Smith v Moran HC Hamilton CIV-2010-419-001598
[2011] NZHC 187
•7 March 2011
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV-2010-419-001598
BETWEEN BARBARA CECILE SMITH Plaintiff
ANDMICHAEL JOSEPH MORAN AND HELEN MARY MORAN Defendants
Hearing: 24 February 2011
Counsel: P J O'Sullivan with P H Fisher for Plaintiff
M A Karam for Defendants
Judgment: 7 March 2011 14:30:00
JUDGMENT OF PETERS J
This judgment was delivered by
The Hon. Justice Peters on
7 March 2011 at 2:30pm
pursuant to Rule 11.5 of the High Court Rules
……………………………………………..
Registrar/Deputy Registrar
Solicitors:
O’Sullivans Lawyers Ltd, P O Box 7283 Hamilton 3247
Email: [email protected]
Clancy Fisher Oxner & Bryant, PO Box 66 Tokoroa 3444
Email: [email protected]
Rogers & Rutherford (S Rutherford) P O Box 2330 Auckland 1140
M A Karam, P O Box 5444 Auckland 1141
Email: [email protected]
Case Officer:
B C SMITH V M J MORAN AND H M MORAN HC HAM CIV-2010-419-001598 7 March 2011
[1] The parties to this case are owners in equal shares of what is expected to be a valuable foal (“foal”). The foal is a full brother to So You Think (“SYT”) which has had numerous winning starts in its racing career to date. SYT won the Cox’s Plate in each of 2009 and 2010 and it ran third in the Melbourne Cup in 2010. A majority stake in SYT is said to have been sold shortly after the Melbourne Cup at a price which, if extrapolated, would put a value on SYT of about AUD$60m.
[2] SYT and the foal in this case are the progeny of Triassic, the mare, and the stallion, High Chaparral. The foal was born or “dropped” on 30 November 2010 at Windsor Park Stud (“Windsor Park”) in Cambridge.
[3] The foal is a “weanling”, that is, not as yet separated from its mother, Triassic. The process by which the foal is weaned is expected to occur naturally within a short period of time. At the outside, it is expected the process will have run its course by mid-May 2011. The Defendants’ view is that the weaning is likely to take place earlier than that, and in fact this month.
Proceedings to date
[4] The Plaintiff commenced proceedings on 6 December 2010. In those proceedings, the Plaintiff seeks a declaration that she holds the sole property and breeding rights associated with Triassic, subject to a Lease for Stud Purposes executed by the Plaintiff and Defendants. The Plaintiff also seeks an injunction restraining the Defendants from doing anything inconsistent with the Plaintiff’s said interest and rights. The Plaintiff also seeks leave to apply to the Court for any further orders or injunctive relief as might be desirable to give effect to the claimed interest and rights. The Plaintiff also seeks costs.
[5] By memorandum to the Court dated 21 January 2011, the Defendants state that they do not contest the Plaintiff’s ownership of Triassic. The Defendants also advise that they will not be filing a defence to the Plaintiff’s claim or a counterclaim, although they reserve the right to make a claim against the Plaintiff at a later time.
At the hearing before me, however, the Defendants advised that, while they do not propose to contest the Plaintiff’s ownership of Triassic, there is a dispute as to whether the Defendants are entitled to share in any future Triassic progeny. Counsel for the Defendants advised me that, notwithstanding the Defendants’ memorandum of 21 January 2011, the Defendants do propose to file a counterclaim and to pursue that claim.
[6] On 26 January 2011, the Plaintiff filed an amended statement of claim and an application for interim relief. In her amended statement of claim, the Plaintiff has included an additional cause of action and in respect of that cause of action she seeks an order for delivery up and return of Triassic and the foal. The Plaintiff also seeks an injunction restraining the Defendants or their alleged agents, Windsor Park, from preventing the transportation of Triassic and the foal from Windsor Park to another farm. As yet, Windsor Park has not been joined as a party to the proceedings. The Plaintiff also seeks any further or other orders which might be necessary or desirable, general damages and costs.
[7] In her application for interim relief, the Plaintiff seeks an order restraining the Defendants or Windsor Park, again as the Defendants’ alleged agents, from preventing Triassic and the foal from being transported from Windsor Park to another farm, on condition that the foal would not be further removed from that farm without the consent of both parties or an order of the Court. The Plaintiff also seeks that costs of and incidental to the application be reserved.
