Sommerfield v O'Keefe[2016] QDC 222

DISTRICT COURT OF QUEENSLAND

1. [1]
   The plaintiffs allege the defendants owe them money for the agistment and preparation of the defendants’ racehorses. They claim these outstanding fees as a debt owing under the agistment agreement. The plaintiffs conducted a commercial enterprise for the agistment of racehorses and the defendants agisted horses on the plaintiffs’ property. A large number of horses were involved with individual horses changing from time to time. The defendants dispute the terms of the agistment agreement and the ownership of the horses from time to time. They deny that any debt remains unpaid.

2. [2]
   The defendants counterclaim for damages in negligence arising from the death of a horse, for refund of an overpayment of $7,480.24 and for return of four horses over which the plaintiffs claim a lien.

The agreement

3. [3]
   It is common ground that in about July 2009 the plaintiffs and the first defendant Mr Kevin O'Keefe entered into an oral agreement for the agistment of horses.

4. [4]
   On 12 August 2009 Mr O'Keefe requested by email that the horses be allocated to one of three accounts for billing purposes. The first account in the name KJ and JM O'Keefe related to Mr O'Keefe in his personal capacity. The second account was in the name of Nevis Nominees Pty Ltd (“Nevis Nominees”) and the third account was in the name of MVO Industries Pty Ltd (“MVO Industries”). Mr O'Keefe was a director, secretary and shareholder of both companies and he appeared to exercise decision making control in respect of horses allocated to those accounts. The plaintiffs issued separate monthly invoices to each defendant in respect of the horses assigned at Mr O'Keefe’s direction to that defendant’s account.

5. [5]
   The Further Amended Statement of Claim sets out a total amount said to be owed as a debt by Mr O'Keefe, but in the alternative claims for individual debts owned by each the three defendants, together totalling the overall sum claimed. Mrs Sommerfield in her testimony spoke of reaching agreement with Mr O'Keefe and could be taken as suggesting that Mr O'Keefe was personally liable in respect of all the horses.

6. [6]
   In my view, the evidence establishes that although Mr O'Keefe negotiated on behalf of all three legal entities, it is clear the plaintiffs contracted separately with each. They were informed of the existence of each of the defendants and invoiced them separately in respect of the horses that they were informed were owned by those companies. Mr O'Keefe gave evidence that his affairs were structured so that the horses were owned by particular entities at different points in their life cycle because of the taxation consequences.  That Mrs Sommerfield was aware the reason for assigning horses to named accounts related to their ownership was confirmed in an email dated 17 September 2013 in which she, under the heading “ownership”, checked with Mr O'Keefe which of a number of horses related to each of the three accounts.  The records kept by the plaintiffs at all times differentiated between the three entities and separately recorded the fees owed by each entity.

7. [7]
   Mr O'Keefe is not legally liable for the debts of the two companies. Each has a separate legal personality. Accordingly, it is necessary to approach the matter as being claims for debts owed by the individual legal entities considered separately.

Was there a transfer of ownership?

8. [8]
   The primary issue between the parties is the contention by the defendants that later in the period, property in many of the horses was transferred to the plaintiffs, with the consequence being that from that point in time the plaintiffs were to bear all agistment costs. The plaintiffs deny that any such transfer occurred.

9. [9]
   The defendants’ horses were agisted as part of a cordial business arrangement from 2009 up to early 2013. Mr O'Keefe testified that his personal bank accounts were garnisheed by the Australian Tax Office (ATO) in about 2012, causing him personal financial difficulty in meeting his commitments, and thereafter MVO Industries also became subject to ATO attention and became unable to meet its financial obligations. The second defendant Nevis Nominees as the trustee of a self-managed superannuation fund was, on the evidence of Mr O'Keefe, unaffected by the ATO action. Accordingly, Nevis Nominees throughout the relevant period was largely up-to-date in paying the plaintiffs’ accounts and at the time of trial had paid its debts in full, although a small contested amount was paid under protest and is in issue before me. In the Fourth Amended Defence it is pleaded that:

“In or about April 2013, the Plaintiffs and the First Defendant had a conversation during which:

1. (a)
   the First Defendant said words to the effect that he could not afford to pay the debt that he owed the plaintiffs;

2. (b)
   they agreed that the First Defendant’s horses would become the property of the plaintiffs;

3. (c)
   they agreed that the Plaintiffs would bear the cost of agisting those horses;

4. (d)
   they agreed that those horses would be sold in order to offset the cost of agistment and care.”^[1]

10. [10]
    This conversation is said to have constituted an agreement between the first defendant and the plaintiffs for the horses to become the property of the plaintiffs on 8 April 2013.

11. [11]
    It is also pleaded that:

“In or about September 2013, the Plaintiffs and the First Defendant (as agent for the Third Defendant) had a conversation during which they agreed that:

1. (a)
   if the Third Defendant could not pay its debt by 30 November 2013 then its horses would become the property of the Plaintiffs;

2. (b)
   those horses would be sold in order to pay the debt owed by the Third Defendant.”^[2]

12. [12]
    It is pleaded that the horses became the property of the plaintiffs when the third defendant failed to pay its debt by 30 November 2013.

13. [13]
    The plaintiffs deny the existence of the alleged agreement. This issue is significant because the defendants assert that from 8 April 2013 for the first defendant, and 13 November 2013 for the third defendant, no fees were due and owing for agistment of the horses transferred under those agreements.

The evidence

14. [14]
    Mr O'Keefe testified that in early 2013 he held a conversation with both plaintiffs offering to transfer the horses to the ownership of the Sommerfields on condition they “sell-off straight away” and reduce the debt owed on the KJ and JM O'Keefe’s account.^[3]  Once the horses went to the Sommerfields, the cost of agistment was to be their responsibility.^[4]  Mr O'Keefe referred to correspondence saying “they [the Sommerfields] sent me a letter to that effect that it was acceptable”.^[5]

15. [15]
    The letter referred to is dated 8 April 2013 and reads:

“Dear Kevin,

This is to confirm our arrangement between Blue Hills Thoroughbreds and your interest.

Blue Hills Thoroughbreds will incur cost of agistment of the mares and their progeny.

As agreed it is intended to sell off stock progressively to offset these costs.

Distribution of funds from the sales will be determined by the values sold with the priority to be given to Blue Hills Thoroughbreds to cover the cost of agistment and care. 

We trust this is to your satisfaction however please call if you have any concerns.”^[6]

16. [16]
    Mrs Sommerfield’s evidence is that she signed the draft letter that was prepared and forwarded by Mr O'Keefe for her signature. She denied she understood the letter to be an agreement for the transfer of ownership of Mr O'Keefe’s horses. Her evidence is that Mr O'Keefe said the ATO had frozen his accounts and in order to get the banks off his back to be able to pay his debts to the Sommerfields he needed a letter from them “to say that [they] were helping him out until he gets on his feet”.^[7]

17. [17]
    Mrs Sommerfield said the signing of the letter occurred in the context that Mr O'Keefe’s accounts were overdue in late 2012.  In March 2013 there was a discussion about his paying off his bill.^[8]  He promised he would be able to pay if they gave him a bit of time.  They agreed to give him a few months if he paid at least $10,000 a month.  This is in the context that the overall cost of maintaining the horses approximated $30,000 a month.^[9]

18. [18]
    The plaintiffs point to various evidence they say demonstrates their actions were inconsistent with ownership in the horses having been transferred on 8 April 2013. No transfer of any horse was recorded on the Queensland Racing Register.^[10]  They continued to invoice for agistment and other fees as before. 

