Capogreco v Rogerson

These proceedings arise out of a dispute in relation to the sale of a thoroughbred racehorse known as “Arlington” (the horse) in April 2012. The horse was purchased as a yearling colt by Mr Gerald (Gerry) Harvey at the 2006 Conrad Jupiters Magic Millions Yearling Sale for $1.55 million. Mr Harvey then sold the horse to the first defendant, Graeme Rogerson (the defendant), but agreed to retain a 25% interest in the horse. The defendant also kept an interest in the horse but on the day of the sale he offered percentage interests for sale to various people, including Sir Patrick Hogan, who took up a 10% interest and Ms Joy Jenkins, who took a 15% interest for herself and her daughter, Samantha Jenkins.

At a later date others purchased interests in the horse. The first and second plaintiffs, Antonio Capogreco (Antonio) and his wife, Rosa Capogreco, purchased a 12.5% interest in the horse; and Joseph Mark Pirrello (Joseph), the fourth plaintiff, purchased a 12.5% interest in the horse for his wife, Anna Pirrello, the third plaintiff. The plaintiffs paid the defendant a total of $426,992.50 on 25 January 2006 for their respective shareholdings.

The great expectations for the horse as a racehorse were not realised. It raced both in Australia and New Zealand and did not achieve success in any Group 1 races although it raced third in the Randwick Guineas, a Group 1 race, in March 2008. Success in Group 1 races was seen (at least by some people) as a pre-requisite to a successful career as a stallion at stud.

In 2011 a decision was made to sell the horse. There is an issue as to how this decision was made. In any event, after that decision was made a majority of the owners decided to race the horse for one more year to see if it could achieve success in Group 1 races. The horse was withdrawn from sale and continued to race. Unfortunately success remained elusive.

In April 2012 the defendant entered the horse into the Magic Millions Broodmare auction Sale planned for June 2012. On 11 April 2012 there was a purported private sale of the horse to Bruce McHugh (Mr McHugh), the second defendant, for the sum of $60,000 ($63,300 inclusive of taxes and commission).

The plaintiffs claim that they were not advised of the offer made to purchase the horse privately nor were they informed or consulted by the defendant of any purported sale or transfer of their ownership interest in the horse to Mr McHugh. The plaintiffs claim that they did not authorise or consent to this purported sale or transfer of their respective ownership interests in the horse. Indeed they claim that they wished to take up the opportunity to purchase the horse at the Magic Millions auction and that there was no indication that the horse was to be sold to Mr McHugh.

The plaintiffs have refused to accept any monies from the sale of the horse and have claimed that there has been no ratification of the sale of the horse.

The plaintiffs have made a demand on Mr McHugh for the return of their shares in the horse but this demand has been rejected. The horse currently attracts $5,500 as a service fee.

On 16 January 2006 Antonio saw an article in the Daily Telegraph entitled “This colt is worth a king’s ransom”. There was a picture of Mr Harvey with the colt that the article reported he had sold at the Magic Millions sale for $1.55 million. The article referred to the colt’s half-brother, Savabeel, as a Cox Plate winner and included the claim that: “Harvey sold the colt to trainer Graeme Rogerson who will syndicate the youngster, and committed to keep the 25 per cent share”.

After reading the article Antonio showed it to Joseph and suggested that they have a look at the possibility of investing in the colt. He informed Joseph that Mr Harvey had sold the horse and then bought back 25% and said “so it must be pretty good”. Antonio telephoned the defendant who advised him that he still had “some shares available”. Antonio claimed that in this conversation Mr Rogerson said that the colt was “the perfect horse” and that he should meet with him in Picton where the horse was staying.

In about late January 2006 Antonio drove to Picton with each of the other plaintiffs and met with the defendant. Antonio’s affidavit evidence was that at this meeting the defendant said the following:

Joseph’s affidavit evidence was that at this meeting the defendant said words to the following effect:

Antonio claimed that at the conclusion of the Picton meeting Joseph said “Let’s have a go Tony as we can make money from the horse even if he can’t run fast”. Antonio and Joseph wrote cheques totalling $426,992.50 and gave them to the defendant.

On 25 January 2006 an employee of the defendant’s stable sent a copy of the Vet’s report to Antonio by email. Also enclosed with the email was a letter that the defendant requested Antonio sign. It was in the following terms:

It is not clear why a single invoice was sent by the defendant for the 25% share rather than two invoices for the 12.5% interests in the horse. Nor is it clear why the defendant required Antonio to sign the letter in respect of a 25% interest rather than a 12.5% interest.

On 15 March 2006 Antonio insured the horse for a 12.5% share at $193,750 at a cost of $7,154.73. The insurer valued the horse at $1.55 million exclusive of GST.

On 25 July 2006 an “Application to Register a Horse” was filed with the Registrar of Racehorses (the Registrar) in which the defendant was identified as the proposed trainer. The name “Arlington” was approved and registration was completed on 28 July 2006. Although there was some dispute about it I am satisfied that each of the owners authorised the defendant’s wife to sign the Application on their behalf.

On 9 August 2006 a form entitled “Ownership Details” was lodged with the Registrar identifying the owners as: the defendant as Owner 1 (5%) (with a note that the defendant “shall be treated as the MANAGER (Subject to AR.57)”; Mr Harvey as Owner 2 (25%); Rajesh Upadhyaya as Owner 3 (5%); the syndicate Bruce Reid Racing as Owner 4 (15%); Joy Jenkins as Owner 5 (7.5%); Samantha Jenkins as Owner 6 (7.5%); Sir Patrick Hogan as Owner 7 (10%); Antonio as Owner 8 (6.25%); Rosa Capogreco as Owner 9 (6.25%); and Joseph as Owner 10 (12.5%). It is not in issue in the proceedings that Joseph held the shares (12.5%) on Mrs Pirrello’s behalf.

The reference to AR.57 in the note in respect of the defendant being treated as the Manager was to Rule 57 of the Australian Rules of Racing (the Rules) that provides as follows:

Rule 1 (AR.1) includes the following definition:

Between February 2006 and mid 2011 the horse did not achieve the success on the racetrack for which the owners had hoped. The defendant said that he tried every avenue but felt that the horse was “half a cheat”. He trained well but did not bring his best form to the track on race day.

During this period Antonio’s son, Carlo Capogreco (Carlo), made contact with the defendant to check what was happening with the horse. Carlo reported his communications to Antonio. During the early part of the period 2006 to 2009, Carlo reported that the defendant had said that the horse was going well in training and that he would be targeting the big races with big prize money that would increase his value as a stallion. Antonio claimed that he was never notified of or participated in any meetings between the owners, nor was he ever consulted by the defendant or the other owners (apart from Joseph) about the racing plans for the horse. He claimed that the defendant’s stable would provide email reports of the racing program and the horse’s performances but he was never given the opportunity to have any input into the horse’s racing program.

In about April 2011 the defendant had a telephone conversation with Joseph in which he informed him that the “owners have decided to sell Arlington as a stud prospect”. He advised him that the horse would be entered in the Magic Millions National Broodmare Sale. Joseph’s unchallenged evidence was that the following conversation then took place:

It is not in issue that Joseph intended to convey that he and Antonio would buy the horse if the price was not too high. Joseph informed Antonio that the defendant had just informed him that the horse was to be sold. However the defendant telephoned Joseph in about May 2011 and informed him that the other owners had decided to race the horse for one more year. Joseph claimed that the defendant said that they could “increase the horse’s stud value” if it won some Group 1 races.

On 10 May 2011 the defendant’s office administrator, Ms Wendy Maybury, sent an email to all the owners in the following terms:

On 2 November 2011, Ms Maybury sent an email to the owners of the horse in terms that included the following:

On 3 November 2011 Joseph wrote to Ms Maybury in the following terms:

On 4 November 2011 Ms Maybury wrote to Joseph advising “I believe Graeme will look for a stud to purchase him”.

In February 2012 Carlo informed Antonio that the defendant had informed him that all of the other owners, except for Joseph, wanted to sell the horse through Magic Millions. Antonio then had a conversation with Joseph in which they discussed the prospect of them buying out the other owners.

According to Joseph’s affidavit evidence, he had a conversation with Ms Maybury in about February 2012 in the following terms:

Joseph claimed that he had a conversation with the defendant in about February 2012 in which he asked him how much the horse was worth. He claimed that the defendant said that he did not know “exactly”. However Joseph’s affidavit evidence made no mention of any conversation with the defendant on this occasion in which he said that he and Antonio wanted the opportunity to buy the horse at the auction.