[8] The grounds on which the Plaintiff seeks interim relief are that:
(a) There is a serious question to be tried as to whether the Defendants have converted Triassic and the foal to their own use;
(b) The balance of convenience favours the Plaintiff;
(c) The overall interests of justice favour the making of the orders sought.
[9] The Defendants oppose the application and the grounds of opposition are that there is no serious question to be tried and that the balance of convenience lies in declining the relief sought.
[10] The parties filed affidavits from various witnesses. The matter was heard on
24 February 2011.
Facts
[11] The facts which are relevant to the disposal of the Plaintiff’s application are
as follows.
[12] The Plaintiff and her former husband (together the “Smiths”) acquired Triassic at a sale in Sydney in 2005. At that time, Triassic was in foal to a filly, later named La Souvenir. The Plaintiff gives evidence that she is a hobby horse breeder with a great interest in and affection for two brood mares that she owns, one of which is Triassic.
[13] As it turned out, the person who bid for the mare on behalf of the Smiths in
2005 was the first-named Defendant, Mr Moran. Shortly after the purchase, the Defendants asked the Smiths whether they could acquire a 50 per cent share in Triassic. The Smiths agreed.
[14] Mr Moran has given evidence that he commenced his career working for Bart Cummings, a legendary Australian trainer; that he, Mr Moran, has managed leading Australian jockeys, has been a Racing Stable Foreman for a leading Randwick trainer, John Morish, and an Assistant Trainer for a leading Flemmington trainer,
Mr David Hall. Mr Moran gives evidence that he is in his 10th year as marketing
manager for Windsor Park and that he and his wife, the second-named Defendant, breed thoroughbreds on their own account and in co-ownership with others.
[15] Triassic “dropped” La Souvenir in October 2005. The Smiths and the Defendants owned La Souvenir in equal shares, although the Smiths subsequently sold their 50 per cent in La Souvenir to a third party.
[16] In November 2005 Triassic was served by High Chaparral. The service took place at Windsor Park. SYT was the resulting foal, dropped on 10 November 2006. SYT was sold to Bart Cummings.
[17] Triassic was served again by High Chaparral in December 2006 but that service was unsuccessful.
[18] The Plaintiff alleges that in March 2007 the Defendants sold their 50 per cent share in Triassic to the Smiths, or their company “Piper Farm Limited”. As I understand the Defendants’ position, their case is that in fact there was no sale. The Defendants contend they were willing to allow the Smiths to seek to breed a filly from Triassic, which the Smiths would own outright. This was to mitigate the fact that the Smiths had sold their 50 per cent share in La Souvenir, a sale which appeared increasingly likely to have been unwise. Whatever the parties may have agreed or why, as stated above, in this proceeding no further point turns on the matter of Triassic’s ownership.
[19] In 2007 the Smiths sent Triassic to be served by Elusive City.
[20] In October 2008 Triassic foaled a colt to Elusive City. The Smiths sold that foal in February 2009 for $260,000.
[21] On 20 May 2009 SYT won his first start. SYT continued to win various races throughout 2009, thereby increasing his value.
[22] On 22 May 2009 the Plaintiff acquired her husband’s share in Triassic. Accordingly, from that point on, the Plaintiff was Triassic’s sole owner, given the concession by the Defendants referred to above.
[23] After that, the Defendants and the Plaintiff entered into an arrangement whereby Triassic would again be served by High Chaparral and that they would each have a 50 per cent stake in any foal which resulted.
[24] In accordance with that arrangement, in June or July 2009, the Plaintiff entered into a service contract with Windsor Park for another service of Triassic by
High Chaparral and the parties entered into a lease of Triassic for stud purposes. That lease is evidenced by a document referred to as a “Notification of Lease for Stud Purposes”. The Notification was given by the parties to New Zealand Thoroughbred Racing Inc. The “start date” of the lease is recorded on the Notification as 1 August 2009 and the “end date” is recorded as 31 December 2010. The lessor is recorded as the Plaintiff and the lessees are the Plaintiff as to 50 per cent and as to 25 per cent to each of the Defendants. The Notification records this term:
“Any foal dropped during the period of this lease will be recorded in the Stud Book as being BRED and OWNED by the Lessee/s unless the special conditions state otherwise. This form is the notification of a broodmare loan for the purposes of recording the correct breeder and owner of a foal in the NZ Stud Book.