19. [19]
    It is submitted by the plaintiffs that continuation of an arrangement struck at the end of 2012 for the parties to go halves in the foals of five horses was also inconsistent with a transfer of ownership of the mares. The benefit of that arrangement for Mr O'Keefe was that the Sommerfields would bear the agistment cost of the mares until the foals were weaned, in exchange for a half share in the foal.^[11]  The invoicing from 2012 to late 2013 in respect of the mares is consistent with this arrangement continuing.

20. [20]
    Mr O'Keefe agreed that he continued to receive invoices in respect of the KJ and JM O'Keefe horses. He made no protest about the invoicing but said he advised in a phone call that he would pay out the accounts up to the date of the letter of transfer as soon as “we have the money”.^[12]

21. [21]
    In September 2013 Mr O'Keefe said he had visited the Sommerfields at their property and discussed that the ATO were taking action in respect of MVO Industries’ assets as he was its sole director.^[13]  He said he put a proposition to the Sommerfields.  He said the following about their response:

“Well, obviously, they didn’t say no, but I – I’m not quite [indistinct] they understood what the ramifications or what the outcomes or – or the actual meaning or intent was.”^[14]

He testified that nothing specific was said by the plaintiffs that he could recall.^[15]

22. [22]
    On 17 September 2013 Mr O'Keefe forwarded the following letter regarding MVO Industries horses to the plaintiffs by email:

“Further to our discussions re part payment of our accounts of 3^rd September 2013 for agistment and associated costs towards the mares, foals, yearlings we wish to confirm.

1. (a)
   We intend bringing up to date our account payments prior to 30^th November 2013.

2. (b)
   Should the circumstances not allow this to occur the following will occur.

 All horses i.e. mares, stallions, yearlings and foals agisted at Blue Hills Thoroughbreds by MVO Industries Pty Ltd will become the sole ownership of Blue Hills Thoroughbreds.

3. (c)
   If or when the accounts are paid it is agreed a suitable outcome is to be finalised by Kevin O'Keefe and Joe and Jenny Sommerfield. 

We are of the belief this confirms our discussion however if you have any queries or different opinion please contact me.”^[16]

23. [23]
    Mr O'Keefe received no response.

24. [24]
    After 13 November 2013 he continued to receive invoices in respect of MVO Industries’ horses. He made no contact with the Sommerfields about these invoices because:

“I didn’t believe that the invoices were applicable to me because of 30 November commitment.”^[17]

25. [25]
    Mrs Sommerfield agreed that the letter of 17 September 2013 was received and not responded to. At that point in time MVO industries owed over a $100,000. Her evidence was:

“Q. So was there any discussion immediately prior to receiving this particular letter?  Did you know what was coming?

A. No.

Q. And what did you – what did you do about this letter?

A. I didn’t do anything.  Its – meant nothing to me.  – I wasn’t – I didn’t want the horses.”^[18]

26. [26]
    Mr O'Keefe’s position is that Sommerfields did not disagree to the proposition he put in writing. He said “there was no disagreement in writing to come back and say we don’t agree with that.”^[19]

27. [27]
    He explained:

“Well, if … there was a proposition put to you in that mannerism and you didn’t want it to occur, you’d disagree, wouldn’t you?”^[20]

28. [28]
    It was put to Mrs Sommerfield in cross examination that she swore an affidavit on 22 October 2015 which said:

“I discussed the letter of 17 September 2013 with Kevin O'Keefe and asked for the ownership of the horses to be transferred to Blue Hills, which is the business name used by me and my husband, but he has refused and said to me words to the effect of ‘that letter means nothing’.”^[21]

29. [29]
    Mrs Sommerfield conceded she must have said that in an affidavit but denied recalling doing so or the conversation referred to. Counsel said the affidavit did not specify when this conversation occurred. The witness said she would have had a conversation with Mr O'Keefe about getting rid of the horses – offloading them.^[22]

Plaintiffs’ submissions

30. [30]
    The plaintiffs submitted their evidence that there was no agreement to transfer ownership should be accepted. Their continued billing of the defendants without protest and the defendants’ correspondence up to 8 October 2014 affirming ownership by the defendants is said to be consistent with the plaintiffs’ testimony.

31. [31]
    The plaintiffs referred to para 22 of the original Defence and Counter Claim dated 14 April 2015 where it is asserted “the horses each belong either to the First Defendant or the Second Defendant or the Third Defendant.” Consistent with that pleading is a solicitor’s letter of 7 August 2015 describing 20 identified horses as being “the Defendants’ horses”.^[23]  In particular the defendants threatened to sue if the filly Thunder Hill/Raheeb (a horse on the MVO Industries account) died and to claim for loss of opportunity damages.^[24]  In a letter dated 8 October 2015, the defendants altered their position to assert a transfer of ownership by reference to the correspondence of 8 April 2013 and 17 September 2013.

Defendants’ submissions

32. [32]
    The defendants submit that the sequence of events described in Mrs Sommerfield’s testimony is implausible. It is submitted that an agreement to defer payments would not be effective in clearing the debt.

33. [33]
    The 17 September letter refers to confirming prior discussions. It is submitted that if that were inaccurate, the plaintiffs would be expected to have raised it with Mr O'Keefe.  Mrs Sommerfield’s later request to Mr O'Keefe to honour the letter is said to be consistent with the existence of the prior agreement.  Mrs Sommerfield was said to be evasive in responding to questions on this topic.

34. [34]
    It was further submitted that the plaintiffs participated in the selling of horses because they owned them and it was for their benefit.

35. [35]
    Counsel argued that Mr O'Keefe provided explanations for why he agreed to gift the horses to the Sommerfields and why he did not dispute the invoices. That he continued to pay off the O'Keefe debt for the period prior to 8 April 2013, it was submitted, supported his version of the agreement.

36. [36]
    It is argued that the plaintiffs had an expectation that if Mr O'Keefe was successful against the ATO he’d want his horses back and would pay the agistment fees owing. This is advanced as the reason why they continued to bill him for the fees and held on to the horses.

Consideration

37. [37]
    It is common ground that the original agreement between the parties was oral. The defendants assert that the alleged agreements to transfer ownership were also oral and were merely confirmed in subsequent correspondence. Given these circumstances, a determination as to the existence of any agreements must depend upon an assessment of the competing testimony of the Sommerfields and Mr O'Keefe.

38. [38]
    The first defendant relies upon a letter of 8 April 2013 as evidencing agreement for transfer of property and the horses belonging to Mr O'Keefe. There is a conflict between Mrs Sommerfield and Mr O'Keefe as to content of conversation that preceded the letter of 8 April 2013. The first defendant relies upon the letter as confirming an agreement for property in the horses to pass. The letter does not speak of transfer of ownership, merely referring to priority being given to the Sommerfields to cover the cost of agistment and care. It refers to the Sommerfields incurring cost of agistment of “the mares and their progeny”. This does not specify any period. Carefully analysed, the letter does not strictly accord with either party’s evidence of prior conversations but, in my view, it is more consistent with the account given by Mrs Sommerfield than that given by Mr O'Keefe.

