Karting Australia has delivered a swift response to Karting NSW’s press release.
Karting Australia Chairman Mick Doohan wrote to all New South Wales clubs, drivers and officials today with information regarding affiliation with KA, plus six specific issues he wished to raise.
Karting Australia’s message:
ESSENTIAL INFORMATION ABOUT AFFILIATION WITH AKA Ltd. (Karting Australia)
I write to you on behalf of the Australian Karting Association Ltd (AKA Ltd) Board to answer a number of questions that we feel need answering while you and your Club considers its future affiliations.
Many of you have contacted us and there is a lot of confusion as to what is right and wrong and what are relevant issues that should be considered.
The first thing that needs to be said is that all parties need to focus on the key issues – what is in the best interest of KNSW karters and secondly what is in the best interests of your own Club.
KNSW have said that their “move to run the sport independently within NSW is a big step and may be concerning to many members”. It is hard for us to disagree with that statement, other than to say that it is a massive step and members have every reason to be very concerned.
The “Karting New South Wales Goals and Vision for the Future” letter that they have distributed today, and that purports to “provide the clarity” for you, fails to properly address almost all the relevant questions that need to be answered by KNSW for your Club to make an informed decision.
It is not sufficient for KNSW to, in very large measure present to you what amounts to “trust us, we know what we are doing” answers to the most basic of questions as to how this will work, what will it cost, and will it work for the long term. Is there a business plan behind this or is this just policy on the run?
The most alarming things in this are:
1. Their stated process is pushing an all or nothing – one in all in approach that they think should bind all Clubs. They fail to mention that any Club that wants to be affiliated with AKA Ltd., will be able to do so through a replacement association.
2. Their financial model appears to be particularly unsound. KNSW admit that their costs will go up because they are “having to pick up insurance costs” but if everything goes as they hope it will, charges to clubs and licence holders might go down but only if you give them the numbers.
We want to address six main issues:
1. Statements about what KNSW pays to AKA Ltd. and what it gets back in return and affordability of the sport;
2. Unfounded KNSW Board suspicions about the functioning of AKA’s Board and Management;
3. Unsubstantiated and incorrect statements about the legitimacy of the transfer of assets from AKA Inc. to AKA Ltd. in 2013;
4. Unsubstantiated and incorrect statements about the AKA Track Development Fund Trust and most importantly who the Trustees are;
5. AKA Ltd Affiliation and Licences,
6. CAMS and the FIA Delegated Authority for Karting.
We have been told by many people who have received calls from KNSW Directors (and others) that “Last year we (KNSW) paid AKA Ltd. $350,000 and got $16,000 back in return.”
That is simply not the case. The reality is
- AKA Ltd. sold 2004 Drivers licences to KNSW for $323,500 which KNSW on-sold to competitors for $445,050 making a profit of $121,554;
- 166 AKA Ltd Organising Permits were distributed by KNSW. AKA Ltd provides them free of charge to each State. KNSW collected Permit Fees totalling $200,750 from those Organising Permits which was all profit
- AKA provided KNSW with $10,000 in State Assistance Funds and $6,000 in State Championship Implementation Assistance free of charge.
In total, AKA provided KNSW with revenue and ‘goods’ (licences, permits (including insurance) and Assistance Programs) that they sold to Drivers and Clubs, collecting revenue of $661,800 resulting in a profit to KNSW of $338,304. That is KNSW’s main source of income and it enables them to provide the services that they provide to karters and Clubs in NSW. There is absolutely no issue with that at all, but to say that AKA Ltd. only contributed $16,000 to KNSW is a gross understatement and is misleading.
Our insurance program that covers all drivers and all Permitted Race Meetings is AKA Ltd.’s single biggest cost every year. It cost us $410,782 in 2017 and $468,048 in 2016.
KNSW have made several curious statements in relation to Permits and Financial Security:
- “The Board will review permit costs and flow savings to our Clubs for their events” and
- “Coming off the back of a loss this year and having to pick up insurance costs, we would look to stabilise cash flows across 3 to 6 months, build some working capital and following this, then commit to reviewing our cost base. Our ambition is to reduce licencing and permit costs over time.”
It should be questioned as to how they could achieve that given that currently:
- KNSW does not incur any costs for insurance as AKA Ltd. provides it to them free of charge so the actual cost base of an Organising Permit is zero dollars; and
- Even with no actual costs involved, KNSW has the highest Permit Fee charges of any Australian State – $24 per person that enters a Race Meeting (excluding TDF levy). That charge gets added onto every entry fee for every event; and
- KNSW makes a minimum of $63 profit from every Competition Licence sold.
