I have been acting for participants in the thoroughbred industry for 35 years and have heard the following words, or similar, many times, from aggrieved buyers of racehorses and shares in racehorses seeking advice as to their legal rights to rescind the bargain and claim restitution:
- “I contacted the guy after seeing an advertisement!”
- “I visited the stable and looked at the horse!”
- “He said he bought the horse at the sales on “spec” because he really liked it as a type and it had a good pedigree!”
- “He said the horse had vetted 100% sound!”
- “He said he would aim the horse at the rich 2YO races!”
- “He said the horse is a well-bred and will maintain its value for breeding even if it doesn’t win any races or prize money!”
- “He said he would look after everything and that I would receive a monthly invoice for my share of expenses!”
- “We simply agreed it was a deal, shook hands and I paid him!”
- “There is nothing in writing. I do not even have a receipt for my payment!”
- “He seemed like a nice guy and I trusted him!”
- “The monthly expenses are a lot more than he said they would be!”
- “The horse is a dud!”
- “The bastard has conned me and ripped me off!”
- “He has done the wrong thing!”
- “Can I get out of it without it costing me any more money?”
- “Can I get my money back?”
There are many industry partisans who advocate that the sale and purchase of racehorses, and shares in racehorses, should not be subject to regulation because investment in racehorses is highly speculative and nothing more than a game of chance. When doing so, they ignore, either through ignorance or for convenience, the fact that such transactions and ownership arrangements are subject to numerous laws (both federal and state) which can potentially impact the rights and obligations of the parties, including (without limitation) the following federal and state laws:
- Competition and Consumer Act;
- Corporations Act 2001;
- Personal Property Securities Act 2009;
- Insurance Contracts Act 1984; and
- Taxation legislation (GST, income tax and capital gains tax); and
State and territory legislation:
- Sale of Goods Act;
- Partnership Act (Uniform partnership legislation);
- Conveyancing Act 1919 (NSW), Property Law Act 1958 (NSW), and similar legislation in other jurisdictions);
- Civil Liability Act 2002 (NSW), Wrongs Act 1958 (Vic), and similar legislation in other jurisdictions;
some of which have consumer protection provisions embedded within them.
The sense of bravado and enthusiasm that often engulfs the parties and results in the bargain being consummated with a handshake after only a brief discussion (an effective sales pitch), instead of by a written agreement being signed by the parties after appropriate disclosure, due diligence and agreement as to terms, rapidly fades when problems arise causing one or other of the parties, usually the buyer, to review the bargain and consider his or her legal rights and remedies. Only then do they lament the fact that the transaction was not the subject of an appropriate disclosure document and written agreement.
This paper is about the sale of shares/interests in thoroughbred horses for racing purposes (known as “syndication”) and the regulatory regime designed to promote and protect market integrity.
I estimate that, in 2019, “ownership opportunities” in racehorses (yearlings and tried horses) with a total cumulative value of more than $40 million will be offered to investors by persons who are, or should be, licensed.