39. [39]
    Mrs Sommerfield says that prior to the 8 April 2013 there was an arrangement for the Sommerfields to meet the cost of agistment on certain mares and foals in return for a fifty percent stake in the foals. The Sommerfields’ subsequent conduct in not invoicing for those mares for the period up until the foals were weaned is consistent with the existence of such an arrangement. The letter is more consistent with a document referring to this existing arrangement and intended to provide some assurance to the bank.

40. [40]
    Turning to the letter of 17 September 2013 about MVO Industries horses, there is no evidence of any agreement by the Sommerfields to the terms proposed in that letter. Indeed, even on Mr O'Keefe’s testimony there was no positive agreement by the Sommerfields either in prior discussion with him or following the receipt of the letter. In that regard the statement of the letter that “we are of the belief this confirms our discussion” is inconsistent with Mr O'Keefe’s testimony that “I’m not quite [sure] they understood what the ramifications or what the outcomes or – or the actual meaning or intent was”.^[25]  His evidence didn’t put it any higher than “they didn’t say no”.  Once again, the subsequent invoicing was consistent with the Sommerfields not asserting ownership.

41. [41]
    After the commencement of the litigation, correspondence to the plaintiffs from the defendants’ solicitors referred to a group of 20 horses, 19 of which were KJ and JM O'Keefe or MVO Industries account horses, as being the “defendants’ horses”.^[26]  In that letter there was a threat to seek damages for the loss of the MVO Industries horse Thunder Hill/Raheeb (F).^[27]

42. [42]
    It is pleaded in the Fourth Amended Defence in respect of the third defendant that on 30 November 2013 “its horses became the property of the plaintiffs pursuant to the agreement pleaded”. In cross examination it was initially put to Mrs Sommerfield that the MVO Industries horses became the property of the plaintiffs when its debt was not paid by 30 November 2013. Later in the cross examination, it was put to Mrs Sommerfield that the oral agreement in conversation with Mr O'Keefe and the Sommerfields prior to the correspondence of the 17 September 2013, was that the horses to become their property did not include racehorses, that is, horses that were racing at that time. Such an arrangement would seem to be inconsistent with the plain meaning of the words of the letter of 17 September 2013. The letter says that should the specified circumstances arise:

“All horses i.e. mares, stallions, yearlings and foals agisted at Blue Hills Thoroughbreds by MVO Industries Pty Ltd will become the sole ownership of Blue Hills Thoroughbreds.”

It seems surprising that such an important distinction should emerge only at that late stage.

43. [43]
    The defendant submits that Mrs Sommerfield’s affidavit evidence of an alleged conversation with Mr O'Keefe, asking him to honour the promise to transfer the horses in the letter of 17 September 2013, is inconsistent with her denial of an earlier agreement. There is no evidence as to when such a conversation would have occurred. Other evidence indicates that as costs mounted, the Sommerfields were desperate to have the horses removed from their property. The affidavit statement on its face assumes that no transfer of property had occurred. Rather, it is a request of Mr O'Keefe to approve such a transfer in the future. In that regard it does not support the defendants’ contention and is more consistent with Mrs Sommerfield canvassing at a later time options for disposal of the horses.

44. [44]
    Mr O'Keefe’s reliance on the alleged change of ownership appears to have emerged only in October 2015. He admitted he did not initially instruct his solicitor about the 8 September agreements. He testified that he pulled the agreements out of his files and provided them to his lawyers. The plaintiffs were first advised of the allegations on 8 October 2015. Mr O'Keefe’s evidence was that it was only on location of the filed documents that he informed his solicitors. The defendants’ case is that Mr O'Keefe entered into oral agreements which he knew were crucial to how much debt he owed to the plaintiffs. These important oral agreements should have been foremost in Mr O'Keefe’s mind. That they would have only have come to his attention or recollection some six months after the commencement of the litigation is not plausible.

45. [45]
    In February 2014 Mr O'Keefe put together a package consisting of horses that he was, through an agent, seeking to sell to a commercial purchaser. In association with a valuer he placed prices upon those horses. The package included nine MVO Industries horses valued for the purposes of that process at $2,366,000. Those horses were, according to the defendant, the property at that time of the Sommerfields pursuant to the September 2013 agreement. Even if those prices were inflated for the purpose of negotiation it would seem that the horses may well have been of a value substantially in excess of any fees owing in late 2013. His active involvement in this offer for sale once again is inconsistent with his having earlier transferred ownership.

46. [46]
    It is common ground that by late 2013 there were discussions between the Sommerfields and Mr O'Keefe about selling off at least some of the horses. The plaintiffs submit that Mr O'Keefe took a lead role in this, consistent with that of an owner. On the other hand, the first defendant submits he was only acting to assist the Sommerfields in disposing of horses that were now their property. On the evidence and exhibits before me it is correct that both parties had some involvement or knowledge about the proposed sale of horses. On 21 July 2014 Mrs Sommerfield advertised by email to her business’ clients a list of brood mares for sale. On 23 July 2014 by email to Mr O'Keefe she advised him about the email and responses that she’d received. She sent him details of offers received and also invited him to indicate the sale price for remaining animal stock. About the same time, an email indicates that Mr O'Keefe was offering foals to a potential buyer. In early August 2014 there were a number of text message exchanges between Mrs Sommerfield and Mr O'Keefe. In my opinion, the exchanges are more consistent with Mrs Sommerfield seeking Mr O'Keefe’s permission for the sale of horses at particular prices. In response, Mr O'Keefe makes comments asking her to seek a higher price for a horse being offered. While not conclusive, it seems to me once again that this evidence is more consistent with the parties treating Mr O'Keefe as being the owner, or acting for the owner, of the horses.

47. [47]
    In my assessment, the evidence does not support the existence of any agreement for property in the horses to pass to the Sommerfields as alleged by Mr O'Keefe. Rather, the subsequent conduct of both parties is consistent with Mr O'Keefe acting as, or acting on behalf of, the owner of the horses. I had the opportunity to see both the Sommerfields and Mr O'Keefe cross examined at length. On this issue of ownership I prefer the evidence of the Sommerfields after taking into account the considerations I outlined above.

48. [48]
    The plaintiffs have discharged the onus of establishing that there was no transmission of ownership to them of any of the relevant horses. The first and third defendants therefore must meet the cost associated with the agistment of the relevant horses for the period they were on the property.

Credits claimed by third defendant

49. [49]
    The parties are generally in agreement as to the amounts owing, with the exception of a dispute as to whether two amounts of income received in respect horses owned by the third defendant should be credited to its account.

50. [50]
    The third defendant submits that credits of $7,475.00 for service fees in respect of a stallion, Monashee Mountain, and $6,600.00 being the sale price of a horse, Hard Drivin’ Mama, are owed to it by the plaintiffs. The plaintiffs admit to receiving these amounts but say that Mr O'Keefe had agreed to those monies being retained by the plaintiffs for having looked after without charge a stallion of his, October Sky.

51. [51]
    October Sky went to the Sommerfields’ property in late 2011 and remained there for a number of years. Mrs Sommerfield’s evidence was that the stallion had originally been on another property but the owner of that property was not willing to have mares taken there to be serviced.^[28]  Mrs Sommerfield said that Mr O'Keefe had “made an arrangement for that stallion to come to our place for a month or so to service whatever mares Kevin wanted to be served by him”.^[29]  She said that they housed and fed the horse free of charge.^[30]  Mrs Sommerfield testified that she advised Mr O'Keefe of clients interested in having their mares go to his stallion Monashee Mountain.  She asked him if he wanted to do up a contract and he replied “no, any services I get to Monashee keep and that’ll be for help putting up – the upkeep of the stallion October Sky.”^[31]  It is apparent from an email placed in evidence that Mr O'Keefe was advised on 6 December 2012 of those service agreements and that the service fees were to be payable on 31 March 2013.

