 which clubs are involved in. 39 40 THE CHAIRMAN: Just on the last two, my recollection - I 41 stand corrected on this - is that they were really brought 42 in to satisfy the Federal Tax Commissioner about your 43 mutual status. So if that's right, it's not strictly 44 within the gift of the New South Wales government. 45 46 MR COSTELLO: That's correct, that's a mutuality issue, 47 certainly monitored by the Federal Government, and I'm not .7/5/08 49 Transcript produced by Merrill Legal Solutions

1 suggesting that we would do away with sign-in procedures, 2 because that is a very useful way of monitoring the ratio 3 of members to visitors attendance and that's how the 4 mutuality tax is actually calculated, so simply looking at 5 some of the responsibilities there, and I'll give you the 6 case of small clubs. If they don't supply a door man and 7 somebody comes in and puts Mickey Mouse or Donald 8 Duck in the sign-in register, it's the club's fault, and it is 9 the club that actually receives the compliance notice and a 10 penalty notice. There's no onus or no responsibility on 11 the individual coming into a club, as a visitor, to 12 properly sign into the club. So a shift of responsibility, 13 I think, is long overdue, but certainly sign-in procedures 14 need to be maintained, we need to create that point of 15 difference. 16 17 THE CHAIRMAN: Do you have a specific alternative 18 proposal? 19 20 MR COSTELLO: I think in this room there are many 21 different thoughts. We have, through the club industry 22 working party, put forward some proposals there about 23 what can be done. I'm happy to provide that further 24 detail. But it is time it was seriously looked at. 25 26 THE CHAIRMAN: I think there's a question about how 27 much influence we can have over the Federal Tax 28 Commissioner, number one, and two, I don't think we 29 have any influence over anybody without having some 30 specific alternative proposal. 31 32 MR COSTELLO: We're not seeking to in any way 33 circumvent the Federal. What we're asking IPART to 34 consider is a recommendation to review both of these 35 areas, with certainly no consequence for the Federal, it is 36 only about the State. We still need to meet our Federal 37 responsibilities, so I'm not asking for anything in the 38 Federal sphere. 39 40 THE CHAIRMAN: Are there other comments on this? 41 42 MR ROWE: Yes, Mr Chairman. As you'll know, a lot of 43 visitors travel interstate now and a lot of them are actually 44 members of RSL clubs in other states. We'd like to see 45 reciprocal rights; if a visitor comes from interstate, that 46 his membership of that club or the RSL is recognised 47 if he goes into a club in New South Wales. We'd .7/5/08 50 Transcript produced by Merrill Legal Solutions

1 like to see reciprocal rights. 2 3 THE CHAIRMAN: He'd still have to sign in. 4 5 MR ROWE: Yes, but we recognise that he's a member of 6 the South Yarra RSL Club, or something like that. 7 8 MR TRIGGS: Shows his card. 9 10 MR ROWE: Yes, shows his card, and thus recognised as 11 being a member of a club and able to come into a club. 12 13 THE CHAIRMAN: That applies now, doesn't it? I'm not 14 a member of an RSL club, but I'm a member of a golf club 15 which has got reciprocal rights. It applies now. 16 17 MR CARROLL: Can I just explain? What generally 18 happens is that members of an RSL sub-branch, for instance 19 in Victoria, where they have full reciprocal rights now 20 through their RSL network, in moving over the border into 21 New South Wales - and it happens similarly in Queensland, 22 where they also have a reciprocal rights arrangement, to a 23 point - because they have it in those two states, it is fully 24 expected when they come over into New South Wales. 25 Now, sure they can sign in, but in Victoria, the reciprocal 26 rights means they have full membership rights of that club 27 they are visiting. So if that club, for instance, provides 28 discount services to its own members, as a visitor, you 29 can also access that. 30 31 THE CHAIRMAN: That's something for you people to 32 sort out for yourselves. 33 34 MR CARROLL: It probably is, but that's just to explain it 35 to you. 36 37 THE CHAIRMAN: My golf club won't enter into a 38 reciprocal arrangement unless we get full membership rights. 39 40 MR GREENHOUSE: I'm happy, Mr Chairman, just to 41 respond to a couple of those points, I guess, on behalf of 42 this office. I should actually start off by passing on the 43 apologies of Michael Foggo, the commissioner of the office, 44 who would have loved to have been here today and he's 45 participated in several of the other round tables held. 46 He's currently part of an exercise crisscrossing the state 47 briefing the industry on the new liquor legislation. He is .7/5/08 51 Transcript produced by Merrill Legal Solutions

