Who Really Owns Your Horse?
One of the issues we constantly face is the lack of understanding of the Personal Properties Security Act 2009 (Act) and its effect on many people in the horse industry. This Act was introduced in 2012 and has profound effect on the legal concept of “ownership” of the horse when your horse is in the possession of someone whose business fails. This Act is complex and goes against the common understanding of what owning your own horse means for you especially if your horse is frequently in someone else’s possession. The effect of the Act covers all personal property that is not land. The difficulty comes with respect to horses when the “owner of the horse” sends the horse to another property such as a trainer or an agistment farm and no longer retains custody. Did you know that while your horse is on someone else’s property, if that person becomes the subject of financial difficulties your horse may be deemed an asset of their property or business and be seized as part of the debtor’s assets to be sold to discharge the debt? We give you the following example: Amy sends her horse to Bridget who is a trainer. The horse stays with Bridget at her training complex for the duration of preparation and racing. Unknown to Amy, Bridget is suffering financial difficulty. Bridget has borrowings with Commercial Bank which has a fixed and floating charge over the non-land assets of Bridget’s racing company. Commercial Bank then registers its interest on the Personal Property Securities Register (PPSR). While Amy’s horse is at Bridget’s stable, Bridget defaults on her loan and Commercial Bank appoints a receiver/manager and seizes the assets of Bridget which it has registered on the PPSR. The horses (including Amy’s horses) which are on the property, may become included as the assets seized by the bank. Amy then has to actually prove the ownership of her horse and that she as a greater “priority” than Commercial Bank, on the registration on the PPSR. Depending on the circumstances this may become problematic and without clear proof as to registration, ownership and priority, Amy may well lose her horse to the claim of Commercial Bank. The process of registering your horse or any interest in the horse the PPSR is relatively simple and inexpensive. It is important to understand the effect of this legislation, not only in relation to the ownership of your horse but also by using this Act to gain security with respect to debts incurred to you by your clients. Through your contracts you may have an interest or a right to sell a horse should your client not pay their debts. In summary:
1. The PPSA captures all personal property including livestock. 2. While you may be the “owner” of the horse, if your horse becomes the subject of competing security interests on the PPSR, and you do not have “priority”, then this claim may be irrelevant in the eyes of the law. 3. Securing your interest on the PPSR is cheap and easy to do. 4. Never assume you are not affected by the PPSA – if your work involves horses moving on to a third-party’s property then you are affected by the PPSA. 5. Your contracts need to ensure that you are protected by the PPSA and that your interest in the horse as owner is protected and as priority. This area of law is untested to many people, but as a far reaching effect especially in the Thoroughbred industry where many people are entrusted with your horse. Remember if your horse is moving off your property you should protect your interest in it. To be sure register.