52. [52]
    Mrs Sommerfield said that Mr O'Keefe also agreed that the proceeds of the sale of a mare, Hard Drivin’ Mama, should be put towards looking after October Sky. The proceeds of that sale were $6,600.00. An email placed into evidence indicates that on 28 May 2013 Mr O'Keefe was advised by Mrs Sommerfield of the sale and the sale price.

53. [53]
    Mr O'Keefe’s evidence was that October Sky was on another property subject to a lease agreement, but it was mutually decided to cancel that lease.^[32]  October Sky was then leased to the Sommerfields on the basis that they would meet the costs of the upkeep of the horse and that the owners would be entitled to a percentage return on services provided to third parties.  In support of this, the defendant relies upon emails that passed between the Sommerfields and O'Keefe.  The first email dated 6 September 2011 was forwarded to Jen Sommerfield with the heading: “Re Mares and Lease” and on the attachment line it read “a draft lease – October Sky final for perusal .doc”.  That email bore an earlier forwarding from Trevor Ives, apparently the original lessee.  It is apparent that Mr O'Keefe merely forwarded on a copy of the draft lease to the Sommerfields.  His email reads “Jen for your information”.^[33]  The lease agreement is a copy of an unsigned document being an agreement between the owners of October Sky and Thunderidge Stud, as the lessee.  It is a lease for a term of three years commencing on 1 May 2011 providing for the lessee to domicile a stallion at his property.  The lessee is granted ten services of his own mares per year.  The lessor retain the right to 30 services over the three year period and would be responsible for the payment of agistment at an agreed rate as well as an administration handling fee of $250.00 for each mare serviced.  A percentage service fee was to be paid to the lessor for all outside mares.  A further email from Jen Sommerfield to MVO Industries Pty Ltd, sent on 10 September 2011, bore the same attachment details as the earlier email from MVO Industries but otherwise had no content.^[34] It appears that Mrs Sommerfield sent a return email with the original attachment still attached but without containing any comment whatsoever. In cross examination the following was put to Mr O'Keefe:

“Q. So you’re saying that an unsigned lease sent back to you meant you had a lease?

A. Well the fact that the – they kept a horse there – advertised it for two years in a row – in a – at their cost in a public publication indicates their intent to commercially service it.”^[35]

54. [54]
    Mr O'Keefe admitted in cross examination that he didn’t mention to his solicitors that the horse had been leased to the Sommerfields until “we got to this courtroom”.^[36]  He denied that he had agreed that the proceeds of the services of Monashee Mountain and the sale proceeds for Hard Drivin’ Mama should go to the Sommerfields for looking after October Sky.

In cross-examination Mrs Sommerfield admitted that she had been sent a copy of the lease with the other stud but said that she did not know why she would have sent it back.^[37]  She agreed that on two occasions she had advertised the stallion as available for breeding but said she did this on behalf of Mr O'Keefe.  It was put to her that she had received and kept services fees for October Sky.  She denied this.^[38]  Mrs Sommerfield was cross-examined about the number of foals to October Sky born in the period 2011 to 2013.  She was re-examined in that regard by reference to the studbook which listed coverings (matings with the stallion) and progeny in a particular year.  On the evidence all of the progeny and all but one of the coverings related to horses owned by Mr O'Keefe.  Mrs Sommerfield’s evidence was that the one horse from another owner by the stallion incurred no service fees as the mare had fertility problems. 

Consideration

55. [55]
    I do not accept Mr O'Keefe’s evidence that an unsigned lease agreement between different parties formed the basis of a lease agreement with the Sommerfields. Mr O'Keefe’s email is entitled “for information” and the terms of the written agreement are inconsistent with what Mr O'Keefe claims the agreement was. The written agreement in fact provides for payment of agistment fees by the lessor.  I prefer Mrs Sommerfield’s testimony that she treated the document sent to her as being for her information and gave no further attention to it. 

56. [56]
    The presence of October Sky on the property was during a period when there was a very cordial relationship between the parties and it is quite conceivable that it developed in the informal way described by Mrs Sommerfield. It would seem to be of no benefit to the Sommerfields to have to maintain a stallion in circumstances where they did not have horses to put to the stallion and where the availability of clients seeking to mate mares with the stallion was necessarily limited. The evidence is that no service fees were received by the Sommerfields and that all but one of the mares serviced belonged to the defendants. In those circumstances it is entirely feasible that Mr O'Keefe would have volunteered to direct some occasional income to meeting the cost of October Sky’s upkeep. He was clearly obtaining a benefit from having the stallion on the property in order to sire foals belonging to him or his associated entities. The income from the sale of Hard Drivin’ Mama and service fees from Monashee Mountain were disclosed to Mr O'Keefe and he would have been aware that they were not paid to one of the defendants’ accounts. Having observed the testimony of Mr O'Keefe and Mrs Sommerfield having regard to these considerations, I prefer Mrs Sommerfield’s evidence in respect of these transactions and find that the proceeds of the sale and the service fees were approved by Mr O'Keefe to go to the Sommerfields.

Counterclaim – death of Tolart Colt

57. [57]
    The second defendant counterclaims alleging breach of contract and negligence by the plaintiffs in respect of the death of a colt, being the progeny of the mare Tolart and the stallion Written Tycoon. Tolart was owned by the second defendant and agisted with the plaintiffs. The colt was born in November 2013 and died on 17 September 2014 after a short illness.

58. [58]
    The plaintiffs admit to being party to an agreement to provide agistment and care to Tolart and its progeny and that it was an implied term of the agreement they would exercise the care and skill of a reasonably competent commercial agister and they owed a duty to the second defendant to exercise the care and skill of a reasonably competent commercial agister.^[39]

59. [59]
    It is common ground that at 2.03 pm on 16 September 2014 Mrs Sommerfield advised Mr O'Keefe by text message that the Tolart colt was suffering colic. Thereafter in a series of text messages Mrs Sommerfield advised Mr O'Keefe of the condition of the colt as time progressed. At 3.49 pm on 17 September 2014 she advised by text that the colt had died. The text messages and replies were as follows:

“Tuesday, 16 September at 2.01 pm

Sommerfield: ‘Tolart/written tycoon colt has a bit of colic I have given him a needle keep u posted’

O'Keefe: ‘Shit what else?’

Sommerfield: ‘Looks like he is coming good’

Tuesday, 16 September 6.23 pm

O'Keefe: ‘Thanks mate’

Sommerfield: ‘Give another update when I get back’

O'Keefe: ‘OK’

Tuesday 16, September 7.39 pm

Sommerfield: ‘All looks good he’s running around in the yard like a madman and eaten his lucerne’

Sommerfield: ‘Thank/f  Much appreciated’

Sommerfield: ‘No worries’

Tuesday, 16 September 10.11 pm

Sommerfield: ‘The little fellow gone down again not good’

Wednesday, 17 September 7.10 am

O'Keefe: ‘How is the little man OK?’

