Supreme Court New South Wales Medium Neutral Citation: Application by Racing NSW; Serene Lodge Racing Pty Ltd (In Liq) v Tinkler [2019] NSWSC 1728 Hearing dates: 14, 28 August; and 3 October 2019 Decision date: 06 December 2019 Jurisdiction: Equity Before: Lindsay J Decision: Determination of competing entitlements to payment out of fund in court Catchwords: PERSONAL PROPERTY – Title – Particular kinds of personalty – Prize money won by race horse – Ownership of horse – Entitlement to prize money FUNDS IN COURT – Payment out – Competing claims – Identification and determination Legislation Cited: Trustee Act 1925 NSW Uniform Civil Procedure Rules 2005 NSW Cases Cited: Dennis v Dennis (1971) 124 CLR 317 Fletcher v Racing NSW [2019] NSWSC 358 Glenwood Lumber Company Ltd v Phillips [1904] AC 405 Golden v V'Landys [2016] NSWCA 300 NSW Thoroughbred Racing Board v Waterhouse (2003) 56 NSWLR 691 Texts Cited: CL Pannam, The Horse and the Law (Law Book Co, 3rd ed, 2004), paragraph [6.25] F Pollock, Possession in the Common Law (Oxford, 1888), page 37 Palmer on Bailment (Thomson Reuters, 3rd ed, 2009), paragraph [31-001] JW Carter, P Lane, GJ Tolhurst and EM Peden (eds), Helmore's Commercial Law and Personal Property in NSW (Law Book Co, 10th ed, 1992, page 15) Category: Principal judgment Parties: First Applicant: Serene Lodge Racing Pty Ltd (In Liq) ACN 126 856 282 Second Applicant: Leslie Norman Tinkler Representation: Counsel: First Applicant: A Bailey Second Applicant: MJ Davis Solicitors: First Applicant: Gavin Parsons & Associates Second Applicant: SMB Lawyers File Number(s): 2019/00082134 Judgment INTRODUCTION 1. Under cover of a summons filed on 14 March 2019, pursuant to section 95 of the Trustee Act 1925 NSW and Part 55 Division 3 of the Uniform Civil Procedure Rules 2005 NSW, Racing NSW paid into court the sum of $139,681.34 (effectively as an interpleader) to abide the orders of the Court. 2. The money paid into court represents accrued prize money generated by the horse "More Energy", less the filing fee paid on Racing NSW's summons. The prize money won by the horse was won between 12 February 2017 and 2 June 2018. 3. In filing its summons, Racing NSW notified the Court that, so far as it was aware, the only parties interested in, or entitled to, the money paid into court are: (a) Serene Lodge Racing Pty Ltd (In Liq), a company of which Leslie Norman Tinkler was the sole director and secretary at the time (on 11 March 2016) an order was made, on the application of the Deputy Commissioner of Taxation, that it be wound up; and (b) Leslie Norman Tinkler. 4. As anticipated by Racing NSW, there are two competing claims for the payment out of the fund in court. By a notice of motion filed on 12 April 2019 Serene Lodge Racing Pty Ltd (In Liq) ("the First Applicant") sought an order that the entirety of the fund in court be paid out to it. By a notice of motion filed on 17 April 2019 Leslie Norman Tinkler ("the Second Applicant") sought an order that the entirety of the fund in court be paid out to him. Each notice of motion sought an order that the costs of the applicants' respective motions be borne by the fund in court. 5. Controversy about entitlements to the fund in court focuses upon uncertainty attending: primarily (a) ownership of the horse "More Energy"; and incidentally (b) identification of members of a syndicate registered with Racing NSW for the purpose of the horse being raced; and (c) the absence of proper records kept by the Second Applicant when the First Applicant was under his control or by his son, Nathan Tinkler. Underlying all this is the apparently indiscriminate use by the Second Applicant of variations of the name "Serene Lodge" in connection with horse racing activities. 6. The applicants are agreed that the central issue for the Court's determination is: Who is the owner of the racehorse, "More Energy"? They agree that, in the context of the current proceedings, entitlement to prize money generated by the horse follows a determination of ownership, subject to a claim by the Second Applicant for a lien over the prize money for moneys spent on the horse if ownership of the horse is found to reside in the First Applicant. THE FIRST APPLICANT'S CLAIM 1. The case for which the First Applicant contends is based upon an examination of documents obtained by the liquidator from various sources (including Racing NSW) external to the books and records of the company, together with use of the company's Australian Business Number in connection with the horse. The First Applicant relies principally upon records from Racing NSW. The records of the company, incomplete as they are, are silent about ownership of, or payment of expenses for, the horse: Transcript