Notwithstanding that Ms Jenkins had put on an affidavit about it, neither Antonio nor Joseph referred in their affidavits to a meeting with Ms Jenkins at about this time. However they agreed in cross-examination that they met with her in a café in Double Bay during which meeting there was discussion about the horse.

Ms Jenkins’ affidavit evidence was that Joseph informed her that he and Antonio were in favour of keeping the horse and finding a stud to stand him. She claimed that Joseph asked her whether she was interested in keeping her share and standing the horse at a stud with them. Ms Jenkins claimed that she informed Joseph that there was no way that she wished to do that as Mr Harvey and Sir Patrick Hogan both owned studs and neither of them were interested in the horse. Ms Jenkins claimed that Joseph then informed her that he and Antonio were friends with Tony Santic (the owner of Makybe Diva a three time winner of the Melbourne Cup) who would take the horse. Ms Jenkins claimed that she did not think this would happen as she had heard that Mr Santic was easing out of standing stallions. She claimed that she informed Joseph that she just wanted the defendant to find the horse a good home.

In cross-examination Antonio agreed that he had a conversation with Ms Jenkins about the prospect of her “coming with us we can buy the horse for stud” (tr 68). The following cross-examination then occurred (tr 68-70):

Joseph was also cross-examined about the meeting with Ms Jenkins in Double Bay relevantly as follows (tr 107-109):

In early April 2012 Mr Harvey received a call from David Chester of Magic Millions who informed him that he had an offer to purchase the horse from a blood stock agent, Les Young, on behalf of Mr McHugh. Mr Harvey’s affidavit evidence was that he informed Mr Chester that he thought the offer was a good offer and more than the horse would bring “in the ring”. He also advised Mr Chester that he was in agreement that the horse should be sold.

The defendant’s evidence was that Mr Chester telephoned him on about 11 April 2012 and advised that the horse had been sold and that he was “dealing direct with the other owners”.

On about 14 April 2012 Ms Jenkins telephoned Carlo and said “did you hear that Arlington has been sold”. Carlo informed Ms Jenkins that he had not heard of the sale. Although he did not give evidence of any further details of the conversation with Ms Jenkins, Carlo claimed that he immediately rang Antonio and said “Joy Jenkins just called to let me know Arlington was sold for $60,000”. It is clear that Ms Jenkins must have given this detail to Carlo at the time she called him. Carlo claimed that Antonio expressed his anger because he and Joseph wanted the opportunity to bid for the horse at auction.

On 14 April 2012 Joseph wrote to the defendant in the following terms:

On 15 April 2012 Carlo telephoned the defendant. He claimed that he had the following conversation with him:

On 17 April 2012 Ms Maybury wrote to Joseph in the following terms:

On 17 April 2012 Joseph wrote to Ms Maybury in the following terms:

On 17 April 2012 Ms Maybury responded to Joseph in the following terms:

On 17 April 2012 Joseph responded to Ms Maybury in the following terms:

On 18 May 2012 Ms Maybury signed a letter on the defendant’s letterhead addressed to Joseph in the following terms:

There was further email communication between Joseph and Ms Maybury in which Joseph tried to find out who had purchased the horse. On 15 June 2012 Joseph wrote to Ms Maybury in the following terms:

The proceedings were commenced on 9 December 2013. They were heard on 20 to 23 July 2015 when Mr MR Pesman SC, leading Mr A Di Francesco, of counsel, appeared for the plaintiffs; Mr RS Angyal SC, leading Mr EW Young, of counsel, appeared for the defendant; and Ms V Brigden, of counsel, appeared for Mr McHugh.

The plaintiffs alleged that the defendant engaged in misleading or deceptive conduct. They pleaded that the defendant made representations (referred to as the “Initial Representations”) to them in mid to late January 2006 that: the horse was a perfect horse; they would make money on and off the track because of its good breeding; it was a safe investment; it did not matter if he won a race or not because his bloodlines made him a valuable stud prospect after his racing career was over; they could not go wrong with the horse; other owners included Gerry Harvey, Sir Patrick Hogan and Bruce Reid who knew what they were doing and would not buy a horse if they thought they were going to lose money from it.

The plaintiffs also pleaded that the defendant made representations (referred to as the “Syndication Representations”) to them that: the affairs of the syndicate (the owners as a group) would be managed generally by him and/or his agents; he would advise, inform and consult the plaintiffs in respect of all significant matters involving the sale and/or disposal of the horse; there would be regular meetings with the owners to discuss the horse’s management and future plans including the sale and/or disposal of the horse; no sale or disposal would occur without the express approval of each owner; and he did not intend to and would not act in his own interests where they conflicted with the interests of the plaintiffs, except in accordance with their informed consent.

At the conclusion of the trial the plaintiffs relied on what they described as their “principal claim” that the defendant represented that: (a) the horse was a safe investment: and (b) that it did not matter whether the horse won a race or not because his bloodlines made him a valuable stud prospect after his racing career was over (tr 290) (the principal representations). There is an issue as to whether these representations were made. There is no real issue that if the principal representations were made, they were made in trade or commerce. There is an issue as to whether if made, the plaintiffs relied upon them. The plaintiffs claim that this is a “no transaction case” and accept that they must demonstrate that but for the principal representations, they would not have purchased the shares in the horse (tr 294).

Although there were other alternative claims made against the defendant (for conversion; breach of contract; breach of fiduciary duty; the loss of opportunity to purchase the horse; and relief pursuant to the Competition and Consumer Act 2010 and the Fair Trading Act 1987) the only claim pressed at the conclusion of the trial was based on the contention in contract that the defendant was not authorised to sell the plaintiffs’ shares in the horse and a claim for declarations that the plaintiffs’ own their respective percentage interests in the horse.

The plaintiffs alleged that either Mr McHugh or his agent, Les Young, had reason to suspect, or alternatively constructive knowledge, that the defendant did not have authority to convey title in the horse to Mr McHugh in respect of the plaintiffs’ shares. However these claims were not pressed at the conclusion of the trial (tr 307-310). The plaintiffs claim declarations in respect of their interest in the horse and each resultant foal owned by Mr McHugh; that Mr McHugh holds all money paid in respect of the horse’s stud activities on trust for the plaintiffs in accordance with their percentage ownership of the horse; and an order that Mr McHugh account to them. The plaintiffs abandoned their claim for damages against Mr McHugh for conversion and detinue (tr 281, 340).

Mr McHugh eschewed any estoppel claim under s 26 of the Sale of Goods Act 1923. He also accepted that if it is found that the defendant did not have authority to sell to him the plaintiffs’ share in the horse, it follows that the plaintiffs are entitled to the declarations they seek and an order for an account.

The real issue in the plaintiffs’ claims against the defendant for misleading or deceptive conduct is whether the defendant made the principal representations that: (a) it was a safe investment; and (b) it did not matter if the horse won a race or not because his bloodlines made him a valuable stud prospect after his racing career. There is nothing in writing that supports either version of the conversation that occurred at the meeting at Picton. It is necessary to review the evidence of each of the parties, their witnesses and the surrounding circumstances to determine these issues.

The transcribing of Antonio’s evidence was clearly made difficult by his entrenched Italian accent. On occasions the cross-examiner indicated an inability to hear or grasp what had been said. This observation should not be taken as any criticism of anyone. Rather it is a matter that needs to be taken into account in assessing the whole of Antonio’s evidence. However I should also record that there was no application made to amend the portions of the transcript referred to in these reasons.

Antonio did not claim that the defendant said that purchasing an interest in the horse was a “safe investment”. He claimed that the defendant said that it was a “good investment”. The defendant admitted that at the meeting with Antonio and Joseph at Picton he did say that it was a “good investment”.