Sommerfield: ‘No still sick but not throwing himself around.  Been up all night with him just gave him another needle for pain, he’s had a couple poos last night’

O'Keefe: ‘Thanks again mate’

Wednesday, 17 September 3.51 pm

Sommerfield: ‘Kevin the little fello has just died’

O'Keefe: ‘Your joking?’

Sommerfield: ‘No wish I was’

Wednesday, 17 September 8.12 pm

O'Keefe: ‘Not insured big problem

 I think I would have deserved a phone call’”.

The second defendant submits that at 10.11 pm on 16 September 2014 the plaintiffs knew the colt’s condition had worsened and a reasonably competent commercial agister in their position would have taken the colt to a veterinary hospital at that time.^[40]  As a consequence it is pleaded that the second defendant suffered loss and damage.^[41]

60. [60]
    The plaintiffs deny any breach of agreement or negligence.^[42]  They allege the plaintiffs had been instructed by the first defendant not to arrange hospitalisation or surgery for any of his horses suffering with colic.^[43]  Furthermore, the plaintiffs claim that the Oakey Veterinary Hospital would not admit any horse belonging to Mr O'Keefe because of money owed.^[44]

Legal framework

61. [61]
    The plaintiffs’ pleadings admit they had a duty to exercise the care and skill of a reasonably competent commercial agister.

62. [62]
    At common law an assessment of breach must be made in accordance with the principles outlined by of Mason J in Wyong Shire Council v Shirt.^[45]  Here the question is not to be decided by reference to the common law alone. The principles provided in the Civil Liability Act 2003 (Qld) (“Civil Liability Act”) have application here.

63. [63]
    Following those principles it may be accepted that a risk of significant harm to the Tolart colt was foreseeable to the plaintiffs. Once the colt was diagnosed by Dr Pascoe as having colic the Sommerfields would have been aware that serious harm, including death, could result.

64. [64]
    The defendant submits that the plaintiffs failed to take precautions that a reasonably competent commercial agister would have taken; namely, that they did not take the Colt to a veterinary hospital at 10.11 pm on 16 September 2014.^[46]

65. [65]
    The Sommerfields denied that a reasonably competent commercial agister would have taken the colt to a veterinary hospital and say the colt was appropriately and reasonably cared for and supervised at all times.^[47]

Breach of duty of care

66. [66]
    In considering whether the precaution pleaded would have been taken by a reasonable agister, the factors stated in s 9(2) of the Civil Liability Act are to be considered.  The probability and likely seriousness of harm were both high.  The balancing exercise is to be approached as outlined in Shirt:

“The perception of the reasonable man’s response calls for a consideration of the magnitude of the risk and the degree of probability of its occurrence, along with the expense, difficulty and inconvenience of taking alleviating action and any other conflicting responsibilities which the defendant may have.”^[48]

67. [67]
    The plaintiffs rely on the fact that veterinary advice had been obtained and acted upon. Dr Pascoe testified to giving the following advice:

“So the signs that you describe weren’t particularly bad, so I said give it the Flu-Nix.  We’ll know within two hours what response we get.  If the horse’s improved in two hours, it’s mostly likely the gas colic that are transient, that’ll go over.  If the signs get worse under two hours then it will probably need surgery.”^[49]

68. [68]
    Dr Pascoe later enlarged on that response:

“I said, basically, look for – for it to get worse under two hours or to break through the barrier of the drug under two hours.  If it comes through the first two hours, it’s probably going to get through it.

… 

Just to observe the horse.  I mean in most cases, with a gas colic, after two hours if they’re ridden through the first pain barrier, they tend to get over it.”^[50]

69. [69]
    Mr Sommerfield acted in accordance with this advice and gave the needle at about 2.00pm and the horse appeared to improve thereafter and as late as 7.39pm was said to be looking good. That is, the horse got through the first two hours and on the veterinarian’s advice could be expected to recover. The position changed at about 10.00pm when an alarm sounded indicating that the horse had lain down. This was a potential indication that the horse was in pain with the colic. The question arises whether upon the horse lying down at 10.00pm the Sommerfields should have, in the exercise of their duty of care, taken the horse at that time to a veterinary hospital for assessment and care. In balancing relevant considerations regard has to be made to a number of impediments to that course. Dr Pascoe had already advised that he would not come out to personally assess the horse because of debt owed to the practice by the owner. Mr O'Keefe was texted at 10.11pm but did not respond, which at that hour was not surprising. Any treating unit would require confirmation that payment would be made. The cost of treatment if surgery were required would be substantial ranging from $5,000 to as much as $30,000. On the issue of payment Mr O'Keefe said that the funds were available and he would have authorised payment given the value of the colt. A relevant factor would have been that the colt was valuable and because of its lineage had potential to be a successful racehorse. The plaintiffs accepted that it was worth at least $15,000 to $30,000 at the time.

70. [70]
    In my view, a reasonably competent commercial agister in the position of the plaintiffs would have initiated steps to take the colt to a veterinary hospital once it showed further signs of pain by lying down at about 10.00pm. At a hospital the horse could have been assessed and, if necessary, immediately treated with surgery. To give effect to that course, it would have been necessary to contact Mr O'Keefe to confirm that payment would be made. I consider a reasonable agister would have done that.

71. [71]
    The plaintiff sought to raise the further issue that the colt was not vaccinated for Hendra virus. This evidence was objected to on the basis that the issue was not raised on the plaintiff’s pleadings. I delayed ruling on the issue of admissibility until argument was heard. I am of the opinion that given its failure to plead this defence the plaintiffs were not entitled to raise the issue at trial, the defendant not having adequate opportunity to adduce evidence in that regard. I disallow admission of the evidence. Even if I am in error in ruling in that way, in my view the evidence does not establish that this would have been an impediment to the horse being accepted for surgery. There was evidence that it would depend on the particular surgeon to determine whether to operate in the absence of vaccination for Hendra virus. The evidence indicated that the Gatton veterinary unit would have been prepared to accept and operate on unvaccinated horses if, after a veterinarian had assessed the horse, it was considered not to be suffering from Hendra virus.

72. [72]
    I conclude on the balance of probabilities that the plaintiffs breached the duty they owed to the second defendant to take precautions a reasonable person in their position would have taken.

Causation

73. [73]
    The plaintiffs have also challenged causation on the basis that it is not proven that had the horse been taken to a hospital it would have survived. The evidence of Associate Professor Nicholas Kannegieter was that for horses with surgical colic the survival rate is generally about 70 to 80 per cent though it can fall as low as 66 per cent.  Having regard to the time of death and other information available to him he was of the view that the Tolart colt would likely have been a good surgical candidate.  Had veterinary care been provided late on the 16^th or early on 17 September, in his opinion the colt would have had a good chance of survival.  I accept that expert testimony. Having regard to that evidence I am satisfied that on the balance of probabilities the breach of the plaintiffs’ duty of care was a cause of death.

Was a direction given?

74. [74]
    The plaintiffs rely on a direction they allege was given at an earlier time by Mr O'Keefe to not take any horses with colic to a veterinary hospital.  The relevant conversation arose in regard to a pregnant mare named Blow Kisses.

75. [75]
    Blow Kisses contracted colic. Mr O'Keefe was contacted and he said to take the horse straight to the veterinary hospital. Surgery was performed at Oakey Veterinary Hospital and the foal was born by caesarean section. Mrs Sommerfield took the foal back to her property to be cared for. Mrs Sommerfield testified that the mare died and she telephoned Mr O'Keefe to advise him of the death. She said:

“He wasn’t very happy and just – just in discussion, just talking about it, he said under no circumstances ever send another horse of his to a vet with colic.

