Kam v Veale
[2000] WADC 249
•18 OCTOBER 2000
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: KAM & ANOR -v- VEALE [2000] WADC 249
CORAM: COMMISSIONER CHANEY
HEARD: 24, 25, 27, 28 & 31 JANUARY 2000
DELIVERED : 18 OCTOBER 2000
FILE NO/S: CIV 569 of 1998
BETWEEN: WINSTON KAM
CATHERINE KAM
PlaintiffsAND
TREVOR VEALE
Defendant
Catchwords:
Contract - Agreement to race and sell racehorses - Subsequent variation of agreement - Lease of horses to defendant - Whether agreement as to use of stables - Whether implied term in lease agreement - Whether partnership revived at end of lease period - Value of horses - Turns on own facts
Legislation:
Partnership Act1895
Result:
Judgment for plaintiff for $4,000. Counterclaim dismissed
Representation:
Counsel:
Plaintiffs: Dr P R McMillan
Defendant: Mr D A Lenhoff
Solicitors:
Plaintiffs: Swaran Ludher
Defendant: Lenhoff & Co
Case(s) referred to in judgment(s):
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Case(s) also cited:
Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353
Mahoney v McManus (1981) 180 CLR 370
Codovange Pty Ltd (In Liq) v Tanga Holdings Pty Ltd (1990) 20 NSWLR 26
COMMISSIONER CHANEY: The claims in this action arise from a venture in which the parties purchased and raced three racehorses. The claim and the counterclaim turn upon the terms of the arrangements between the parties over the period between early 1993 and early 1998.
The pleadings as they stood at the commencement of the trial based the claims and counterclaims in contract. At the end of the trial, the defendant sought to amend the counterclaim to add a claim based on a partnership arising by virtue of the terms of the Partnership Act 1895, or alternatively a claim based on unjust enrichment. After argument as to whether those amendments should be allowed, I indicated that a decision in relation to the amendment would be made in the context of the decision in respect of the whole trial.
Looking at the pleadings as a whole, there are three broad questions which arise for determination in this case. They are:
1.What were the terms of the initial agreement between the parties concerning the sharing of liabilities and of income in relation to the three horses?
2.What were the respective rights and liabilities of the parties following the leasing of the horses to the defendant in April and June 1994?
3.What were the respective rights and liabilities of the parties in relation to the horses when they ceased to be subject to the leases to the defendant?
The original arrangement between the parties
The plaintiffs plead that, in or about January 1993, they entered into a partnership with the defendant to be known as "The Livingstream Blood Stock" to engage in the business of buying racehorses for the purpose of racing them for profit, resale and related activities. It is pleaded that the partners would each share one third in the capital and profits of the business and contribute equally toward the expenses and losses.
Par 4 of the statement of claim then pleads:
"4.At the request of the defendant, who represented that he had no immediate funds to contribute towards the business, it was agreed that pending future adjustments;
i. The plaintiffs would advance the purchase monies for acquisition of horses;
ii. The plaintiffs would stable and maintain the horses;
iii. The defendant would train the horses;
iv. The defendant's portion of prize winnings would be set off against his liability for the expenses of the business."
Other than that the agreement was "not reduced into writing", no particulars were given, nor any sought, in relation to the partnership. Particulars were sought of the representation, and the request, referred to in par 4. The particulars given were that the representation and request were made orally, and that the request was made "at the plaintiffs then residence at 19 Hardey Road, Ascot on diverse occasions between January and July 1993".
In his pleading, the defendant gave a different version of the arrangement between the parties. He denied the partnership pleaded by the plaintiffs, and instead pleaded an agreement in the following terms:
"2.1During or about June 1993, the parties made an oral agreement in terms whereof:
2.1.1The second named plaintiff would purchase racehorses in Australia.
2.1.2The defendant would without charge, train, break in and educate the horses purchased as aforesaid.
2.1.3All the expenses in respect of the horses such as, but not limited to, stabling, feed, veterinary services, shoeing and the like were to be paid by the second named plaintiff.
