The owners of two NBL teams intend to launch an appeal after their legal battle with the league hit a roadblock following a ruling by the NSW Supreme Court on Friday.
The Illawarra Hawks and South East Melbourne Phoenix were the plaintiffs listed in the filing, with the two parties seeking preliminary discovery of documents from NBLCO and Larry Kestelman. Hawks owner Jared Novelly has long been critical over how the NBL has operated under the stewardship of Kestelman; among his perceived concerns are the NBL’s financial transparency, how finances are distributed to the league’s 10 teams, business dealings between the league and companies owned by Kestelman, and clarity around gambling revenue.
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The legal fight was first heard in the Supreme Court in May, which was two months after Novelly led a push for Kestelman to sell all his shares in the NBL equally to the league’s 10 teams. Phoenix majority owner Romie Chaudhari was the only other club owner to publicly support Novelly’s case.
However, on Friday, the Court ordered a permanent stay on the proceedings, with the plaintiffs “to pay the defendant’s (NBLCO) costs of the motion as agreed or assessed”.
The Court ruled that the two NBL clubs breached a contractual covenant not to sue NBLCO. The two clubs opted to take the legal path in a bid to seek the preliminary discovery of documents from NBLCO; however, the court finding cites clause 14.3 in their licence, which requires all disputes to be resolved through the Court of Arbitration for Sports in Switzerland, and not through public court proceedings.
The Court’s ruling didn’t make a judgment on the substance of Novelly and Chaudhari’s concerns with the NBL’s governance. It did, however, adjudicate their process to seek discovery of documents as a breach of their licence, which theoretically opens the door for the league to take action against the club owners.
“The National Basketball League welcomes today’s decision of the NSW Supreme Court to stay the proceedings commenced by the Illawarra Hawks and South East Melbourne Phoenix,” the NBL said in a statement on Friday.
Larry Kestelman (L) and Jared Novelly faced off in the NSW Supreme Court over the direction and running of the NBL Getty Images/ESPN
“The Court determined both clubs had breached their Licence Agreements and has permanently stayed the proceeding, and also ordered the clubs pay the NBL’s costs.
“The Court accepted that the purpose of the relevant provision was “to make sure that any disputes between the clubs and the NBL are resolved confidentially, not in public litigation that could damage the NBL competition as a whole”.
“This ruling is an important moment for the NBL, and Australian basketball. It reinforces the need for all parties to respect their contractual obligations and to act consistently within the proper governance of the League. We hope today’s decision allows all parties to move forward. The NBL remains focused on what matters most: strengthening the competition, supporting its clubs, and delivering world-class basketball to fans in Australia, New Zealand and around the world.”
Novelly’s Hawks quickly signalled their intention to appeal the ruling.
“The Hawks intend to appeal the judgment and Crest will continue to do everything possible to shine a light on the NBL and clean up the sport,” Crest Sports and Entertainment — owners of the Hawks — said in a statement provided to ESPN.
“Today’s ruling was on a stay application only and turned on a technical point after the Court rejected NBLCo’s primary argument. It should not be misrepresented as an exoneration of NBLCo’s conduct (which the court has not yet examined). The NBL’s attempt to frame this technical decision as anything more than that reflects its deeply troubling approach to governance and its pervasive insistence to hide material facts.
“Since the case was filed, the concerning behaviour of NBLCo that prompted it has only escalated. This includes a partnership between an NBL director and an existing referee through a travel company, instances of self-dealing via property leases, and secret ambassador agreements designed to circumvent salary caps for teams affiliated with NBL directors and officers.
“Fundamental issues such as lack of transparency and financial disclosure remain unchecked and must be addressed. Many team owners are concerned that millions of dollars of distributions may have been improperly withheld from clubs. This discovery application was simply an effort to obtain information that should already be available, as it would be in any other sporting code.
“Crest remains committed to supporting parties who have come forward with evidence of misconduct and reporting these matters to the relevant authorities, including Sports Integrity Australia, CAS, Basketball Australia’s Integrity Unit, ASIC, and FIBA.”
ESPN has requested comment from the NBL regarding some of the specific allegations listed in Crest’s statement.
A spokesperson for RC Aussie Hoops, owner of South East Melbourne Phoenix, also provided a statement to ESPN.
“NBLCo must be held to account for its lack of transparency, blatant conflicts of interest and shameless self-dealing,” the statement read.
“Today’s judgment is based on a jurisdictional technicality and should not be misrepresented as clearing the NBLCo of potential wrongdoing.
“SEMP intends to appeal the judgement and continue to pursue NBLCo until the Clubs get the information and answers that are owed to everyone involved in the sport.”