…

He said I’ve spent all this bloody money on surgery and I’ve lost a mare and he said I’ll probably lose the foal.”^[51]

76. [76]
    In response to the plaintiffs’ claim that the defendant instructed them not to send another horse suffering from colic to a vet hospital, the second defendant’s reply filed 4 June 2015 said as follows:

“The second defendant denies the allegation in paragraph 3 of the answer to the counterclaim of the second defendant because neither the first defendant, second defendant nor third defendant instructed the plaintiffs not to arrange hospitalisation or surgery for any of the horses suffering with colic.”

77. [77]
    In cross examination of Mrs Sommerfield, counsel for the defendants in response to her statement that Mr O'Keefe told her never to take any of horses back to that clinic with colic, put to the witness that Mr O'Keefe never gave her that instruction.^[52]

78. [78]
    Mr O'Keefe’s evidence on this point was inconsistent with the defendants’ pleadings and the questioning of Mrs Sommerfield. He was asked in evidence in chief:

Q. “Now did you instruct the Sommerfields never to send another horse to the vet if it had colic?”

A. “I said never send another mare and foal to them if it’s got colic because it’s very unlikely that you get – well, that taught me a lesson because I’ve been in the horse game a long time and I’ve never had a – a mare and foal go to a vet for colic.  So when you lose the two of them, no.”^[53]

Mr O'Keefe then went on:

“The other thing I should add, too, is that when it’s that severe, and it – and they had to take the foal – and Jen might contradict me here – but that’s – it’s a long way to go before they become a race horse.  A long way.”^[54]

79. [79]
    In cross-examination it was put to Mr O'Keefe that he certainly gave a direction to Mrs Sommerfield to not take horses to the Oakey Veterinary Hospital that were suffering from colic. He replied: “No. Only brood mares who were in foal.”

80. [80]
    The evidence was that veterinary expenses for operating on a horse with colic could be quite significant. Ranging from $5,000 up to $30,000. The potential cost provided a substantial reason for Mr O'Keefe to direct that his horses not be taken to a hospital where surgery may be considered necessary. Mr O'Keefe’s evidence was that had a request been made of him he would have agreed to pay for surgery to the Tolart colt because he regarded it as a valuable horse being a half-brother of Miss Cover Girl, a successful racehorse. The Tolart Colt was owned by Nevis Nominees and Mr O'Keefe said that the money was there to provide for the medical care if necessary.

81. [81]
    Mr O'Keefe’s testimony in relation to his direction being limited to mares in foal is inconsistent with the evidence of both Mr and Mrs Sommerfield.

82. [82]
    In my view, Mr O'Keefe’s concession that he did indeed give an instruction to the Sommerfields to not take certain horses to the hospital for treatment for colic, and the inconsistency between the pleadings and instructions put by the defence and Mr O'Keefe’s evidence that his instruction was limited to brood mares, reflects adversely upon the credibility of his account. On this issue I prefer the testimony of the Sommerfields that they were given such a direction by Mr O'Keefe following upon the death of Blow Kisses.

83. [83]
    Mrs Sommerfield informed Mr O'Keefe that the horse was suffering from colic on 16 September and again early on 17 September (when on Dr Kannegiter’s evidence surgery would have still have given the colt a good chance of survival).  Mr O'Keefe gave no instruction retracting his earlier direction.

Contractual term

84. [84]
    The plaintiffs rely on the instruction received from Mr O'Keefe to not arrange hospitalisation or surgery for any of his horses suffering from colic. I have found on the facts that such an instruction was given by Mr O'Keefe. The contractual agreement between the parties for the agistment of horses was oral and not the subject of formal ratification. Mr O'Keefe acted on behalf of the second defendant and gave all instructions in relation to the horses owned by that defendant. Given the nature of the agreement between the parties I am satisfied that although the direction given was oral and not the subject of formal confirmation, it nevertheless constituted a variation of the agistment agreement and the plaintiffs were justified in acting upon that instruction.

85. [85]
    Sub-sections 7(3) and 7(4) of the Civil Liability Act provide that the parties to a contract are entitled to make express provision for their rights, obligations and liabilities in relation to breach of duty and causation. That Act does not limit or otherwise affect the operation of such an express provision. Here there was an express provision affecting liability.

86. [86]
    In the circumstance that the plaintiffs were contractually directed not to refer horses with colic to a veterinary hospital, any failure by them to do so did not create a liability for breach of contract or for breach of duty of care. Accordingly, the second defendant’s claim for damages for the death of the Tolart colt must fail.

Damages

87. [87]
    Although I rule in favour of the plaintiffs on the counterclaim, it is appropriate that I nevertheless consider what damages would have been awarded had the second defendant been successful in its claim. Expert evidence of valuation was received from Mr Mee who placed a value of $75,000 plus GST on the colt at the time of death. The plaintiffs conceded that in their view the horse at the time of its death was worth at least $15,000 to $30,000. Mr O'Keefe gave evidence that Mrs Sommerfield, referring to foals born on the property, described the horse to him as the pick of the bunch.

88. [88]
    Mr Mee said in his report that the three principle factors to consider when valuing a thoroughbred yearling are:

1. (a)
   a physical inspection,

2. (b)
   stallion; and

3. (c)
   female family.

His assessment based on parentage noted that 23 Written Tycoon colts were sold during that sale season at an average of $45,609.  At the Magic Millions January sale three colts sold for an average of $129,167.

89. [89]
    Mr Mee did not, of course, have the advantage of physical inspection. He said he valued the horse on the assumption it hadn’t had colic or surgery. He conceded that awareness of those matters may affect the price a buyer would pay.

90. [90]
    He also valued the horse on the basis that it was considered a candidate for the Magic Millions premier yearling sale. He based this on a comment made to him by Mr O'Keefe.  The evidence is that no application had been made for the Colt to enter that sale.

91. [91]
    His valuation of $82,500, inclusive of GST, was based on those assumptions.

92. [92]
    In determining damages I will assume that a finding has been made that the Colt would survive colic surgery with good prospects of being able to race in future. The evidence is that the Sommerfields were of the view that the horse may have been worth as much as $30,000.

93. [93]
    Turning to Mr Mee’s valuation, it is apparent there were relevant factors he failed to take into account in reaching the figure of $82,500. Mr Mee was not, in my view, an impressive witness and at times his reasons for reaching conclusions were confused. He clearly placed weight on an assumption that the horse was considered to be a type justifying entry in the Magic Millions sale. The evidence did not support this assumption. He also valued the horse without regard to its having suffered colic or needing surgery. He conceded that these matters may have an impact on buyers. The estimated value of the horse given by Mr Mee needs to be discounted to take those factors into account.

94. [94]
    Doing the best I can with this information I assess damages for loss of the horse at $45,000.

Counter Claim - Miss Cover Girl issue

95. [95]
    The second defendant counterclaims alleging the plaintiffs were unjustly enriched at its expense by refusing to credit to the second defendant’s account monies paid by the second defendant for the plaintiff’s share of training and transportation costs for the horse Miss Cover Girl. The amount involved is $7,480.24. That amount was paid under protest by the second defendant on 1 June 2016 and restitution of that amount is now sought.