In cross-examination Antonio gave the following evidence on matters pertinent to the claim that the defendant made the second of the principal representations (tr 35):

However only minutes later Antonio gave the following evidence in further cross-examination (tr 38):

Antonio was asked about the contents of Joseph’s affidavit and their discussions before they made contact with the defendant in January 2006 and he gave the following evidence (tr 41-42):

Antonio denied that he and Joseph were prepared to buy a share in the horse without seeing it and that the defendant had said that he wanted them to look at the horse before they made up their minds whether to buy a share in the horse (tr 42). He agreed that he took his cheque book of the account that was linked to his home mortgage with him when he went to inspect the horse at Picton (tr 43). He was then cross-examined as follows (tr 43-45):

Antonio was pressed further in cross-examination as follows (tr 47):

Antonio denied that the defendant said that he thought the horse was a potential stallion if he could win Group 1 races (tr 49). However he gave the following evidence (tr 50):

Antonio gave evidence in cross-examination that the reasons why he bought a share in the horse included its bloodlines; that he knew Mr Harvey thought enough of the horse to buy back 25% of it; that the defendant had paid $1.55 million for it; that the defendant was going to train the horse; that it was a beautiful horse; and that he hoped to make a lot of money from the horse as a stallion (tr 52). He said that it was “not really” that he hoped to make a lot of money from the horse as a racehorse (tr 52). He said that the reason he paid for the horse and purchased it was because of the breed of the horse (tr 54). He accepted that he knew about the risks when he paid for the horse but gave the following evidence (tr 53-55):

Mrs Capogreco swore two affidavits, the first on 1 October 2014 and the second on 1 March 2015. In her first affidavit she gave evidence that Antonio makes all the major financial decisions in their household. She said that she trusted him to look after their family’s finances. Antonio informed her in January 2006 that he was thinking of buying some shares in a horse with Mr and Mrs Pirrello. Mrs Capogreco said that she did not at any time have any knowledge about horses or horseracing. However she liked the idea of owning a horse so that she could go to the races to watch it race.

Her affidavit evidence was that she accompanied Antonio, Joseph and Mrs Pirrello to the farm at Picton to see the horse and to meet with the defendant. She said that she did not recall what was said but remembered that the men were talking to each other in the presence of herself and Mrs Pirrello but that she and Mrs Pirrello were not actively involved in those discussions. She did not remember the defendant telling her about contracts or terms of buying the horse.

Mrs Capogreco said that after Antonio purchased the shares in the horse in January 2006 she did not involve herself in the affairs of the horse. She said that she did not discuss the profits and expenses of the horse with anyone, and that their son, Carlo, handled the management of the horse, including the bills.

Mrs Capogreco’s affidavit evidence also included a recollection of Antonio informing her in about May 2011 that the owners were going to sell the horse without telling them but that it was to race for another year “to increase his value”. Mrs Capogreco also recalled that on about 14 April 2012 Antonio informed her that Joseph had just told him that the other owners had sold the horse “without telling us”.

Mrs Capogreco’s second affidavit annexed various documents in relation to the registration of the horse and changes in ownership. Although there was some possibility of an issue about a signature on one of the documents, that fell away at trial.

Mrs Capogreco was not cross-examined.

Carlo is the son of Antonio and Rosa Capogreco. He described himself as a restaurateur. He said that he and Antonio have “a couple of businesses in Ulladulla” and generally on the “couple of days” that Antonio works he looks after the restaurants and on the other days Carlo looks after the restaurants (tr 145).

Carlo gave affidavit evidence (paragraph 3) that in January 2006 Antonio had a conversation with him in which he said:

In cross-examination Carlo agreed that at the time of this conversation with his father he understood that he was talking about something that he was going to do in the future (tr 138). He gave the following further evidence in cross-examination (tr 140-144):

Although there was no mention in Carlo’s affidavit of any discussion with the defendant in relation to the horse’s potential as a stallion, he claimed in his cross-examination that the defendant had said to him that “the horse, whether he does or does not make it to the track, will become a very, very high commodity in the breeding industry” (tr 140). He also claimed that the defendant had said on “numerous occasions” that the horse would “change our lives financially” (tr 143). He was cross-examined in respect of this claim as follows (tr 143):

Joseph gave affidavit evidence that the defendant said to him at the meeting in Picton (15/08/14 [5]).

In cross-examination Joseph gave the following evidence (tr 89-91):

Joseph said that he did not know much about horses. He asked the defendant who else was buying into the horse and he gave the following evidence in cross-examination about the conversation at the meeting in Picton (tr 93-94):

Joseph was then asked about his claim that the defendant had said that the horse was a “safe investment”. He gave the following evidence in cross-examination (tr 95-97):

After further reference to the Picton meeting, Joseph was taken to a portion of his affidavit in which he claimed that he said to Antonio that “it looks like if we can’t have fun with the horse on the track, we can make money from breeding him when he is retired” (tr 98). He was cross-examined as follows (tr 99-100):

In later cross-examination Joseph was asked about the various reasons that he decided to purchase an interest in the horse. He said those reasons included: the horse’s bloodlines; that Mr Harvey was keeping 25% of the horse; that he knew the defendant had paid $1.55 million for the horse; and that Sir Patrick Hogan and Bruce Reid were taking a share of the horse (tr 102). He gave the following evidence (tr 103):

Mrs Pirrello swore two affidavits in the proceedings, the first on 15 August 2014 and the second on 2 March 2015. Mrs Pirrello describes herself in her affidavit as a housewife but gave oral evidence that she had worked as a salesperson.

Mrs Pirrello recalled the meeting at Picton in January 2006 with the defendant and said that he talked to each of the plaintiffs about the horse. Mrs Pirrello claimed that Joseph and Antonio did all the talking for Mrs Capogreco and for herself. However she did recall that the defendant said words to the following effect:

Mrs Pirrello claimed that the defendant did not discuss the terms and conditions of the sale with her “except as they related to him training the horse”. She did not remember discussing the terms of sale with anyone and claimed that she could not understand a lot of what the defendant was saying. She saw Mr Pirrello’s purchase of a share in the horse “as an opportunity to dress up and go to the races when the horse was racing”. She said that she had no involvement, nor did she wish to have any involvement with the management of the horse or the financial decisions relating to the horse. She left those matters to Mr Pirrello. Her evidence was that she remembered seeing Mr Pirrello very angry in April 2012 when he informed her that the horse had been sold by the defendant.

Mrs Pirrello’s second affidavit attached various documents in respect of which there is no issue. In cross-examination Mrs Pirrello agreed that she and Joseph are very good friends with Antonio and Mrs Capogreco. She agreed that Joseph has coffee with Mr Capogreco every morning (tr 127). She agreed that she knew that Mr Capogreco was involved in “maybe” one horse or another horse but did not know much about it (tr 128). She claimed that she did not get involved with the detail and she left it to Joseph (tr 129). However she agreed that when she saw the horse at Picton she thought that it was a “beautiful horse” and very athletic looking (tr 130). She claimed that at this meeting the defendant “was talking about how beautiful the horse is going to win a lot of money and, yeah, like a salesman he was talking” (tr 130). She gave the following further evidence in cross-examination (tr 131-132):

Mrs Pirrello said that she did not remember the defendant saying that he would manage the horse and if there was anything that needed the owners to decide it would be decided by majority rule (tr 133).

The defendant’s affidavit evidence in relation to the meeting at Picton was as follows:

In cross-examination the defendant said that if the horse was sold to a stud he would have got a percentage. He gave the following evidence (tr 166):

The defendant was asked about his evidence in paragraphs 16 to 18 of his affidavit referred to above. He gave the following evidence (tr 169-170):

I understood the defendant’s reference in this evidence to having a “ready-made home” to mean that in his mind if the horse had turned out to be a Group 1 winner, either Mr Harvey or Sir Patrick Hogan would have welcomed him as a stallion at their studs. His reference to Zabeel is also pertinent. The horse’s half-brother, Savabeel, was one of Zabeel’s progeny. The defendant’s evidence was that Joseph and Antonio had done their research on the horse’s family before the Picton meeting.

The defendant claimed that he advised the plaintiffs that “to be a stallion it had to be a Group 1 winner” (tr 183). The defendant also gave the following evidence (tr 183-184):

There is no doubt that the defendant was very enamoured of the potential of the horse. He accepted that he informed Antonio and Joseph that the horse was a “good investment”. He gave the following evidence (tr 185-186):

I am satisfied that at the conclusion of this segment of cross-examination the defendant effectively abandoned any suggestion that he had said to Antonio and Joseph that the horse would only be a “good investment” if he were a Group 1 winner. However I understood from the whole of his evidence that he maintained that he said to Antonio and Joseph that the horse would only be a potential stallion if he could win Group 1 races.

There are two principal representations upon which the plaintiffs rely in respect of their misleading or deceptive conduct claim against the defendant. Although they were both allegedly made at the Picton meeting, it is appropriate to consider them separately.

