Flynn v Flynn - [2011] WADC 141

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: FLYNN -v- FLYNN [2011] WADC 141

CORAM: STAUDE DCJ

HEARD: 12-18 APRIL 2011

DELIVERED : 7 SEPTEMBER 2011

FILE NO/S: CIV 1214 of 2009

BETWEEN: MARSHALL WARREN FLYNN
Plaintiff
AND
PRESTON JOHN FLYNN
First defendant
YVONNE MARIA FLYNN
Second defendant

Catchwords:

Tort - Conversion - Sale of interest in racehorse - Whether property transferred by terms of contract - Conversion by coowner - Conversion by person registered as owner of horse - Damages

Contract - Sale of interest in racehorse - Whether time of the essence - Whether contract terminated by late tender of balance of purchase price - Damages for breach

Property - Sale of interest in racehorse - Failure to account for share of proceeds of racing - Coowner's liability to account

Legislation:

Sale of Goods Act 1895

Result:

Judgment for the plaintiff. Defendants liable in damages

Representation:

Counsel:

Plaintiff:     Mr R J Price
First defendant              :     Mr A J Camp
Second defendant          :     Mr A J Camp

Solicitors:

Plaintiff:     HHG Legal Group
First defendant              :     Butcher Paull & Calder
Second defendant          :     Butcher Paull & Calder

Case(s) referred to in judgment(s):

Baker v Barclay's Bank Ltd [1955] 2 All ER 571
Baltic Shipping Co v Dillon (1993) 176 CLR 344
Coleman v Harvey [1989] 1 NZLR 723
Dennis v Dennis (1971) 124 CLR 317
Fraser v Kershaw (1856) 2 K & J 496
French v Styring (1857) 2 CBNS 357
Hewitt v Debus [2004] NSWCA 54
Hill v Reglon Pty Limited [2007] NSWCA 295
Holland v Wiltshire (1954) 90 CLR 409
Jarvis v Williams [1955] 1 WLR 71
Jones v Samios; Queensland Harness Racing Board (Unreported, QSC 1246/1984, 29 March 1985)
Kitano v Commonwealth of Australia [1974] HCA 31; (1974) 129 CLR 151
Marriott v Franklin (1993) 60 SASR 457
Mayhew v Herrick (1849) 7 CB 229; (1849) 137 ER 92
Parr v Ash (1876) 14 SCR (NSW) 352
Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204
Re Gillie; ex parte Cornell v Gillie (1996) 150 ALR 110
Ryan v Dries [2002] NSWCA 3
Squire v Rogers (1979) 27 ALR 330
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

STAUDE DCJ:

Introduction

The plaintiff and the first defendant are brothers and the second defendant is the spouse of the first. I will call them by their first names. The dispute is over an alleged contract between Marshall and Preston made orally in or about March 2001 for the purchase by Marshall from Preston of a half share in a thoroughbred colt later named Changing Lanes (the Changing Lanes' contract).
Marshall's case is that the contract was in the same terms as a previous agreement with respect to a horse named Knight Reflector. As in that case, the purchase price was $5,000 of which $3,000 was payable forthwith and the balance upon the horse becoming a 2‑year‑old. Marshall contends that he borrowed $3,000 which he paid to Preston in accordance with the contract, thereby acquiring a half interest in Changing Lanes and a right to possession.
Preston says that there was no such contract. He admits that Marshall paid him $3,000, but says that it was merely a loan made at his request to assist him at a time of financial difficulty.
Changing Lanes was registered in the name of Yvonne and raced successfully for a number of years before being sold in 2008 for $15,000.
Marshall's claim is for damages for conversion; alternatively, for breach of contract. In the further alternative, he claims as co‑owner an account of 50% of Changing Lanes' winnings (less expenses), trophy value and sale proceeds. The sale of the horse renders redundant the pleaded claim for declaratory relief. The plaintiff has disavowed any claim based on partnership. Although Preston's involvement in racehorses appears to have had a business dimension, Marshall's interest did not.
The defendants were jointly represented. The court sought and was given an assurance that their interests coincided fully and that no potential conflict of interest existed.

Principal issues

The principal issues, as submitted by the plaintiff, are as follows:
(1)Was there a sale, by contract between Marshall and Preston, of a half interest in Changing Lanes?
If so:
(2)What were the terms of the contract?
(3)What were the terms of the agreement relating to Knight Reflector?
(4)Are Preston and/or Yvonne liable to Marshall for the tort of conversion?
(5)Did Preston breach the Changing Lanes contract?
(6)Are Preston and/or Yvonne liable to account to Marshall as co‑owners with Marshall in Changing Lanes?
(7)What liability are Preston and/or Yvonne under, if any, for:
(a)conversion;
(b)breach of contract; or
(c)to an account as co-owner(s).
Within those main issues are sub‑issues of fact and law, including those identified by the defendants in their written submissions, which need to be resolved. However, not every issue of fact raised in this dispute is material and in need of determination, however important it may seem to the parties. Indeed, I take it as my function to distil, according to relevance, where the parties or the interlocutory processes of the court have not, the issues to be determined.
Fact-finding in this case is complicated by a number of circumstances, including the passage of time, the informality of the relationship between Marshall and Preston as brothers, co-workers and co-owners of Knight Reflector, their acrimonious falling out in October 2001 and the intensely personal nature of the dispute which ultimately falls to be decided according to the credibility of their testimony. That I do not address or conclude every controversy signifies that that I do not consider it necessary to do so.
The Changing Lanes' contract is pleaded in the further amended statement of claim as follows:
4.By an oral contract made between the plaintiff and the first defendant in or about late‑March 2001, the first defendant sold to the plaintiff and the plaintiff acquired (alternatively the first defendant agreed to sell and the plaintiff agreed to purchase) a half share in Changing Lanes, in consideration for the plaintiff's promise to pay the purchase price of $5,000 (Purchase Price), $3,000 of which was to be paid within a reasonable time and the balance at a later time (Changing Lanes Contract).
PARTICULARS
(a)The contract was made at a meeting between the plaintiff and the first defendant at the Swan Hotel on Queens Street, Fremantle in Western Australia in or about late‑March 2001 (the Meeting).
(b)At the Meeting, the first defendant said to the plaintiff words to the effect that the plaintiff could acquire from him a half share in Changing Lanes, on the same basis of payment of purchase price by the plaintiff as had previously been agreed between the parties with respect to a horse named "Knight Reflector" (Knight Reflector), being an initial amount of $3,000 and a further payment of $2,000 when Changing Lanes turned two years of age (by racing convention), and on the same terms as to contribution to ongoing maintenance costs of the horse as the parties had previously agreed with respect to Knight Reflector.
(c)The plaintiff said words to the effect that he agreed with the first defendant's proposal but needed time to pay the $3,000. The first defendant responded by saying words to the effect of "ok, you're in".
(d)Approximately two weeks after the Meeting the plaintiff made payment of the said $3,000 by providing the first defendant with a cheque, made payable, at the request of the first defendant, to "Chatswood Stud". The cheque was accepted by the first defendant and was subsequently presented.
5.Pursuant to the Changing Lanes Contract, the plaintiff acquired a half share in Changing Lanes immediately upon the formation of that contract at the Meeting; alternatively, upon payment to the first defendant of the said sum of $3,000.
6.There were terms of the Changing Lanes Contract that, inter alia:
(a)the plaintiff would pay $3,000 of the Purchase Price within a reasonable time after the Meeting, and the balance of $2,000 when Changing Lanes turned two years old on the same basis as applied to a previous arrangement between the parties concerning Knight Reflector;
PARTICULARS
The term was partly expressed and partly implied. In so far as it was express, the particulars to paragraph 4 are repeated. The requirement that the sum of $3,000 be paid within a "reasonable" time is implied to give business efficacy to the contract and/or is to be implied in law.
(b)the same basis as the parties had agreed with respect to contributions to the ongoing maintenance costs of Knight Reflector, applied to Changing Lanes;
PARTICULARS
The term was express. The particulars to paragraph 4 are repeated.
(c)the parties would share the net proceeds (that is, after deduction of costs associated with the horse) of any future prize moneys won by Changing Lanes, between themselves in proportion to their respective interests in the horse;
PARTICULARS
The term was implied, being necessary to give business efficacy to the Changing Lanes Contract.
7.Further to paragraph 6(b):
(a)The arrangements that the plaintiff and the first defendant had agreed with respect to contributions to the ongoing maintenance costs of Knight Reflector were that the first defendant would, until the horse turned two years of age by racing convention on 1 August 1999, pay for all of the costs of the maintenance of the horse; and when the horse turned two years of age, the plaintiff would thereafter contribute half of the ongoing maintenance costs.
PARTICULARS
In about March 1998, by an oral contract of sale made at the Swan River northern foreshore immediately north of Stirling Bridge, Fremantle in the State of Western Australia, the first defendant sold the plaintiff a half share in Knight Reflector for $5,000, $3,000 of which was payable within a reasonable time and the balance of $2,000 payable when Knight Reflector turned two years of age by racing convention on 1 August 1999. It was also orally agreed between the plaintiff and the first defendant that the first defendant would, until the horse turned two years of age on 1 August 1999, pay for the maintenance costs of the horse; and when the horse turned two the plaintiff would thereafter contribute half of the maintenance costs.
(b)By reason of the matters pleaded in paragraphs 6(b) and 7(a), there was incorporated into the Changing Lanes Contract a term whereby the first defendant would, until Changing Lanes turned two years of age by racing convention, pay for all of the costs of the maintenance of the horse; and when the horse turned two the plaintiff would thereafter contribute half of the ongoing maintenance costs.
(c)For the purposes of the Changing Lanes Contract, Changing Lanes turned two years of age on 1 August 1999 in accordance with racing convention for assessing racehorse age.
By par 8 of the statement of claim Marshall alleges that as a consequence of the Changing Lanes' contract he became an owner of a half share in Changing Lanes and entitled to immediate possession.
Preston denies the plaintiff's allegations and pleads in the amended defence as follows:
3.As to Particular (d) of paragraph 4 of the Statement of Claim the First Defendant says the Plaintiff loaned the First Defendant $3,000.00 on terms the First Defendant would repay the Plaintiff within a reasonable time or otherwise out of the First Defendant's earnings from his work in the Plaintiff's kerbside house numbering business.
PARTICULARS
(a)The loan agreement was oral and made in person between the Plaintiff and the First Defendant at the United Credit Union Building Society Fremantle.
(b)The loan was to be interest free.
(c)(i) The $3,000 was advanced by the Plaintiff on 9 April 2001.
(ii)The money was advanced in the form of a building society cheque in the sum of $3,000 written in favour of Chatswood Stud at the request of the First Defendant and handed to the First Defendant.
(iii)As from late August 2001 it was further agreed funds then anticipated to be received by the Plaintiff from his insurance company following a claim by the Plaintiff for the loss of fishing equipment owned by the First Defendant and stolen out of the Plaintiff's fishing boat on a fishing trip in early August 2001 were to be kept by the Plaintiff as repayment of the said loan.
(iv)The Plaintiff advised the First Defendant in mid August 2001 that he had lodged an insurance claim for in or about $2,600 in respect of the loss of the fishing equipment and that he anticipated that the funds were about to be received.
4.(a) The First Defendant denies paragraph 7 of the Statement of Claim and says as to paragraph 7(a) that the Plaintiff paid $7,000 to the First Defendant.
PARTICULARS
(a)The First Defendant bred Knight Reflector from the mare Golden Zeepaard.
(b)The Plaintiff paid the $7,000 to the First Defendant by three cash payments; two of $2,000 and one of $3,000 at his home in the presence of the Second Defendant. The precise date and time the payments were made the First Defendant does not now recall.
(b)As to paragraph 7(b) of the Statement of Claim by the First Defendant says that the Plaintiff commenced to make payment of half of the cost of keeping Knight Reflector by payments by the Plaintiff to the First Defendant of $75 per month as reimbursement agreed between the Plaintiff and the First Defendant for such expense.
PARTICULARS
(a)The Plaintiff agreed to pay one half of all costs incurred in keeping the horse and forthwith commenced to make payment.
(b)The payments were made initially in the sum of $75 per month as cash payments by the Plaintiff to the First Defendant. After the horse was put into work in preparation for commencement of racing and thereafter during the horse's racing campaign, the Plaintiff received a copy of each invoice from the trainer.
There was a good deal of evidence by Marshall and Preston relevant to the issue of whether the Changing Lanes' contract was made. This is a case where the history of the brothers' relationship and of their prior dealings forms part of the factual matrix within which the contract was allegedly formed. As the evidence‑in‑chief of the witnesses was, by prior order, given in the form of prepared statements, none of which was the subject of objections as to admissibility, there was a good deal of evidence tendered in this form which might be viewed on its face as objectionable as being irrelevant, self‑serving in nature, hearsay or as offending the rule against evidence of collateral facts (relevant only to credibility). The same may be observed of some of the documentary evidence, nearly all of which was tendered by consent.
Notwithstanding the problems that can arise from the admission of inadmissible evidence (see Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [35]), I have taken the view that as both sides are represented and as the litigation is civil in nature, it is not for the court to take issue where the parties have not. In any event, the nature of this dispute is such that some parts of the evidence serve more than one purpose.