[25] It is not clear to me that the copy document included in the evidence as the Notification is the complete document but it is common ground any foal dropped was to be owned in the proportions to which I have referred.
[26] Mr Moran’s evidence is that Triassic failed to get in foal to High Chaparral on various occasions following 1 September 2009. SYT continued in a winning way throughout the 2009 season, winning the Cox Plate on 19 October 2009. SYT’s success added further impetus, if any was required, to have Triassic served by High Chaparral as soon as possible. Mr Moran has given evidence that, after Triassic failed get in foal to High Chaparral in about September 2009, he and Windsor Park instigated changes to Triassic’s breeding preparation. These changes included intensive fitness work and the engagement of a Mr D Hanlon, a reproductive specialist of Matamata Vet Services. Mr Moran has given evidence that Triassic was again served by High Chaparral in around December 2009 and went into foal. In fact, his evidence is that Triassic conceived triplets. The foal in this case is the outcome of that successful service.
[27] SYT continued to perform at a very high level throughout the racing season in
2010. As he did so, the foal (unborn at that time) continued to increase in value.
[28] That is as much as it is necessary to say for the purposes of disposing of this application. There were, however, events throughout 2010 which, if this dispute continues, will have to be considered.
Application
[29] The Plaintiff’s case on her application for interim relief is straightforward. It
is that:
(a) It is accepted that the Plaintiff owns Triassic and a 50 per cent share in the foal;
(b)The Plaintiff wishes to move the mare from Windsor Park to another stud;
(c) The foal is dependent on the mare and the two should remain together until the foal is weaned;
(d)There is no suggestion that the stud to which the Plaintiff wishes to re- locate the mare and foal is unsatisfactory in any way;
(e) The Plaintiff wishes the Defendants and those in control of Windsor Park to be restrained from interfering in loading the mare and foal onto transportation.
[30] The Defendants’ position, in opposition to the Plaintiff’s application, is also straightforward. Their case is that, whatever the position may be regarding ownership of the mare and whatever the outcome may be of the dispute as to any future Triassic progeny, they own a 50 per cent stake in the foal. The foal is valuable, the facilities and expertise at Windsor Park are of an exceptionally high standard, and there are inherent risks both in transporting the foal and in introducing it to a new environment. There is no good reason to run those risks.
[31] Matters which are common ground between the parties are that mare and foal should stay together until the foal is weaned; the facilities and expertise at Windsor
Park are of a high standard; the stud to which Trassic and the foal are proposed to be located are also of a high standard; and that, after the foal is weaned, the parties, or the Court in their place, will have to make decisions as to the foal’s future. That includes decisions as to whether the foal should be sold, and if so where and when, or raced or retained for future breeding purposes.
[32] The Plaintiff has two principal reasons for wishing to re-locate Triassic and the foal. First, her evidence is that she does not consider that she can be sure she will receive Windsor Park’s independent advice regarding the care of Triassic and the foal. The Plaintiff is concerned that Windsor Park’s dealings with, and advice to, her on those matters will be affected, adversely, by Windsor Park’s relationship with Mr Moran.
[33] Secondly, the Plaintiff is deeply attached to Triassic. The Plaintiff has taken, and continues to take, great pleasure in seeing Triassic with her foal. However, because of the souring of the relationship with the Defendants, the Plaintiff no longer wishes to visit Windsor Park. That said, since issuing proceedings in December
2010, the Plaintiff has visited Windsor Park on at least three occasions. [34] The Defendants’ response to the Plaintiff’s reasons are as follows.
[35] First, the Defendants say that Windsor Park is an outstanding New Zealand bloodstock nursery and its advice is second to none. Without disparaging in any way the stud to which the Plaintiff wishes to re-locate the foal, the foal’s present environment could not be bettered.
[36] Evidence of the standing of Windsor Park in the New Zealand bloodstock industry has been given by various witnesses.