The first matter for determination is whether the defendant made the principal representation that the horse was a “safe investment”.

Antonio owns and operates a number of restaurants in Ulladulla on the south cost of New South Wales. Prior to his purchase of the share in the horse, Antonio had owned three racehorses with others and in his own right, Lucky Lad, Pronto and De Lago King. These horses did not achieve a great deal of success on the track. At the time of the Picton meeting Antonio was no stranger to the racing industry, although he was certainly far less experienced than the other owners in the horse.

As indicated earlier, Antonio did not at any stage of his evidence claim that the defendant said that the purchase of the shares in the horse was a “safe investment”.

Although Joseph described himself as a “fisherman” he admitted that he is the managing director of a substantial fishing company known as Seafish Tasmania (tr 86). He used to “commute” to Tasmania from Ulladulla every week but by the time of the trial that had been reduced to once a month (tr 87). Joseph claimed that he always sees himself as a fisherman rather than as a businessman or a director (tr 86). However it is clear that Joseph is an experienced businessman.

Joseph claimed that the defendant said that the purchase of the shares in the horse was a “safe investment”. The defendant denied saying that it was a “safe investment”. He claimed that he said that it was a “good investment” and was corroborated in that regard by Antonio’s evidence.

On balance I am satisfied that the defendant said it was a “good investment”. I am not satisfied that the defendant said it was a “safe investment”.

The next matter for determination is whether the defendant said to Antonio and Joseph that Mr Harvey and Sir Patrick Hogan thought the horse was a potential stallion if he could win Group 1 races.

Antonio’s evidence was marred in part by the inconsistent positions he adopted in his evidence in respect of whether he knew that it was important for the horse to be a Group 1 winner to be a valuable stud prospect. After first agreeing with the proposition (tr 35), he then denied it (tr 38) and appeared later to accept it again (tr 50).

Antonio’s affidavit evidence was that the defendant said that the horse would make the plaintiffs’ money “on the track and off it because it’s got good breeding” (tr 38). In his affidavit in reply of 1 March 2015 dealing with paragraph 17 of the defendant’s affidavit Antonio denied that the defendant said that the horse “was a potential stallion if he could win Group 1 races”. Antonio sought to maintain that denial in general terms in his cross-examination. However Antonio admitted that he told Joseph that whether they could make money selling the foals depended upon whether the horse was a success as a racehorse (tr 42). In addition Antonio’s evidence that “they wanted to try and convince me it’s, you know, always about winning a race” was not explored further, but highlights Antonio’s understanding that the aim was for the horse to race on to see if it could achieve success on the racetrack.

Neither Antonio nor Joseph mentioned in their affidavits that the defendant had said anything about the horse’s prospects at stud being dependent upon winning Group 1 races. The defendant’s affidavit evidence in paragraph 17 was that he informed Antonio and Joseph that Mr Harvey thought that the horse was a potential stallion if he could win Group 1 races. He also claimed he informed them that Sir Patrick Hogan was of the same opinion. Notwithstanding that Joseph responded to paragraph 17 of the defendant’s affidavit in his reply affidavit of 2 March 2015, he did not deny that the defendant had said that Mr Harvey liked the horse and thought he was a potential stallion if he could win Group 1 races. Nor did he deny that the defendant said that Sir Patrick Hogan was of the same opinion. However he claimed in his reply affidavit that the defendant “clearly said words to the effect that the horse would be worth a lot of money as a stallion even if he did not win races”.

However in cross-examination Joseph claimed that the defendant had said something about Group 1 races at the Picton meeting. He accepted that he understood from what the defendant said at the meeting that there was a relationship between Group 1 races and the value of the horse as a stallion. He accepted that this made good sense and that the defendant said that people who wanted to breed future winners would look to breed their mare with a winner.

It is clear that Joseph accepted that the defendant did say something about Group 1 races and the need for the horse to win Group 1 races and that this was connected in some way to the potential for the horse at stud.

On balance I am satisfied that the defendant did say that Mr Harvey had said that he thought the horse was a potential stallion if he could win Group 1 races and that Sir Patrick Hogan was of the same opinion.

The next question is whether in the circumstances, it is probable that the defendant also said that it did not matter if the horse won a race or not because his bloodlines made him a valuable stud prospect after his racing career was over.

Antonio did not give affidavit evidence that the defendant made this statement. Rather he claimed that the defendant said that the “horse will make you money on the track and off it because it’s got good breeding”. There was no mention in Antonio’s affidavit that the defendant said that it did not matter whether the horse won a race or not. Even when he had a further opportunity in his affidavit in reply to respond to the defendant’s affidavit no mention was made of such a statement. The absence of any evidence in Antonio’s affidavit needs to be taken into account in assessing whether Mr Pirrello’s evidence that the defendant did make such a statement should be accepted.

Carlo’s affidavit evidence of his conversation with Antonio before he purchased the share in the horse is significant. Antonio informed him that it was “a good investment because even if we don’t win at the races we will win from breeding him”. Any possible doubt about the timing of this conversation was jettisoned in cross-examination when Carlo made it very clear that it occurred before Antonio purchased the share at a time when he was thinking about making the investment (tr 140-144). It was clearly before Antonio had the meeting with the defendant at Picton.

This conversation with Carlo puts a very different complexion on Antonio’s claim that the defendant said that the horse would make him money “on the track and off it because it’s got good breeding”. It was only in Antonio’s cross-examination that he changed what he had claimed the defendant said to him by suggesting that the defendant said that the horse can make “a lot of money even if he didn’t win any race”. This was the first time that Antonio mentioned this, nine years after the meeting at Picton.

Joseph’s claim in his affidavit was that the defendant said that it did not matter if the horse won a race or not because his bloodlines made him “a valuable stud prospect” after his racing career was over. Joseph also changed the content of his claim in his cross-examination. At first he said that the defendant said that he thought the horse was a “potential stallion” but then denied that and claimed that the defendant said that the horse “would make a very nice stallion” and that it “wasn’t even potential”. He then claimed that the defendant said that the horse was “going to make a very good stallion”.

The defendant denied that he said that it did not matter if the horse won a race or not for it to be a valuable stud prospect.

I did not find Carlo’s evidence in cross-examination on this principal representation convincing. He made no mention in his affidavit of any discussion with the defendant about the horse’s stud prospects if it did not win a race. Yet nine years after the event when he was giving his evidence he claimed that the defendant said that “whether he does or does not make it to the track,” the horse “will become a very, very high commodity in the breeding industry”. There has never been any suggestion, and it was never put to the defendant, that irrespective of the horse’s performances on the track he would become a “very, very high commodity in the breeding industry” (tr 140).

One of the real difficulties for each of the parties and the witnesses in this case was the time lag between the relevant events in a paddock in Picton in 2006 and the giving of their evidence nine years later in 2015. This horse raced for years with varying results both in Australia and New Zealand and there is no documentation that supports the proposition that the defendant ever said that irrespective of the horse’s performance he would be a valuable stud prospect.

Indeed if as the plaintiffs claim they had relied upon such a statement it is inconceivable that they would not have suggested that the horse go to stud perhaps at a time after he came third in a Group 1 race or at some time earlier than the beginning of the complaints about the training fees having to be paid with no return. Even when the decision was communicated about the horse being kept for a further year rather than selling it at the Magic Millions auction in mid-2011, neither Antonio nor Joseph suggested that the horse go to stud at that time.

It was never suggested in the conversations with Ms Jenkins in early 2012 that the defendant had informed the plaintiffs that irrespective of his performances he would be a valuable stud prospect. True it is that at this time the plaintiffs were looking at the possibility of placing the horse at stud with Mr Santic. However when Joseph spoke with the defendant in February 2012 he did not suggest to him that he must be valuable because of his bloodlines. Rather he asked the defendant what he thought the horse was worth. When the defendant responded that he did not know “exactly” what the horse was worth, there was no suggestion that Joseph then recounted to the defendant his claimed representation that irrespective of his performance on the track he would be a “valuable stud prospect”.

In all these circumstances I am satisfied that the defendant did not say that irrespective of his performance on the track, or whether he won a race or not, the horse would be a valuable stud prospect.

I am not satisfied that the defendant made the second principal representation. It was accepted that if I were to find against the plaintiffs in respect of their principal representations claim it is unnecessary to consider the other pleaded representations (tr 294).