The plaintiff's case

Marshall is older than Preston by seven years. Until late 1995 he had very little to do with him. He made contact with him at that time and did some work for him in his skin and hide business at Hamilton Hill. Later, from November 1997 to March 1998 he worked for Preston as his manager at Capel.
Marshall's evidence was that in 1997 Preston spoke to him about a horse he owned called Tricky Tactics. He offered him a half share in the horse for $1,000 if Marshall would arrange and pay for its agistment during a spell. According to Marshall, they agreed that once the horse had been spelled they would share the costs of training. Marshall arranged for Tricky Tactics to be agisted on the property of Dudley Tuckey, the father of his partner. He paid $1,000 cash to Preston. In August 1997 Tricky Tactics was sent to a trainer, Glenn Webster. The horse performed poorly and was sold by the trainer for $2,000, the proceeds being applied towards arrears of training fees. Marshall was challenged in cross‑examination as to where Tricky Tactics was agisted and the circumstances in which he acquired a share. It was suggested that he did not pay Preston anything for the horse.
Registration records indicate that Preston and Yvonne were registered as owners of Tricky Tactics on 23 May 1996. On 1 January 1998 it was registered in the names of JNM Triscari and CR Hooper: exhibit 1, vol 1, p 128. Marshall said he was unaware of Yvonne's registration as an owner.
In mid-1998 Preston commenced working with Marshall in a business that involved painting house numbers on street kerbs. They worked together until early 2001, normally working from 9.30 am to 2.30 pm.
According to Marshall, in March 1998 they were fishing together on the northern side of the Stirling Bridge in Fremantle when Preston offered him a half share in a 6‑month‑old colt by Prego out of Golden Zeepaard for $5,000. Preston said to Marshall at that time that he was 'a bit tight for money'. Marshall remembered seeing Golden Zeepaard win a race at Belmont on 18 October 1995 ahead of Mr Concrete and Rural Express. Marshall, aware that Golden Zeepaard had bad legs, enquired whether the colt's legs were sound. Preston assured him that the colt was fine. According to Marshall, Preston said:
Give me three grand upfront and another two grand when it turns two years of age.
I'll cover all costs until it is two years old then we go 50:50 in all fees, outgoings, trainer, farrier, etc and 50% each with anything it produces.
You won't have to pay anything for about 18 months.
Marshall said he agreed to these terms and paid Preston $3,000 in cash within a few days. He said he understood that the balance of the purchase price would be payable on 1 August the following year, being the conventional birth date of all horses.
The horse was later named Knight Reflector. It was brought to Western Australia as a yearling and agisted by V & SE Piscioneri at Waroona. On 1 August 1999 when Knight Reflector turned 2, Marshall and Preston were painting street numbers together. According to Marshall, at about that time he paid Preston $2,000 in cash. Thereafter, he received accounts from Preston for agistment and other expenses to which he contributed half. The horse was pre‑trained by Bruce Watkins (Lark Hill Horse Breakers). At an early stage the horse became shin sore and was sent back for further agistment at Waroona. Bruce Watkins started preparing the horse again in February 2001, but it was considered not ready for racing and agisted again until September 2001.
Knight Reflector had its first race at Northam on 3 October 2001. Throughout this period Marshall and Preston shared expenses relating to the horse. The agistment fees charged by Piscioneri were invoiced to Preston, but contributed to in equal shares. During 2001 Knight Reflector was trained by Bob McPherson, whose fees were also shared. Initially, training fees were invoiced to Preston, but after the two fell out in October 2001 McPherson invoiced them separately.
Knight Reflector was registered in Marshall and Yvonne's names on 1 March 2001. Marshall said it did not concern him that Yvonne was registered as the co‑owner. Her name appeared first and Marshall understood that she would receive the winnings. He never saw any cheques for Knight Reflector's winnings. As far as he was concerned Yvonne was not involved in making any decisions in relation to the horse.
According to Marshall, at Northam on 24 October 2001 he and Preston had a falling out. Marshall's evidence was that Preston was annoyed that Marshall and his partner Sandy had placed their own bets on Knight Reflector, rather than betting jointly with him, and that Marshall had to change a tyre on the way to Northam that day causing them to be late. The relationship deteriorated from that point. Subsequently, Marshall dealt with Bob McPherson directly in relation to Knight Reflector.