96. [96]
    Both parties agree that after a Magic Millions auction, Mr O'Keefe offered Mrs Sommerfield fifty per cent ownership of Miss Cover Girl, which was then owned by the second defendant. Both parties gave evidence that Mrs Sommerfield agisted Miss Cover Girl on the Sommerfields’ property until the horse was sent to Kelly Schweida for training. However, the exact arrangement of payment of the training fees is in dispute. The issue for the Court to decide is: what were the terms of the March 2013 agreement in relation to Miss Cover Girl?

How the arrangement was understood

97. [97]
    Mrs Sommerfield testified that the arrangement was as follows: Nevis Nominees and Mrs Sommerfield would own fifty per cent of Miss Cover Girl each. The Sommerfields would agist Miss Cover Girl on their property and Mr O'Keefe would pay the full amount of Mr Schweida’s training fees up to the amount of what would have been half the agistment fee at the Sommerfields’ property.^[55] That is, to reimburse the Sommerfields for half of the agistment cost.  Mrs Sommerfield and Mr O'Keefe would eventually race the horse together.^[56]

98. [98]
    The horse did return to the Sommerfields’ property following the Magic Million auction, and was agisted there. No invoices for agistment were sent to the defendants. Once the horse went to Mr Schweida for training, two identical invoices of fifty per cent each were issued every month: one to Blue Hills Thoroughbreds and one to Nevis Nominees, the second defendant.^[57] Mrs Sommerfield paid her invoices to Mr Schweida directly. For a period of time, Mrs Sommerfield would then create a sundry invoice for the amount she had paid, and send that to Mr O'Keefe (as Nevis Nominees).^[58] Mr O'Keefe would then pay Mrs Sommerfield using internet transfer.^[59] This resulted in Mr O'Keefe paying the full amount of the Kelly Schweida training fees for that period. Mrs Sommerfield said this happened at Mr O'Keefe’s request.

99. [99]
    On cross-examination Mrs Sommerfield explained the arrangement in this way:

“Like, the horse’d stay at our place, get broken in and everything and – and we looked after that and then when the horse went into the trainer he [Mr O'Keefe] would pay my 50 per cent until we were about even in the cost of roughly what it would’ve cost him to have Miss Cover Girl at home at 50 per cent charged to him.”^[60]

100. [100]
     On 4 February 2015 Mrs Sommerfield received an email from the defendants protesting the invoices and requesting credits for the training fees that Mr O'Keefe had reimbursed Mrs Sommerfield for.^[61] Mrs Sommerfield did not give Mr O'Keefe a credit for this amount nor respond to this email.^[62]

101. [101]
     Mr O'Keefe testified to a different arrangement: Nevis Nominees and Mrs Sommerfield would own fifty per cent of Miss Cover Girl each. The Sommerfields would agist Miss Cover Girl on their property free of charge and both parties would pay half of the Kelly Schweida training fees each.^[63] Mr O'Keefe said in relation to outgoings:

“I think I had to pay the outgoings – the outgoings like shoeing and drenching – anywhere she had to pay someone else externally, but that didn’t occur until the June thereafter, I don’t think.”^[64]

102. [102]
     It should be noted that Mrs Sommerfield also gave evidence of other horses (progeny) that were owned fifty-fifty with Mr O'Keefe where the agistment was provided for free but other costs, such as trimming or vaccinating, were shared.^[65]

103. [103]
     Mr O'Keefe agreed that Miss Cover Girl returned to the Sommerfields’ property after the sale where it was agisted until it went to Kelly Schweida’s property. Mr O'Keefe further agreed that Kelly Schweida invoiced fifty per cent of the training costs to Nevis Nominees and fifty per cent to Mrs Sommerfield.^[66] However, his evidence was that, for a period, he paid Mrs Sommerfield’s half of the Kelly Schweida training fees to help her with cash-flow problems, on the assumption that the Nevis account would be credited for the amount paid.^[67] This went on for a period of six months, between January 2014 and July 2014,^[68] where Mr O'Keefe would receive a sundry invoice from Mrs Sommerfield for her share of the training fees and he would pay it to her.

104. [104]
     Mr O'Keefe denied that the arrangement was for him to pay 100 per cent of Kelly Schweida’s fees until O'Keefe’s share of the agistment fees had been paid off.^[69] The second defendant now claims a credit for the amount of $7484.24, being fifty per cent of the training fees of Miss Cover Girl.

The reasons for giving Jennifer Sommerfield a fifty per cent share

105. [105]
     Ms Sommerfield believed that Mr O'Keefe gave her a fifty-fifty share in the horse because he felt bad for owing the plaintiffs so much money.^[70] Under cross examination, Kevin O'Keefe said:

“The – the giving away of 50 per cent was not by the KOK or the MVO component.  It was by Nevis as a purely [sic] and simple gesture.”^[71]

Then later, also in cross examination:

Q. “So it was a gift, this 50 per cent, wasn’t it?  It was a goodwill gift?”

A. “It was a goodwill gift.”

Q. “Yes.  And you expected nothing in return for giving them the 50 per cent, did you?”

A. “Only respect.”^[72]

106. [106]
     It should be stated that the Australian Stud Book and RISA printouts, Exhibit 20, show the owners of Miss Cover Girl as being fifty per cent Jennifer Sommerfield and fifty per cent Kevin O'Keefe and Barry Taylor (Mr O'Keefe’s solicitor).^[73] Prize money for Miss Cover Girl, when it did start to race, was split evenly between Mrs Sommerfield and Mr O'Keefe.^[74] Presently Miss Cover Girl remains with Kelly Schweida and Mrs Sommerfield is paying invoices for fifty per cent of the horse’s training fees.^[75]

Submissions

107. [107]
     The second defendant submits it is illogical that payment of training fees was intended to cover the half cost of unbilled agistment fees. Mr O'Keefe in his evidence commented that there was no way to know at what point the cost of training fees would approximate the agistment cost. It is submitted that if there was such a deal the plaintiffs would have billed the second defendant for the agistment fees.

108. [108]
     Mr O'Keefe testified that the cost of agistment “would be absorbed by her as a contribution because I’ve given her 50 per cent”.^[76] In relation to meeting the trainer’s fees, Mr O'Keefe said that to help Mrs Sommerfield with cash flow problems and because his “superfund finance was there” he offered to help her “on the assumption that she credited the Nevis account… we would reimburse her for 50 percent of the training fees”.^[77]

109. [109]
     The plaintiffs argue the second defendant failed to pay any cost of agistment pre-training and breaking in when as a 50 per cent owner it would have been obliged to do so. Therefore payment of the plaintiff’s training cost to offset that obligation is the only rational explanation.

110. [110]
     The plaintiffs submit that an agreement for the second defendant to meet the full cost of training provides the explanation for how the second defendant could satisfy its obligation to pay its share of the agistment cost.

Consideration

111. [111]
     The parties provide conflicting accounts as to the terms of the oral agreement between them. The starting point for any assessment of the conflicting accounts must be that a 50 per cent share in the horse was gifted to Mrs Sommerfield. Given the benefit received, it would not be surprising if Nevis Nominees was not charged for agistment and preparation provided by the Sommerfields. That was the arrangement between the Sommerfields and Mr O'Keefe for other horses where they received a 50 per cent share of foals born on the property.^[78]

112. [112]
     Both parties accept that the training fees were to be split 50:50. However, in this instance Nevis Nominees paid the 50 per cent bill to Mrs Sommerfield from the trainer. If this was in lieu of the agistment fees, why was a record of those fees not kept in the accounts? If Mr O'Keefe was prepared to accept Mrs Sommerfield’s estimation without verification of the cost, that would be seem to be an unusually trusting arrangement. Mr O'Keefe could, of course, have chosen to follow up his initial generosity by also gifting the cost of training but that is not what is claimed by Mrs Sommerfield.