pages 21-22 and 24. The First Applicant's case depends upon an analysis of documentation, including inconsistencies in the use of names or identifiers associated with the horse, rather than direct evidence bearing upon ownership of the horse. THE SECOND APPLICANT'S CLAIM 1. The Second Applicant's case depends largely upon his evidence, and the corroborative evidence of his son Nathan, about the circumstances in which the horse was purchased by Nathan's company Patinack Farm Pty Ltd and dealt with by Messrs Tinkler. It draws support from three facts. First, expenses incurred in upkeep for the horse have been at all material times (and, in particular, between 12 February 2017 and 2 June 2018, when the prize money the subject of present disputation was won) paid for or borne by the Second Applicant. Secondly, at the time the money paid into court was won by the horse "More Energy", the First Applicant was in liquidation. Thirdly, it was the Second Applicant, not the liquidator of the First Applicant, who caused the horse to be entered into the races which generated the prize money. PROCEDURAL CONTEXT 1. With the consent of the two applicants, their competing motions were heard together with evidence on the hearing of one to be evidence on the hearing of the other, so far as relevant. 2. The motions were for the most part heard on 14 August 2019, with a supplementary hearing, for submissions, on each of 28 August 2019 and 3 October 2019. Although the amount at issue is comparatively modest, the parties were unable or unwilling to effect a compromise. 3. The applicants each filed three sets of written submissions. The First Applicant's were respectively dated 5 July 2019, 18 September 2019 and 4 October 2019. The Second Applicant's were respectively dated 12 August 2019, 26 September 2019 and 3 October 2019. 4. The evidence before the Court included an affidavit filed by Racing NSW in support of its summons, an affidavit sworn on behalf of the liquidator of the First Applicant, an affidavit affirmed by the Second Applicant and an affidavit affirmed by Nathan Tinkler. The liquidator's affidavit and those of the two Tinklers were the subject of cross examination. CONSIDERATION 1. A determination of the competing claims to the money in court turns upon ownership of the horse "More Energy". The liquidator's claim to the money has a reasonable foundation in inconsistencies in documentation relating to the horse, particularly use of the First Applicant's ABN on invoices issued by Racing NSW in respect of the horse. However, a striking feature of the evidence, is that the horse appears at all material times to have been in the possession, custody or control of the Second Applicant and trained on his behalf by Jason Coyle, to whom he acknowledges a liability for fees associated with the horse's maintenance. The First Applicant has not at any time sought, and does not now seek, to recover possession of the horse. The old adage that "possession is nine-tenths of the law" cannot be applied literally, but the facts of the present dispute bring it to mind. Cf, CL Pannam, The Horse and the Law (Law Book Co, 3rd ed, 2004), paragraph [6.25]; F Pollock, Possession in the Common Law (Oxford, 1888), page 37; Glenwood Lumber Company Ltd v Phillips [1904] AC 405 at 410. 2. Even if one approaches the evidence of Leslie and Nathan Tinkler with scepticism, as I do (because of their failure to maintain proper records of business transactions, the oral character of all critical transactions, their community of interest and the rough and ready character of the evidence they gave) their version of events provides a coherent explanation of dealings with the horse. 3. Not so the case of the First Applicant. The horse's association with the name "Serene Lodge" commenced before the First Applicant's incorporation with a reference to the name of a company (Serene Lodge Pty Ltd) which has never been incorporated, and (even on the First Applicant's case) it continued beyond the time when the First Applicant may have had an entitlement to participation in the horse's racing activities. The First Applicant has never exercised dominion of any kind over the horse or asserted a right to take possession of, or to sell, the horse. 4. The liquidator explained the absence of any recovery action on behalf of the First Applicant on the basis that "attempts … to secure the assets of [the First Applicant] had been limited by the availability of funding and the lack of available records, but … [the liquidator had] not expended money to cover an asset that [he] would not have the funds to control". From the perspective of the liquidator this is understandable. Whether creditors of the First Applicant were not prepared to fund a claim of ownership to the horse was not a topic explored before me. It is not necessary to enter upon speculation; the fact remains that the First Applicant has never exercised, or sought to exercise, dominion over the horse. 