[37] Mr G R Cunningham is studmaster at Curraghmore Stud. Mr Cunningham gives evidence that he “was born into the racing and breeding industry”, and that he established Curraghmore Stud in 1994, having managed another stud for seven years prior to that. Mr Cunningham gives evidence that Curraghmore is one of New Zealand’s leading thoroughbred nurseries and features consistently as a leading
vendor at the Karaka Yearling Sales each year. In his affidavit, Mr Cunningham describes Windsor Park as a “leading NZ bloodstock nursery, boasting expert horse people of the highest order, who are leaders in the New Zealand bloodstock breeding industry”. Windsor Park presently holds the title of NZ Breeder of the Year 2010.
[38] Mr R G Walls is chairman and chief auctioneer at New Zealand Bloodstock Limited, and he has worked for that company or its predecessor for 42 years. Mr Walls’ evidence is that Windsor Park has a reputation “second to none”. He describes it as a “top class” operation.
[39] Mr Nelson Schick, part-owner and studmaster of Windsor Park, has given evidence. Mr Schick’s evidence is to the effect that to date Windsor Park has given the Plaintiff independent and expert advice in all matters relating to horses at Windsor Park in respect of which the Plaintiff has an interest, and that Windsor Park will continue to do so. Mr Schick says that, in relation to Triassic’s foal, all dealings with the Defendants have been as a client, in the same way Windsor Park has dealt with the Plaintiff.
[40] Attached to Mr Moran’s affidavit is a copy letter dated 9 February 2011 from Mr Kirwan of Coolmore Stud of Sydney, Australia. In that letter Mr Kirwan advises that Coolmore is the world’s largest thoroughbred breeding operation. Mr Kirwan advises that he considers Windsor Park to be an extremely efficient breeding operation and states that he holds Windsor Park in the highest regard. Mr Kirwan also refers to the foal as “one of the most valuable foals in the world at present”.
[41] Also annexed to Mr Moran’s affidavit is a letter from Gai Waterhouse, of Gai Waterhouse Racing Stables, a leading Australian trainer. In her letter, Ms Waterhouse advises that she makes it “her duty” to purchase yearlings from Windsor Park each and every year as their record is second to none. In her letter she states that Windsor Park’s horses are turned out in “immaculate order”. Ms Waterhouse also says that, if she were a breeder, she would have bloodstock under the care and management at Windsor Park.
[42] In summary, the Defendants’ position is that there can be no doubt that the
services or expertise Windsor Park offers are of the highest possible calibre.
[43] The Defendants also contend that there is risk inherent in transporting the foal (with mare) and in seeking to introduce both to a new environment. The Defendants have adduced evidence from experienced participants in the industry of the risks to which I have just referred.
[44] Mr Cunningham gives evidence that there are a number of significant risks in transporting and re-locating mares and foals. He says that anything is possible every time a horse is put on a float. Mr Cunningham describes the risks of transportation and the potential risks which can arise after the mare and foal are re-located to a new environment.
[45] Mr Moran has included as a further exhibit to his affidavit a letter from Sir Patrick Hogan of Cambridge Stud. In his letter, Sir Patrick states that there are times when it is practically necessary to move young horses, such as sending mares with foals at foot to be served by stallions at stud farms; taking weanlings and yearlings to sales; and transporting horses for medical attention. However, Sir Patrick also states that, other than for absolutely necessary reasons such as these, it is extremely unwise to move young horses from their existing familiar surroundings. Sir Patrick states that there are inherent risks involved, both from the possibility of injuries sustained during transportation and from the many variables which can adversely affect horses when adjusting to their new environment. Sir Patrick’s opinion is that, from both a safety and commercial perspective, the foal would benefit from remaining in his established location.
[46] On this point, Mr Kirwan, to whom I have already referred, states:
“It is my professional opinion that this foal is far too valuable to consider moving from his current secure and nurturing environment. This foal is an extremely commercial prospect, who should be given every opportunity to reach his full potential, just as So You Think did as a foal at Windsor Park Stud. Unless for surgical reasons, I can think of no logical justification to risk moving such a valuable thoroughbred foal.”
[47] For her part, the Plaintiff and others from whom she has adduced evidence, contend that the risks to which the various witnesses refer are grossly exaggerated. The evidence from the Plaintiff’s witnesses is that valuable bloodstock is being moved around the country and indeed around the world on a daily basis. That said, obviously not all risk can be excluded.