Marshall denied that there had been much discussion before his decision to buy Knight Reflector. He was not at that point considering making a loan to Preston to help him financially.
It was put to Marshall in cross‑examination that, in relation to Knight Reflector, he had in fact contributed to expenses before it became a 2‑year‑old. He maintained that he had made an initial payment for his share of the horse in March 1998 and from August 1999 paid 50% of its upkeep. The bills in relation to the horse would be sent to Preston who would let him know what his share was. He denied paying anything towards the expenses of Bruce Watkins or the Pisconeris prior to August 1999. He admitted that the horse had come to Perth in about September 1998, but rejected the suggestion that he did not make a decision to buy his share until after he had seen it and satisfied himself that its knees were sound. Marshall also denied that he paid $7,000, rather than $5,000, for his share.
Marshall remembered going down to see the horse when it arrived from the east. He accepted that the horse went shin sore in September 2009 and over the next 18 to 20 months went between the Pisconeris for agistment and Bruce Watkins for educating. It then went to Bob McPherson for training and had its first race on 3 October 2001 at Northam. In relation to the falling out on 24 October 2001, he said he never pooled bets with Preston. He denied that there was any arrangement between himself and Preston to that effect.
Marshall gave evidence of a conversation with Preston in late March 2001 at the Swan Hotel in Queen Victoria Street, North Fremantle. It was a weekday afternoon. During that conversation Preston said:
I've got a young colt in the Eastern States out of Racer's Edge and Throwing Copper, it's about six months old.
Marshall knew about Racer's Edge and Throwing Copper. He had seen videos of Racer's Edge at Preston's house a month before. Preston told him that Throwing Copper and Racer's Edge had mated. Preston offered him a share in the following terms:
The same deal as Knight Reflector. Give me three grand now and two when it turns two.
Marshall gave evidence that he agreed and that the two shook hands. He told Preston that he would have to borrow money to make the first payment.
It was suggested to Marshall that he did not make a decision to buy Knight Reflector until he had seen it and would therefore not have made a decision to buy Changing Lanes until it had been brought to Western Australia. Marshall denied that this was the case.
Marshall's evidence was that he approached David Hurford, manager of United Credit at Balcatta, where he had a loan facility of $5,000. He met with Mr Hurford and asked to borrow a further $5,000 to buy a racehorse. His application was granted and his personal account was credited accordingly. He then informed Preston that he had the money. Preston requested a cheque payable to Chatsford Stud to whom he owed fees for agistment. Marshall met Preston in the Swan Hotel carpark. As he wrote the cheque out, Preston took the chequebook and pen from him and changed 'Chatsford' to 'Chatswood'. He then completed the cheque for $3,000 and crossed it. A copy of the cheque was tendered in evidence: exhibit 1, vol 1, doc 41.
Also tendered in evidence (by consent pursuant to s 79C of the Evidence Act 1906) was a statement by Mr Hurford made 25 February 2011. Mr Hurford stated that he had completed a fact sheet in relation to Marshall's application for finance on 30 March 2001 on which the purpose of the loan was entered as 'purchase racehorse'. Documents relating to the loan application, including the fact sheet and Mr Hurford's handwritten loan assessment sheet are in evidence: exhibit 1, vol 1, docs 35, 36, 37. Interest on the loan was 12.95% pa.
Marshall said that from time to time during 2001, prior to their falling out in October that year, he would ask Preston how the colt was going. At that stage it was still in Victoria.
Knight Reflector raced on a number of occasions from October 2001 to August 2002 when it was sold. During that time, Marshall dealt mostly with the trainer, Mr McPherson, in relation to the horse. He had occasion, however, to speak to Preston about his share of race winnings. These conversations were usually unpleasant.
According to Marshall, he telephoned Preston in mid‑January 2002 and asked him about 'the little fella in the east'. Preston denied there was such a horse. He said he then saw Preston at Ascot in February 2002 at a bar and again asked him about 'the little fella'. Preston dismissed his enquiry.
In mid to late March 2002, Marshall drove to Preston's home in Swanbourne to discuss the colt as he was aware that it was in training. Yvonne answered the door. Marshall said he told her that Preston was not acknowledging his half share in the colt and asked her if she would talk to Preston about it, but she 'just laughed and turned her back'.
Marshall said he then sought legal advice from Mandurah solicitors, Masel Nicholson, who sent two letters on his behalf dated 12 April 2002, the first to Preston, claiming unpaid winnings of Knight Reflector, and the second to Seaton Park, a horse agistment property in Victoria, regarding 'the Racer's Edge/Throwing Copper colt': exhibit 1, vol 1, docs 53, 54. The letter to Preston claimed $397.63, being Marshall's share of stakes won by Knight Reflector. The letter to Seaton Park Stud asserted an interest in the colt and requested that Marshall be kept informed of the colt's progress. Marshall said he did not receive a response to either letter. Marshall was at a loss to explain why he did not assert an interest in the horse in the letter to Preston, saying that it was a matter for his solicitor (who was no longer acting for him). He expected, however, that Seaton Park would bring Masel Nicholson's letter to the attention of Preston.
Marshall said he telephoned Preston in July 2002 to make arrangements to pay the balance of the purchase price of the colt. According to Marshall, Preston said that it had been sold to Singapore interests.
On 15 August 2002, Marshall wrote to Mr Chris Tidy, the racing manager of the WA Turf Club, attaching the letter to Seaton Park Stud of 12 April 2002: exhibit 1, vol 1, doc 67. Mr Tidy's response advised him that his letter had been forwarded to the Registrar of Racehorses: exhibit 1, vol 1, doc 68. Marshall said his intention was to prevent the registration of the horse until his interest was recognised.
On 1 August 2002, by convention, the horse became a 2‑year‑old. Marshall said that later that month he posted a cheque to Preston for $2,000, being the balance of the purchase price. The cheque was made out to P Flynn, and was enclosed with a note which read, 'Final payment for Racer's Edge Throwing Copper colt'. He marked the cheque butt 'PJ horse'. The day that he posted the cheque, Marshall said he telephoned Preston to tell him that he had sent it. There was no meaningful conversation. He rang him again about a week later and again was told in no uncertain terms to go away.
According to Marshall's evidence, the cheque was never presented. The endorsed cheque butt followed numerically another cheque payable to the Water Corporation which was debited on 5 September 2002 and preceded another cheque to Stratco WA, which was dated 15 September 2002 (according to the cheque butt), debited on 21 October 2002. Although Marshall was cross‑examined about why he did not send the cheque by registered post, it was not put to him that his evidence was false or that he had forged his cheque records.
It was clear to him by that point that Preston was denying his interest in the horse. He hoped that if Preston presented the cheque, that fact would have some evidential value as an admission. Marshall said that he telephoned Preston in December 2002 and asked him to acknowledge his interest in the horse. He said that Preston replied, 'I'll spend every single cent of every single dollar from that horse to deny you the fact that you have anything to do with that horse'. There was no further conversation. He spoke with Preston on about four other occasions in late 2002. He said Preston would hang up when he raised the issue of the horse.
Marshall was asked about a tape recording which he made of a telephone conversation he had with Preston which he described in a letter to Mr Brad Lewis of the WA Turf Club as containing irrefutable evidence of an admission by Preston of Marshall's interest in the horse. He agreed that he could not hear all of what was said in the recording, but said that a Mr Kindred, whom he had consulted for advice, had listened to it. This tape was eventually played and admitted into evidence together with a transcript, but proved to be rather unhelpful evidence which assisted neither side, merely comprising self‑serving statements by each. It does not affect my findings.
Changing Lanes ran its first race on 20 April 2003 and won. In May 2003, Marshall instructed solicitors Anthony Torre & Monaco to write to the WA Turf Club asserting his interest in the horse and his entitlement to a share of stake moneys won by the horse: exhibit 1, vol 1, doc 75. On the same date, the solicitors wrote to Preston and Yvonne separately. By that stage it had been ascertained that the horse had been registered in Yvonne's name as Changing Lanes.
Preston and Yvonne replied to their letters by letter dated 8 May 2003 from their solicitors, Nielsen & Co: exhibit 1, vol 1, doc 78. This letter stated, inter alia, that:
1.Changing Lanes was owned by Yvonne.
2.Preston was in financial difficulty in or about April 2001 and sought a loan from Marshall in the sum of $3,000 to assist him to pay agistment fees owing to Chatswood Stud.
3.The sale of half interest in the horse in 2001 was denied.
4.Payment of a further $2,000 was not made as alleged by Marshall.
5.No upkeep fees were paid (which was not alleged by Marshall).
6.The sum of $3,000 borrowed by Preston was repaid in 2001 by Preston 'providing labour services to your client and with your client deducting a sufficient amount from those services to repay the loan'.
7.The claim by Marshall had only been made as a result of Changing Lanes winning a race on 20 April 2003.