2.1.4The first named plaintiff would from time to time endeavour to resell the horses purchased as aforesaid in Malaysia.
2.1.5The defendant would forgo his 10 per cent trainers' entitlement to any prize money won by the horses in Australia and the defendant and each of the plaintiffs would receive one third of the net amount of prize money after deduction of the 5 per cent jockey's entitlement.
2.1.6All horses purchased as aforesaid were to be registered in the names of the defendant and the plaintiffs as owners.
2.1.7In the event of any of the horses being sold, the defendant and each of the plaintiffs would receive one third of the net profits of the sale."
It is common ground between the parties that three horses were purchased between July and November 1993. The first, Ninjamas, was purchased on 11 July 1993 for $9,000, the second, Kintuskin, was purchased on 22 August 1993 for $5,000 and finally, Killiney was purchased on 25 November 1993 for $35,000. The admission on the pleadings that Killiney was purchased on 25 November 1993 is difficult to reconcile with the evidence. In particular exhibit 9.29, the agreement for purchase dated 15 November 1993, and the surrounding correspondence, suggest that payment for the horse was made on 19 November 1993. Under the terms of agreement, the transaction was completed upon payment. The precise date of purchase has some significance as will be seen later.
The parties are also agreed that a total of $12,891 expenses were incurred and met by the plaintiffs in relation to the horses between July 1993 and April 1994.
The defendant's case is that, on the purchase of Kintuskin, the agreement was varied "so that upon the sale of horses in Australia the defendant would be entitled to one third of the net proceeds of such sales" as distinct from the original agreement which was said to be that the defendant would receive one third of the "net profits" of the sale.
In late 1992, the plaintiffs purchased a house at 19 Hardey Road, Ascot. That house adjoined the defendant's home. Mrs Kam gave evidence that she and her husband had a number of conversations with the defendant in late 1992 and early 1993 in relation to the possibility of forming a partnership to purchase racehorses to be trained by the defendant, who was a registered trainer. She said that in early 1993 she and her husband had a meeting at their home with the defendant and his wife. It was at that meeting that she said that a partnership, to be known as "The Livingstream Blood Stock", was to be formed and "was to engage in the business of buying racehorses for the purpose of racing them for profit and or resale in Singapore and or Malaysia".
In her witness statement, which constituted her evidence-in-chief, Mrs Kam gave this account of the agreement reached at that meeting.
"The partnership agreement was oral. It was agreed that:
(a)My husband and I would initially pay all of the purchase monies for the purchase of horses. I said we should contribute one third each. Veale said he did not have any money. If I put up his share he would train the horses until his share was paid.
(b)My husband and I said we would provide stabling for any horses purchased. The stables were on our property.
(c)Fodder charges and other costs associated with the horses would be paid by the partners in equal shares.
(d)Veale said when the horses won any monies, his one third share of those winnings would be set off against his one third contribution towards the purchase price of the horses.
(e)Veale said that his contribution to the partnership would be his training the horses. This was until he had paid his one third share towards the purchase price of the horses.
(f)Veale said that once his one third share of the purchase price of any horses was met, his training would become an expense on the partnership and would be met equally by each of the partners in one third shares.
(g)My husband said he would investigate the resale of trained horses in the Singaporean and Malaysian market. This would not be a charge on the partnership. I would keep the partnership books. I would not charge for this.
(h) Before any horse was sold the owner or owners were given the first option to purchase the horse. This was requested in the lease documents as to Killiney."
Under cross examination, Mrs Kam agreed that the meeting at which the agreement was struck was "a lot later than January". She also agreed that the name "The Livingstream Blood Stock" was not agreed at the initial meeting, but only came up some time later, and that the business name was only registered in September 1993. The option to purchase "requested in the lease documents as to Killiney" would appear to be a reference to a document executed in July 1994, and it is difficult to see how it could have formed a term of the agreement said to have been made in early 1993.