1 in Wagga today. I think he was in Broken Hill yesterday 2 and Batemans Bay tomorrow and who knows where next 3 week. So I pass on his apologies for not being able to be 4 here today. 5 6 Just a couple of those issues that David has raised. I guess 7 the limitations on off-premises catering - I mean, these 8 are things which are the policy decisions of government 9 to make a competitive environment, I suppose, 10 that's been the policy of successive governments, and it is 11 going to require a clear policy decision of government to 12 alter that. It is difficult to say but that's the 13 way it was at that stage and that's the way it carries on 14 in terms of off-premises catering. 15 16 With the club membership size, I did a bit of asking 17 around at the agency on this one. It seems there are very 18 few of these applications that come before the court. 19 Invariably, they're granted without much dispute. 20 Apparently a consideration seems to have been initially 21 some sort of overcrowding issues around clubs, but when 22 you start to think about the logic of that, it doesn't seem to 23 withstand much scrutiny. But certainly there didn't seem 24 to be too many people arguing for it to be retained in the 25 legislation, there weren't too many staunch defenders of 26 the legislation, 27 and I'll leave that there. 28 29 In terms of the ability of contract caterers to serve 30 alcohol, again, there's a fairly clear policy intention 31 there that our compliance people take quite seriously, 32 around there being a very clear line of responsibilities 33 for the responsible service of liquor on club premises and 34 that's something that can't be contracted out. Again, 35 what the efficiencies are need to be articulated a bit more 36 fully, I suppose, but at the present time, the logic for it 37 is to have a very clear line of responsibilities, who is 38 responsible for the proper service of alcohol, and it is 39 the club at the present time. 40 41 In terms of the sign-in procedures and the five kilometre 42 rule, there's some issues there that David has mentioned, 43 and we've had some discussions over the past few years 44 around some of the detail around this, and if there are 45 other bright ideas that might go toward tidying up some 46 of the problems that might exist in a practical sense with 47 those, then they can be looked at, but I guess the risk is, .7/5/08 52 Transcript produced by Merrill Legal Solutions

1 of course, moving to an open-door policy, and these 2 restrictions have been about avoiding that problem. But 3 there's things that can be done on a limited basis to 4 ameliorate some of the problems that are there, there's 5 some processes that we can work through for those, and 6 there's probably several other issues, the reciprocal 7 rights issue as well; there are processes that can be 8 worked through with the clubs about that. 9 10 MR COSTELLO: Mr Chairman, can I just make a couple 11 of final points there. If IPART chooses not to delve into 12 these areas, we'll follow the policy adjustment path, but 13 we also suffer policy blockages as well. We've got the 14 Minister for Planning, Frank Sartor, introducing 15 legislation encouraging clubs to build aged care 16 facilities, given the shortfall in supply, yet we can't 17 supply the aged care facility, even if it is on the club 18 premises, with food. So there are some blockages there 19 that we'll seek to unblock. 20 21 THE CHAIRMAN: I should perhaps just say, so people 22 understand what an IPART review is about. Governments 23 often ask IPART to conduct a review precisely because they 24 want a review of their policies, so the fact that it's a 25 matter of government policy per se is in no sense a 26 prohibition to IPART reviewing proposed changes, as 27 long as it is consistent with our terms of reference. 28 29 The other point is before we propose any changes to 30 government policy, we will, of course, have regard to 31 what the purpose of the policy was and how well the 32 policy was working, so we'll certainly look at what the 33 purpose of the policy intent is and how well it is working. 34 We can't rule something out just purely because it's 35 government policy and indeed in this particular case, the 36 clear intent of this review has been to ensure the financial 37 viability of the clubs industry, and it's generally 38 recognised that one possible way of doing that is greater 39 diversification and that is relevant to some of the issues 40 that have been raised. 41 42 Before closing, I did promise those people sitting in 43 the back of the room that they'd have a chance at this 44 stage to comment. The gentleman on the right. 45 46 47 SPEAKER: Mr Chairman, I'm a member of a sub-branch and I .7/5/08 53 Transcript produced by Merrill Legal Solutions