113. [113]
     Mr O'Keefe’s explanation seems more plausible. That is, in order to respond to the Sommerfield’s cash flow concerns, he agreed to meet Mrs Sommerfield’s share of the training cost out of the Nevis Nominees account on the agreement that they would be credited to the account. Such an arrangement is explicable once it’s understood that the accounts of KJ and JM O'Keefe and MVO Industries Pty Ltd, due to their tax situation, were heavily in debt to the Sommerfield’s already. On the other hand, the evidence is that Nevis Nominees had funds available, which is confirmed by the fact that over time it had in general met its obligations to the Sommerfields.

114. [114]
     Mr O'Keefe explained it in this way:

“I had no dollars in K and MVO and I said the only place we got money is that.  And you pay the account; I’ll reimburse you to give you the cash flow.”^[79]

115. [115]
     The amounts paid were invoiced and recorded in the accounts and therefore identifiable for repayment. Mrs O'Keefe described the invoices in her accounts as sundry invoices. Her only explanation for issuing these sundry invoices was that was what Mr O'Keefe requested.^[80]

116. [116]
     I find Mr O'Keefe’s evidence to accord better with the objective circumstances. In respect of this transaction I accept his account and reject that of Mrs Sommerfield. I am satisfied that the agreement reached between the parties was for the second defendant to pay Mrs Sommerfield’s share of the training fees on the understanding that she would be accountable to the second defendant for those amounts in the future.

117. [117]
     The second defendant should succeed on this component of its counterclaim. The plaintiffs will be ordered to pay the second defendant the sum of $7,480.24.

Lien over Nevis Nominees horses

118. [118]
     The second defendant counterclaims for possession of horses currently held by the plaintiffs. It seeks an order for recovery of possession of those horses. Counsel for the second defendant in his submissions limited the claim to four horses: I Told You, Tolart, Tolart/Hotel Grand (F) 2012 and Tolart/Monashee Mountain (C) 2015. Those horses have always been on the account of Nevis Nominees and there is no money owing by Nevis Nominees. The second defendant submits that the plaintiffs have no grounds for continuation of a lien over those horses.

119. [119]
     The plaintiffs seek to maintain their lien in respect of the four horses until the second defendant has paid any interest together with any cost orders made against it. They rely upon s 24 of the Civil Proceedings Act 2011 which relevantly provides:

“Discharge of lien or security

1. (1)
   This section applies to a proceeding if –

1. (a)
   a party (the claimant) claims the recovery of particular property other than land (the relevant property); and

2. (b)
   the party from whom recovery is sought –

1. (i)
   Claims to be entitled to retain the relevant property because of a lien or as security for money; and

2. (ii)
   does not otherwise dispute the title of the claimant.

2. (2)
   The court may make an order –

1. (a)
   allowing the claimant to pay into court, to be held until the end of the proceeding –

1. (i)
   the amount of money in relation to which the lien or other security is claimed; and

2. (ii)
   any other sum for interest and cost as the court may direct; and

2. (b)
   that, on payment into court, such judgment be given for recovery of the relevant property as the nature of the case requires.”

120. [120]
     It is well established in law that where a bailee, by his labour and skill, improves a chattel delivered to him he has a lien for his charge in that respect. The mere provision of agistment without more would not satisfy this requirement. The decision of Scarfe v Morgan^[81] is relied upon by the second defendant.  In that case the defendant received a mare and brought her into foal by servicing her with his stallion.  The Court considered that this improvement of the value of the mare by way of skill and labour provided a basis for a lien to be claimed. 

121. [121]
     The second defendant acknowledges that work done by the plaintiffs in respect of three of the horses would satisfy the principles in Scarfe v Morgan.  However, they challenged whether that there is a proper basis for asserting a lien over the fourth horse, Tolart/Monashee Mountain (C) 2015.  It is submitted that the lien may only attach to the chattel improved.  As the Tolert/Monashee Mountain colt was born in November 2015, and the second defendant has paid all amounts invoiced since November 2015, it is submitted that there has never been any amount owing in respect of that colt.

122. [122]
     I find this submission persuasive and hold that a lien is not available in respect of the Tolert/Monashee Mountain colt.

123. [123]
     Turning to the lien claimed in respect of the remaining three horses, the plaintiffs submit that they are entitled to continue to exercise their lien until interest is paid. Interest is claimed on a sum of $7,480.21 in arrears from 5 February 2015 to and including 1 June 2016. The amount of interest is calculated as being $607.13. This claim cannot succeed as I have found against the plaintiffs in respect of that amount. No interest will accrue.

124. [124]
     The plaintiffs also submit they ought to be able to maintain the lien until any cost orders made against the second defendant are satisfied. I understand there are some outstanding costs orders.

125. [125]
     The second defendant challenges whether s 24 of the Civil Proceedings Act is applicable to justify the plaintiffs’ claim to be able to maintain a lien over the horses.  I am satisfied that it is not.

126. [126]
     Section 24 provides a mechanism by which the court may permit recovery of property held under a lien, once the amount of money in relation to which the lien is claimed is paid into court, along with any sums for interest and costs which the court may direct. The provision assumes that there is a valid lien for a claimed amount of money apart from any potential orders for interest or costs. It is not a mechanism for providing security for the payment of interest and costs taken alone.

127. [127]
     At common law where a bailee improved a chattel he had a lien for his charges in respect of that work. In this case there is no money owing in respect of the plaintiffs’ work in exercising care and skill in regard to the three horses. In my view, as a matter of law no lien is available here. In the absence of a lien arising due to money owing for work done, the plaintiffs cannot assert a lien merely on the basis of outstanding court ordered interest or costs. On the facts of this case the plaintiffs cannot satisfy the requirements of s 24(1)(a)(i). An order should be made for return of the horses to the second defendant.

Summary

128. [128]
     The plaintiffs have succeeded in their primary claims against the first and third defendants for debts owing. The second defendant has failed in its counterclaim for damages for breach of contract and/or negligence in respect of the Tolart colt. On the other hand, the second defendant has succeeded in its counterclaim for reimbursement of the plaintiffs’ share of training and transportation costs for the horse Miss Cover Girl. Finally, the second defendant has recovered possession of four horses held by the plaintiffs.

Orders

129. [129]
     The orders of the court will be:

1. The first defendant pay the plaintiffs the sum of $153,949.72 plus interest on that amount pursuant to the Civil Proceedings Act 2011 (Qld).

2. The third defendant pay the plaintiffs the sum of $409,321.68 plus interest on that amount pursuant to the Civil Proceedings Act 2011 (Qld).

3. The plaintiffs’ claim against the second defendant is dismissed.

4. The plaintiffs pay the second defendant the sum of $7,480.24.

5. The plaintiffs deliver possession to the second defendant by making available for collection within 14 days of 9 September 2016 the horses known as I Told You, Tolart, Tolart/Hotel Grand (F) 2012 and Tolart/Monashee Mountain (C) 2015.

6. The second defendant’s counterclaim for damages for breach of contract and/ or negligence is dismissed.