Mrs Kam was also cross examined about the contents of an earlier version of the statement of claim. That pleading, prepared on instructions from Mrs Kam some two years prior to trial, pleaded that the original agreement included a provision that the net value of the defendant's training was to be regarded as a capital contribution, which the pleading went on to quantify. The pleading was subsequently deleted from the statement of claim. That contention that the value of the defendant's training might be treated as a contribution of the capital of the partnership no longer forms part of either party's case. It might be observed however that such an arrangement would seem to make far more commercial sense than either of the agreements pleaded by the parties which render completely uncertain the value of the respective contributions to the partnership. The point can be illustrated by the fact that, on either version, the value of the defendant's contribution to the partnership would differ markedly depending on whether a horse was sold one month after purchase or three years after purchase.
The recognition by Mrs Kam to an entitlement to credit for the value of training services by Mr Veale was also supported by instructions which she gave to her accountant, which were incorporated in a set of financial statements prepared by the accountant on Mrs Kam's instruction. The cross examination on the previous pleading and the instructions to the accountant, which had some force, does not greatly assist the determination of the issues since it appeared to be designed to establish that the true arrangement was more likely to be that originally pleaded, but that is not consistent with the defendant's case which relies on a different agreement. It does however tend to show that Mrs Kam has not been consistent in her version of the agreement through the course of the proceedings.
Kintuskin was the first of the horses to race. It raced on 17 November 1993, and won. When the prize money was distributed, it was divided by Mr Veale as to one third each to Mr and Mrs Kam and Mr Veale. That distribution was not in accordance with the arrangement pleaded by the plaintiffs, but was consistent with the agreement pleaded by the defendant. When cross examined about that matter, Mrs Kam maintained that she complained to the defendant about the fact that his share had not been applied in reduction of his liability for the purchase price of the horses. Mrs Kam said:
"I told him that I wanted to sell the horse and be no more of the partnership because I wasn't prepared to pay huge sums of money purchasing horses when he would immediately become one third owner and then not contribute any of the contributions in terms of their maintenance and a whole lot of other charges that relate, for example, nomination fees, VAT fees and everything else, and then he just pockets one third of the stakes money. I mean, it was an impossible thing to carry on. So I told him that it was impossible. I wanted to sell the horses and that's the end of the matter."
She said that she did not sell the horses because the defendant told her that he wouldn't agree to any sale. She said that she thought, that as one third owner, they needed his consent to sell the horse. She did not check the position with anybody at that point.
Not only did Mrs Kam not proceed to sell the horses, but in fact it was only about the time of receipt of the distribution of Kintuskin's first prize money that the purchase of Killiney was completed. As observed above, the party's agree on the pleading that Killiney was purchased on 25 November 1993, although the evidence suggests that it may have been around 19 November. Registration of the horse in the names of the three party's did not, however take place until 6 January 1994. By that time, there had been a further distribution of prize money from Kintuskin's winnings, again with no deduction for the liability to the partnership which Mr Veale would have had under the plaintiff's version of the agreement. If, as the plaintiffs contend, these distributions constituted a breach of the agreement by Mr Veale, it seems unlikely that Mr and Mrs Kam would have proceeded with the purchase and registration of Killiney as a partnership asset. Mrs Kam's explanation for doing so was that although the contract for the purchase of the horse was only between her and the vendor, "as far as (the vendor) was concerned we were the joint owners of the horse and according to the contract of sale (the vendor) has to register the horse in the new owner's name." That explanation is not consistent with either the terms of the agreement or logic. Registration of ownership was a matter totally in the hands of the purchasers, and the vendor did not have the taste of registering the horse in the new owners name. If the defendant had flaunted the original agreement as the plaintiffs contend, it is incredible that the plaintiffs would have signed over a one third interest in Killiney, a horse several times more expensive than either of the two which had been previously purchased.
The defendant's evidence was that in or about June 1993, an oral agreement was reached in terms which reflect those pleaded in par 2.1 of the defence which are set out above. Subsequently, Ninjamas was purchased. According to Mr Veale, Ninjamas was a horse which would be an attractive proposition for sale in Malaysia. On 22 August 1993, Mrs Kam and Mr Veale attended an auction with a view to the purchase of a weanling or a yearling. They were not successful in making a purchase, but bought Kintuskin instead. Kintuskin, being a mare, was not, according to Mr Veale, a good prospect for sale in Malaysia. It was in that context that Mr Veale said that the original agreement was varied. Mr Veale said that he had no chance of making any money out of the sale of Kintuskin in Malaysia, since he did not think that profits would be earned. According to Mr Veale, Mrs Kam responded that he would have one third of the horse and get one third of all proceeds of sale of the horse, rather than one third of the profits. It was on that basis he said that Kintuskin was purchased.
I prefer the evidence of Mr Veale as to the terms of the original agreement. It is consistent with logic, and with the way that the parties subsequently conducted their agreements.
That conclusion disposes of the first part of the plaintiffs claim for relief, namely a claim for $20,630, being the defendant's liability towards contributions to the maintenance of the horses prior to the point where the defendant leased them. Under the agreement, liability for that sum rested with the plaintiffs, and the defendant's contribution to the partnership consisted of his training.
The rights and liabilities of the parties following leasing of the horses to the defendant
In April 1994 there was a change in the arrangements between the parties. A lease agreement was executed in relation to Kintuskin. By that agreement, the plaintiffs and the defendant as lessors, leased to the defendant as lessee the horse for a period of one year commencing on 19 April 1994. The rental payable for the horse was described as 331/3 per cent of prize money. The circumstances surrounding the making of that lease are in issue, but little turns upon that issue. It is clear that at about that time the defendant became entitled to a totally and permanently incapacitated pension, a condition of which was that he could not be in gainful employment. That had the result that he could not train horses for others, although he could be a hobby trainer training his own horses. That was obviously the impetus for the arrangement for the lease of the horses, although I accept the defendant's evidence that the fact that, under the lease agreement the defendant would be responsible for the costs of maintaining the horse was, by that stage, an attractive aspect of the arrangement for the plaintiffs. In July 1994, leases were also executed in favour of the defendant as lessee in relation to Killiney and Ninjamas. Rental was again 331/3 per cent of prize money. Again, there is some dispute on the evidence as to how these lease agreements came about, but nothing turns on that dispute. The parties are agreed that the lease agreements took effect in their terms and governed the entitlements in relation to the horses from the date of their execution for the period of the lease.
The leases in relation to Killiney and Ninjamas each contained an identical special clause which read:
"Katherine and Winston Kam are to receive the total 331/3% rental after trainers and jockey percentage is deducted. The horse can be sold at market value during period of lease if necessary."
The leases in relation to Ninjamas and Killiney expired on 16 July 1995. A fresh lease of Ninjamas was then executed by the parties, leasing the horse for a period of three years commencing 15 September 1995. A new lease in relation to Killiney was also executed for a one year period commencing on 10 October 1995. In respect to the latter lease relating to Killiney, there were special clauses which read:
"1. The lease is subject to review after 10 October 1996.
2.As agreed Catherine and Winston will exercise their option to offer the horse for sale at the time when he does well or wins a race. Trevor will have the first option to buy. The sale price is to be determined by the appointed bloodstock agent."
The second lease in relation to Kintuskin also contained a special clause which read:
"The lessees have an option to purchase the horse for $6,000. The option expires on 15 September 1996."
It is clear that, by April 1994, the parties, by their conduct, accepted that the terms of the original agreement for the purchase and racing of the horses no longer applied. The notion of selling the horses in Malaysia appears to have been abandoned. It is, however, apparent from the special conditions that the parties contemplated selling the horses if the opportunity arose. As from the execution of the leases relating to each horse, I find that the terms of the original agreement between the parties no longer had any application.
The plaintiff makes a claim for $20,750. The claim is based on the proposition pleaded in par 12 of the statement of claim that:
"The defendant is liable to the plaintiffs for the use of the plaintiffs stables for the period April 1994 to September 1995, calculated on the basis of $250 per week for the period from 19 April 1994 to 28 September 1995."
The pleading of that claim does not assist in identifying a basis upon which the plaintiff might be entitled to relief. Pleading on this issue was amended during the course of the action. Particulars were sought in respect to the basis of liability for this aspect of the plaintiffs claim, but the particulars given do not assist. The request made was to "state upon what basis, whether in fact or in law, it is alleged that the defendant is liable to the plaintiff to the amount of $35,130" (being the previous amount of this aspect of the claim). The response was:
"The defendant is liable both in fact and in law to pay rent for use of the plaintiffs stables for the period in question while the horses were leased to him. The defendant also stabled horses of other trainers at the plaintiffs stables during the said period."
In an earlier version of the pleading, the particulars went on to say that "there was no agreement made. The plaintiffs dealt with the defendant on the basis he would need to pay for the use of their stables". Subsequently, and in her evidence, Mrs Kam contended that there was an agreement although she said that no amount of rental was agreed upon. Amended particulars of the statement of claim provided shortly prior to trial pleaded an oral agreement in July 1995 to pay the cost of the stabling horses. Given that the claim for stabling commences in April 1994, it is difficult to see how the pleaded agreement, which is not consistent with the oral evidence of the plaintiff in any event, could have formed a basis for recovery of this aspect of the claim.
Even if some agreement were made out on the evidence, the rate claimed of $250 per week is excessive. The plaintiffs evidence in support of that figure, adduced through a Mrs Baker, who had never seen the stables, and had extremely limited experience in renting out her own premises, would not found a sufficient basis for assessing the claim asserted by the plaintiff. Furthermore, there is considerable doubt as to the extent to which the plaintiffs stables were actually used by the defendant during the relevant period. Those matters do not, however, require any finding to be made, since I find that there was no agreement between the plaintiffs and the defendant that the defendant would pay for the use of the plaintiffs stables during the period that he leased the horses. No basis for a claim other than in contract arises, and none was urged upon me by counsel for the plaintiffs.
It follows that the entitlements of the parties following the leases of the horses to the defendant were entirely governed by the terms of the written lease agreements. There is no issue between the parties that prize money was distributed in accordance with the requirements of the lease agreements during the period of their operation. It follows that the plaintiffs claim in respect to rental for the lease of the stables must fail.
The respective rights and liabilities of the parties in relation to the horses when they ceased to be subject of the leases to the defendant
The need to determine the respective rights of the parties following the expiry of the leases arises because of a claim made by the plaintiffs, and the counter claim of the defendant.
The plaintiffs claim that, as of 26 November 1997, the three horses had a total value of $13,500, being $1,000 in respect to Ninjamas, $8,500 for Kintuskin, and $4,000 for Killiney. They claim an entitlement to two thirds of the value of each horse.
The defendant contends that the horses had a total value of $4,200 as at 26 November 1997, being $200 for Ninjamas, $3,000 for Kintuskin (being the price actually obtained for Kintuskin on sale on 25 September 1997) and $1,000 for Killiney. The defendant acknowledges that the plaintiffs became entitled to an amount of $2,000 being their two thirds share of the selling price of Kintuskin, but seeks to set off against that entitlement the amount of the counter claim.
The counter claim as pleaded at the commencement of trial claimed an amount of $10,859.86 being two thirds of the expenses allegedly incurred by the defendant for training and maintaining the three horses subsequent to the expiration of the leases. The claim was put on the basis that it was an implied term of the lease agreements "that insofar as there may be periods during which the said horses, or any one of them, were not leased by the defendant from the plaintiffs, the plaintiffs would each be liable for one third of the training fees and of the expenses incurred in maintaining the horses for such periods." Particulars of the basis of the implied term were sought, and the response was that "the term was implied to give efficacy to the agreement." That cause of action is obviously unsustainable. The pleading itself falls short of what would be required to imply such a term, and the requirements for an implied term are certainly not made out in the context of this case (see Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337).
It was no doubt in recognition of that problem that the defendant sought at the end of the trial to amend the counter claim so as to plead a claim under the Partnership Act 1895, and for unjust enrichment. The amendment sought to be made was as follows:
"24A.In the alternative to paragraphs 19 to 23 above during the periods that the horses were not leased by the defendant there existed between the parties a partnership in respect of the business of training and racing the horses."
Particulars of post lease partnership
The plaintiff relies upon conduct and upon the Partnership Act 1895. After the expiration of the leases the defendant maintained and trained the horses and entered Kintuskin in races and paid the plaintiffs one third each of the winnings, which the plaintiffs retained, and retained for himself one third of the winnings, to which the plaintiffs made no objection. Horses continued to be owned by the plaintiffs and the defendant as to one third each. The agreement of the parties to contribute in equal shares to the expenses is implied by the Partnership Act 1895 and by the plaintiffs admitting in evidence that they were liable for one third each of the expenses of all three horses in the whole period after the expiry of the leases of the horses (refer the first name plaintiffs witness statement par 43 and the second named plaintiff witness statement par 53 referring to the expenses of Kintuskin; in cross-examination the plaintiffs admitted they were liable for one third each of the expenses of all horses after they came off lease).
25. Further and in the alternative to paragraphs 24A:
1.During the period after the expiry of the lease of each of the horses the defendant:
(a)made payments and incurred liabilities in maintaining and racing the horses; and
(b)spent his time as a trainer training the horses,
for the benefit of the defendant and the plaintiffs.
Particulars of benefit
As to maintenance, the plaintiffs as part owners of horses were obliged with the defendant to maintain the horses. As to racing and training the plaintiffs shared in the winning of the horses.
Particulars of payments and liabilities
Refer each item in annexures A, B and C (other than those items referred to as training) amounting to $9,958.80.
2.The value of the defendants time spent in training amounts to $6,331, particulars of which are set out in annexures A, B and C, alternatively the value of the defendant's said time amounts to $5,250 (210 days as set out in the said annexures x $25 per day).
3.The amount of the said payments and liabilities and the value of the said time amounts to $16,289.80 alternatively $15,208.80.
4.If the plaintiffs are not ordered to pay the defendant the sum of $10,589.86 alternatively $10,139.20 representing two thirds of the said payments and liabilities and the said value of the defendant's time, the plaintiffs will be unjustly enriched."
Before ruling on the application for amendment, it is useful to review the situation between the parties at the time that the leases came to an end. As I have already found, the original terms of the partnership no longer applied, having been displaced by the changed arrangements whereby the defendant leased the three horses. There is no evidence of any discussion between the parties as to what arrangements were to subsist when the leases expired. What happened in fact was that Mr Veale retained possession of Kintuskin and Killiney after their leases expired. In respect to Kintuskin, the parties agreed to put her to stud, on the basis that the stud owner had an option to purchase her with foal for $6,000. If the owner did not exercise the option, then the horse would be put to stud the following year, the owner would keep the first foal and the horse would be returned in foal. The option was not exercised, and, in accordance with the agreement with the stud owner, Kintuskin was returned to Mr Veale in foal in March 1997. By this time, the relationship between the parties had deteriorated markedly, and by May 1997 Mr Veale told the plaintiffs that he wanted nothing further to do with them.
At the expiry of the lease of Killiney in October 1996, the horse remained under the control of the defendant. In January 1997 it suffered an injury. It was unlikely to race again. By early October 1997 the plaintiffs had instructed solicitors, who wrote to Mr Veale on 13 October 1997 threatening proceedings. This letter was written shortly after the defendant had sent bills to the plaintiffs in respect to costs incurred in relation to Kintuskin and Killiney. In the case of Killiney, the account contained the following narrative:
"The lease for Killiney ran out on October 10 1996 therefore costs for Killiney have reverted back to the original three owners as of that date. During this period Killiney was in work to race, however, as I was not aware that the lease had run out and you were not consulted about bringing him back into race work, you have only been charged for his upkeep at the agistment rate of $6.00 per day instead of the training rate of $45.00 per day."
The accounts rendered by the defendant to the plaintiff in respect of Kintuskin and Killiney appear to have been arbitrarily drawn by the defendant. It is impossible to identify any agreement which underlies the amounts claimed, and the evidence does not generally support a basis for concluding that the amounts claimed would be an appropriate allocation of expenses as between the partners. Mrs Kam was cross-examined about an account, exhibit 9.13. Precisely when that account, which related to costs associated with Kintuskin between March 1997 and 31 May 1997, was given to the plaintiffs by the defendant is unclear on the evidence. Presumably that occurred some time not long after May 1997. The account bears a handwritten endorsement, apparently by the defendant's wife, that it represents "costs for Kintuskin so far." It is noteworthy that there is no reference to costs arising prior to March 1997, which were a significant portion of the costs included in subsequent the accounts in October 1997 and December 1997.
In the course of cross-examination, Mrs Kam accepted that had she not misunderstood exhibit 9.13 when it was received, she would have paid the portion that related to her share of the agistment, but not the other expenses related to an attempted sale of the horse, about which she had no knowledge. In the proposed amendment to the counterclaim, reliance is put on this concession. Reliance is also placed on passages of each of the plaintiff's statements of evidence-in-chief, but I do not consider that the passages referred to support the defendant's contention.
Subsequently, on 30 December 1997, the defendant sent further accounts for Kintuskin and Killiney to the plaintiffs. In respect to Killiney, the narrative to the account stated:
"Lease for Killiney ran out on October 10 1996 therefore costs for Killiney have reverted back to the original three share ownership as of that date. During this period Killiney was in work to race, disregard previous account of 12 October 1997 as this is the true account of costs owing for Killiney."
The account then specified a number of maintenance expenses related to the period 30 October 1996 to 8 January 1997. In respect of Kintuskin, a further account was sent on 30 December 1997, again adding expenses to those which had been claimed in October.
Neither of those accounts matches the amounts claimed in annexures A and B to the defendant's defence and counterclaim and it does not appear that there has ever been an invoice in relation to Ninjamas, either in the terms of annexure C to the defence and counter claim, or otherwise.
In cross-examination, Mr Veale said that he had not rendered an account in relation to the expenses of maintaining the horses prior to October 1997 because, until he was removed as manager of Killiney in October 1997 he was prepared to "wear" the costs himself and it was only after that event that he decided that the plaintiffs should "pay up". It is apparent that the defendant then tried to reconstruct accounts to reflect his expenses in relation to the horses after the expiry of their leases. By his own admission, his records in relation to those issues were poor. The evidence as to what might be a proper quantum of the defendant's claim, if he has one, is a shambles.
It is not possible to construe a partnership in relation to the ownership of the horses after the expiry of the leases simply on the basis of the provisions of the Partnership Act 1895. The terms of the special clauses in the lease agreements make it clear that, at least from the time that the second leases of Ninjamas and Killiney were entered, the parties, or at least the plaintiffs, were looking to sell the horses if an opportunity arose. There was no element of joint enterprise by the parties thereafter. The defendant's case denies a partnership at the outset, but pleads a specific agreement, which could not have been the intention of the parties after the period of the leases. When Kintuskin came out of lease, she was put to stud as a means of disposing of her. The mere fact of joint ownership is not, in all the circumstances of this case, sufficient to give rise to an obligation to contribute to expenses jointly. Rather, the defendant simply continued to assume responsibility for the expenses, and never intended rendering accounts for those expenses to the plaintiffs until their relationship deteriorated to such an extent that litigation became imminent. Similarly, it appears from the first invoice in relation to Killiney, that Mr Veale was treating the horse as if the lease had not expired. There was no consultation with the plaintiffs. It cannot be said that a partnership was then in existence. The conclusion by Mrs Kam in cross-examination that she assumed some liability existed on her part in relation to agistment is not a sufficient basis for concluding that the defendant has some enforceable cause of action which cannot otherwise be discerned from the evidence or the pleading.
The circumstances are not such that it can be said that the defendant made payments by way of maintenance of the horses in a way which benefited the plaintiffs such that the plaintiffs would be unjustly enriched if they were not required to repay those expenses. The defendant made the payments voluntarily, not expecting repayment, and entirely without consultation with the plaintiffs. I find that it was not open to him to unilaterally determine to raise a charge in respect of expenses in some cases allegedly incurred years before his first account of October 1997.
It follows that the amendments sought to the counter claim would not avail the defendant of a remedy in any event. The application to amend was made at the end of the trial, and the plaintiffs case may well have been conducted differently if these causes of action were pleaded at the outset. Furthermore, the adequacy of the pleading in terms of identifying clear causes of action is at least questionable. Those findings lead to the conclusion that the amendments should not be granted.
It follows that the defendants counter claim should fail.
There remains the plaintiffs claim for two thirds of the value of the horses as at November 1997. The plaintiff pleads the value of the horses as being $1,000 for Ninjamas, $8,500 for Kintuskin and $4,000 for Killiney.
At the time that the writ was issued, Ninjamas was still under lease to the defendant. Subsequent to the expiry of the lease in September 1998, the defendant's solicitors advised the plaintiffs solicitors that the plaintiffs were at liberty to collect the horse from the person in whose possession it then was. The plaintiffs did not take up that invitation. The plaintiffs claim in relation to Ninjamas is based upon a refusal by the defendant to deliver the horse to them despite demand. Even ignoring that no demand was, or could have been, made prior to the issue of the writ, the plaintiffs have no entitlement to judgment in relation to the value of that horse, since the demand was not refused.
As to Kintuskin, there was conflicting evidence as to its value. The plaintiffs claim was based on the proposition that the horse was sold at under value when the defendant sold it to a Mr Dowling, the person with whom the horse had been agisted from time to time. It is certainly the case that the sale took place without the consent of the plaintiffs. The transfer document was executed by the plaintiffs for the purpose of facilitating the possible exercise of the option by the stud owner when Kintuskin was put to stud in 1996. Mr Dowling was a friend of Mr Veale and his wife. At the time of the sale, Kintuskin was in foal. Five months earlier, the horse had been passed in at auction at $6,000 with a reserve of $12,000. Little effort appears to have been made by the defendant to obtain the best possible price for Kintuskin.
The defendant's valuer Mr Quinlivan, assessed the value of Kintuskin at $3,000 to $6,000 based on the proposition that there is no way of knowing that the bid of $6,000 at which the horse was passed in in April 1997 was a genuine bid. He acknowledged that he had never seen the horse, and in cross-examination, he accepted that the service fee for Stratoblest, the stallion which Kintuskin had been put to, was at the time, $5,500.
Mr Smith, a bloodstock consultant called by the plaintiff, assessed the value of Kintuskin at $8,500 given that it was in foal by Stratoblest. Mr Smith arrived at his valuation based upon information he obtained from records of Goodwood Bloodstock Agency, and a valuation carried out in November 1997 by his former manager.
In my view, the figure of $3,000 did not represent the true value of Kintuskin at the time of its sale. Taking all of the evidence into account, I am of the view that it is appropriate to assess the value of Kintuskin at $6,000, being the upper range of Mr Quinlivan's valuation, but slightly less than that of Mr Smith. Given the value of the stud fee, the fact of a reserve being set at $12,000 only five months before, and a bid, which admittedly may or may not have been a genuine bid, of $6,000 being made at that time, the figure of $3,000 is simply inadequate.
On that basis the plaintiffs should have received two thirds of the price, namely $4,000, from the sale of Kintuskin, and they are entitled to recover that amount from the defendant.
In respect to Killiney, that horse was ultimately auctioned and in fact was sold to the defendant as the highest bidder at $700. The plaintiffs received their share of that sale price and are entitled to no more.
In the result, the plaintiff is entitled to judgment in the sum of $4,000, and the counter claim should be dismissed.
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