The plaintiffs’ claim for misleading or deceptive conduct against the defendant will be dismissed.

The plaintiffs limited their alternative cases to a claim that the defendant in breach of contract purported to sell their shares (or cause their shares to be sold) in the horse by private sale to Mr McHugh. It is alleged that the defendant was not authorised to accept the offer made on Mr McHugh’s behalf without advising the plaintiffs that the offer had been made. If this finding is made Mr McHugh accepts that he cannot obtain any better title and does not make any claim under s 26 of the Sale of Goods Act 1923 that the plaintiffs’ are precluded by their conduct from denying the defendant’s authority to sell. In those circumstances Mr McHugh does not oppose the declarations and order sought by the plaintiffs.

The arrangements in respect of the purchase of the shares in the horse and the management of the horse were very loose. However it is clear that there was an oral agreement that was partly evidenced in writing by the cheques and invoice and in the documents that were lodged with the Registrar that Antonio, Rosa and Joseph on behalf of Mrs Pirrello had each agreed to purchase their respective shares in the horse for the consideration paid to the defendant at Picton in January 2006.

The Rules provide that any person who “takes part in any matter” coming within the Rules “thereby agrees with the Australian Racing Board and each and every Principal Racing Authority to be bound” by the Rules (AR.2). The word “syndicate” means and includes a combination of persons not exceeding twenty (AR.69A). The Rules provide that every member of a syndicate “shall in all respects and for all purposes” be bound by the Rules “irrespective of the nature or extent of the interests or rights of such members in the syndicate” (AR.69L). In this case the syndicate was not registered. Rather the horse was raced by the co-owners with the defendant as Manager.

Each of the owners of the horse agreed to be bound by the Rules and agreed that the defendant was not only the trainer of the horse but also the Manager to which AR.57 applied. The owners agreed that the mechanism for removing or replacing the defendant as Manager was by memorandum signed by the owners “representing a majority interest in the horse” (AR.57(1)). They also agreed that the defendant alone was entitled to, inter alia, “act for and represent” them “in relation to the horse in all respects for the purpose” of the Rules (AR.57(2)(d)). The Rules are silent in respect of the sale of thoroughbred horses.

There is in evidence a copy of the Australian Bloodstock Code of Practice issued by the Australian Racing Board. The Introduction to that Code is in the following terms:

The definition section of the Code includes the following:

The Code also deals with obligations of agents and includes the following:

It was not suggested in final submissions that this Code applied to the defendant. However the Code is informative of the obligation of an agent who represents a principal in the sale of a thoroughbred horse, particularly in the circumstances of the sale of the horse to Mr McHugh.

Antonio’s affidavit in chief made no mention of any statement made by the defendant about what would happen regarding the sale of the horse. Antonio claimed that the defendant said that the owners “will regularly get together” to decide the horse’s “racing and stud plans”. There was no mention in his affidavit in reply of any discussions about any meetings of the owners to deal with the sale of the horse. Joseph’s affidavit evidence in chief was that at the Picton meeting the defendant said that all the owners “will have regular meetings to discuss and decide the plans of the horse”. There was no express reference to the sale of the horse. Nor was there any such reference in Joseph’s affidavit in reply.

Although it has been unnecessary to deal with the other pleaded representations, having regard to the conclusions reached in respect of the plaintiffs’ claim against the defendant for misleading or deceptive conduct in respect of the principal representations, it is appropriate to say something at this juncture about the relevant pleaded Syndicate Representations. It was alleged that the defendant represented to Antonio and Joseph that “no sale or disposal [of the horse] would occur without the express approval of each owner”. It is understandable that the plaintiffs focused on the principal representations in their final submissions because there is no basis to justify a finding that this representation was made at the meeting at Picton.

One issue between the parties is whether the defendant said that he managed the syndicate on the basis of “majority rule”. However even if the defendant did say this and it was accepted by the plaintiffs, there is the further issue as to whether such a “rule” applied to the sale of the plaintiffs’ shares in the horse.

As referred to earlier, the defendant claimed in his affidavit that at the meeting at Picton in response to their enquiry as to who would manage the horse he said to Antonio and Joseph, “I run these syndicates as partnerships. I will manage the horse and if there is anything I need the owners to decide, then that will be decided by majority rule”

The defendant gave the following evidence in cross-examination (tr 171-174):

After further cross-examination the question of the meaning of “majority rule” was raised again (tr 192-193):

The defendant gave a further explanation of how the majority rule works in practice (tr 188):

The defendant also explained that in the event of an hypothetical 50/50 split between the owners over a decision touching upon the management of the horse, he would have the deciding vote (tr 176). However he could not recall whether he had informed Antonio and Joseph of this “casting vote” arrangement when he met with them at Picton.

Antonio and Joseph denied that they were advised of any “majority rule” term at the Picton meeting (tr 61; 101). However Joseph’s evidence was that he assumed that decisions “would be by consensus” (tr 101).

The events of mid-2011, when the horse was entered into the Magic Millions sale and then withdrawn are an example of the majority rule in practice. The defendant gave the following affidavit evidence in respect of the entry of the horse into that sale:

There is an issue about whether Antonio or Joseph indicated to the defendant or Ms Maybury that they wanted the horse sold as soon as possible. Both denied giving such indication to the defendant. It appears that the “indication” came mainly from Ms Maybury who reported her conversations with Antonio or Carlo and Joseph to the defendant. She claimed that Antonio (although it would appear it was Carlo) was complaining about the training fees and indicating that the horse should be sold. On balance I accept Ms Maybury’s evidence that there were complaints made about the training fees. However I am satisfied that those complaints were made in the context of the horse’s lack of success in Group 1 races and/or races generally. I am not satisfied that Antonio (or Carlo) said that they wanted the horse sold as soon as possible. I am satisfied that Joseph did not make any complaint either to Ms Maybury or the defendant and did not indicate that he wished to sell the horse as soon as possible.

In any event, both Antonio and Joseph were notified of the outcome of Ms Jenkins’ discussions with the other owners in achieving a majority decision that the horse should be withdrawn from the Magic Millions sale in mid-2011 and raced for a further year. I accept that neither Antonio nor Joseph was consulted about this outcome before they were notified by email. In one sense the decision to race the horse for a further year was a “matter” affected by the Rules and one in respect of which the defendant was entitled to represent the owners as Manager. Clearly the outcome was achieved on the basis of a majority decision. However Joseph’s unchallenged evidence was that he complained to the defendant that no one had consulted him or Antonio about the sale. This complaint was met by the defendant suggesting that Antonio and Joseph could bid at the auction. I am not satisfied that the plaintiffs’ conduct in respect of these events of mid-2011 justifies a finding that they agreed to or acquiesced in other owners making a decision to sell their shares in the horse without their consent.

On balance I am satisfied that the defendant informed Antonio and Joseph at the Picton meeting that he ran the syndicates as partnerships and if he needed the owners to decide matters about the horse, it would be decided on the basis of majority rule. However I am satisfied that this statement related to the defendant’s role as trainer of the horse and as Manager under AR.57. There was no discussion about what would happen if the horse was to be sold. The parties were focused on what they clearly regarded as the very exciting prospect of achieving great success in racing the horse and thereafter standing him at stud. I am not satisfied that the plaintiffs agreed at the meeting at Picton that their shares in the horse could be sold without their consent by the decision of the majority interests in the horse.

The Magic Millions records in evidence (Ex E) include a sheet entitled “Private Sales”. The only vendor identified on that document is the defendant and the only purchaser is identified as Mr Young’s company, Doncaster Bloodstock Services Pty Ltd. That document records that it was generated by Mr Chester on 11 April 2012. It records a purchase price of $60,000 together with commissions and or GST making a total of $63,300.

There is also in evidence the Conditions of Sale for the 2012 Magic Millions sale (Annexure “D” to the affidavit of Mahsa Curci sworn 14 July 2015 (the MM Conditions)). The MM Conditions include the following:

The MM Conditions provide that: the “sale” will be conducted by an Auctioneer with absolute discretion to withdraw any Lot before or during the sale (2.4.3); the vendor is entitled to instruct the Auctioneer to re-offer the Lot on the completion of the Auction and “the horse shall be re-offered without reserve” (2.4.7); and subject to any reserve price “all Lots are sold at the final bid accepted by the Auctioneer” (2.5). The only references to a private sale in the MM Conditions are as follows:

I am satisfied that on a reasonable reading of the MM Conditions the “private sale” referred to in the MM Conditions is a private sale at the date of the auction or thereafter and not some months prior to it.