1 am pleased to see that the core content will be kept for 2 our RSL - I hope so. 3 4 The other one was about the training of directors. I put in 5 my submission, which was taken off the Internet today, 6 which I'm very upset about. It was a private submission 7 and there was no mention of any other club, or anything 8 like that, it was a private submission. What the other part 9 is, the club managers should have university degrees. 10 They are handling big money today, they have all the 11 regulations that they have to comply with. If we look 12 around our table here today, you'll see that most of these 13 are CEOs of clubs. They are not the membership of the club 14 and I think the membership has not been given a fair go to 15 bring their views up, what we expect out of managers. The 16 managers today are like God. They get in there and they 17 can nearly select their own boards. I know of one large 18 club today who, if I was to mention it in here, would be 19 very surprised how the CEO stacks the board. It is a very 20 important thing. Members like to see the board running 21 smoothly, and today you are talking about your membership 22 trying to get young people there, but the clubs are not 23 encouraging people with an education to get onto the 24 board. They only want to select the people who are going 25 to agree with the CEOs of the boards. This is very, very 26 bad for the average member. 27 28 Members put their selection up, and we see that the CEOs 29 have got the board stacked with what they can bring in 30 from outside, and it's not right. Fair enough, if they 31 were active members in the club, I would go along with it, 32 but they are the average person who is in the club. They 33 are there for what they can get out of it. 34 35 The other thing is about the directors. You want the 36 directors to be educated and go to different classes to get 37 qualifications. Our CEOs are paid big money to run clubs 38 today. Do you think that they are going to take any notice 39 of the board members down there? No, they are not. 40 They are getting big money. They have their floor 41 managers there who look after the day-to-day running of 42 the club, and that is how I see it all the time. 43 44 I go into various clubs doing RSL benefits, and I see the 45 same thing where the members are very discontented that 46 they cannot have a view of what is going on here today. I 47 feel that the club managers, when you select them, should .7/5/08 54 Transcript produced by Merrill Legal Solutions

1 be graded, and they should have a qualification before they 2 take a management position on. Most of the managers, the 3 CEOs that I know, have graduated. They start off in the 4 bar, they go on to be a shift manager, and that's how they 5 go up to be secretaries. I'm afraid you have to look at 6 your own CEOs and make sure that they have the 7 qualifications required to run a club. Thank you very much 8 9 MR SARGANT: I am a director. I represent Gosford RSL 10 Club. I start with the first agenda item, corporate 11 governance, and I believe that flows into most of the other 12 items that you have on the agenda. Most of the clubs are 13 registered companies under the Corporations Law and are 14 subject to the rules of officers and directors. One of them 15 is to have the ability to read a financial statement. If the 16 directors can read a financial statement, then you will 17 know that the financial position of the club before it even 18 needs to go to a Viability Panel. That is one of the issues 19 that I believe is very important. 20 21 The other point is about amalgamations. Amalgamations 22 unfortunately take place in a lot of cases too late. You 23 will find that the potential parent clubs are being asked 24 to take on debt. There again there is a duty as a director 25 under the Corporations Law to act in the best interests of 26 the members. It may be that they can't demonstrate 27 straight away that they are acting in the best interests of 28 the members, whether it is intentional or unintentional, 29 from government policy in relation to the regulatory 30 regime, and our state tax regime which is imposing a huge 31 cost on the industry and individual clubs which weren't 32 there when the strategic direction was first set out. How 33 do you address that, I don't know. I hope one of the 34 results of this review will provide some models that can 35 be used in order to alleviate this position. 36 37 Clubs are responsible, (a), for their members; (b), the 38 community; and, (c), for the employees and the associated 39 economy that they support. Should they founder, as they 40 are, then the society is going to suffer, and the local 41 economy is going to suffer. We have already seen the 42 equivalent of full time employment jobs have gone down 43 at least 9,000, from about 52,000 to 43,000 in the last 12 44 months. That's has a huge impact on local employment. 45 46 Constitutions - very difficult. Yes, you do have the 47 bias of interest groups within your clubs, but they are .7/5/08 55 Transcript produced by Merrill Legal Solutions

1 issues that can be worked out providing a rational 2 approach is taken. 3 4 Finally, I would like to say that I don't believe that 5 the industry has ever walked away from its responsibility 6 as far as negative social costs to the community is 7 concerned. It may be that they need to be rattled a little 8 bit now and again. I believe that industry is proceeding 9 down the path; that is, trying to work with government 10 and those institutions to address those issues. Thanks 11 very much. 12 13 THE CHAIRMAN: Thank you. If there are no further 14 interventions I would like to draw today's proceedings to a 15 close. As I have intimated at various times this afternoon, 16 there are some issues that we might want to pursue 17 further with individual stakeholders with a bit more 18 clarification once we have worked through today's material. 19 20 A written transcript of today's proceedings will be 21 available on the Tribunal's website within the next week, 22 and we will be using that to refresh our memory, and we 23 may want to get back to some of you directly. Finally I 24 would like to thank you all once again for attending 25 today and for your contributions, thanks very much. 26 27 MR COSTELLO: Mr Chairman, could I ask what I think 28 is a very important question? 29 30 THE CHAIRMAN: Yes. 31 32 MR COSTELLO: Will the transcript be a word for word 33 record of what has been said here today? 34 35 THE CHAIRMAN: Yes. 36 37 MR COSTELLO: So any unsubstantiated comments 38 made by individuals will appear on the website. 39 40 THE CHAIRMAN: Yes. 41 42 MR COSTELLO: That is disappointing. 43 44 AT 5.06PM THE HEARING WAS ADJOURNED ACCORDINGLY 45 46 47 .7/5/08 56 Transcript produced by Merrill Legal Solutions