The defendants' case

In relation to Tricky Tactics, Preston denied that he asked for or received any money from Marshall for the horse, but he agreed that Marshall had arranged for its agistment and that the two had shared further training costs prior to it being sold. In my opinion nothing turns on the evidence generally in relation to Tricky Tactics.
Preston's version of the Knight Reflector transaction was that it was discussed on a number of occasions after the horse was 18 months old and Preston had decided to race it in Perth. Preston said that he had never fished with Marshall in the Swan River at Fremantle near the traffic bridge (where Marshall said the Knight Reflector agreement was made).
According to Preston, Marshall did not decide to purchase a half share until the horse arrived in Perth in October 1999. The terms of the agreement were that Preston would be the manager and make all decisions about the horse and that Marshall would pay half of all costs associated with the horse from when he purchased his share. Preston said he had never bought or sold a half share in a horse without sharing expenses from the time of the agreement. He also said it was agreed that betting would be done together. The agreed price for a half interest in Knight Reflector was $7,000 (not $5,000), which Marshall paid by an initial payment of $2,000 and two instalments of the balance within the month. He said the trainer, Bob McPherson, sent separate monthly invoices to each of them for their respective shares of the training expenses. He also said it was agreed that betting would be done together.
Preston said that the occasion of their falling out was at Northam on 3 October 2001 when Knight Reflector had its first start, not 24 October, the date of its second start, as stated by Marshall. Preston gave a different account from Marshall as to what occurred. Preston also gave an account of an incident at Pinjarra on 21 November 2001 when he said he argued violently with Marshall about placing his own bet on Knight Reflector. There was no dispute, however, that the brothers had a serious falling out.
Preston arranged for Knight Reflector to be registered in Yvonne's name, as he did Changing Lanes. On his evidence, she was merely his nominee. He said she did not own an interest in any of the horses which he registered in her name.
Preston's evidence was that he bred a half brother to Knight Reflector from Golden Zeepaard by Racer's Edge called King of Rory which arrived in Perth as a 3‑year‑old on the same float as Changing Lanes. King of Rory was a year older than Changing Lanes. According to Preston, Marshall expressed an interest in buying a half share in King of Rory and that it was this horse to which Marshall had referred in his evidence as the 'little fella from the east'. By the time King of Rory arrived in Perth, Preston and Marshall had fallen out and there was no question of Marshall acquiring an interest in the horse. Preston sold a half share to another.
It was Preston's evidence that Marshall expressed great interest in Golden Zeepaard and its offspring. Marshall denied this and rejected the suggestion that it was in fact King of Rory of which he hoped to acquire a share and of which he enquired of Preston from time to time.
Preston denied that he ever met or had a drink with Marshall at the Swan Hotel in Fremantle where Marshall said the Changing Lanes' contract was made. He denied that any such agreement was made.
In early 2001 he owed more than $30,000 to Chatswood Stud. He said he borrowed $3,000 from Marshall to reduce this debt. They had loaned each other money on a number of occasions previously. On no occasion did they ever specify a time for repayment or require interest to be paid. He said that prior to Marshall purchasing a share in Knight Reflector, he had advanced a loan of $2,000 which they later regarded as an initial payment for the horse. It was Preston's evidence that Marshall gave him $3,000 which he paid to Chatswood Stud. According to Preston, Marshall was not interested in Throwing Copper (Changing Lanes' dam), or any of her progeny.
Preston said that Marshall was interested in King of Rory because it was a half‑brother to Knight Reflector. He said Marshall advanced a sum of $3,000 to him as a loan, but in the expectation that it might later be treated as a part‑payment for a share in that horse. Marshall denied this.
Preston said that he met all of the expenses relating to Changing Lanes when it was in Northam and from when it arrived in Perth. Marshall did not contribute and he did not observe Marshall to take any interest in Changing Lanes. This was contrary to Marshall's evidence that he had been to see the horse at Lark Hill and in pre‑training.
Preston said that he never refused to speak to Marshall if he telephoned, but he accepted that he did not want to have anything to do with him after they fell out. He did not receive a call from Marshall telling him that he had sent a cheque for $2,000. He denied receiving a cheque for $2,000 or any amount of money from Marshall in relation to Changing Lanes.
In relation to the Nielson letter, Preston said that he drafted the letter with Mr Nielson. He said he was 'quite comfortable' with the letter even though it asserted that Yvonne was the owner of Changing Lanes. Despite what the letter stated he regarded himself as the real owner. Yvonne was merely the 'registered person'. I will have more to say on that point.
He admitted that the letter was incorrect in stating that he paid back Marshall's $3,000 loan from what he earned painting kerb numbers. He said he had originally planned to do that and would have done so had he not repaid Marshall from the proceeds of an insurance claim which Marshall made with respect to fishing rods and reels which Preston owned and which he said were stolen whilst he was on a fishing trip with Marshall at Coral Bay in August 2001. I will return to that issue also. He also said that Marshall had stopped contributing to Knight Reflector's training fees of about $1,500 per month.
When Changing Lanes was registered, the WA Turf Club was instructed to pay all winnings to a Commonwealth Bank account in the names of Preston and Yvonne. Later, a Westpac account was nominated. According to the defendants, Yvonne did not benefit directly from the winnings and was only ever paid a weekly allowance of $600 for household expenses from the accounts into which the winnings were paid. Preston's evidence was that Changing Lanes' winnings were paid into a joint account with Yvonne and that the stake winnings went into a business that he commenced in mid‑2003 and which was wound up in 2006.
Preston said that he sold Changing Lanes to a Graham Ballantyne for $15,000 in 2008 when it was 8 years old and did not retain any interest in the horse or receive any share of its winnings from that time. Neither defendant was able to produce a record of receipt of the payment, even though it was Preston's evidence that he and Yvonne operated only one account at that time. The registration records show that Changing Lanes was registered in Yvonne's name on 1 December 2002. It was transferred to Preston's name on 6 June 2006 and to the name of Donna Hackett (Ballantyne) on 18 November 2008.
Two issues assumed particular significance in the context of Preston's evidence: ownership of Changing Lanes and repayment of the alleged loan. I will deal, firstly, with the defendants' position with respect to ownership.
A bundle of minutes of pleadings, superseded pleadings and related correspondence went into evidence by consent: exhibit 1, vol 1, docs 107 ‑ 115. Preston was cross‑examined on these documents and the letter of Nielson & Co of 8 May 2003. The evidence revealed substantial changes to and inconsistencies in the defendants' position with respect to the ownership of Changing Lanes from the date of the Nielsen letter in which it was initially asserted on behalf of Preston and Yvonne that Yvonne was the owner of the horse.
The original defence (exhibit 1, vol 2, doc 108) alleged that Preston made a gift of the horse to Yvonne at about the time of its birth. This allegation was particularised in the defendants' further and better particulars of defence dated 3 March 2006 at pars 5(a) and 5(c).
In November 2005, only three months after the defence was filed, the defendants' counsel sent a proposed minute of amended defence which withdrew the allegation that Preston had gifted his share to Yvonne and alleged that Yvonne held Changing Lanes on trust for Preston. This change was sought to be explained by letter from Mr Camp to Mr Price, counsel for the plaintiff, dated 3 March 2007 seeking the plaintiff's consent to the amended defence. On behalf of the defendants Mr Camp wrote as follows:
Further to our telephone conference today I confirm that on my instructions the second defendant:
(a)pleaded to par 14(a) of the statement of claim in her initial defence on the basis that as the registered proprietor she was the actual owner;
(b)pleaded to par 14(b) of the statement of claim in her original defence on her assumption that as a listed owner she was responsible for the actions of the first defendant – her admission was to the alternate claim of "… in conjunction with the first defendant …";
(It is not in issue that the day-to-day care and control of the horse was left with the trainer and/or agistment provider and that the first defendant managed the horse's programme.)
(c)pleaded to par 14(c) on her assumption that as registered owner she was the actual owner and responsible for any action by the first defendant that excluded the plaintiff from his interest therein. This plea was specifically to the particulars to par 14(c) including –
i.A repeat of the particulars to 14(b) and at this point the same point is made as in my previous paragraph that the original plea was in the alternative "… in conjunction with the first defendant …".
ii.Pleaded also is the admission that she did apply to become the registered owner of the horse.
iii.Her plea that she "used and continues to use Changing Lanes as if it were her property to the exclusion of the plaintiff's interest" is a plea in the sense of particular (iii) "… or with the first defendant …".
iv.The initial defence was framed on the understanding of the second defendant that as registered owner of the horse she was the actual owner and was responsible for the actions of the first defendant. For this reason she made the admissions on the basis that the decisions and acts of the first defendant were made on her behalf and therefore attracted responsibility.
The amendments to the defence follow from the second defendant's acceptance and understanding that she was only ever bare trustee for the first defendant and as registered owner held the horse beneficially for the first defendant. The amendments to paragraphs 12, 13 and 14 of the original defence are therefore no more than amendments that follow from the proposed amended paragraph 1 of the defence that the first defendant is the owner.