The defendant gave affidavit evidence that during the latter part of 2011 and the first few months of 2012 Ms Maybury informed him of her telephone conversations with Joseph and Antonio in which they advised that they did not want to pay any more costs and wanted the horse sold. His affidavit in this regard included the following:

In examination-in-chief the defendant was taken to the period at the end of 2011 and early 2012. He gave the following evidence (tr 156-159):

On two occasions during his cross-examination the defendant said that Ms Jenkins was his “go-between” with the plaintiffs (tr 159; 217). During his cross-examination he also reiterated his affidavit evidence that he tried without success to get in touch with Antonio and Joseph. He was cross-examined as follows (tr 225-226):

In this passage of evidence the defendant agreed that the reason he wished to get in touch with Antonio and Joseph was because “for sure” the horse was going to be sold. At this stage it was to be sold through Magic Millions at auction.

The defendant was reminded that a decision had been made by the majority of the owners not to sell the horse and to race it for a further twelve months from mid-2011. He was cross-examined further (tr 227):

The defendant relied upon a number of other witnesses in support of his case and it is appropriate at this juncture to deal with their evidence.

Mr Harvey swore an affidavit of 17 December 2014 in which he referred to his background in breeding and racing thoroughbred horses since 1972. At the time he gave his evidence he owned approximately 500 broodmares and, either wholly or in partnership with others, approximately 300 racehorses. He is also the co-owner with his wife, Katie Page, of Magic Millions Sales Pty Ltd.

In the 2006 Magic Millions Yearling Sale Mr Harvey offered a number of yearlings on behalf of his Baramul Stud. One of those yearlings was the horse. Mr Harvey claimed in his affidavit that the defendant confirmed that he would take an ownership interest in the horse and would manage it, with any decisions to be taken by the owners “to be determined in accordance with what the majority wanted to do”. Mr Harvey left the management of the horse entirely to the defendant and said that he regarded himself as “just one of the owners”.

Mr Harvey’s affidavit evidence was that he was aware that the horse was listed in the 2011 Magic Millions Sale in May or June of that year. Soon after that listing he received a call from Ms Jenkins who advised him that she was calling all of the owners to get them to agree to race the horse for one more year. Mr Harvey informed Ms Jenkins that if this was what the majority wanted to do then he would go along with it.

Mr Harvey said that after the horse was withdrawn from the 2011 Magic Millions sale, and over the next few months, he had a number of discussions with the defendant and expressed his opinion that the horse should be sold. The defendant agreed with him and indicated that he was trying to find a stud that would take him. Mr Harvey also said that at various times during the first few months of 2012 he discussed the horse with the defendant who confirmed “that the other owners no longer wanted to continue racing” the horse and that “the horse would be sold at the 2012 Magic Millions sale, unless he could find a stud to take him prior to the sale”.

In cross-examination Mr Harvey gave the following evidence (tr 198-200):

Mr Harvey agreed that by the standards of Australian racing, the horse was a very expensive yearling (tr 201). He had no interest in standing the horse at Baramul Stud and agreed with the defendant that it should be sold. He gave the following evidence in further cross-examination (tr 201):

Although Ms Maybury had advised Joseph that it was Mr Harvey and Ms Jenkins who organised the sale through Magic Millions, Mr Harvey was not cross-examined about this matter.

Although Ms Jenkins’ evidence in relation to her meeting with Antonio and Joseph in early 2012 in Double Bay is referred to earlier it is appropriate to refer to her additional evidence in relation to this aspect of the plaintiffs’ claims.

Ms Jenkins’ affidavit evidence of 9 February 2015 referred to her involvement with owning or part owning at least 100 racehorses and breeding stock over the previous 30 years including several trained by the defendant. Ms Jenkins has acquired shares in several horses from the defendant and raced them in partnership with other owners introduced by the defendant. Ms Jenkins said that the horse showed “early promise” running a place in the Group 1 Randwick Guineas as a three year old. However she said that after the Randwick Guineas he lost form.

Ms Jenkins’ affidavit evidence was that in early 2012 she received a call from the defendant who informed her that the horse was not going to make it in Group 1 and that the other owners did not want to keep on paying the bills for training him “and want the horse to be sold”. Although Ms Jenkins had been instrumental in removing the horse from the Magic Millions sale in mid-2011 she advised the defendant that she “now” agreed the horse should be sold. She claimed that the defendant informed her that he had located a stud that would accept him and informed her that it was a “good home”, that they would look after him well and would provide him with good mares. Ms Jenkins said that the defendant did not tell her the name of the buyer at that time.

Ms Jenkins claimed that “a little later” some time in early April 2012 she was informed by the defendant or his personal assistant that the horse had been sold privately to Mr McHugh for $60,000, which she considered to be a good price.

In cross-examination Ms Jenkins said that she purchased Sir Patrick Hogan’s 5% share in the horse bringing the combined shareholding with her daughter up to 20% (10% each) (tr 261). Ms Jenkins said that if she owned a share in a horse with others she would expect to be consulted before the horse was sold (tr 261). She gave the following evidence (tr 261-262):

Ms Jenkins was asked about her conversation in her affidavit with Joseph regarding keeping the horse as follows (tr 266-267):

Although the defendant claimed that Ms Jenkins was his “go-between” with Antonio and Joseph, Ms Jenkins did not give evidence of such an arrangement, nor was she cross-examined about it.

David Reid is a director of a company that has either owned or part owned approximately 100 racehorses over the past ten years including a number trained by the defendant. He has acquired shares in approximately twenty horses from the defendant and raced them in partnership with other owners introduced by the defendant. He agreed to take a 15% share in the horse.

Mr Reid’s affidavit evidence (16 December 2014) was that he was willing to sell the horse in 2011 but after he was informed that the majority wished to keep racing it he was prepared to go along with it. His affidavit evidence included the following:

Mr Reid gave the following evidence in cross-examination (tr 252-256):

Mr Reid said that the arrangements in relation to these syndicates is “fairly loose”. He regarded it as a group of people who were together in a horse on a “handshake deal” (tr 257).

Wendy Maybury gave affidavit evidence (17 December 2014) that she worked as the office administration manager for the defendant for the period May 2005 to August 2013. Ms Maybury claimed that Mr Capogreco complained that the horse was costing him a lot of money with few returns. She informed the defendant that Antonio had said that he would not be paying any more training fee accounts and wanted “out of the horse” and said that he would talk to the defendant and the other owners.

Ms Maybury claimed in her affidavit evidence that after the horse was withdrawn from the Magic Millions sale in 2011, Antonio continued to express his “displeasure” that the horse was still in training and had not been sold. She recalled that Antonio said that he would not be paying any more accounts and wanted him sold. She informed the defendant of this conversation.

In cross-examination Ms Maybury accepted that she had the capacity to send emails to all of the owners simultaneously (tr 237). She agreed that notwithstanding her evidence about Antonio complaining about the training fees, all of the fees were paid on time (tr 239). When she received Joseph’s email complaining about the sale of the horse in April 2012 she would have immediately discussed it with the defendant (tr 242). However she claimed that she did not recall the particular discussion (tr 242). Although initially resisting the proposition that she would not have responded to Joseph’s email without discussing it with the defendant, she ultimately agreed that she probably did discuss it with him (tr 243). Although she did not recall it she agreed that the defendant probably told her what to put into the reply. Indeed she accepted it was “very likely” (tr 244). She was cross-examined as follows (tr 244):

Ms Maybury ultimately accepted that her affidavit was probably not correct where it referred to Antonio’s continued expression of “displeasure” (tr 245).

Although he gave evidence in Mr McHugh’s case, Mr Young’s evidence is relevant to the determination of the matter. Mr Young is the principal of Doncaster Bloodstock Services Pty Ltd and has worked as a bloodstock agent for about 35 years. He first saw the horse as a yearling at the Magic Millions Sales in January 2006 and thought that he was “a very good horse, and had a commercially attractive pedigree”. He followed the horse’s racing career and developed the opinion that it had not been well managed. He felt it was a better horse than his performances suggested and would be a good stallion prospect.