KNSW are asking you to trust them to deliver lower prices on Permits that they sell to you where their current cost base is zero even though they will be “having to pick up insurance costs” that are likely to run into the hundreds of thousands of dollars of new and additional expenditure. KNSW is a high cost association, not because of AKA Ltd., but because they have chosen to be.
They are asking you to do the same on licences.
If Clubs decide to disaffiliate from KA, they should expect to pay a considerable amount of money for Organising Permits (including insurance), simply because their cost base is about to increase substantially.
The various statements about AKA Ltd. “Board members being in actual or potential breach of their directors duties… acting while conflicted or not adequately disclosing conflicts of interest”… “misleading members” and “not acting in the interests of its Members” are baseless assertions that are easy to make but are impossible to substantiate because they are simply not true.
If the KNSW Board believe they can substantiate any of these assertions then they should bring them forward promptly and properly through the appropriate forum, and not try to legitimise them in an inappropriate manner.
At a Special General Meeting of AKA Inc. on 18 August 2012 (at which KNSW was represented and where they either moved or seconded all three (3) motions that were carried at that meeting) it was resolved:
a) To form a company to be known as Australian Karting Association Ltd.; and
b) To adopt the Constitution of the new company (which remains unaltered today); and
c) On the 31 August 2013, (that) the entire operations of the AKA Inc. including its entire administrative, statutory and judicial functions would be transferred to AKA Ltd., following completion of which, AKA Inc. would be wound up.
Shortly after 31 August 2013, the operations of AKA Inc were transferred to AKA Ltd. Various Deeds assigning agreements and property of AKA Inc. and the trusteeship of the Track Development Fund Trust were executed transferring the interests of AKA Inc. to AKA Ltd.
In 2012 AKA Inc. and KNSW purchased a property in Penrith from which both entities would run their registered offices. The vehicle for the purchase was a Unit Trust.
Over the years, AKA Ltd. has at various times considered transferring ownership of the unit in the Unit Trust and its co-trusteeship of the Unit Trust to AKA Ltd. However, given that the mortgage over the property would have to be re-negotiated and the expense of stamp duty, such transfer has never occurred. The AKA Ltd. Board could not justify spending (what is estimated to be) upwards of $40,000 of karters money to do that for no real gain.
The property at Penrith, or rather the unit in the Unit Trust, is the last remaining asset of AKA Inc. AKA Ltd. has formally raised with KNSW, on a number of occasions, our view that the Trust should dispose of the Penrith property and that the Trust be wound up, but no response has been forthcoming from KNSW.
The AKA Track Development Fund Trust (Trust) was established pursuant to a Deed dated 21 October 2005. AKA Inc. was appointed as the Trustee at that time. The Trust Deed gives power to the Trustees of the Trust to appoint New Trustees and to transfer the relevant assets of the Trust to them. As part of the transfer of the entire operations of AKA Inc. to AKA Ltd. it was necessary for AKA Inc. to appoint a New Trustee of the Trust. This was completed on 12 November 2013, whereupon:
a) AKA Inc. as the Trustee, appointed AKA Ltd. as the New Trustee of the Trust and transferred all assets of the Trust to the New Trustee; and
b) AKA Inc. as the Trustee, relinquished all control of the Trust to the New Trustee.
The Deed was signed under the Common Seal of AKA Inc. and by AKA Ltd.
The Trust is a Discretionary Trust. This means that the Trustees may exercise their absolute discretion over the Trust and the Funds in the Trust. The Members of AKA Inc. at the date of settlement of the Trust are the Specified Beneficiaries of the Trust but they do not and cannot exercise any control over the trust or the Trustees.
The Trust has continued to operate since October 2005. At the start of 2018 the Trust had nearly $500,000 in loan funds advanced to Clubs across the country including five loans that have been started since 2015 under the New Trustees. We currently have one loan awaiting completion of the Deed of Loan and have responded positively as recently as 29 August to an enquiry from an NSW Club that is considering resurfacing their Race Track.
The TDF is completely functional and is being managed responsibly by the Trustees in accordance with the provisions of the Trust Deed. The Trustees provide an audited annual report on the Trust which is included in the AKA Ltd. Annual Report which is available online at www.karting.net.au
For all karting Clubs, AKA Ltd. is a known quantity. For those wishing to stay affiliated with AKA Ltd., it will be business as usual.
One noticeable change will be a reduction in your direct costs and you will also have the benefits of working with us to develop and implement at your club, the Plus 1 Project which targets grassroots karting competition (just like the Clubs in the other States are doing right now.)