In the amended defence dated 24 April 2008 it was asserted by the defendants simply that Preston was the owner. The allegation foreshadowed in the minute that Yvonne was the legal owner was not pleaded.
Turning to the alleged loan and its repayment, Preston's evidence was that when Marshall advanced him $3,000 by way of loan in 2001 his intention was to repay him from his share of the money they earned painting street numbers on kerbs. The 'loan' was not repaid in the manner described in the Nielsen letter. Rather, Preston maintained that the debt was reduced by the proceeds of an insurance claim by Marshall in respect of the loss by theft of five fishing rods in August 2001 when he and Marshall went to Coral Bay on a fishing trip, taking Marshall's boat. By that time he had not repaid any of the money. Preston said he took with him five expensive fishing rods, three of which were new. The rods were stolen from the boat. Preston observed that the EPIRB device and the lifejackets were not stolen as they were locked in the cabin. (In his witness statement he insinuated that Marshall made a false claim for these items. In fact he did not.)
Preston stated that Marshall told him he would make an insurance claim in respect of the stolen rods. Preston estimated that they were worth $2,600. He stated that Marshall told him that when the claim was paid it would reduce the loan, leaving $400 for Preston to pay. On a number of occasions he inquired of Marshall about the insurance claim. In 2002 Marshall told him that the claim had not been processed. Preston spoke no more about it. He expected the money would be recovered. Preston's evidence as to whether he paid Marshall the balance of $400 was vague, inconsistent and otherwise unsatisfactory. There is no objective evidence of payment. Marshall disputes that it was ever made.
The insurance claim for the fishing rods was raised in the defence and emerged at the trial as a significant factual dispute. Preston relied on the assertion to support his case that the sum of $3,000, which was indisputably paid to him by Marshall in April 2001, was a loan which had been effectively repaid. His evidence was supported by that of Yvonne who said that she remembered two occasions on which Marshall and Preston had gone fishing at Coral Bay, the second occasion being August 2001. She remembered seeing Preston's rods and being told by him that they were of good quality and that he had spent a lot of money on them. She was present when the brothers returned from Coral Bay. Preston told her that his fishing rods had been stolen.
Her evidence was challenged. When it was put to her that her defence prior to March 2011 pleaded that the loss of the rods occurred on a fishing trip to Lancelin in 2000 she acknowledged that she might have been mistaken.
Preston and Yvonne's son Jason gave evidence that he recalled his father going on a fishing trip in 2001 when he was 14 years of age because he had helped his father prepare his rods and reels. He remembered when his father and Marshall returned early from the trip his father saying that his rods had been stolen. Jason saw that he did not have the rods with him. As he unloaded the boat he saw that the jackets, flares and EPIRB were in the cabin and that there was no sign of the cabin door being broken. Jason's evidence was challenged. It was clear from his evidence in cross‑examination that the loss of the fishing rods at that time had been a matter of family discussion in the context of this litigation.
Marshall's evidence was entirely to the contrary on this issue. He recalled a fishing trip to Coral Bay with Preston in August 2001. He did not recall Preston taking any fishing gear on that trip. He said Jason was not present when he picked Preston up at the commencement of the trip. Marshall gave a very detailed description of his boat and its contents. They arrived in Coral Bay on Tuesday, 21 August 2001. After the first day of fishing he took an echo sounder and a GPS off their external mounts and placed them in the cabin. He put his rods and reels on a bunk bed in the cabin and locked the door. He and Preston stayed at the Coral Bay caravan park that night, leaving the boat anchored offshore. The next day when they went to the boat Marshall discovered that his fishing gear had been stolen. The padlocked cabin door had been broken. The theft was reported to the Exmouth police.
According to Marshall they did not return to Perth immediately. He was able to borrow other fishing gear from the caravan park manager and he and Preston continued fishing and left Exmouth early on Saturday morning. The return journey was memorable in that the hub of one of the boat trailer wheels failed and had to be replaced. They arrived at Preston's house in Swanbourne at 5.00 am on Sunday, 26 August 2001. According to Marshall, neither Jason nor Yvonne was there.
Marshall then notified an insurance claim to his insurance broker Club Marine and was advised to obtain a quotation for the stolen equipment for valuation purposes. In January 2002 he obtained a quotation for 14 items of fishing equipment, including six rods which had been left on the bunk beds in the cabin of the boat. He also obtained a quote to fix the broken cabin door which was subsequently repaired for $290. It was Marshall's evidence that all of the fishing gear for which he claimed insurance was his. The claim was subsequently settled by Club Marine in July 2002 by payment of $640 and a further amount of $99. The policy limited the recovery for lost equipment to $500 plus GST. On Marshall's evidence no claim was made in respect of any equipment owned by Preston and Preston never spoke to him about the insurance claim.
The evidence of Paul Stein of Club Marine was admitted by consent in the form of a statement made on 28 February 2011: exhibit 5. Mr Stein's statement dealt with two insurance claims by Marshall, the first for loss by theft on 1 January 2000 of equipment and fuel taken from the boat while it was parked at 129 Waterford Drive, Hillarys, which claim was settled by payments to Marshall of $2,122.85 and $266.50 and to Whitfords Volunteer Sea Rescue Group (Inc) of $250, the second for loss by theft in August 2001 at Coral Bay which was settled by payments to Marshall of $640 and $99.
Preston's evidence was that he never gave Marshall any invoices or receipts, or indeed any valuation information in relation to the fishing rods which he claimed to have been stolen from Marshall's boat at Coral Bay.