In 2011 he attempted to purchase the horse for one of his clients who was looking to purchase a stallion to go to stud in 2011. He put an offer of $80,000 but this offer was rejected. The offer went through David Chester of Magic Millions who, Mr Young said, “obviously passed it on to Mr Rogerson”. He said he did not know what actually happened but he would have expected it would have been discussed with the owners (tr 271). The defendant denied any knowledge of this offer (tr 229). Part of Mr Young’s interest in the horse was that although it had not performed as well as hoped on the racetrack it had “excellent bloodlines” (tr 271). He agreed that the expectation would be that the offer would only be rejected after consultation with the owners of the horse (tr 272).

Mr Young explained some of the vagaries of the registration of thoroughbred racehorses (tr 273):

Mr Young also explained that in a lot of cases the arrangements in respect of purchasing racehorses are “oral” with no real written communication. One receives a copy of the contract between the two agents involved, one representing the seller and one representing the buyer, in this instance being Magic Millions and Doncaster Bloodstock Services Pty Limited respectively. The industry practice as Mr Young has experienced it in respect of syndications and purchasing and selling thoroughbred racehorses is rather “loose” (tr 276).

Mr McHugh has been involved in the thoroughbred breeding and racing industry for fifty years and has owned or part-owned a large number of thoroughbred horses over that time. He gave evidence of instructing Mr Young to purchase the horse in April 2012. Mr McHugh said that if he had been offered $120,000 for the horse at any time up to the end of June of 2012 he would have sold it (tr 284).

Antonio agreed in cross-examination that in early 2012 he was “in favour” of the horse being sold (tr 70). I am satisfied that Joseph’s conduct, including his conversation with the defendant in February 2012 about his expectation of what the horse may be worth amounted to an acquiescence that the horse could be sold at the Magic Millions auction. I am satisfied that both Joseph and Antonio authorised the defendant to act on their behalf in arranging for the sale of the horse at the Magic Millions auction in mid-2012. The defendant was acting as their agent (and that of the other owners) in making that arrangement for sale at auction.

Mr Reid’s description of the arrangements between the co-owners as being “on a handshake” is most apt. It appears that much of the business that is done between at least Mr Harvey, the defendant, Mr Reid and/or Sir Patrick Hogan and Ms Jenkins is on a very informal rather osmotic basis with mutual understandings established over the years whilst they have been co-owners of various horses.

There is nothing in AR.57 that authorised the defendant to sell the horse without notifying the plaintiffs. Indeed that is not the real issue between the parties. Clearly the defendant was authorised to list the horse for sale at the Magic Millions auction in mid-2012.

The real issue is whether there was an obligation on the defendant to inform each of the owners (or to ensure that each was informed) of the quite different proposal to that which had been agreed (the sale at the Magic Millions auction) that an offer had been received to purchase the horse privately for $60,000.

The prospect of the horse being sold at private sale was not communicated to the plaintiffs. Mr Harvey, who in fact is the co-owner of Magic Millions (about which no complaint is made in this case) was advised of the sale. There was no evidence that Mr Chester telephoned any owner other than Mr Harvey to advise them of the offer. Rather Ms Jenkins and the defendant claimed they were informed of the “sale” (not the offer) by Mr Chester. The plaintiffs were not contacted at all by Mr Chester.

The defendant claimed in his affidavit that Mr Chester informed him that he was “dealing direct with the other owners”. He claimed that Mr Chester made this statement after he had informed him that the horse had been sold for $60,000. It was also said after the defendant had informed Mr Chester that he thought that this was a “good result” because there had been “no interest in him as a stallion” and that he had been “struggling to find a home for him”. The defendant was cross-examined about this evidence as follows (tr 226):

The defendant’s suggestion that “no doubt” Mr Chester talked to the owners is indicative of an understanding that it was necessary to talk to the owners. It is odd that Mr Chester would say that he was going to deal “directly” with the owners when the Magic Millions Private Sales Sheet that he generated recorded the defendant as the only vendor. In any event it is clear that Mr Chester did not deal directly with the owners. He dealt with Mr Harvey in that he advised him of the offer. Mr Harvey did not instruct Mr Chester to accept the offer. Rather he claimed that he informed Mr Chester that he was “in agreement the horse should be sold”.

Each of Antonio, Mrs Capogreco and Mrs Pirrello had ownership of part of a chattel: Leason Pty Ltd v Princes Farm Pty Ltd [1983] 2 NSWLR 381 at 382A-B. It was submitted that prior to the sale to Mr McHugh, the horse was owned by the plaintiffs and the other co-owners as tenants in common in proportion to their shares. In Re Gillie & Ors; Ex parte Cornell (1996) 150 ALR 110, Finn J was dealing with a claim in respect of a herd of dairy cattle. The wife of a bankrupt had (with her husband’s help) removed approximately half of the herd of cattle that were claimed to be part of the bankrupt estate. His Honour said at 114:

His Honour also referred to a “considerable body of early, arcane, but subsisting law” on the rights of co-owners of chattels when one co-owner assumed to deal with the co-owned property for his own benefit (at 113). In this regard his Honour referred to a number of articles, one of which is by DB Derham, “Conversion by Wrongful Disposal as Between Co-Owners” (1952) 68 LQR 507. In that article Mr Derham’s statement that if two people became co-owners of a chattel there is no presumption of a partnership was in reliance upon the decision in French v Styring (1857) 2 CB (NS) 357; 140 ER 455. That was a case dealing with joint ownership of a racehorse and the question of whether the agreement between the parties constituted a partnership. Cockburn CJ (Cresswell, Crowder and Willes JJ agreeing) said at 457:

Mr Derham said at 508:

It was submitted there is nothing special about a racehorse in the sense that it attracts the law as it relates to chattels including s 26 of the Sale of Goods Act 1923 and s 36A of the Conveyancing Act 1919. The Sale of Goods Act 1923 provides relevantly:

Section 36A of the Conveyancing Act provides:

In Ferrari v Beccaris [1979] 2 NSWLR 181 McLelland J made an order under s 36A for the sale of a racehorse co-owned by the plaintiff and defendant who had leased it to the plaintiff. In interpreting s 36A his Honour said at 183B-D (footnotes omitted):

In Dennis v Dennis (1971) 124 CLR 317 the High Court dealt with an appeal in which the trial judge had found that an agreement had been reached pursuant to which the plaintiff obtained a half interest in the subject horse. The High Court held that it could not be concluded that the legal consequence of the agreement was as found by the trial judge such as to create a proprietary interest in the horse. Although that case is distinguishable from the facts of this case Windeyer J said at 325:

Windeyer J also said that ownership of the horse “is a matter of a legal title” (at 325).

In Colin Graham Kimber and Lynette Mary Manwaring v Susan and John McNair [2008] NSWDC 114, the plaintiffs claimed that the defendants had breached the agreement between them by selling the horse the subject of the proceedings without their consent. That case is also distinguishable from the present in that the parties entered into a written agreement pursuant to which the second defendant agreed to train the subject horse in accordance with its terms and the first defendant acquired a one-half share in the horse.

In that case the defendants argued that AR.57(2) enabled the defendants to deal with the horse, including selling the horse. There was also the additional provision of the written agreement between the parties pursuant to which the trainer, the second defendant, had “100% control over the horse” for the term of the agreement.

Rolfe DCJ held that AR.57(2) did not operate so as to authorise the manager of a horse to sell it. Nor was his Honour satisfied that the provision of the written agreement entitled the defendants to sell the horse without the plaintiffs’ consent. His Honour concluded that the defendants breached the agreement by selling the horse without the plaintiffs’ consent.

The discernment of the terms of the contract between the plaintiffs and the defendant is not straightforward in the circumstances of this case. However it is clear that the owners agreed that possession of the horse would vest in the defendant whilst he trained, raced and managed the affairs of the horse for the purposes of the Rules.

Joseph and Antonio met each morning for coffee. I am satisfied that Joseph would have kept Antonio informed of all the developments in relation to the horse of which he became aware. Joseph understood that decisions would be made by “consensus”. When the majority of the owners decided to sell the horse in 2011 and a decision was then made to keep it for a further twelve months to see if it could improve on the track, Antonio and Joseph accepted this outcome.