5. Although records of Racing NSW provide evidence bearing upon ownership of the horse, in these proceedings they present an uncertain picture of the horse's ownership. 6. In any event, they are directed to identification of a "registered owner" for the purpose of racing; they do not constitute documents of title: Pannam, The Horse and the Law (3rd ed, 2004), paragraphs [6.10] and [6.25]. The Rules of Racing (which govern registration of horses, owners and others for the purpose of racing) are rules to which participants in racing become contractually bound, although in some cases they are given statutory consequences: NSW Thoroughbred Racing Board v Waterhouse (2003) 56 NSWLR 691 at [35]; Golden v V'Landys [2016] NSWCA 300 at [60]-[61]; Fletcher v Racing NSW [2019] NSWSC 358 at [52]. They do not govern competing claims to the ownership of horses as property. That is in this case left to the general law. 7. The ownership of a horse is "a matter of a legal title": Dennis v Dennis (1971) 124 CLR 317 at 325. Although special rules apply to wild animals and the like, animals (including horses) may be owned and possessed like other chattels: Palmer on Bailment (Thomson Reuters, 3rd ed, 2009), paragraph [31-001]; JW Carter, P Lane, GJ Tolhurst and EM Peden (eds), Helmore's Commercial Law and Personal Property in NSW (Law Book Co, 10th ed, 1992), page 15. 8. There is no dispute that Patinack Farm Pty Ltd lawfully acquired the horse. If accepted, the evidence of the Tinklers establishes that title, and possession, passed to the Second Applicant from Patinack Farm Pty Ltd. The parties are agreed that, in the present proceedings, entitlement to the disputed prize money generated by the horse follows ownership of the horse. As between the applicants, the balance of probabilities favours the Second Applicant. 9. Not without reservations (earlier noticed), I accept the substance of the Tinkler evidence. In its essential details, that evidence is to the effect that the horse was purchased from Magic Millions Sales Pty Ltd on 1 November 2012 by Patinack Farm Pty Ltd (Nathan Tinkler's company); in or about March 2014 the Second Applicant acquired the horse from Patinack Farm Pty Ltd in lieu of agistment fees owed to him by Patinack Farm Pty Ltd; and since his purchase of the horse, the Second Applicant has covered all expenses in relation to the horse, including expenses relating to training, care, upkeep and medical attention. 10. No claim is made to the money in court by Nathan Tinkler, the liquidators of Patinack Farm Pty Ltd (as evidenced by Exhibit S3) or any person (other than the Second Applicant) associated with a racing syndicate bearing the name "Serene Lodge". As a precaution, the second defendant gave to the Court a written undertaking to meet any claim his former wife (a one time syndicate member) might have to the fund in court: MFI T9. Jason Coyle has, through the Second Applicant, asserted a claim to remuneration associated with the horse, but he does not independently apply for a payment out of court (Exhibit T4). PROPOSED ORDERS 1. Having accepted the evidence of the Tinklers, I propose to order that the fund in court be paid out to the Second Applicant subject to the fund being charged with payment of the First Applicant's costs, to be assessed on the indemnity basis. The effective cause of disputation as to ownership of the horse, and entitlement to the fund in court, is the Second Applicant insofar as his administration of the affairs of the First Applicant, and himself, did not extend to keeping proper documents relating to dealings with the horse. The creditors of the First Applicant should not be disadvantaged by the liquidator's need to test the Second Applicant's claim to the fund in court. 2. As the fund is to be paid out to the Second Applicant, after deduction of an amount referable to the First Applicant's costs, there is no need to make an order for the payment of his costs. In practical reality they too come out of the fund without need of an order. 3. Before making any order for payment out of court, I propose to allow the parties an opportunity to agree upon the quantum of the First Applicant's costs of and incidental to the two motions before the Court. If there is no agreement, I will allow the First Applicant an opportunity to apply for a lump sum costs order so as to bring these proceedings to an end without undue further expense or delay. ********* DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 December 2019