The Australian Rugby Union was investigating axing a side from Super Rugby before Western Force signed the controversial alliance agreement with the governing body, the senate hearing into the future of the sport in Australia heard yesterday.

Cutting a side was discussed by the ARU board as late as August 18 last year – eight days before the agreement was finalised.

Senator Linda Reynolds questioned whether RugbyWA should have been told about the discussions before they signed the agreement that ultimately led to their demise.

Senator Reynolds said the ARU board was given a briefing by former chief operating officer Rob Clarke and head of professional rugby Anthony French on cutting the Australian sides from five to four.

"You can understand Western Force's concerns that they were not aware of these discussions. Is that not something you should have disclosed to Western Force?" she asked ARU chairman Cameron Clyne.

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"Given that you were actively, for some months, considering the option of cutting a team, I believe Western Force had a right to know because what the alliance document did by accident or design was gave you an opportunity to cut them."

Mr Clyne claimed no decision about axing a side was made until April this year and he did not recall the August meeting last year.

The hearing was also told that Imperium Sports Management was technically insolvent in New Zealand when it bought Melbourne Rebels debt free from the ARU for $1.

Senator Reynolds described it as the deal of the century with $13 million written-off, $6 million in increments and another $1.8 million of creditors paid out.

"This whole deal is very, very puzzling," Senator Reynolds said.

"Someone who has not run a major Australian sport before, how they were given a whole rugby franchise for $1 and incremental payments that no other Super Rugby club got.

"We understand that there were no conditions placed on Imperium on how they used the money.

"We have heard evidence that this money, probably quite rightly under the contract, did go to Imperium and their many associated organisations and companies here and in New Zealand to pay off debt because it was actually a company that was technically insolvent, we understand, in New Zealand.

"We are puzzled about the due diligence. How could it ever have happened that there was such a generous offer and they were still in trouble.

"They paid themselves consultancy fees more than they were paying the players and the staff combined.

"They were using that money to pay themselves exorbitant fees.

"I'm not sure who did your due diligence Mr Clyne but they missed a lot it seems. I think from what we've seen and heard you might want to sack them."

Mr Clyne said due diligence was carried out. He did not know about the technical insolvency.

"During due diligence no red flags were raised so the issue of insolvency didn't come up," he said.

Mr Clyne questioned the need for the hearing saying he was disappointed by the line and tone it had taken as it focussed on the ARU's sale of Melbourne Rebels rather than the future of Australian rugby.

Mr Clyne said claims by former Wallaby John Welborn, now rugby adviser to Andrew Forrest who has vowed to back the Force, that he had asked for $70 million from the mining magnate to reinstate the Force were false and a complete misrepresentation.

He said there were only promises and no binding financial support from WA for the Force.