Large family gatherings of that size are still not permitted anyway, but I don't see how it is anything like a large family, tbh....it's a professional environment...and given a lot of people are still working at home, the idea of 50 out of towners training for a physical contact sport in their town might cause a few people to scratch their heads.
It probably wouldn't do the town any major harm....it might encourage a few idiots to break social distancing measures or even to head down to the oval to try to sneak a peak of the action....I'd imagine it would probably require police resources to keep curious people away.
I'n not saying it would have a huge impact, but all of these considerations need to be taken into account and the storm may well have had more success if they had gone through the proper processes of scouting and receiving approval to use a venue rather than just expecting a council to agree to their requirements.
It looks like a private club has stepped in and offered its facilities anyway, but I hardly think it's the council's fault. It's not unreasonable of them to have some doubts about such a proposal.....especially if the club hasn't really done the necessary legwork to make sure all necessary boxes were ticked in relation to their request.