[48] In addition, the Defendants refer to email correspondence which is in evidence, in which the owners of Windsor Park have repeatedly advised the Plaintiff that she is very welcome to visit the stud at any time during normal business hours. This email correspondence also advises that arrangements can be put in place for the Plaintiff to see Triassic and the foal without the Plaintiff having to deal in any way with either of the Defendants or indeed anyone else at Windsor Park with whom she does not wish to have dealings.
Serious issue
[49] Dealing first with whether there is a serious issue to be tried, whatever the position may be regarding the breeding partnership alleged by the Defendants on affidavits, the Plaintiff is the owner of Triassic. How the Plaintiff’s proprietary rights might be affected by another agreement or agreements with the Defendants as to progeny is not material at this stage.
[50] Equally, the Plaintiff has only a 50 per cent stake in the foal. Neither she nor the Defendants may dictate where the foal should be situated. The Plaintiff clearly has a serious issue to be tried as to whether she can require re-location of the mare. I am not satisfied, however, that the Plaintiff does so in relation to the foal and it is common ground between the parties that mare and foal should stay together pending the foal being weaned.
[51] Regardless, in my view the determination of the Plaintiff’s application rests
on the balance of convenience.
[52] Turning to the balance of convenience, it is necessary to weigh on the one hand the Plaintiff’s expressed concerns as to the independence of the advice she might receive from Windsor Park and her expressed wish to see the horses on a regular basis against, on the other, the risks involved in transporting the foal and introducing it to a new environment.
[53] In my view, the balance of convenience lies in the Defendants’ favour. My view is that the concerns the Plaintiff has expressed can be met in ways which do not require the running of the risks inherent in moving the foal and re-locating it to a new environment.
[54] First, the Plaintiff may engage an independent consultant to advise her if she wishes, who can act on her behalf in dealings with Windsor Park. I should add that the Plaintiff did not refer to any issue which she anticipates arising in the coming months relating to the care and wellbeing of the mare or, indeed, of the foal. Whilst her counsel advised that the Plaintiff anticipated the weaning process might be contentious, the Defendants did not consider that was likely to be so. That is because the Defendants’ view is that nature should be allowed to run its course and the foal weaned naturally, rather than by some premature, engineered separation.
[55] Secondly, in my view, it is clear the proprietors of Windsor Park have done everything they can to alleviate any discomfort the Plaintiff may have on visiting Windsor Park, given the dispute which exists between the Plaintiff and the Defendants. Windsor Park is a large organisation and the proprietors of Windsor Park have made it clear that the Plaintiff will not be required to meet anyone at Windsor Park whom she does not wish to meet during the course of any visit she may make.
[56] If, however, the foal were to be injured in the course of re-location or in the course of its introduction to a new environment, then at the very least the foal’s value would be affected, as might its racing future. I am not persuaded that there is any good reason to take such a risk for the sake of a matter of weeks.
[57] Two other matters arose during the course of the hearing, to which I should refer for the sake of completeness. The first relates to the Plaintiff’s conduct on an issue which arose in December 2010 and the second relates to a discussion at the conclusion of the hearing as to how the Plaintiff’s concerns might be met.
[58] Dealing with the first, there is evidence in the affidavits as to contractual arrangements between the Plaintiff and Defendants to have Triassic served by a stallion, Mastercraftsman, in late 2010, with any progeny resulting from that service to be shared 50/50 between the parties.
[59] Having dropped the foal, Triassic was brought into season, with an expectation she would be served by Mastercraftsman between 17 and 20 December
2010. Mastercraftsman was due to leave New Zealand on 21 December 2010.
[60] At some point the Plaintiff developed reservations about Triassic being served by Mastercraftsman and she wished to abandon the service contract. A dispute arose between the Plaintiff and Defendants as to whether this was the Plaintiff’s decision alone to make and whether the agreement between the Plaintiff and Defendants required the Plaintiff to permit Triassic to be served.
[61] Priestley J conducted a teleconference between the parties on 17 December
2010. Priestley J’s minute of 17 December 2010 records that His Honour stated at the teleconference that an injunction would issue, prohibiting Triassic being served by Mastercraftsman. The injunction was conditional on the Plaintiff giving an undertaking in writing to pay any damages arising to the Defendants from the order.