The email communications in late 2011 in which Joseph sought clarification of what it meant for him if the horse went to stud clearly concluded with advice that the defendant was looking for a stud to purchase the horse. From this time Joseph, and I conclude Antonio, knew that the defendant was, on their behalf, attempting to find a stud that would purchase the horse. Far from suggesting that the defendant was attempting to arrange for the horse to stand at stud whilst the horse remained in the ownership of the plaintiffs and their co-owners, this was clearly an indication that the defendant was trying to sell the horse. The plaintiffs’ silence after these communications amounted to a consent for the defendant to act on their behalf to try to find a stud that would purchase the horse from them and their co-owners. That did not mean that the defendant could simply decide on his own to sell the horse for any amount he wished to any stud he could find. Rather I am satisfied that he was obliged to advise the plaintiffs and seek their views on any offer that he received.

In any event circumstances changed in early 2012. Although Ms Maybury could not recall the conversation with Joseph in February 2012 I accept that she informed him that the horse was to be sold at the 2012 Magic Millions auction. I am satisfied that in this conversation Joseph advised Ms Maybury that he and Antonio wanted the opportunity to buy the horse at auction if the price was not too high.

I am also satisfied that the meeting with Ms Jenkins in Double Bay was consequent upon Joseph and Antonio’s desire to keep their shares in the horse and attempt to purchase it outright at the auction. Although Ms Jenkins suggested that she may have understood the conversation differently, I find it difficult to accept that she could reach any other conclusion than that Joseph and Antonio wanted to keep their interest in the horse and buy it outright. I am satisfied that Ms Jenkins knew at that time that Joseph and Antonio wished to purchase the horse and send it to a stud.

Although the role of Manager under AR.57 was limited to managing the horse for the co-owners for the purposes of the Rules, the co-owners, including the plaintiffs, authorised the defendant to represent them in placing it with Magic Millions for the auction sale in June 2012.

I am satisfied that the defendant had notice through the conversation between Joseph and Ms Maybury that Antonio and Joseph wished to and intended to bid for the horse at the Magic Millions auction. Although the defendant said he was relying upon Ms Jenkins as a “go-between” with the plaintiffs, there is nothing in the evidence that establishes that Ms Jenkins understood that she had any obligation to inform the defendant of the conversations that she had with the plaintiffs. Accordingly I am not satisfied that the conversation between Antonio and Joseph and Ms Jenkins in Double Bay amounted to notice to the defendant that Joseph and Antonio wished to bid at the auction.

Ms Jenkins’ affidavit evidence that in early 2012 the defendant said “I’ve located a stud that will accept him” is at odds with the defendant’s evidence that he was advised of the sale after the event. In cross-examination the defendant said he did not recall such a conversation with Ms Jenkins and suggested that if it did occur it would have been after he knew that Mr McHugh had purchased the horse (tr 230-231).

There was no evidence of the instructions given to Magic Millions nor was there any documentation recording communications Mr Chester had with any of the owners.

The plaintiffs submitted that from all of the evidence there are three possible terms of the contract between them and the defendant in relation to the defendant’s ability to sell their interests in the horse. The first is that the defendant could only sell the plaintiffs’ shares in the horse with their consent (irrespective of the majority view); the second is that the defendant could sell the plaintiffs’ shares in the horse if co-owners of more than 50% of the shares in the horse so agreed (irrespective of the plaintiffs’ views); and the third is that the defendant could sell the plaintiffs’ shares in the horse if co-owners of more than 50% in the horse so agreed and the plaintiffs were advised of the offer to purchase the horse before any sale took place.

The defendant submitted that although the plaintiffs’ third possibility might present as a probable term of the arrangements between the parties, it is really more elaborate than the term suggested. It was submitted that what the plaintiffs are really proposing in this term is that they be informed of the following six matters: (1) the method of sale (auction, private treaty, public tender); (2) the date, time and location of the proposed sale; (3) if by private treaty, the proposed sale price (PSP); (4) if by private treaty, any price offered by a putative purchaser (PPP) greater than the PSP, with sufficient notice to enable the plaintiffs to consider whether to make an offer matching or exceeding the PPP; (5) if the mode of sale notified pursuant to (1) changes, reasonable notice of that fact and of the alternative mode adopted by the defendant; and (6) in the event of (5), fresh compliance with (1) to (4).

These contentions did not focus upon the specific change of circumstances in early 2012 when the horse was listed for sale at the Magic Millions auction. It is necessary to review the conduct of the parties to determine the nature of the agreement that was reached at this time. In all the circumstances I am satisfied that by late March early April 2012 the co-owners of the horse, including the plaintiffs, had agreed that the defendant was authorised to put their shares in the horse up for auction at the Magic Millions auction sale in mid-2012. Listing the horse for auction at the Magic Millions mid-2012 sale is quite a different and separate matter from pursuing a private sale of the horse, obviously involving possible offers, the taking of instructions, possible counter offers and ultimately, if suitable, acceptance of any offer.

One of the curiosities of this case is Mr Young’s evidence that in 2011 he made an offer of $80,000 to purchase the horse and that the offer was rejected. There was no evidence that any of the owners knew about this offer, let alone considered it and instructed anyone to reject it. Another curiosity in this case was the apparent sale of Sir Patrick Hogan’s share in the horse to Ms Jenkins for an undisclosed amount. It is apparent that none of the other owners were offered this shareholding and no notice of this transaction was given to the other owners or to the Registrar. In addition when the defendant spoke with Carlo on 15 April 2012 he claimed that he “gave” his share to Bruce Reid. These arrangements do not appear at all consistent with the Australian Bloodstock Code of Practice in its aim to achieve high standards of transparency. It appears that these co-owners who deal with each other on a regular basis and seem to know each other’s expectations, dealt with their shares on a “handshake” without consulting each other.

Once the horse was entered into the Magic Millions sale for mid-2012, the owners were in a position to know from the MM Conditions the confines within which the sale would take place. This was one of the very few instances in the six year history of their relationships that there was some certainty. It was a sensible and reasonable process to adopt where some owners wanted to terminate their interests in the horse and others (the plaintiffs) preferred to keep their interests in the horse. It was in these circumstances unnecessary to seek an order under s 36A of the Conveyancing Act. The auction provided the opportunity to the owners to terminate their relationships in a transparent and fair way letting the market fix the value of their interests. It also provided the opportunity to the plaintiffs to maintain their interests in the horse by bidding at the auction. This, for the plaintiffs, was a far more preferable process than seeking to negotiate with the other owners who were obviously so very much more experienced in the racing industry than both Joseph and Antonio, but more so Joseph.

Much of what happened between these parties occurred in the context of the loose handshake arrangements in the racing industry setting which is governed by the Rules and codes of practice. Each of the owners expected that all owners would be consulted about an offer to purchase the horse. That is particularly understandable where hundreds of thousands of dollars had been paid for their respective shares in the horse and on training fees.

When the private offer was received each owner holding the legal title to the shares in the horse was entitled to be advised that such an offer had been received. Although the defendant claimed that Mr Chester contacted him to advise that the horse was sold, Ms Jenkins’ evidence that the defendant informed her that he had found a home for the horse some time before she heard from Mr Chester about the sale, suggests that the defendant probably was aware that an offer had been made. Although the defendant claimed that he did not recall the conversation with Ms Jenkins before the horse was sold, I am of the view that it is probable that Mr Chester would have made contact with the named vendor, the defendant, to advise him of the offer that was received.

The defendant was obliged to inform the plaintiffs that rather than proceeding with the plan that was in place for the horse to go to auction at the Magic Millions sale in June 2012, there was now an offer of $60,000 for the horse from a private buyer. The defendant was not entitled to sell the horse at private sale without the plaintiffs’ knowledge. The fact that a majority of owners may have expressed their satisfaction with the outcome after the event does not mean that the defendant was authorised to sell the plaintiffs’ shares in the horse at a private sale of which they had no notice.

The defendant did not have authority to sell the plaintiffs’ interests in the horse. They are entitled to the declarations that they hold their respective percentage interests in the horse and an account from Mr McHugh.

The plaintiffs’ claims against the defendant for misleading or deceptive conduct are to be dismissed.

The defendant did not have authority to sell the plaintiffs’ shares in the horse at the private sale. The plaintiffs are entitled to the declarations that they hold their respective percentage interests in the horse and to an order for an account as against Mr McHugh. I am of the view that the parties should proceed to mediation to see if they can reach a more commercial arrangement now that they have these reasons.

I will give the parties time to consider these matters and/or to prepare Short Minutes of Order to reflect the outcome of the proceedings including the question of costs. I will deal with all outstanding matters when the proceedings are next listed on 23 October 2015.