Findings of fact

My findings in relation to this matter reflect a preference for Marshall's evidence over that of Preston, based on the degree to which I am satisfied of the cogency, plausibility and consistency, internally and with objective facts, of each. I am satisfied as to the honesty, accuracy and reliability of Marshall's evidence.
I find that an agreement was made in March 2001 whereby Preston agreed to sell to Marshall a half interest in Changing Lanes as a colt on the same terms as they had previously agreed the sale by Preston to Marshall of a half interest in Knight Reflector, namely, a price of $5,000 payable by initial part‑payment of $3,000 and a second payment of $2,000 when the horse became a 2‑year‑old, with expenses to be shared from that time.
I do not accept that the sum agreed for Marshall's share in Knight Reflector was $7,000 or that Marshall did not agree to buy Knight Reflector before he had seen it upon its arrival in Western Australia. Nor do I accept that the Knight Reflector agreement was on terms that expenses were shared from the date of the agreement. Similarly, I do not accept that Marshall would not have purchased the Changing Lanes' colt sight unseen or that Preston would not have agreed to expenses being shared when it became a 2‑year‑old.
In respect of the sale to Marshall of half shares in Knight Reflector and Changing Lanes, I find that Marshall and Preston were, at the material times, on good terms. They enjoyed a close fraternal relationship by working and fishing together and, of course, they shared an interest in thoroughbred racing.
The suggestion that Marshall invented his claim to a share of Changing Lanes only after it won its first race, that is, around the time of the letters from Anthony Torre & Monaco to Preston and Yvonne, has no foundation whatsoever. It is roundly refuted by evidence that in March 2001 Marshall applied for and obtained finance from United Credit to fund the purchase of Changing Lanes. I accept that the purpose of the loan was truthfully stated in the loan application. I do not accept that Marshall borrowed funds from United Credit at a high rate of interest, falsely stating the purpose to be a racehorse purchase, in order only to pay his brother $3,000 by way of a loan. I find on the evidence that Preston was in need of financial assistance in March 2001 as it seems he was in March 1998 when the Knight Reflector agreement was reached. On each occasion it was convenient and in his interests to involve his brother in the manner Marshall has described.
Marshall's claim to Changing Lanes made in the Anthony Torre & Monaco letter is consistent also with the letter by Masel Nicholson to Seaton Park in April 2002, Marshall's letter to the WA Turf Club in August 2002, his various approaches to Preston and his tender of the cheque for $2000.
Dealing with the defendants' contention that the $3,000 paid by Marshall to Preston in March 2001 was a loan repaid by the proceeds of an insurance claim, I do not accept that Preston took with him to Coral Bay or had stolen from the Marshall's boat five fishing rods to the value of $2,600. Whilst I accept that there was discussion between Preston and Marshall as to the making of an insurance claim in relation to the theft, I do not consider that any property of Preston was the subject of Marshall's claim and I do not accept that Preston ever followed up Marshall in relation to the progress of the claim. It is objectively improbable. He had no reason to do so.
When one considers his evidence against the background of the amendment to the defence in March 2011 to alter both the date of the alleged loss and the location, it is impossible to accept Preston's account. Preston was challenged in cross‑examination on the basis that for over five years and until one month before trial, his defence had alleged that the theft of the rods occurred at Lancelin in January 2000. It was on the basis of this allegation that discovery was given by the plaintiff of insurance documents relating to a claim by Marshall for loss suffered at that time due to a theft from his boat which occurred while the boat was parked at his residential address.
Preston said that he had always been in doubt as to when the relevant fishing trip occurred and that he had misgivings as to what was pleaded in the defence. When further discovery was given earlier this year of documents relating to the claim made in respect of the theft in August 2001, he appreciated that he had previously been mistaken as to the details of the boat trip.
Preston was cross-examined to good effect in relation to inconsistencies between what had been pleaded from time to time and what was stated on his behalf in the letter from Nielsen & Co in April 2002 about repaying the alleged $3,000 loan from kerb painting earnings. In the result I am unable to accept any of Preston's evidence in relation to the fishing rods. It is unnecessary in the circumstances for me to deal with Marshall's evidence that on their return to Perth from Coral Bay in August 2001 Preston suggested that Marshall make a false insurance claim, except to say that it strikes me as a plausible source of Preston's idea to characterise Marshall's payment to him as a loan rather than a part‑payment. Nor is it necessary for me to deal with Preston's contradictory evidence in relation to the alleged payment or set-off, as the case may be, of the balance of $400. It would not assist the defendants for me to do so.
I consider that if Jason were present when his father and his uncle returned from Coral Bay he is unlikely as a matter of commonsense to have given significance to the state of the cabin door or whether particular items of equipment were in the boat. His evidence is inherently improbable in this regard. His 'recollections' reflect the perceived importance of this event to his parents. I find that he is mistaken about the fishing rod episode. I prefer the evidence of Marshall that Jason was not present when Marshall dropped Preston home after the trip to Coral Bay.
I do not find that Yvonne's evidence is reliable in this respect and I accept Marshall's evidence that she was not present at that time.
Preston's credibility has been greatly damaged in my eyes by his various assertions as to repayment of the 'loan'. Ironically, in order to maintain that there was no agreement to sell an interest in Changing Lanes, it was not necessary to plead or prove that the Marshall's money was repaid. However, the inconsistencies between the position put in the Nielsen letter, the defence as pleaded from time to time and his evidence at trial, the contrary evidence of Marshall and the insurance documentation render the defendants' position wholly untenable.
The unsatisfactory evidence of Preston cannot be explained by his being honestly mistaken up to the point at which documents relating to the 2001 Coral Bay insurance claim were discovered. Preston has merely adjusted his evidence to objectively proven facts. His initial instruction to Mr Nielsen, reflected in the statement in the Nielsen letter that the money had been repaid from earnings, was untrue, as all his subsequent assertions about repayment, including his evidence in court have been.
The various positions taken by the defendants in respect of the purported ownership of Changing Lanes by Yvonne I have set these out elsewhere in these reasons. The registration of Changing Lanes in Yvonne's name was misleading as far as the racing authorities were concerned in two respects. It tended to conceal the interest of Preston and it implicitly denied the interest which I am satisfied Marshall had acquired.
Other than to deny Marshall's interest, Preston at no time gave any significance to the registration of Changing Lanes in Yvonne's name. Indeed it was clear from Preston's evidence that he cared little about ownership as between Yvonne and himself. It was the same with Knight Reflector. Consequently, when it came to his evidence he was confused and contradictory.
According to Preston, he would register horses in Yvonne's name in order to give her a sense of being involved in what was essentially his horse breeding and racing activities.
In relation to Knight Reflector, the defendants contended by their original defence (November 2005) and in the further and better particulars (March 2006) that Yvonne owned the horse and that the money paid by Marshall for his share was paid to Preston on her behalf. In keeping with that position the further and better particulars alleged that Marshall paid agistment costs for Knight Reflector to Preston as Yvonne's appointed agent. This position was consistent with the defendants' original case that Yvonne owned Changing Lanes. The further and better particulars alleged that Changing Lanes' winnings were paid to Yvonne and that the prize money, though paid into a joint account, was Yvonne's.
In the amended defence the defendants alleged that Preston bred and was the owner of Knight Reflector and that Marshall's payments for agistment were paid to Preston. At no time were the further and better particulars of defence dated 3 March 2006, which formed part of the book of papers for the judge, amended so as to be in keeping with the amended defence.
In par 11 of the amended defence Yvonne admits par 14(a) of the statement of claim which alleged that at all material times since 2002 she asserted to Marshall that she was the sole owner of Changing Lanes (by reference to the Neilsen letter). She says further, however, that her assertion was mistaken and that Preston was the owner of the horse at all material times, such that Marshall had no cause of action against her.
I am satisfied that in respect of both Knight Reflector and Changing Lanes Yvonne was not an owner in the sense of having a beneficial interest in the horses. Rather, she was nominated as the owner for the purpose of registration because it suited Preston's interests.
Rule 15(1) of the Australian Rules of Racing (AR) relevantly provides:
Every application to register any horse shall contain or be accompanied by the following particulars, vis:-
(a)in respect of the horse's ownership –
(i)the name and signature of each owner, his date of birth and usual address; or
(ii)if the horse is owned by a company, the name of the company and its registered address; or
(iii)in the case of a horse owned by a syndicate, the name of the syndicate and the names of the trustees or registered managers thereof and the usual address of each of them; and
…
AR1 defines 'owner' to mean any entity included under the definitions of 'nominator' and/or 'person'. 'Nominator' means any owner or, if the horse is leased, any lessee by or on whose behalf a horse is entered. 'Person' is defined to mean any syndicate, company, combination of persons, firm or stud owning or racing a horse or horses. 'Lease' is defined to include any agreement whereby the owner of a horse permits another person to race it.
I find that Preston permitted Yvonne to race the horse and to that extent, and without more, Yvonne was a lessee for the purpose of the rules and was registered as an owner in that capacity. Marshall did not permit Yvonne to race the horse and therefore she was not a lessee of his interest.
According to the Australian Rules of Racing, Marshall's ownership should have been stated upon the application to register Changing Lanes. The importance of declaring ownership is demonstrated by AR 56B which provides that the stewards may penalise a person who 'fails to declare any share or interest in, misrepresents or provides any misleading or inaccurate information regarding the ownership of a horse'.
By LR (local rule) 32 the lessee of any horse leased for racing before entering a horse for racing must lodge for registration with the secretary of a principal racing authority the lease or other documents under which the lessee claims to be entitled to the possession or control of such horse. There are other requirements in the rules regarding leases, in particular LR 34 which deals with approval of a lease of a horse.
Although the rules of racing have changed from time to time since 2002 when Changing Lanes was registered (the Racing and Wagering Western Australia Act 2003 shifted control of thoroughbred racing to RWWA, occasioning some rule changes), I am satisfied that the relevant rules at all material times were to the same effect. Preston and Yvonne paid scant regard to the rules of racing with respect to ownership and registration. The transfer form dated 6 June 2008 by which Yvonne purported to transfer Changing Lanes to Preston contained a declaration as follows:
I/we the above signed declare that the names of the Owners appearing on this transfer form fully disclose the true, complete and accurate ownership of the stated horse.
Further analysis of the rules is not warranted as the registration of thoroughbred racehorses, although of great importance to the control, regulation and supervision of racing, is not determinative of ownership. Notwithstanding the representation of ownership made to the WA Turf Club and later, Racing and Wagering Western Australia, no lease of Changing Lanes having been registered or approved, Yvonne's relationship to Changing Lanes was that of lessee in the sense that that word is defined by the rules of racing. That characterisation is more accurate than a description of her as a legal owner or trustee.

Importantly, as the lessee of the horse Yvonne exercised control over it. She raced the horse and received trophies and prize money. She had the effective use and possession of the horse insofar as racing activities were concerned.