- We will assist in the formation of a replacement, lower cost Association (New Association);
- Insurances that are currently in place will remain available to you;
- Organising Permits will be issued by AKA Ltd. through the New Association. We expect that they will cost each Club significantly less, as the New Association’s overheads will be considerably lower than those of KNSW;
- The same will apply to Driver’s licences. They are all AKA Licences. They will continue to be recognised nationally and you will also continue to have access to international licences. Note that we do not and nor do our Clubs recognise non-AKA Ltd. licences so any talk of reciprocal licence arrangements with other AKA Ltd. affiliated State associations are completely misguided;
- Only an affiliated Club will be eligible to host national events and participate in programs like Junior Sprockets, Safety Grants and KARM that are in place, funded and have been implemented to support the Clubs.
AKA Ltd. holds the sole delegated authority from the General Assembly of the FIA through CAMS to control, regulate, supervise, administer and promote the sport of Karting in Australia for the next five years with a further five-year option.
Additionally, Eugene Arocca the CEO of CAMS has further confirmed to us today that: “I can categorically assure you that CAMS will not entertain an affiliation from KNSW. CAMS has a longstanding and existing delegation with Karting Australia, which we have every intention of honouring.”
OUR WILLINGNESS TO TALK
Despite the statements being made about the AKA Ltd Board and CEO over the past week, we have still shown a willingness to work through the important issues. AKA Ltd. Director and former KNSW President Glen Egan reached out to the KNSW Board again this week, trying to find a circuit breaker for the dispute only to be met with the response “why are you calling us… it’s all too late, the train has already left the station.”
LOOKING FORWARD – DO YOU STAY, OR DO YOU GO?
We understand that the KNSW Board are asking you to vote on whether your Club (and indeed all Clubs if they obtain a majority) stays affiliated with AKA Ltd. and whether KNSW stays affiliated with AKA Ltd.
We don’t believe that you should be being asked to vote on multiple separate issues in one resolution. Its unreasonable of KNSW to expect you to do that. As there are multiple questions, they should be dealt with in separate resolutions.
As we have said before, Affiliation with AKA Ltd. is completely voluntary, and a choice to be made by each Club without external pressures being applied to you. If some clubs break away, so be it, that is their decision but if your Club does not want to, don’t do it and you cannot be forced to do it.
We will work with those Clubs who want to work with us and who want to receive the continuing and well-known benefits of affiliation – not the least of which are stability and certainty.
In a process such as this, a prudent Club Committee should demand to be properly informed of what it is that KNSW is offering to you and how disaffiliation would work financially for the Clubs including:
- Can you see the KNSW business plan?
- Where will KNSW’s funds come from to cover the cost of disaffiliation and running on their own?
- What will be the costs to each Club and to the drivers?
- How much will insurance cost and what is the coverage of the insurance being offered? Who is sourcing that insurance and what are their credentials?
- How much will Organising Permits Cost?
You also need to know what rules you will be operating under, what licences will be accepted and much more or it will easily descend into a “rabble.”
These are all legitimate questions that KNSW must answer in detail if they expect you to consider and vote on an important issue like this.
IF YOU DECIDE TO GO
Clubs that decide to leave AKA Ltd. along with the current KNSW Board, need to be aware that they are most likely to have residual contractual and financial obligations to AKA Ltd. and/or the Trust (if they have a TDF Loan.)
TDF loans and Safety Grants will need to be repaid (with interest) in accordance with the Deeds of Loan and the Grant Agreements and the timing system equipment will all have to be returned in accordance with the Timing System Agreements. Please don’t be fooled about any statements that KNSW may make about “who has the authority to forgive loans”. Loans do not get forgiven. TDF Loan documents are legal documents binding KNSW (the borrower) and the Club (the guarantor) with the Trustee of the Trust (the lender). Interest accrues from the commencement of the term of the loan – it is only forgiven (in accordance with the terms of the Loan) at the end of the loan’s term if there is no default along the way. If there is a default, then the borrower becomes liable for payment of the accrued interest as well.
Provided that AKA Ltd.’s property is returned, and our loans and grant funds are promptly and fully repaid we will wish you well.
In closing, I want to tell you that the AKA Ltd. Board our management and staff wish that this was not happening, and we regret that your Club and our members are being put through this. Our preference is to be doing things that are productive with and for our NSW Clubs just like we are doing with the other States and the Clubs in those States where we are working to improve clubs and club competition through our building better kart clubs and Plus 1 Project.
Chairman – Karting Australia