[62] The Defendants’ representative at the conference appears to have understood that the Plaintiff would give the undertaking as to damages. The service could have happened at any time. Accordingly, the Defendants’ representative relayed the terms of the order to the Defendants and Windsor Park. The personnel at Windsor Park then brought all arrangements regarding the proposed service of Triassic to a halt.
[63] However, as I understood it from the Plaintiff’s legal advisers at the hearing, on learning of His Honour’s order, the Plaintiff was uncertain as to whether she wished to give the undertaking.
[64] The Plaintiff’s ambivalence, however, as to the provision of the undertaking was not promptly relayed to the Defendants. In fact, the Plaintiff’s legal advisers did not communicate the Plaintiff’s failure to give the undertaking until shortly after
5:00pm on Friday, 17 December 2010. The Plaintiff’s position was not brought to the Defendants’ attention until 20 December 2010, because of the timing at which the Plaintiff’s communication was received. The Plaintiff’s decision to refrain from giving the undertaking meant that Triassic might well have been served.
[65] On being informed that the Plaintiff did not propose to provide the undertaking as to damages, the Defendants and Windsor Park investigated whether it was too late to serve Triassic. They discovered that it was. Accordingly, the opportunity was lost.
[66] In a nutshell, the Defendants complain that the Plaintiff achieved the outcome she sought in relation to preventing the proposed service by Mastercraftsman, without actually giving the required undertaking. The Defendants also referred to the fact that, in respect of the January 2011 application for interim injunction, the Plaintiff had not given the unqualified undertaking required by r 7.54, High Court Rules.
[67] Counsel who participated in the telephone conference before the Judge (Mr M Fisher for the Plaintiff and Ms A Craven for the Defendants) were not at the hearing before me. However, there was no satisfactory explanation given to me as to why the Plaintiff ’s legal advisers had not immediately communicated to the Defendants that the Plaintiff was uncertain as to whether she would give the undertaking which was required if the injunction were to take effect. There was no explanation as to why the Plaintiff’s legal advisers had not relayed the Plaintiff’s position to the Defendants by email or telephone, as might have been expected given that timing was critical to the success of any service.
[68] As I have said, my view is that the present application turns on the balance of convenience factors which I have referred to above and so it is not necessary to consider any issue which might arise as to disentitling conduct on the part of the Plaintiff. I add that the undertaking in damages given by the Plaintiff on her January
2011 application for interim relief was not in the form required by the Rules and was circumscribed. However, an undertaking which was in accordance with the Rules was filed the day after the hearing. I simply record these events for the sake of completeness as having been discussed at the hearing.
[69] Secondly, in the hope that it might be possible to enter into some arrangements which would assist the parties going forward, I asked both to consider putting in place an agreement which might facilitate the taking into account of the Plaintiff’s views, and those of any consultant she might engage, as to the future care of the foal.
[70] Counsel for the Plaintiff advised me that the Plaintiff’s view was that, while the mare and foal remained at Windsor Park, she had no expectation that her views, or any advice expressed on her behalf, would be taken into account. Accordingly, she declined to make any proposal to achieve the end to which I have referred.
[71] The Defendants proposed that the Plaintiff nominate an independent expert who would be consulted regarding the date and process of weaning, and that the Defendants themselves would abdicate any right to be involved in decision-making and would leave such decisions entirely to Mr Till or Mr Schick of Windsor Park. The Defendants also proposed that the Plaintiff and her expert could have unrestricted daily access to Windsor Park, with notification to Windsor Park’s head office in advance, as is routine. The Defendants also advised that they had made a suggestion of a meeting or meetings at which the parties would be present and would discuss the future of the foal.
[72] As I have said, Windsor Park is not a party to these proceedings and, accordingly, I do not propose to make any orders which might affect Windsor Park. All I can do is note the constructive approach adopted by the Defendants and record my hope that, if the Plaintiff does decide there is a consultant who might be able to
act on her behalf in her dealings with Windsor Park, that that is communicated to the Defendants. Some arrangement along the lines proposed by the Defendants might then be put in place. It would also be appropriate for the parties to refrain from making any media comment regarding the foal unless both agree in advance. The Plaintiff is aggrieved that Mr Moran has made such comment without referring to her, and there should not be any repetition of that.
Result
[73] The application for interim injunction is declined. Having succeeded, the
Defendants are entitled to an award of costs on a 2B basis.
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PETERS J
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