The claim for conversion

During the period in which Yvonne raced Changing Lanes both Yvonne and Preston benefited from the prize winnings which, according to Preston, were paid into a joint account at least until 16 June 2008 when Preston completed a form which directed Racing & Wagering WA to pay prize winnings to an account in Yvonne's name.
Marshall asserts that Preston and Yvonne are liable in damages for conversion on the basis that they each dealt with Changing Lanes in a manner that denied his proprietary right.
The essence of the tort of conversion is wrongful interference with the proprietary rights of another with respect to a chattel. In order to assert an action in conversion the plaintiff must have been entitled to possession of the chattel when it was converted.
Marshall must prove a right of possession stemming from the agreement to purchase an interest in the horse. He asserts that there was an immediate transfer of ownership upon the formation of the contract in March 2001. His argument is based upon the application of the Sale of Goods Act 1895. The sale of an undivided share in a horse is a sale of goods: Jones v Samios; Queensland Harness Racing Board (Unreported, QSC 1246/1984, 29 March 1985).
By paying Preston the sum of $3,000 he made a part‑payment within the meaning of s 4(1) of the Sale of Goods Act such that the contract is enforceable even though made orally.
Section 17(1) of the Sale of Goods Act provides that property is transferred to the buyer at such time as the parties intended it to be transferred. For the purpose of ascertaining the intention of the parties regard should be had to the terms of the contract, the conduct of the parties, and the circumstances of the case: s 17(2).
Section 18 sets out a number of rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass. Relevantly, rules 1 and 2 are as follows:
When there is an unconditional contract for the sale of specific goods, in a deliverable state, the property and the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or time of delivery, or both, be postponed.
Where there is a contract for the sale of specific goods, and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until such thing be done, and the buyer has notice thereof.
Section 20 provides that unless otherwise agreed the goods remain at the seller's risk until property is transferred to the buyer. No question of seller's lien has arisen.
The defendants' position as pleaded in the amended defence, outlined in their written trial submissions and ultimately argued by counsel, is as follows.
The defendants deny the Changing Lanes' contract, but have submitted in argument that if there were a contract for sale it did not entitle Marshall to possession of the horse. Marshall acquired a contractual right to a share of the horse's winnings less expenses, but the contract did not convey property in the horse to him. A mere contractual right to delivery does not ground a claim for conversion; property must pass: Jarvis v Williams [1955] 1 WLR 71.
It was not argued by counsel that the facts disclosed a Dennis v Dennis (1971) 124 CLR 317 scenario, where a joint venture agreement involving the sharing of prize money and the proceeds of sale between an owner and a trainer was held not to create a proprietary interest on the part of the trainer. Rather, counsel contended that it was implicit in the purported contract that Preston retain exclusive possession, as in French v Styring (1857) 2 CBNS 357 which concerned a contract which allowed one owner the exclusive management of a horse, the other owner agreeing to abstain from exercising his rights in respect of the chattel.
On the defendants' case, as the contract involved exclusive possession by Preston, there was no delivery, by which I understand the defendants to mean that no property passed. So, if there were a contract, Marshall's claim would be limited to breach of contract for failure to deliver.
I do not accept this. On the facts as found the Changing Lanes' contract created a tenancy in common in equal shares. To the extent that Marshall let Preston make arrangements for the training and agistment of the horse he did not relinquish his possessory right as a co‑owner.
I am satisfied, taking into account the terms of the contract, the circumstances in which it was made and the parties' conduct, that the parties intended that property in the Changing Lanes' colt would pass to Marshall upon acceptance. He had a proprietary interest in the colt from that point. No act of delivery was required. Preston and Marshall were tenants in common. There was unity of possession.
The next question is whether there was a conversion of Changing Lanes. Conversion involves deliberately dealing with a chattel in a manner inconsistent with the rights of another whereby the other is deprived of the use and possession of it: Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204. As a matter of law it is enough that the conduct in question is inconsistent with the plaintiff's proprietary rights. Whilst the acts which constitute the conversion must be intentional, no dishonesty is required in order to establish the tort.
The plaintiff contends that an action for damages for tort of conversion lies by a co‑owner against another, notwithstanding that the property was not destroyed or sold in a market overt such that no other remedy exists. The plaintiff urges the court to find that the acts of the defendants denied his proprietary rights, including possession, with respect to Changing Lanes. Whilst the damages sought for conversion are no greater than the amount which the plaintiff would expect to recover for breach of contract or upon an account being given by Preston as co‑owner, Marshall points to conversion as a wrong for which Yvonne is also liable.
The defendants contend that no action for conversion against Preston is available. The defendants' position rests on the authority of Parr v Ash (1876) 14 SCR (NSW) 352 in which Martin CJ held (355):
The principle to be gathered from the cases is that where one joint or part owner of chattel property seized the joint property, and deprived the other owner or owners of the use and possession of it, no action will lie except where the property was sold in market overt or where it was destroyed so that the part owner could not recover his share.
This formulation followed a number of English cases, including Mayhew v Herrick (1849) 7 CB 229; (1849) 137 ER 92. The law in England has been reformed by the Torts (Interference with Goods) Act 1977 (UK), s 10.
The rationale for the rule in Parr v Ash lies in the nature of the right of possession which co‑owners necessarily share. So a co‑owner does not commit conversion merely by using the joint property, but if a co‑owner assumes exclusive possession and uses the property solely for their own benefit, then that will amount to a conversion: Baker v Barclay's BankLtd [1955] 2 All ER 571 (fraudulent conversion of partnership cheques).
The defendants argue that co‑ownership is a defence to a claim for conversion except where there is effective destruction of the chattel such that possession is entirely lost. Otherwise, the unity of possession on which tenancy in common is based precludes an action based on the exercise of a right to possession by one owner. Furthermore, it is submitted that even upon the sale of Changing Lanes (not being a sale in a market overt) Marshall's proprietary interest is preserved by s 21 of the Sale of Goods Act. Reliance is placed on Fraser v Kershaw (1856) 2 K & J 496 where it was held that the nemo dat quod non habet rule applied to the interest of a co‑owner purportedly sold to another.
The plaintiff contends that Parr v Ash is no longer good law, pointing to a line of cases supporting the proposition that a co‑owner's right to claim for conversion is not so restricted. The starting point is Kitano v Commonwealth of Australia [1974] HCA 31; (1974) 129 CLR 151, 172, where Mason J held:
Conversion may be brought at the instance of a co‑owner of a chattel, in particular it will lie at the suit of a co‑owner of a ship. In Barnardiston v Chapman & Smith (1715) 4 East 121;102 ER 776 a ship was possessed by one tenant in common and sent to sea without the consent of his co‑tenant. It was held that trover would lie, the ship having been lost. In Barnardiston v Chapman & Smith the defendant dealt with the ship in a manner inconsistent with the rights of the plaintiff as co‑owner by excluding him from possession and preventing him from exercising his rights.
In Hill v Reglon Pty Limited [2007] NSWCA 295 Beazley JA (Spigelman CJ & Ipp JA) [116] – [119] explained that the statement of Mason J in Kitano was made in the context of the appellant's claim against the Commonwealth for conversion on the grounds that Australian Customs issued a certificate of clearance in respect of a vessel of which the appellant was a co‑owner, thus allowing the three other co‑owners to sail away. The vessel was not destroyed. According to Mason J, the co‑owners, not the Commonwealth, had deprived the appellant of possession. At [119] Beazley JA observed:
If a cause of action in conversion required either the destruction of goods or the sale in a market overt, as contended by the appellants, it is inconceivable that Mason J would not have said so and there would not have been any necessity for him to give any more extensive consideration to whether there had been a conversion by, for example, considering the effect of the issue of a certificate of clearance.
His Honour went on to consider Coleman v Harvey [1989] 1 NZLR 723 in which the New Zealand Court of Appeal disputed the proposition that an action in conversion did not lie by one co‑owner against another except where the right of property was lost. In that case Somers J formulated the principle as follows:
Conversion is the wrongful act of dealing with goods in a manner inconsistent with the owner's rights with the intention of denying the owner's rights or asserting a right inconsistent with them. One of those rights is possession or the immediate claim to it.
Beazley JA held that this proposition accorded with what Mason J said in Kitano and was also supported by Re Gillie; ex parte Cornell v Gillie (1996) 150 ALR 110. His Honour observed [123]:
Whilst there may have been an historic basis for the restrictive rule that the goods must be destroyed, or some act akin to destruction, such as a sale in a market overt, it is apparent that the law has developed and should be applied in its modern form.
According to the learned editors of Fleming's Law of Torts (10^th ed, 2011) the restrictive rule is anomalous [4.140].
In Coleman v Harvey and Hill vReglon Pty Limited the intermixture of chattels resulted in co‑ownership of the mixture, in Coleman silver ingots and in Hill scaffolding elements. Conversion was held to be available as a remedy notwithstanding that the plaintiff's proprietary rights in each case were not destroyed.
Whilst this is not a case of common bulk, the decisions provide ample authority for the plaintiff’s proposition that a claim for conversion is available to the plaintiff as a co‑owner. In my opinion the decision of the Court of Appeal (NSW) in Hill v Reglon Pty Limited is highly persuasive authority for the proposition that a co‑owner's right to claim damages for conversion is not restricted to cases where the chattel has been destroyed or sold in a market overt.
Being satisfied that Marshall did acquire a proprietary interest as a co‑owner of Changing Lanes and that a claim for conversion is open to him, I turn to consider whether the acts of Preston and Yvonne establish conversion on the part of one or both of them.
Marshall contends that Preston by his actions denied his title and right to possession of Changing Lanes. He did so by denying in the Neilsen letter of 8 May 2003 and on other occasions that Marshall had any interest in Changing Lanes and asserting that Yvonne was the owner of the horse, arranging the registration of Yvonne as the owner, permitting her to race the horse and receive prize winnings, and selling the horse to another in 2008.
As far as Yvonne was concerned she agreed to be registered as the owner of the horse and to race the horse and be paid any prize winnings. She also denied the claim of Marshall to a share in the horse by the Nielsen letter.
I am satisfied that the acts of Preston and Yvonne in dealing with Changing Lanes were wholly inconsistent with and repugnant to the proprietary rights of Marshall. There can be no clearer case. None of the established exceptions to strict liability applies. In my view the denial of Marshall's interest, the assertion that Yvonne was the owner, the exclusive use made of Changing Lanes and its winnings, and the eventual sale of the horse are proved and are sufficient to establish the cause of action against each defendant.
Preston and Yvonne denied Marshall's ownership in the Neilsen letter and on other occasions when the issue was raised in conversation. With Yvonne, Preston acted to deny Marshall's rights as an owner by registering Yvonne as the owner of Changing Lanes and permitting the horse to be raced by her and the prize winnings to be paid to her. Yvonne was no mere nominee, but exercised control over Changing Lanes as the registered owner until transferring her ownership registration to Preston on 6 June 2008 prior to the sale of the horse.

