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Partnership property - no partner has a better right to possession than another

28 September 2015

No partner has a better right to possession of partnership property than another

It is not hard to imagine disputes arising between people who own property together. One such dispute over ownership of a race horse came before the High Court recently.

Coxhead v Dwyer [2015] NZHC 1600

Mr Coxhead (together with other members of his family) owned a 52% share in a thoroughbred mare called Miss Meena. The owners of the remaining 48% share were brothers, Messrs Harjit and Hardesh Dheil. Miss Meena was stabled and trained at a facility owned by Mr Dwyer.

Without consulting the Dheil brothers, Mr Coxhead decided to change trainers. He paid outstanding fees to Mr Dwyer and asked him to make the horse available so he could move it to another training facility. Ms Hackshaw, who was the Dheils’ solicitor and Mr Dwyer’s partner, challenged Mr Coxhead’s right to change trainers without reference to the Dheil brothers.

Eventually Mr Coxhead failed to pay all invoices rendered to him by Mr Dwyer for agistment fees. Mr Dwyer issued a Notice of Lien and, when his invoices were not paid, sold the horse at auction. Ms Hackshaw was the successful bidder.  She subsequently transferred ownership to herself, Mr Dwyer and Mr Harjit Dheil.

Mr Coxhead issued proceedings claiming that Mr Dwyer, Ms Hackshaw and Mr Dheil were liable to him in conversion. The judge described the tort of conversion as arising when a plaintiff’s chattel is taken without lawful justification and with the intention of exercising control over it in a manner adverse to the owner. The Judge did not uphold Mr Coxhead’s claim. Although the ownership arrangements for Miss Meena, were described as a “syndication”, the judge held that they were a “partnership” to which the Partnership Act 1908 applied.  The owners of Miss Meena were “persons carrying on a business in common with a view to profit” and were therefore partners. The judge also stated that no partner has any better right to possess partnership property than another and if one partner asserts exclusive possession, then that partner is guilty of conversion. Thus Mr Coxhead did not have the right to exclusive possession of Miss Meena and was not entitled to demand release of the horse to him. The judge held that the decision to change the place at which the horse was stabled and trained should only be made by those entitled to exclusive possession of Miss Meena – being all of the partners; and that Ms Hackshaw, Mr Dwyer and Mr Dheil were entitled to rely on their lawful acquisition of Miss Meena through Ms Hackshaw at the auction.

The judge did not accept Mr Coxhead’s claim that his designation as Racing Manager of Miss Meena under the Rules of Racing gave him the authority to make decisions about training arrangements. The judge found that the Rules of Racing (which are made under the Racing Act 2003) do not replace the legal rules applicable to partnership arrangements.

Minimising disputes

The likelihood of disputes between co-owners of any type of property, whether they are partners in terms of the Partnership Act or co-owners without being partners, can be minimised if the terms of their agreement are discussed at the outset and recorded in a professionally prepared agreement.

 

Please email me at barbara.mcdermott@nwm.co.nz with your ideas for future articles. Keep an eye out for next month's column, where I will discuss another relevant rural legal issue.


Barbara McDermott is a partner of Norris Ward McKinnon, specialising in commercial and rural law. With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters.