Thoroughbred International Marketing Pty Ltd v Neate &
[2011] VCC 1381
•12 December 2011 [First Revision]
| IN THE COUNTY COURT OF VICTORIA | Revised |
| AT MELBOURNE | Not Restricted |
| CIVIL DIVISION | Suitable for Publication |
| COMMERCIAL LIST GENERAL DIVISION |
Case No. CI-10-00184
| THOROUGHBRED INTERNATIONAL MARKETING PTY LTD | Plaintiff |
| (ACN 078 331 576) | |
| v | |
| DAVID NEATE | First Defendant |
| and | |
| TARA FARM PTY LTD | Second Defendant |
| (ACN 065 417 558) |
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| JUDGE: | HIS HONOUR JUDGE McINERNEY |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 21, 22, 25, 27, 28, 29 July and 1, 2 and 3 December 2011 |
| DATE OF JUDGMENT: | 12 December 2011 [First Revision] |
| CASE MAY BE CITED AS: | Thoroughbred International Marketing Pty Ltd v Neate & Anor |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 1381 |
REASONS FOR JUDGMENT
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| Subject: | CONTRACTUAL TERMS – identification of contractual parties |
Catchwords: Horse racing – breeding rights – syndicate – disintegration – business relationship – evidence of contractual terms – lack of written contracts and recording of business communications – credibility – set off – legal capacity – identification of contracting parties in each instance.
Cases Cited: Hargraves v R [2011] HCA 44
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J A Ribbands with | Hardys |
| Mr M J Stirling | ||
| For the Defendants | Mr M G McNamara | White Cleland Pty Ltd |
!Und efined Boo kmark, I
HIS HONOUR:
1 The plaintiff, Thoroughbred International Marketing Pty Ltd, was trading at all
relevant times as ISV, Independent Stallions Victoria, the director being Michael Becker, a stud master. Mr J A Ribbands and Mr M J Stirling
appeared on behalf of the plaintiff.
2 The first defendant was Mr David Neate. Mr David Neate is the owner of Tara
Farm in Torquay, is a businessman and horse breeder. Mr M G McNamara
appeared on behalf of Mr Neate and on behalf of the second defendant, Tara
Farm Pty Ltd.3 Tara Farm Pty Ltd, according to the pleadings and to the oral evidence of Mr
Neate, owns the mares which are located on the property Tara Farm owned
by Mr David Neate. There are, as I understood Mr Neate's evidence,
approximately ninety broodmares on such property.
4 This particular cause, CI-10-00184, concerns the disintegration of the
business relationship between Mr Becker and Mr Neate. The case has
involved an assessment of the manifestations of such a relationship over a
period from 2004 until the issue of proceedings in January 2010.
5 To say the least, this case presented some unique problems to the lawyer.
Each of the main parties, that is, Mr Becker and Mr Neate, determined to
conduct their business relationships in a manner which was most unbusinesslike. One is tempted to conclude such is the way business is done in the racing game. Certainly Mr Becker appears to conduct himself on a
handshake basis without any proper business recording of contracts or any
proper recording of business communications.
6 Mr Neate is a person with a commerce degree and an experienced business
person, who in other enterprises carried out the task of an audit committee
chair, and in corporate annual returns, describes himself as a person with “extensive corporate experience”; however, in this instance determined to
conduct his passion of horse breeding on a basis which would not conform to
the minimum audit requirement.7 One general point which I think is important in considering the facts in this
case is their broad business relationship.
8 Mr Neate owns the freehold of the Tara Farm and conducts his horse
breeding enterprise, according to his evidence, through the company Tara
Farm Pty Ltd.
9 Mr Becker, as the stud manager and syndicate manager, conducts his own
business as a stud at all relevant times, originally in 2004 at the Vinery Stud in
Longwood, and then on a new property at Nagambie from 2006.
10 Mr Becker is clearly dependent on the investment from relevant clients such
as Mr Neate and other partners who have the necessary capital for Mr Becker
to bring into his stud “leading stallions” to promote the stud run by Mr Becker.11 To understand the development of this relationship it was deemed appropriate
by both counsel to begin at the first temporal connection between the parties,
both in evidence-in-chief and cross-examination.
12 When I say parties, I intend to talk in terms of Mr Becker as the director of the
plaintiff company, which traded as ISV, and Mr Neate as the proprietor of the
second defendant and the person who traded by way of the unregistered trading name of Tara Farm. This is necessary as it is the only way to make
one's way through the maze of facts presented to the Court.
13 At the end of my factual findings I will ascribe legal liability relevant to such
findings as best as I am able in the circumstances of this case.
14 In assessing credibility of these two main parties, that is the individuals that I
have spoken about, I have taken into account all the factors relevant to a Court assessing credibility referred to by the High Court mostly recently in
Hargraves v R [2011] HCA 44 (26 October 2011), at [23].
Beckett Syndication
15 Beckett was a stallion of some repute. At the yearly sales in the United
Kingdom in 1999, he had sold at the highest price then paid of approximately
$A5 million. His sire was Fairy King who had sired the famous stallion located
in Australia, Costa De Lago. At such sale there was apparently a bidding war
between the world renowned Coolmore Stud interests and a Middle Eastern
sheik. Apart from such reputation produced by those circumstances, Mr Becker in fact himself was in Ireland in mid June 2004 and, to use his words,
“fell in love with Beckett”.
16 Mr Becker entered into a loose arrangement to lease Beckett. There was
consideration as to also buying the southern breeding rights to Beckett and then syndicating him. He was, as I have already remarked, to be a headline
stallion for Mr Becker at the ISV Stud. Discussions appear to have been well
advanced while in the UK and Ireland during June 2004.17 In approximately that month, Mr Becker suggested to Mr Neate that Beckett
could be syndicated. As Mr Becker said, it was difficult to find and fund good stallions to stand in Victoria, as we have recently heard confirmed with the complaints about foreign domination of the Melbourne Cup field this year.
18 On 22 July 2004, Mr Becker put a written proposal to Mr Neate, tendered as
Exhibit B. This related to two propositions, being the purchase of Beckett for
€231,000 (approximately $430,000 at that time), that is the southern breeding rights, plus freight, quarantine and transportation costs, and secondly, a proposed syndication of such rights into forty shares with the horse standing
at the ISV Stud.
19 At this time the horse was in quarantine in the UK, given the advance discussions which I have previously referred to. Mr Becker agreed in cross-
examination that he was, because of those advanced discussions and the fact that the horse was already in quarantine, pushing Mr Neate for a commitment,
due to such timing and the need to advertise that Beckett was to stand at the
ISV stud.
20 Mr Becker said in cross-examination that he never had sufficient money to be
involved in the purchase of the southern breeding rights of Beckett. It was put
that he agreed with Mr Neate to purchase twenty-five per cent of the southern
breeding rights or syndicate rights; such would be at a figure of approximately
$132,000.
21 However, it was clear that in the letter Mr Becker had offered to purchase ten
shares at $12,000 a share in the syndication provided however he could pay off such sum over two years, it being anticipated that he would do that by way of earnings from the syndication itself.
22 There is no written evidence of whether such proposal was accepted. Mr
Becker said that subsequent to forwarding this proposal he spoke to Mr
Neate, it would appear at or about 27 June 2004, and that Mr Neate agreed to
purchase in his own right the southern breeding rights of Beckett after a
number of conversations, at or about that time.
23 Mr Becker advised the owner's agents of this agreement and as a result, the
facsimile of 29 July 2004 arrived,[1] being confirmation advice of agreement to
the owner, the owner being Tally Ho Stud, and a draft shuttle agreement[2]
between the northern syndicate and the proposed southern syndicate.[3]
[1] Page 11 of the Court Book
[2] Pages 10A and 10B of the Court Book
[3]4 Exhibit A
24 Subsequent discussion proceeded into August, that is as to the terms of the agreement and to the allocation of shuttle costs leading up to the agreement.4
25 The agreement was signed on behalf of Mr Neate by Mr Becker, in fact one
day before the horse arrived in Australia, that is on 8 August 2004.[5]
[5] Page 12A of the Court Book
26 As to the purchase of the southern rights, an invoice in the sum of
$404,695.16 (€231,000) was forwarded to Tara Farm Pty Ltd by the agents.[6]
The cost for the southern rights was paid for by Tara Farm Pty Ltd by
electronic transfer on 3 September 2004.[7]
[6] Exhibit A, page 9 of the Court Book
[7] Page 11B of the Court Book
27 There was never any documentation produced as to the syndication,
consistent with Mr Neate's evidence. What Mr Neate was involved with in regard to Beckett and his own mares was, as he described it, a hobby, and he agreed in cross-examination that consistent with industry practice there was often no documentation. Often as he said, these agreements were made by handshake only, and it is clear that such is the position that prevailed so far as
the syndication rights were concerned here.
28 Mr Becker says that following the decision of Mr Neate to buy the southern
breeding rights, further discussions were held per phone at or about the same
time as the original proposal as to the syndication.
29 Mr Becker said in evidence that Mr Neate agreed to the syndication and the
horse in fact thereafter arrived, as I have said, on 9 August 2004. Mr Neate
having by such time travelled overseas.
30 As a result of the advice from Mr Neate to Mr Becker, Mr Becker advised the
owners of the intent of Mr Neate to syndicate, and was forwarded a draft agreement as to the terms of the cost between the owners.[8] Subsequently, Tara Farm Pty Ltd, in conformity with such agreement, paid the transport costs, the insurance costs and the quarantine costs for the horse.9
[8]9 Exhibit A, page 10A of the Court Book
31 As to the syndication, Mr Becker said that he was advised by Mr Neate that
Tara Farm was to have thirty shares, that Mr Neate had sold six shares in the
syndicate to Wallace Smith and one share was to be allocated to Erinvale on a contra basis. Mr Neate confirmed in his advice to Mr Becker that he had sold the shares to Wallace Smith at $20,000 a share.
32 The proposal as to sales of syndicate shares was to be at a commercial rate
of $25,000 plus GST a share. Mr Neate was aware of, although he said he never actually saw Exhibit G, which Mr Becker said he forwarded to him, the proposed joint venture agreement to be signed by shareholders in regard to the Beckett syndication. Mr Neate had, he said, earlier seen a similar
document which he called the “Truce Agreement” and as such he was aware
of the terms of Exhibit G.[10]
[10]11 T718
33 Again, consistent with the relationship, this joint venture agreement forwarded on the evidence of Mr Becker to Mr Neate, was, of course, never signed. However, as I have said, Mr Neate said that the parties acted according to this
agreement because he had in fact, as I have already said, seen a similar agreement with the same terms which had been forwarded earlier to him by Mr Becker, being the “Truce Agreement”.
34 As syndicate manager, ISV conducted sales of shares on behalf of Mr Neate,
and allocated nomination rights. Mr Becker said he undertook sales of shares, being the remaining shares, and hence was liable for four shares in Tara Farm at $12,000 a share, that being a pro rata price based on the original proposal that he had put, which he said Mr Neate agreed as a cost to purchase a share, that is the wholesale price, and indeed as Mr Neate said
that he was prepared to sell shares to Becker at such price.
35 On the above basis, Mr Becker conducted the syndicate. He had an
obligation to keep records under the joint venture agreement and to obtain appropriate payments for any sales of nominations or shares, and he did so. Indeed, pursuant to such agreement and obligation, Mr Becker said he
prepared stud returns for each of the years 2004, 2005, 2006, 2007 and 2008
(being respectively Exhibits C, D, K, L and M).
36 Beckett had arrived in Australia on 9 August 2004 after being quarantined in
Ireland, and started his duties at the beginning of the new season. Mr Becker
gave evidence that he sent in, each year, returns to all syndicate members.
Indeed, he said this was always done and was the appropriate practice in
regard to syndicate stallions.
37 It is clear from the evidence of Mr Fleiter of Macquarie Legal, with thirty years’
experience in the industry, that such a practice was appropriate and indeed
usual business practice for studs.1138 Mr Aylett, the stud manager, who was called by Mr Neate of Tara Farm,
confirmed seeing the first page of the 2004 report, Exhibit C. However, he
said he had never seen Exhibits D, K, L or M.39 Mr Neate denied ever seeing such returns. However, in cross-examination
did not dispute that such could have been sent and received by his offices
respectively at Footscray West or North Melbourne. Mr Aylett confirmed that
often the business of the form was conducted through those offices.40 In considering this aspect and the conflict of evidence between the parties, I
take into account Mr Fleiter's assessment of Mr Becker as a stud master,
breeder. Mr Fleiter said “Mr Becker was respected and held in high regard”.[12]
[12]13 14 15 T762
41 Indeed, Mr Neate himself said that he was aware of Mr Becker's reputation as a stud master and that he trusted Mr Becker, and according to the draft agreement, such returns were to be forwarded by the stud master.13
42 Mr Neate was not concerned that he did not receive the returns because what
was important for him was that his mares were covered by a good stallion, and for this he paid all the expenses and never sought contributions from fellow syndicate shareholders. As he said, he did not worry about the finer
financial points in this undertaking.
43 It is important, in understanding this relationship, to quote the evidence of Mr
Neate. Such evidence is of assistance in coming to conclusions as to what
the agreement actually was and as to whose evidence I can give credibility to.
I quote from pages 721-722 of the transcript.
44 He was asked by Mr Ribbands the following:
Q: “That’s all well and good from the perspective of the mares that have been served, but what I’m enquiring about is your desire to understand what work the stallion that you are a part owner in has been put; has it made money for example? You would expect to get a report at the end of the year giving you the details of the work that the horse has done, correct?--- A: Look I think I can only answer the question by saying I didn’t run this area in a business-like manner. It’s clear - if I may finish – it’s clear that I paid all the expenses for this horse from the day it arrived in Australia except for what he was required to do under the standing rights, which was keep the horse, and I never thought to collect them. I never did it, I never addressed it, it was a hobby for me. It was very slack.”
45 I then asked the following question:
Q: “When you say you never thought to collect them you never collected or never thought to collect a summary of what had happened?--- A: I never collected any of the money that I’d outlaid, Your Honour,
for the syndicate, not a penny of it.”
46 I then said:
Q: “I am missing that, what do you mean? You could have called for
proportional payments from people … But you never sought it?A:
“Well I didn’t think about it. It was a hobby and I didn’t treat it as a business, Your Honour, and if it wasn't for this court case I don’t think I'd even be aware of it.”
47 Mr Ribbands then asked a further question:
Q: “Without being critical, and I’m not suggesting that there’s anything wrong with this, but I gather then that basically from your perspective you've got a good stallion there to serve all your mares and that was about as much as you needed to know about it, is that a fair comment?--- A: I should have known a bit more, but I guess the important thing for me was that I covered my mares and the other important thing was I might end up with a great stallion. That's what I was really hoping for.”
48 Having considered the evidence of each party in this respect, I can see no
reason whatsoever in such circumstances to disbelieve Mr Becker, who gave
evidence that such reports were forwarded to Mr Neate each year.49 Further, I accept his evidence that if in fact he did own and was responsible
for the ten of the shares, he would have indicated in such reports such
ownership, so that he would have been able to obtain the appropriate rights
related to such share ownership.50 I do not accept Mr Neate's evidence that he never received such reports.
Indeed, in the circumstances of this enterprise, given the money paid by Mr
Neate, I find that he would have actually asked for such reports if they had not
been sent. Otherwise he would have no information as to what mares had
been covered, and who had obtained or utilised nomination rights.
51 The above findings are important when considering the allegations made as to
the purchase of the southern hemisphere rights. Mr Neate says that Mr
Becker agreed to purchase twenty-five per cent of such rights. Indeed, Mr
Neate says that he would not have agreed to purchasing such rights without a
commitment from Mr Becker, so that Mr Becker would not be conflicted,
considering that ISV had three other stallions standing that year.52 Hence Mr Neate said, Mr Becker was to take twenty-five per cent or ten
shares at $12,000 a share, with two years to pay. And as I have said, as set out in Mr Becker’s original proposal, it was hoped the payments would be made from earnings Mr Becker made from sales and nominations. Mr Neate says that this was agreed before he agreed to purchase Beckett, that is somewhere between the 26 July and 28 July. However, once again, there was no written confirmation of this alleged agreement.
53 Insofar as Mr Becker’s alleged agreement with Mr Neate to buy ten shares or
a quarter of the rights, at no stage was any written demand for such sum made by Mr Neate, nor was there any written confirmation of same from the time of the alleged agreement, that is somewhere around 26 July to 28 July
2004, through to the time when legal proceedings were threatened as a result
of the Artie Schiller problems in late 2008 or early 2009.
54 In re-examination, insofar as this failure to provide any written confirmation of
Mr Becker’s alleged agreement, Mr Neate was asked whether there was any
reason for this failure, to which he responded “No, not particularly. Not that I recall. I didn’t have any written agreements with any people I sold shares to.”14
55 In support of Mr Neate's allegation of such agreement with Mr Becker, Mr
Aylett was called, Mr Neate's stud master. He said that after Beckett arrived
at Euroa, he accompanied Mr Neate to the stallion promotion where Beckett was first paraded. Mr Aylett said that Mr Becker told him, that is Mr Aylett, the following: “I have got a quarter”. When this matter was put to Mr Becker in
cross-examination he said that while he could not remember the precise
conversation, he doubted that he had ever said that.56 Mr Aylett was not involved in the business machinations of Mr Neate. As he
said, he was the farm manager only. He was not asked in cross-examination when it was that he was first asked to recall this conversation, although he was adamant that he could recall it.
57 Further support was sought from the calling of Mr Guy, a bloodstock agent
who assisted in the Beckett showing at the stallion parade. He gave evidence that Mr Becker had said that Beckett was owned predominantly by Mr Neate,
but that Mr Becker would be taking an equity share in Beckett and was being
funded by Mr Neate, and ultimately from the sale of such shares he would get
some equity himself.15 This was put to Mr Becker and he said in response, he could recall a discussion but he certainly could not be sure what that discussion was. I find that the comments of Mr Guy are equivocal at best.
58 Mr McNamara also relied as support for Mr Neate's evidence that Mr Becker
was a quarter shareholder, by how Mr Becker dealt with the shares.[16]
[16]17 See in particular paragraphs 12 and 21 of the submission of Mr McNamara
59 In summary, without consulting Mr Neate or accounting to Mr Neate, Mr
Becker sold a share to Valleyview Stud/Ms Frenzel for $25,000; a share to Lawson Hall for $25,000; and a share to Clearview Stud Pty Ltd for $25,000, making total sales of $75,000. Mr McNamara submitted that such actions are inconsistent with anything but ownership in regard to such shares.
60 Further, Mr Becker entered into agreements for the sale of a share to
Willowvale Stud and to Messrs Griffin and Maher. However again, due
apparently to financial difficulties which those purchasers ran into, Mr Becker cancelled such sale agreements without consultation with Mr Neate. Hence, in summary, Mr Becker had sold five shares in Beckett.
61 When these matters were put to Mr Becker, he said he “Would have thought
that I had [discussed] such” an understanding that he was to buy the four shares left over from the allocation at a sum of $12,000 each “[B]ecause it was all shown in the 2004 breeding report”.17
62 Indeed Mr Becker said that he felt, in the circumstances, that he was honour
and duty bound to pay $12,000 for such shares. He said “That is the agreement I had in mind that I had with David from the time of the purchase of the horse” and that he was honour and duty bound to pay for those shares left
over. However, he could not recall any precise discussion with Mr Neate in regard to that belief.[18][18]19 20 21 T300-302
63 Mr Becker said in evidence that he in fact, given his position as stud master
and of the syndication, had the right to trade such unallocated shares. And indeed, after accounting for the $12,000 to Mr Neate, the right to profit from the sale of such shares, provided of course that he made a profit. Hence,
albeit that he sold the three shares and ultimately made a profit, and was unable to complete sales of two other shares, he remained liable only for the four shares at $12,000, with a two-year leeway to pay.
64 Mr Becker said that at no stage was he aware of the claim made by Mr Neate
that he was liable for ten shares until the end of the 2008 breeding season,
when problems as to the Artie Schiller service costs had emerged with Mr
Neate.65 Mr Becker said that what happened is that, because of monies owed for the
covering of the mares of Mr Neate by Artie Schiller, Mr Becker was being pressed for payments by the owners of Artie Schiller, and he approached Mr
Neate for payment of such service fees at the end of the 2008 season or early
into the 2009 season.
66 It was at that stage that Mr Neate made the allegation of monies owed on
Beckett in response to the request from Mr Becker for payment for the Artie
Schiller services. That is, five years after the alleged agreement, Mr Neate raised it for the first time, according to Mr Becker. Given such allegation, legal proceedings commenced shortly thereafter after Mr Becker went to see a
solicitor.
67 Despite the arguments put by Mr McNamara as to the inconsistency of the
sales effected by Mr Becker, the lack of any acknowledgement of Mr Neate as to Mr Becker's right to sell shares and profit, after accounting for $12,000 only, and the evidence of Mr Aylett, which I dismiss in the circumstances as not having the significance that it might otherwise would because of his limited
role in regard to business, I in fact accept the evidence of Mr Becker against
that of Mr Neate.68 I am not satisfied that any of the matters put by Mr McNamara in argument to
which I have referred to, satisfactory prove to the appropriate degree the allegations of Mr Neate that Mr Becker agreed to purchase ten shares in Beckett, be it either in the proprietorship or in the syndication.
69 Hence I dismiss the evidence of Mr Neate in this regard and I therefore
dismiss the claim of the second defendant in paragraph 4(c) of its Defence, and paragraphs 13 to 16 of the Counterclaim, and the right to set off any such amounts.
Alternative Claim regarding Beckett
70 As to Beckett, there is an alternative claim detailed in paragraph 19A through
to 19C of the Third Amended Counterclaim of Tara Farm Pty Ltd dated 29
July 2011. Pursuant to paragraph 19A, Tara Farm Pty Ltd calls for an
accounting as to the four shares as to Beckett, being the three shares sold
and the remaining share standing in the ISV name.1971 On Mr Becker's own admission, the sum of $48,000 is owed by him to Mr Neate for such shares.
72 As to the profits made on such shares, firstly in regard to the sale to
Valleyview Stud, or Ms Frenzel, payment took place on 30 September 2006
when the sum of $25,000 plus GST was received. In fact the sale had taken place some two years earlier on a terms contract made in approximately
September 2004. The capital profit was therefore $13,000, plus any nomination rights during the period 2005 and 2006.
73 The second sale was the sale to Lawson Hall, or the person Tony Fiume, at
approximately the same time on the same terms, again obtaining by way of the sale, a capital profit of some $13,000 and the nomination rights in the period 2005/2006.
74 The third sale was to Clearview Stud Pty Ltd. The sum of $25,000 plus GST was negotiated by way of a contract in November 2006 and payment was made in 2007. Such payment, as I have said, produced a capital profit of $13,000 and any nominations until such sale was paid for.
75 As I have said, Mr Becker also negotiated two other sales which fell through,
to Willowvale Stud, the person there being a Mr Stuart McRobert, and to
Messrs Griffith and Maher. Mr Becker said both sales fell through, albeit that
each of the parties, while the sales were still in existence, had been given nomination rights. To say the least, there is some variation in the recording of such sales and the nomination rights in the records to which I have referred, which were prepared by Mr Becker.
76 As to the profits on the shares, Mr Becker said, as I have already remarked,
that there was an understanding that he would take the risk in this regard.
That is, if a sale of a share produced a loss he would bear it, and any profit
was his to retain, after accounting to Mr Neate for the agreed commercial price of $12,000. To quote Mr Becker: “It’s just a commercial risk you have to take.”20 Such risk, he said, came about because he felt that he was honour bound in the circumstances to account to Mr Neate for the $12,000 for each share sold.
77 There is simply no credible evidence as to the terms of this contract but for
that of Mr Becker. As I have remarked, Mr Neate never sought to oversee the
arrangement. On his own admission he was particularly slack and unbusinesslike as to the arrangement and never sought to collect a penny that he had outlaid, nor seek proportionate payments. Indeed, as I have already
remarked, he said, in words I read out from the transcript, but for the Court
case he would not have even been aware of these matters.78 I therefore, upon considering all of the evidence, accept Mr Becker as to the
terms and as to the arrangements made for sales in regard to profits of
shares. I find his evidence credible, reliable and honest.
79 Mr Becker's evidence is strongly supported by the fact that he recorded each
such purported sale and nomination right in the yearly syndicate returns,
which I have found that he sent to Mr Neate each year.80 I find therefore that there is no basis for an accounting of the profits of such
sales, or the use of service rights in regard to such sales, and I would therefore dismiss the claim in regard to those four shares set out in
paragraphs 19A and 19B of the Counterclaim.
81 Clearly however, there is a debt owed to Mr Neate, and as I have said, I am
only referring to Mr Neate at the moment, because I have yet to decide the actual contracting parties, which I will do shortly, but there is, based upon my finding, a debt owed to Mr Neate for $48,000 as to the four shares in Beckett, and there should also be an accounting to Mr Neate for the use of any services and nomination rights associated with the two sales which did not proceed, being the sales to Willowvale Stud, and Messrs Griffith and Maher.
Northern Hemisphere Rights to Beckett
82 While admitting an obligation to pay to Mr Neate the sum of $48,000 for the four shares in the Beckett syndicate, by paragraph 7 to 8 of the Reply to the
Counterclaim, Mr Becker pleads that he was released from the payment of
such sum, effectively a set off, by the fact of the sum paid by ISV for the northern hemisphere rights to Beckett, being $54,291.62 paid on 4 December 2006.
83 On 9 November 2005, after Mr Becker had discussed with Mr Neate the
strategy of purchasing the northern rights to Beckett, Mr Becker faxed to Mr Neate a proposal as to such purchase, from the Irish bloodstock agents, Kerr
& Co. However, no agreement was reached in 2005 and in fact Beckett
returned to Ireland that year. Subsequently, Mr Neate saw Exhibit 3, a further email from Kerr & Co dated 8 November 2006,21 which contained a handwritten note from Mr Becker to Mr Neate as to the proposal.
84 Mr Neate asked Mr Becker to negotiate the northern rights.[22] Albeit that Mr
Neate said that he was never in fact informed that the transaction had been
finalised, he said he was certainly aware that it must have been finalised when
he became cognisant of the fact that Beckett had not returned to the northern
hemisphere at the end of the season 2006. Mr Neate said that given such
realisation and his understanding that such purchase was for the benefit of the whole syndicate, he realised that he would be up for his portion of the purchase price.[23]
[22] T611
[23] T612-613
85 Pursuant to such agreement, Mr Becker paid for such rights, as I have said,
on 4 December 2006, the sum of $54,291.62.[24] Surprisingly, given such evidence, when Mr Becker was cross-examined on such purchase it was put to him that such purchase was a folly of his own and/or some attempt by him to shore up a value of Beckett. I find unequivocally, on the basis of Mr
Neate's own evidence, that he is and was responsible for 30/40ths of such
purchase.
[24]25 Exhibit J, pages 35 and 37 of the Court Book
86 Mr Becker said that at about the time of such purchase he had told Mr Neate
that he would set off the cost of such purchase against what Mr Becker owed
Mr Neate for the Beckett shares. However, when he was pressed on this
matter, he said he certainly could not recall a precise conversation where
such was involved, or the date of such conversation.87 It was further put to Mr Becker that when confronted by Mr Neate about owing
the money on Beckett, that he was not forthcoming insofar as declaring the
fact of the release having already been effected; that is, that he did not proffer
such alleged release in answer to Mr Neate’s demand.
88 Mr Becker said that he did not so respond to Mr Neate’s demand, that he was
owed $120,000 plus for the Beckett shares, because Mr Becker was just so surprised, being that the allegation was made in the course of a response to a phone call from Mr Becker seeking payment of the Artie Schiller service fees
which he made at the end of 2008 and 2009. As he said, this being the first time in the four to five years since the Beckett syndication in 2004 that he had
ever heard of such a claim by Mr Neate.
89 Again, unlike what was put by Mr McNamara in cross-examination, Mr Becker
did not say in evidence that Mr Neate had phoned him to ask him for the
$120,000. What he said was that when he, Mr Becker, was pressing Mr
Neate in late 2008, early 2009, for the payment for the Artie Schiller servings,
that this matter had been raised by Mr Neate, and after that he went on and
sought legal assistance.
90 Again, in considering this evidence, I am constrained in considering the
evidence of Mr Neate, by his lack of precision and the unbusinesslike manner
in which he approached generally the whole of the Beckett syndication.91 Mr Neate confirms Mr Becker's evidence as to Mr Becker’s authority to so
purchase and Mr Neate’s liability for payment for such rights.
92 I accept Mr Becker's evidence that Mr Neate agreed to offset or release such
against the money which Mr Beckett owed for the four shares in Beckett.
93 Assuming an offset is possible, and I will come to that in due course, or the
release is taken into account against the $48,000, the release would be in the sum of $40,718.71, Mr Becker would therefore still be responsible for the payment of $7,281.29 for the four Beckett shares.
Beckett Agistment Fees
94 The final matter insofar as Beckett is concerned, is the Beckett agistment
fees. By paragraph 10 of the Amended Statement of Claim, the plaintiff
claims for agistment fees for Beckett for four months from July 2009 to October 2009. An analysis of the evidence, in particular the emails,25
demonstrates the arrangement made for Beckett to be at the ISV property
pursuant to the syndication, was at an end. Mr Neate, as he did not have
proper facilities at Tara Farm for a stallion, had asked for the stallion to stay at
the ISV property.
95 I find that the plaintiff is entitled to charge for such stay and that Mr Neate is
liable for 28/40ths, this being his holding at such date. The relevant invoices
are set out in the materials and they total $4,950.00[26] 28/40ths of that amount is $3,430.35.[26]27 They are respectively invoices 26467, 24520, 24591 and 24670.
96 I would dismiss the claim of the second defendant at paragraphs 20 to 22 of
the Counterclaim in this regard.
Denon Syndication
97 As to the controversy relevant to the stallion, Denon, such comes about in an
indirect way. As at the date of the original Writ, that is 30 January 2010, the
Statement of Claim, drawn by counsel, did not refer to Denon. In the
Amended and Further Amended Statement of Claim respectively dated 13
January 2011 and 29 July 2011, the plaintiff claims from the second defendant
a series of charges for agistment and other services, specifically in regard to Denon, and as at 30 July 2011, the Court, and indeed the parties, were
served with updated particulars in this regard.
98 On 29 July 2011, the second defendant filed an Amended Defence to the
Amended Statement of Claim and a Second Counterclaim. Previously, the
second defendant had denied and/or sought to set off all the items set out in
paragraph 10 of the Statement of Claim.99 On 29 July 2011, as to paragraph 10 in the plaintiff's Statement of Claim
against the second defendant, the second defendant admitted, at paragraph
9A, subject to setoff, the following:
(a) Invoice No. 23065 less $960.65, hence owing the sum of $5,812.05, that is owing to the plaintiff; (b) Invoice 231060 for $3,824.70; (c) Invoice 23559 for $13,200; (d) Invoice 23842 for $2,042.15; (e) Invoice 23929 for $5,685.90; and (f) Invoice 24126 for $1,584. 100 As to each of those amounts that I have referred to, the second defendant
sought to set off same against its Counterclaim against the plaintiff.
101 Four other invoices set out in paragraph 10 of the plaintiff's Statement of
Claim of course relate to Beckett. They total $4,800.50, and have already been discussed by me in the Beckett section. And in regard to these
agistment charges, I have already determined the obligation of $3,430 owing
by Mr Neate to the plaintiff for such agistment.102 As to Denon therefore, pursuant to paragraph 10, there remains in dispute as
to the plaintiff's claim under paragraph 10, the following:
[28] Page 54A of the Court Book
[29]30 Page 64 of the Court Book
(a) Invoice 23520 for the sum of $21,656.50;27 (b) Invoice 23522 for $1,402.50;[28] and (c) Invoice 240085 for the sum of $10,385.29.[29] 103 The second defendant otherwise denies the claims in paragraphs 10, 11, 12
and 13 of the plaintiff's Amended Statement of Claim, and the second defendant otherwise alleges that any sums owed to the plaintiff are entitled to
be set off pursuant to the Counterclaim against the plaintiff.
104 By way of Counterclaim dated 29 June 2011, the second defendant alleges
the wrongful transfer of three shares in the Denon syndicate to the plaintiff
and a failure to account for same; and by paragraphs 23, 24, 25, 26 and 26, payment by the plaintiff of additional fees on behalf of the second defendant;
and further, by paragraph 27, the wrongful utilisation of the payment of $20,000 for airfreight for Denon, and that such sum was wrongly applied by
the plaintiff in paying a sum of $1,886 for agistment charges at ISV Stud for a
mare, Gulf Mistress.105 In the reply to such Defence and Counterclaim dated 20 May 2011, the
plaintiff admits that he did not pay Tara Farm for such shares in the Denon syndicate and pleaded that he did not have any obligation to do so, and further, that the second defendant had no standing to make such a claim in
these proceedings.
106 As a background to the Denon issues and the solution of the matters of
dispute that I have just referred to, it is clear that in approximately February 2005, Mr Becker, in conjunction with a friend, Paolo Crespi, obtained an opportunity to obtain the services of Denon in the southern hemisphere. The owners and purchasers of such rights were to be Mr Neate of Tara Farm and Mr Ryan of Limerick Lane as to fifty per cent each. The purchase for such
rights was paid for by the owners in the sum of $US350,000 and a further
$130,000 expenses.30
107 In about September 2005, the owners of Denon agreed to syndicate Denon.
As Mr Becker believed the size of the syndicate required ASIC approval, Mr
Becker, on behalf of the owners, approached Sire Custodians Pty Ltd, the
only company approved by ASIC to syndicate stallions. (On the evidence of Mr Fleiter, solicitor of Macquarie Legal, who is and was very experienced in
such transactions, the view of Mr Becker was incorrect and it was not actually necessary to have the syndication ASIC approved).[31] Mr Fleiter however, attended to the syndication documentation and to the agreement for such syndication identified by him.[32]
[31] T765
[32] Exhibit S, page 82AD of the Court Book
108 Sire Custodians, pursuant to the agreement, were appointed to manage and
operate the syndicate for the benefit of the owners.[33] Irrespective of the reference to ISV, as the owner in the document, the actual owners were the second defendant and Limerick Lane Pty Ltd. ISV acted as a “trustee” for both of them. Such was confirmed by Mr Neate in his evidence. Mr Neate
stated that he had no dealings whatsoever with Sire Custodians in 2005, and indeed never saw the syndication deed.[33]34 See clause 3.1 of the Agreement
109 As Mr Fleiter said, the Cross-hemisphere Ownership Agreement dated 12
August 200534 disclosed Mr Becker as the personal representative of the
southern hemisphere owners, then being Tara Farm Pty Ltd and Limerick Lane Pty Ltd, and then after the syndication, such financiers, that is the
owners, would end up with the shares.
110 Mr McNamara put in cross-examination of Mr Becker that by his allowing
himself to be so described in such document as the owner he was party to a
false representation.
111 I do not accept that such reflects on the credibility of Mr Becker or his
character, for it is clear to me that at all times his trust or representative
relationship was known to each of the owners and to Mr Fleiter.112 Pursuant to the agreement, ISV were delegated the manager's powers to
operate the syndicate, such delegation being allowed under Clause 4.1B. All payments were supposed to be approved by the manager. As Mr Fleiter
stated, as manager of the syndication, it was the responsibility of Sire Custodians Pty Ltd to receive all monies for shares sold or nomination rights
sold in its capacity as promoter, and all monies were payable to Sire
Custodians Pty Ltd.113 In its role as delegated manager, ISV advised the manager the details of the
shareholding, accounted to the manager for moneys received in such capacity for sales of shares et cetera, and such information was noted on the
register.[35]
[35]36 See the register first produced as of 30 June 2006 being Exhibit 6, page 101 of the Court Book.
114 Given the actual ownership, and the fact that the syndication could not
proceed unless forty shares had been allocated by the offer closing date, the shareholders for the first year were as indicated in the register and recorded by the stud master manager and manager. Such details would have been
sent by Sire Custodians to all shareholders. Mr Becker stated in evidence that he never applied for any shares, but the six shares recorded in ISV’s
name were those remaining, which were actually unsold at the end of the first
year and were held by ISV as “trustee” for the owners.115 Mr Becker, as to four of such unallocated shares in the records under the ISV
name, gave evidence that they were subsequently given to him by Mr Ryan following a discussion in 2005. This followed Mr Becker agreeing to pay
outstanding VAT on the leasing of Denon. I am not certain to whom, but I think to some tax collecting body in Europe, and that was in the sum of
$36,692. True it is that Mr Becker in fact did not make that payment until
some time in 2008.
116 Mr Becker was aware that the value of a Denon share in 2005 was $33,000; hence if he is to be accepted, the value of such shares and the value
“deeded” to him by the alleged agreement from Mr Ryan, would have been to
a value of some $132,000. Mr Ryan was not called by Mr Becker. The Court was advised by Mr Becker’s counsel that was because Mr Ryan was in France at the time of this trial.
117 Mr Becker agreed in cross-examination that during 2005 he had also put this
VAT proposal to Mr Neate. Mr Becker agreed with the evidence given by Mr
Neate that he never received Mr Neate’s approval to pay this VAT, much less
Mr Neate’s agreement that he could “deed” himself four shares in the Denon
syndication.
118 Mr Neate in fact gave evidence that after Mr Becker approached him about
making the VAT payment, Mr Neate sought independent advice, and as a result in fact personally advised Mr Becker that he was not prepared to pay the VAT. Mr Neate said that at no time did he agree to Mr Becker taking shares in the syndicate in any circumstances, unless of course Mr Becker paid $30,000 plus GST for such shares.
119 I have given this matter close consideration. I find I cannot accept Mr
Becker's evidence as to these four shares. It makes no commercial sense. I
do not consider that Mr Becker is lying about this; however, given the breadth
and the laxity of arrangements with Mr Neate, I am satisfied that either Mr Becker was confused about the circumstances or that he concluded that given
such “deeming” by Mr Ryan, it was also approved by Mr Neate.
120 Further in this regard, Mr Becker gave very confusing evidence as to making
various syndicate payments levied against Mr Neate’s shareholding.36 Again, such makes no commercial sense. However, there has been no claim made by Mr Becker for such payments.
121 Further, as to the sale in 2008 of two of his alleged four shares for $30,000 such was evidenced in the Denon mare reconciliations,[37] being the sale to Alan Boxall and to Clearview Park, I find they were sales to which Mr Becker
had no authority to make.
[37]38 39 Exhibit 7, page 103 of the Court Book
122 Further, I conclude that Mr Becker had no authority to sell or trade nomination
rights in regard to all of the six shares which were in the ISV name. Such were effected during the years 2005 to 2008 for, on Mr Becker's evidence, a figure between $12,000 a nomination initially, and by 2009, $9,900 a nomination.
123 Again, I make the comment that it is obvious that Mr Becker must have felt
that he was so entitled, either by his misunderstanding of an arrangement with
Mr Neate, or specifically upon the authority of Mr Ryan, to effect such sales.
Such is demonstrated to me by the fact that such sales were detailed in the
information provided to Sire Custodians and subsequently reported in the
Denon mare's reconciliation.38124 I accept however the submission of Mr Ribbands, that the accounting for the
cost of shares, that is those four shares, the sale of such shares or the nomination fees pursuant to the syndication agreement, are matters for Sire Custodians as the syndicate managers on behalf of all of the owners, and it is
at their option whether any recovery is taken on behalf of all shareholders in
the syndicate. No doubt the second defendant could instruct them to do so.125 I find that the second defendant has no standing in this regard as to the
counterclaim it makes in Clause 26(aa), 26(a), 26(c) and 26A, B, C, D and E.
Gulf Mistress
126 The next matter I want to deal with is paragraph 27 of the Counterclaim. This
relates to an agistment charge paid for Gulf Mistress in the sum of $1,886.50
by the plaintiff from a payment received in regard to the Denon syndication.127 Mr Neate says he never owned Gulf Mistress, nor did the second defendant
own Gulf Mistress. Mr Becker charged the second defendant for agistment
fees for Gulf Mistress.128 Mr Becker said in evidence he obtained instructions as to the agistment of
Gulf Mistress from a third party. That party said that Mr Neate had authorised
such agistment payment after being requested to seek Mr Neate's advice as
to same by Mr Becker.129 A third party's advice as to what Mr Neate may or may not have agreed to is
not sufficient. I find on the evidence that Mr Becker, or the plaintiff, was not authorised to allocate funds received from the second defendant to such account, being the payment of $1,886.50.
130 Again, I find no dishonesty in Mr Becker in so acting, and I accept that he acted on the basis that he thought he did have permission of Mr Neate, having been so advised by the third party.
131 The final matters relating to Denon are the accounts detailed in paragraph 10
of the Further Amended Statement of Claim dated 29 July 2011.
132 The second defendant, in its Defence of 29 July 2011, admitted liability for the
payment of $5,812.05, $3,824.70, $13,200, $2,042.15, $5,685.90 and $1,584.00, totalling $32,148.80. The second defendant however disputed its
liability for three amounts.
133 The first of those was Invoice 23520. As a result of examination and cross-
examination on this matter, it is agreed that the correct figure charged for the insurance for Denon for the 2007/2008 year, was in fact $12,488.00. As the delegated manager from Sire Custodians, Mr Becker, or ISV, was entitled to
pay accounts on behalf of shareholders, albeit Mr Fleiter said in his evidence
that Sire Custodians do not get involved in insurance after the first year and
that such is up to the owners.
134 I, however, accept Mr Becker's evidence that such insurance was paid on
behalf of the owners, and that he had never received advice from Mr Neate or
Mr Ryan not to do so. Specifically, I do not think the email to Sire Custodians
of 4 July 2007 is inconsistent with this view.39
135 Despite the evidence of Mr Neate that it was not his practice to insure after
the first year, I find that given its delegated role, ISV was entitled, until told not
to do so, to pay the insurance, and that is what occurred. In the
circumstances, the second defendant is liable to the plaintiff for such sum, that
being $12,488.00.136 The next invoice is Invoice 24085.[40] This relates to additional costs involved with the Denon syndication in the 2007 year when Denon was quarantined in New South Wales due to the outbreak of equine flu; that is, he did not actually
work that year because he was restricted to New South Wales.
[40]41 Exhibit V, page 64 of the Court Book
137 Mr Fleiter, in his evidence, said that the syndicate manager was entitled in the
circumstances to charge for such costs. Albeit that Mr Neate in his evidence
denied liability for same, I find it was an appropriate charge that was made.138 Equally, on the balance of the evidence of Mr Fleiter, I find that Invoice No.
2352241 was again a cost paid by ISV as indicated in the invoice, and that ISV
was acting within its power to pay such sum on behalf of the owners and was
entitled to be recompensed for such figure.139 Hence I find that in regard to each of the invoices, the second defendant owes
such sums to the plaintiff, being respectively $12,488.00, $1,402.50 and
$10,385.29, making a total of $24,275.79.140 If added to the earlier total of admitted invoices, the total owed by the second
defendant to the plaintiff is the sum of $56,424.59.
Artie Schiller Service Fees
141 In regard to Artie Schiller, the southern hemisphere breeding rights had been
leased for three breeding seasons from the owners of Artie Schiller, Hurricane
Hall Stations Pty Ltd, Kentucky, USA, by Mr Becker.[42]
[42] Exhibit Q, page 90 to 90S of the Court Book
142 Mr Becker said that he was phoned by Mr Neate some time into the 2007
season as to Mr Neate’s mares being served by Artie Schiller. He sent Mr Neate a draft agreement involving the costs involved in the service of the
broodmares at the rate of $33,000 per mare for three years.[43] Suffice to say, and consistent with the dealings between these two men, no one insisted on such being signed. Mr Neate in fact denied ever receiving such.
[43]44 Exhibit R, page 89 of the Court Book
143 As background, Mr Neate had hoped to have his mares serviced by the horse,
Denon. However, given the equine influenza outbreak in August 2007, such
as I have already remarked, this led to Denon being marooned in New South Wales, and Mr Neate being urgently in need of a stallion to service his mares
in Victoria.
144 There is no dispute on the papers before the Court that Artie Schiller actually
serviced the ten mares forwarded from Tara Farm, nine who subsequently foaled in the 2007 season, and the seven forwarded from Tara Farm in the
2008 season, five of whom foaled. There were none served in the 2009
season.
145 Subsequent to the telephone call, Mr Becker said that the ten mares arrived
unannounced. Mr Becker said that he thereupon had his secretary, as is his usual practice, send the paperwork relevant to each mare as to the actual conditions surrounding such servicing.44 Again, and consistent with Mr Becker’s practice, these documents forwarded were blank and, as best I can
understand it, never executed in regard to any of the mares.
146 In cross-examination, it was put to Mr Becker that he agreed to Artie Schiller
servicing Mr Neate's mares on the basis that the costs for same would be set off by way of working out the debt that he owed in regard to the Beckett purchase in 2004. Mr Becker denied this. Further, he said he would have no
right to do it as to do so would act directly in disconformity with the agreement
with the American owners.147 In this regard it is to be noted that if I accept Mr Neate's evidence that his
mares would be serviced by Artie Schiller for $11,000 per service, such would breach the lease agreement between the owners and ISV, being that such
fees would be not less than $17,000.[45] Although it must be noted that given the outbreak of equine influenza, Mr Becker said in evidence that the owners
[45]46 Exhibit Q, clause B, page 90 of the Court Book
were prepared to discuss a three-year agreement in order to shore up support for the stallion, that is where people would pay upfront fees for three seasons.
148 Further, it was put to Mr Becker in cross-examination that Mr Neate and his
manager would say, which they did before this Court, that at Mr Becker's property at Nagambie, Mr Neate and Mr Aylett attended to look at Artie
Schiller, and later when the three men were in Mr Becker's office, Mr Neate
specifically rejected the three-year deal proposed by Mr Becker, but said he
would send ten mares at $10,000 each, but for only one year.149 In answer to such proposition, Mr Becker said he could not recall such
conversation, but he specifically denied that at any time Mr Neate limited the
arrangement for Artie Schiller to service his mares to one year only.150 Regrettably, but consistently with the way Mr Becker ran his business, no
invoice for these costs was prepared by Mr Becker until 1 August 2008. The
first of those invoices appears at page 57 of the Court Book. Unfortunately, it
does not reflect the terms as alleged by Mr Becker, but is an invoice for one
year only at a price of $18,000 a service, which bears no relation to Exhibit R, the pro forma allegedly forwarded to Mr Neate, and also relates to the nine
services in 2008. Suffice to say, of course, Mr Neate says he made no such
agreement to pay that fee.151 A further invoice was subsequently sent on 1 July 2009,46 by which time the
full sum of $270,000, being for the three-year term that Mr Becker alleges that Mr Neate entered into, should have been paid. However of course, that had
not been paid, and this invoice dated 1 July 2009 is for annual fees for $20,000 per service, again bearing no relationship to the pro forma allegedly
forwarded to Mr Neate.[47]
[47]48 Exhibit R
152 Finally, there is a further invoice dated 1 January 2010, which attempts to
reconcile the above invoices and the inconsistencies,48 albeit now charged at a base fee, such being a non discount fee, which does not reflect the alleged contract as suggested by either party.
153 Mr Neate, in evidence, denied any such contract, that is, for a three-year term
to be paid by way of two tranche payments, the final payment which should
have been paid on 1 July 2008.
154 Alternatively, Mr Neate said that the agreement was for him to send mares to
Artie Schiller at $10,000 a service, which indeed he did in 2007 and 2008. Indeed Mr Neate said, in 2008 after he had sent the mares for service, Mr
Becker phoned him and told him the owners would not sanction such deal
with Mr Neate and wanted him now to agree to a three-year deal. Mr Neate says he refused, saying such would defeat the purpose of the alleged agreement of Mr Becker to offset the moneys owed by Mr Becker for the Beckett shares.
155 Mr Neate gave evidence that all such mares serviced by Artie Schiller were
owned by Tara Farm Pty Ltd, and in the Amended Defence and Amended Counterclaim dated 29 July 2011, the second defendant admitted ownership
of the mares and that they had been so serviced and that the second defendant was liable as to $10,000 for each service in regard to live foals being produced, that is fourteen foals, and GST, making a total figure of
$154,000.[49]
[49]50 paragraph 17 of the Counterclaim
156 I find that there was a contract to service the mares entered into between Mr
Neate and Mr Becker. Clearly such services took place and there is a sum to
be paid for such services. I am unable to accept the evidence of Mr Becker
that there was a three-year agreement or that Mr Neate is liable for the sums
which Mr Becker has alleged.157 I find in the circumstances, Mr Becker has not satisfied the burden as to his
allegations in this regard. In this instance there is no evidence inconsistent with that of Mr Neate or Mr Aylett. Given the evidence, I find that the price that should be set for each of the services should be the sum of $10,000 as alleged by Mr Neate and supported by Mr Aylett. Therefore, the amount outstanding to the plaintiff for servicing of the mares forwarded by Mr Neate, is the sum of $154,000.
158 As I have already decided, the second defendant is not entitled to a set off
against this sum pursuant to clauses 13 to 16 of the Counterclaim.
159 However, there may be, depending on what happens subsequent to this
determination, an agreement to set off the monies owed to Mr Neate for the
cost of the Beckett shares, after an offset is made for the purchase of the northern hemisphere rights. Again, that all comes down to legal capacity and the matter as to who actually contracted, which I will come to now.
Contracting Parties
160 This issue, referred to in the last paragraph, specifically brings up the question
of legal capacity and who were the actual contracting parties.
161 In the original Statement of Claim, the plaintiff alleged the ownership of the
mares was that of the first defendant, Mr Neate, or in the alternate, the second defendant. In the Defence of the first defendant filed 12 February 2010, Mr
Neate denied ownership of the mares serviced by Artie Schiller.
162 During the hearing, on a number of occasions, I questioned Mr McNamara as
to whether this issue was being pursued; that is, given that Mr Neate had not
been businesslike in these transactions and indeed, to use his word “slack”,
whether there was to be maintained any difference between Mr Neate acting in his own right and on behalf of the second defendant. This becomes paramount, as in the final submissions of Mr McNamara, he submitted that Mr
Neate at all times had authority to buy, and the second defendant.50
163 I had wondered, as Mr Neate had agreed that all these deals were done “by
handshake” between Mr Becker and him, whether such would be an issue.
However, albeit the number of various issues that this Court had to consider in
this case, Mr McNamara has pursued this issue in his submission.
164 Obviously Mr Neate has at last decided to act, at least in this Court, in a
businesslike manner. That is, where my findings allow for a determination,
then the Court must determine the issue of legal capacity and who were the
actual contracting parties in each instance.
165 As has proved usual with this relationship, and with the manner in which Mr
Becker ran his business, there is no clear business practice as to the
forwarding of accounts. For example, in an Artie Schiller invoice dated 4
January 2010,[51] the invoice is addressed to Tara Farm. In a Denon invoice
[51] Page 78 of the Court Book
dated 27 January 2009,[52] the invoice, which I have already decided in regard
[52] Exhibit V, page 64 of the Court Book
to the 2007 costs, additional costs for Artie Schiller, records the invoice as
being to Tara Farm, and under that, David Neate.
166 Again, in regard to the invoice as to Artie Schiller of 1 August 2008, the
invoice is recorded as Tara Farm and then Mr David Neate.[53] And then a
[53] Page 57 of the Court Book
further invoice which was exhibited by the defendants at Exhibit 4, records an
invoice to David Neate, Tara Farm.
167 Mr Ribbands, in final submission, submitted that the Court should find that at
all times Mr Becker, on behalf of the plaintiff, contracted with Mr Neate in his
own right.[54][54]55 see paragraph 10 of the plaintiff’s closing written submissions
168 Mr McNamara submitted that all contracts, whether entered into by Mr Neate,
were made with authority to bind Tara Farm Pty Ltd, who was a disclosed party, and that Mr Neate was never bound personally and that this was known
to Mr Becker.
169 The persistence with this point necessitates the Court to consider again each
of the transactions.
170 Coming firstly to the Beckett dealings. Mr Becker in evidence said this:
“At all times my discussions since I have known Mr Neate have always
been with Mr Neate who owns a property called Tara Farm at Torquay…
So all of my dealings have always been with and on the instruction of
David Neate, who trades as Tara Farm.”55
171 He said that there was no difference between Mr Neate and Tara Farm, and
that he had never sat and decided to split the difference; one was the same.[56]
[56] T475
172 Mr Neate's evidence was that the Beckett agreement was nothing other than
an agreement between mates, and was informal. As I have said, his approach to such was slack and unbusinesslike, and he had never even seen the pro forma joint venture agreement[57] but had acted in accord with a like agreement which he was well aware of which had been forwarded to him by Mr Becker, which he described as the “Truce Agreement”.[58]
[57] Exhibit G
[58]59 T718
173 As agreed in evidence, all mares sent to be serviced by Beckett were branded
with the brand “DN”, that is the personal initial of Mr Neate. Tara Farm, where the mares were kept, was not a registered business name, albeit that in
Exhibit X, the Inglis sales catalogue for 2011, sales of horses are said to be
“on account of Tara Farm”, and indeed, as is obvious from that exhibit, horses
are bred and sold under that unregistered name.
174 At no stage had Mr Neate ever advised Mr Becker that the contract was to be between the plaintiff and the second defendant, nor, he said, did he go round
introducing himself as contracting on behalf of the second defendant. Indeed
he liked to keep a low profile in this regard.59
175 As to the annual returns forwarded, as I found, by Mr Becker to Mr Neate in
each of the years 2004 to 2008, Tara Farm was recorded as the shareholder and not the second defendant. In the circumstances, I accept Mr Becker's evidence that the agreement with Beckett was between him and Mr Neate, that is not with the second defendant.
176 Again, relating this issue to the Denon relationship. Clearly the syndication
document identified by Mr Fleiter[60] had been prepared from information given
[60] Exhibit S, page 82AB of the Court Book
to Mr Fleiter by ISV. As I have found, ISV was the declared owner in the
documentation, acting as agent or trustee for the second defendant and
another. Such is confirmed by the first year's syndicate returns showing the
second defendant as the shareholder.[61][61]62 Exhibit 6, page 101 of the Court Book
177 I find that in regard to Denon, there was no contract between the plaintiff or
the first or second defendant. The payments which I have ordered to be
made by the second defendant in this regard as to Denon come about from the plaintiff acting in its role as the delegated manager and, of course, but for
the three of which I have determined, are all admitted by the second
defendant as being owed to the plaintiff by way of pleadings filed.
178 Coming then to Artie Schiller, the time difference, insofar as Artie Schiller, is
such that it comes after the Denon syndication. Clearly, as a result of the Denon syndication and the information given to Mr Fleiter by Mr Becker or
ISV, Mr Becker must be taken to have been aware by August 2007 of the
existence of the corporate body, Tara Farm Pty Ltd.
179 Tara Farm Pty Ltd had been registered as the purchaser and holder of shares
in Denon. However, as to Artie Schiller, as I have referred, this contract
emanated out of a telephone call between Mr Neate and Mr Becker following the equine flu, or influenza outbreak, and the travel restrictions on Denon to
New South Wales in 2007.
180 Mr Neate gave no evidence of actually advising Mr Becker that the mares
were the property of the second defendant. Mr Becker maintains such agreement was with Mr Neate personally and/or Tara Farm, who he understood were as one.
181 As I have already remarked, Tara Farm has no legal standing. All accounts in
regard to Artie Schiller service fees that I have referred to, were sent out to either David Neate or Tara Farm. Conspicuously there is no reference at any stage to the second defendant.
182 Despite the inconsistency as suggested in regard to Exhibit 4 by Mr
McNamara in cross-examination and in final submission, such does not
discredit, in my view, the evidence of Mr Becker in this regard.
183 Insofar as Exhibit 4, the transfer of the sum in the Invoice 341007 seems
unique.62 I accept Mr Becker's evidence that such must have come about as a direct request from Mr Neate's office, and that the submission made by Mr Ribbands that such is unique, probably because it was for GST purposes.
184 Despite that inconsistency, upon all the evidence, I find that the contract in
regard to the servicing of Artie Schiller was between the plaintiff trading as
ISV and Mr Neate personally, and did not involve the second defendant.Orders 185 Hence we come to the consequences of such findings both in regard to the
facts of the relationships and specifically in regard to the questions as to who
were the contracting parties.186 Coming first to the claim of the plaintiff.
187 The plaintiff is entitled to recover personally from Mr Neate the sum of
$154,000 pursuant to paragraph 1 to 9 of the plaintiff's claim. Also, against Mr
Neate, pursuant to paragraph 10, the plaintiff is entitled to recover agistment
fees in regard to Beckett, being the sum of $3,430.35, making a total judgment against Mr Neate personally of $157,430.35, plus appropriate
interest to be agreed.
188 Also, given the admissions as I have referred to in my findings, the plaintiff is
entitled to judgment against the second defendant in the total sum of
$56,424.50, again with appropriate interest to be agreed.189 The sum of $56,424.50 is made up as follows:
(i) As to Denon, by way of the admissions in the Amended Defence, being the admissions in (a) Invoice 23065 in the sum of $5,812.05; (b) invoice 23160 in the sum of $3,824.70; (c) invoice 23559 in the sum of $13,200; (d) invoice 23842 in the sum of $2,042.15; (e) invoice 23929 in the sum
of $5,685.90; (f) invoice 24126 in the sum of $1,584 making, the sum of
$32,148.80.(ii) In addition to that is to be added my findings as to the second defendant
in regard to Denon, concerning the three disputed invoices. Firstly,
invoice 23520 for $12,488.00; secondly, invoice 23522 for $1,402.50;
and thirdly, invoice 24085 for $10,385.20, making a total of $24,275.70.
If you add both those admitted invoices and the invoices that I have found they
total, $56,424.50.
190 We then come to the counterclaim.
191 I dismiss the claim of the second defendant as to paragraph 4(c), the one alleging the Beckett debt owed by the plaintiff for the ten shares. I have dismissed it on two bases: one is that there was no contract between them,
and secondly, that I do not find the facts alleged by Mr Neate proved.
192 In regard to paragraph 4(d), as to an alleged agreement to set off against the Beckett debt the service fees in regard to Artie Schiller, again, I found that
there was no such agreement but also, even if proved, it would not assist the
second defendant, because the second defendant was not party to the
Beckett or Artie Schiller agreements.193 I dismiss the counterclaim set out in paragraphs 13 to 18.
194 As to the alternative claim set out in paragraph 19A to C, there should be an
accounting by the plaintiff for any nomination rights exercised in regard to the aborted sales to Willowvale Stud and Griffith Maher. That accounting should be to Mr Neate.
195 I also find that the plaintiff is indebted to Mr Neate in the sum of $48,000 for the purchase of the four Beckett shares. However, I dismiss the claim made
by the second defendant in this regard, as I do not find that there was any
contract between them.
196 However, hopefully, if some good sense comes out of this hearing, the parties
will note that I have made a finding that there is $48,000 owing to Mr Neate. I have also made a finding that there is the sum of $40,718.71 which I have found is liable to be paid by Mr Neate to the plaintiff for the purchase of the
northern hemisphere rights, leaving the plaintiff indebted to Mr Neate for $9,282.00. However, as I have said, as there is no agreement with the
second defendant, I dismiss the counterclaim in this regard.
197 I also dismiss paragraphs 20 to 22 of the Counterclaim.
198 Coming then to paragraphs 23 through to 26(aa). This relates to Denon and, as I have determined, the second defendant has no standing to take such action and I would therefore dismiss the claims in paragraphs 23 to 26(aa) and then (a), (c), and then A, B, C, D and E of the Counterclaim.
199 However, again, should good sense finally prevail in this case, I point out my
findings in regard to the obligation of the plaintiff as to liability for the Denon
shares, and the sale of the Denon shares. I would imagine that good sense would see an assessment of that figure and that that could be set off against monies that Mr Neate owes to the plaintiff in the sum of $157,430.35 plus interest.
200 As to paragraph 27 to 27C, the item in the Counterclaim as to Gulf Mistress, I
find that the plaintiff is indebted to the second defendant in the sum of
$1,886.56.
201 Coming then to the Reply and Defence to the Amended Counterclaim,
paragraph 7 is a Defence to the Counterclaim of the second defendant, and
there is a denial of any right to set off by the second defendant of the alleged
Artie Schiller agreement, and by paragraph 7, release from the monies owed
upon the four shares in Beckett by the cost expended in the purchase of the
northern hemisphere rights to Beckett.202 As to such rights, I have found Mr Neate is liable to pay for the northern rights
30/40ths of the cost of the northern hemisphere rights, being the sum of
$40,718.71. Whether this is achieved by way of agreement or some formal
amendment of the pleadings, the plaintiff is entitled to a release or a set off against the monies owed to Mr Neate for the four shares in Beckett in the sum of $48,000 by the amount owed by Mr Neate for the northern hemisphere rights of $40,718.71 making a balance of $7,281.29. However, I would formally dismiss the claim made under paragraph 7 in the Amended Defence
to Counterclaim on the basis that there is no need for such off set as there is
no contract with the second defendant, which founds the claim as to Beckett.203 I will need to discuss the issue of interest and costs with the parties.
- - -
Page 18 of the Court Book
Exhibits 10 and 8
T773
T719
T807
T844T298/Exhibit C
Exhibit M
T302
Page 36 of the Court BookExhibit O
Page 54 of the Court Book
See the admission of second defendant, paragraph 23
Page 82W of the Court Book
In particular, T168-170
Exhibit 7
Exhibit 13, page 103D of the Court BookPage 54A of the Court Book
Exhibit R, page 91 to 91A of the Court Book
Page 70 of the Court Book
Page 78 of the Court Book
paragraph 61 of the defendants’ closing written submissions
T474
T710
Page 47 of the Court Book
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