The Balmain Tigers Leagues Club could be placed into receivership by Tuesday night, with serious consequences for the Wests Tigers NRL club.
The leagues club has taken urgent action in the NSW Supreme Court against Rozelle Village, a property developer attempting to develop the Tigers' Victoria Road headquarters.
Rozelle Village alleges the leagues club defaulted on a series of loans, including one for $4.5 million made in 2009.
Rozelle Village was last week restrained from appointing a receiver, or a receiver and manager, or a voluntary administrator to the Balmain Tigers Leagues Club or any of its assets until 5pm on Tuesday.
It was also restrained from calling up or accelerating payment of the principal or interest under the two loans it gave the club in 2009.
In return, the leagues club was not allowed to sell any assets worth more than $10,000 without permission.
Justice Paul Brereton will decide by the 5pm deadline whether to continue to restrain Rozelle Village. If he declines, receivers could be called in immediately.
Counsel for the leagues club, Robert Newlinds, SC, said if Rozelle Village succeeds in having the leagues club placed into receivership, it could "potentially bring to an end an 108-year-old football club".
Mr Newlinds said the action "would destroy the leagues club" and "that would have knock on effects to the football club, the Wests Tigers, and the people who play in the NRL competition".
"It is highly unlikely the receiver will continue to make grants to the football club," Mr Newlinds said.
The court heard the site, on the corner of Darling Street and Victoria Road in Rozelle, has been empty for three years.
The developer bought it off the leagues club and exercised its right to evict when the state government announced plans to build a metro that would run right through the intersection.
The leagues club moved to two new premises - Five Dock Bowling Club and another venue at Flemington. Rozelle Village loaned the club millions of dollars to fit out these venues.
The leagues club was to move back into the Rozelle site once the multimillion-dollar redevelopment was complete, but progress has stalled. The metro was scrapped and the site has fallen into disrepair.
Mr Newlinds said the loans were granted "to allow us to survive during the period of the redevelopment".
But he said there is no indication that the project will ever get development approval.
Justice Brereton was told Rozelle Village alleges six "trigger" events have occurred that have led to it threatening to put the leagues club into receivership.
This includes $700,000 in interest payments owed to it.
The developer also alleges the leagues club sold off poker machine licences.
Mr Newlinds said the leagues club admitted selling off surplus poker machines but said Rozelle Village was aware and consented.
In any event, the sales occurred in the ordinary course of business, Mr Newlinds said.
He said the money was used to make grants to the football club.
The court was told the developer called in the loans on Friday.
Rozelle Village also alleges the leagues club failed to lodge its accounts with ASIC on time, backdated a signature on a document, made mistakes in its accounting, and made unauthorised payments to the football clubs.
But Mr Newlinds said payments to the football clubs was the leagues club’s "reason for being".
The Wests Tigers is a joint venture club comprised of the Balmain Tigers and Wests Magpies.
In January the Wests Tigers struck an agreement with the Australian Rugby League Commission to overhaul their corporate structure with seven directors. The board consists of two directors from the Balmain side, two from Western Suburbs, and three independent members.
Under the new arrangement, the ARLC has agreed to cover the financial shortfall of the cash-strapped Balmain side for the next two years. Balmain must square the ledger within that period or face losing their shares in the joint venture.