Co-owner's liability to account

Marshall is also entitled to succeed to the same extent (damages are not in issue as to quantum) upon an account to which he would otherwise be entitled as a co‑owner: Squire v Rogers (1979) 27 ALR 330, 345; Marriott v Franklin (1993) 60 SASR 457, 465; Ryan v Dries [2002] NSWCA 3, 65. In Squire v Rogers Deane J held (345):
The cases in which one co‑owner can obtain an account of receipts from another co‑owner who has had the sole use of the joint property are, except where the sole use has been the result of agreement, whether expressed, implied or imputed, holding over or actual exclusion, limited to those cases where one co‑owner has received more than his share of the rents or other revenues of the common property: (authorities cited).
I accept the plaintiff's submission that there is no relevant distinction between co‑ownership of land in respect of which rents and profits are received and a chattel, such as racehorse, in respect of which prize money has been won. The right to an account arises from the ouster of one co‑owner by another, that is, the exclusion of a co‑owner from exercising their right of possession.
In this case, the agreement between the parties as to the amounts of the prize winnings of Changing Lanes and the expenses of maintaining the horse are agreed. Accordingly, it is unnecessary to direct the taking of a formal account. Preston's liability on an account is the same as for conversion.

Breach of contract

If, contrary to my conclusions, the defendants are not liable for conversion (either because Marshall did not acquire a proprietary interest in Changing Lanes or Preston is not liable as a co‑owner) and there is no liability to account for that reason, then the matter would fall to be determined according to the rights and obligations that would otherwise arise from the Changing Lanes' contract.
I have found that Preston offered to sell and Marshall agreed to buy a half interest in the colt that became Changing Lanes for the sum of $5,000. That contract, being for the sale of goods, is enforceable by reason of the part‑payment of $3,000 by Marshall to Preston soon after the contract was made in March 2001.
Preston, of course, denies that there was such a contract: amended defence par 2. He pleads that the only relevant contract with Marshall was a loan agreement: amended defence par 3. In submissions at trial, however, as I have noted, the defendants contend that if there were an agreement with respect to Changing Lanes it did not have the effect of transferring an interest in the horse to Marshall. Rather, it was an agreement to race the horse on terms which gave Preston complete control of the horse: defendants' trial submissions, 25 March 2011, pars 8 ‑ 10.
It is also unpleaded, but submitted, that the contract afforded no right of ownership until payment in full of the purchase price. Preston argues that by failing to pay the balance of the purchase price on or before 1 August 2002 when the horse was deemed by convention to become a 2‑year‑old Marshall breached his contractual obligations. So, it is argued, no claim by him for breach by failure to deliver can be maintained, the contract having been terminated by non‑performance.
The problem with this argument (if it can be entertained at all in circumstances where no factual basis for it has been pleaded) is that the contract did not confer a right to terminate for non‑payment of the balance of the purchase price and did not otherwise make time of the essence.
Defence counsel referred to Hewitt v Debus [2004] NSWCA 54. That case involved the right of a vendor of land to terminate a contract of sale for the purchaser's failure to pay an instalment of the purchase price on time. The contract stated that if payment was not made on time the vendor could terminate the contract but did not expressly make time of the essence. In that case the vendor purported to terminate the contract. The purchaser did not seek specific performance but alleged that the termination was wrongful and amounted to repudiation. The majority of the Court of Appeal upheld the trial judge's decision that as time was not of the essence the contract could not be so terminated. Accordingly, there had been repudiation.
Counsel took me to a critique of the decision by Professor Carter: (2004) 78 ALJ 632. The learned author, who considered it was wrong, commented as follows (633):
An important feature of modern contracts, particularly commercial contracts, is the termination clause. Such a clause may, of course, confer a right of termination for delay without making time of the essence. The law therefore now recognises two different bases on which an express provision may operate to justify termination. In the context of time, one is the conferral of a contractual right of termination for delay. The other is a provision which makes time of the essence, thus making all time stipulations essential terms of the contract.
This is a contrast between:
(1)direct conferral of a right of termination, by means of a termination clause; and
(2)the definition of the nature of the time stipulations, from which a right to terminate is implied by law, via a statement that time is of the essence.
The contrast was recognised by the High Court in Shevill v Builders Licensing Board (1982) 149 CLR 620 and Legione v Hateley (1983) 152 CLR 406, 445. Therefore, one could be forgiven for thinking that, if a contract confers a right of termination for delay, the question whether time is of the essence is irrelevant, at least as regards the right to terminate.
The Changing Lanes' contract did not make time of the essence. Nor did it confer on Preston a right of termination for delay in payment of the balance of the purchase price. Accordingly, counsel's submission in closing address that the plaintiff could not claim damages for breach because the contract was terminated by delay is unfounded. I have found that Marshall tendered a cheque for the balance of the purchase price in late August 2002. Nothing had occurred prior to that time to terminate the contract.

A corollary argument in closing was that, Marshall having breached the contract by late payment, he could only obtain relief by claiming specific performance. The submission was not made out in any detail but seemed to be premised on a proposition that Marshall could not sue on the contract if he were in breach. To be relieved of the effect of his breach he had to prove in equity that time was not of the essence.
Counsel cited Holland v Wiltshire (1954) 90 CLR 409. This case involved the sale of land pursuant to a contract which provided for a deposit and the payment of the balance of the purchase price on a certain date. The purchasers failed to complete by that date or within a further period fixed by a notice which indicated the vendor's intention to take proceedings for breach of contract if the sale was not settled within that period. The purchasers failed to settle and the vendor re‑sold the land at a lower price. He then sued for the deposit and damages. The dispute was as to whether the vendor was entitled to damages. In relation to the date fixed for settlement by the contract Kitto J held (418):
At common law such a stipulation would certainly have been regarded as of the essence, that is to say it would have been treated as a condition of the contract in the sense that failure of one party to adhere to it would be held to entitle the other to put an end to the contract. This is still the position when common law relief is sought, except in cases to which s 16 of the Property Law Act 1936 to 1945 (SA) applies. That section, which repeats s 25(7) of the Judicature Act 1873 (Imp), provides that stipulations in a contract as to time which according to rules of equity are not deemed to be or to have become of the essence of the contract, are to be construed and have effect at law in accordance with the rules of equity. The qualification thus made upon the rule to be applied in the exercise of common law jurisdiction is, however, of limited application. It applies only in cases which are inappropriate for the granting of equitable remedies by way of relief against the loss by a party of his contractual rights by reason of a failure on his part to perform the contract in precise accordance with its provisions as to time. This is so because only in such cases do the rules of equity treat as not of the essence of the contract time stipulations which are of the essence according to a traditional view of the common law. (citations omitted)
In my view the first defendant's argument is misconceived. By s 10 of the Sale of Goods Act, unless a contrary intention appears from the contract, stipulations as to time of payment are not deemed to be of the essence of a contract of sale. The Changing Lanes' contract merely provided that the balance of the purchase price would be paid when the horse turned two. Whilst it might be implied that this meant 1 August, the conventional horses' birthday, the contract did not specify that or any other date, or a period from that date within which payment was to be made. There is nothing in the contract to evidence an intention which would displace the statutory rule that time for payment is not deemed to be of the essence of the contract.
The rejection of the tender of the balance of the purchase price amounted to a repudiation of the contract, entitling Marshall to sue for breach. Other acts by Preston denying Marshall's interest in the horse, such as registering it in Yvonne's name and asserting her ownership in the Nielsen letter were also repudiatory.
Damages should be assessed on the basis that Marshall is entitled to be placed in the position that he would have been in had the contract been performed. There is no reason to doubt that had the contract not been breached, Preston and Marshall (or Yvonne and Marshall) would have been registered as the owners of Changing Lanes and the horse would have been raced as in fact it was, such that Marshall would have received an equal share of the prize winnings. Accordingly, in my opinion, the damages awarded for breach of contract against Preston would equate to damages for conversion.

Damages

The damages in respect of breach of contract and conversion are the same. They equate to half of Changing Lanes' winnings after deduction of expenses, half of the value of trophies won, and half of the proceeds of sale. Interest is claimed to the date of judgment.
The winnings and expenses are agreed, as are the calculations of interest. Changing Lanes won stakes of $333,711.56. Interest to 12 April 2011 is $118,179.82. Expenses were $83,095.16. Interest is $27,384.37. The net amount including interest to 12 April 2011 is $341,412.03, of which 50% is $170,706.01. Interest from 12 April 2011 to 7 September 2011 (148 days x $20.60) is $3,048.80. The parties also agree that half the value of trophies won is $750. I do not consider that this component should attract interest. Half the proceeds of sale, inclusive of interest is agreed at $8,577.48. Interest from 12 April 2011 to 7 September 2011 (148 days x $1.23) is $182.04.
Damages are therefore assessed at $183,264.33.
I would reduce this amount by the sum of $2,000 and interest thereon from 1 August 2002 (9 years x 6%), $1,080, total $3,080, to take account of the balance of the purchase price, the tender of which was refused by Preston.
It was argued that I could reasonably avoid the adjustment by assessing damages for loss of enjoyment of the rights of ownership in the same amount. Whilst I accept that Marshall did not acquire his share in the colt for commercial reasons but to enjoy participation in the sport of thoroughbred racing as an owner, damages for non‑pecuniary loss in contract claims are only available in limited circumstances and there was no basis for such a claim pleaded: see Baltic Shipping Co v Dillon (1993) 176 CLR 344.
In the exercise of my discretion I would round the damages to $180,000.

Result

I find for the plaintiff against the defendants jointly and severally and award damages of $180,000.