The Victorian Civil and Administrative Tribunal ordered the seller of a showing and eventing horse to refund the price paid by the buyer.  The Tribunal found that the horse was afflicted by arthritic changes in the horse’s joints at the time of sale and was therefore not of an ‘acceptable quality’ in breach of a guarantee under Australian Consumer Law (ACL). The seller challenged the Tribunal’s decision to the Supreme Court of Victoria on the basis that the ACL did not apply to her sale of the horse. She was successful. In February 2017, the Supreme Court held that the Tribunal wrongly assumed that the Australian Consumer Law (ACL) applied to the sale and it directed the Tribunal to hear the matter all over again.  The Tribunal needed to decide, not assume, if the ACL applied to the sale in question.

When a business like a stud or equestrian centre or a professional equestrian sells a horse, there is no question that the guarantees under the ACL apply to the sale. Such sales are considered business sales. But what is the situation in private sales, involving mums and dads so to speak: When does the ACL apply to those types of sales, if at all?

A private sale is a sale by an individual person conducted in private usually to another individual person.  A private sale retains that character even if the horse is advertised for sale to the public, because inquiries, negotiation and the sale all occur privately.  Apart from auctions and business sales, private ones make up the vast majority of sales in Australia.

If proven bad temperament or behaviour causes a private sale buyer to lose confidence and feel unsafe, or a proven medical issue presents affecting the horse’s health, the buyer will want to know if the ACL applies.  If the ACL applies the seller guarantees that at the time of sale, the horse is of an acceptable quality and fit for the purpose disclosed by the buyer to the seller.  All too often buyers fail to utilize a contract for the sale of a horse for their own protection. The guarantees potentially come to these buyers’ rescue because they apply to sales whether they be by word of mouth, in writing or a mixture of the two. An unsafe or medically unsound horse would probably be unfit for purpose and of an unacceptable quality. But an important restriction on the applicability of the guarantees under the ACL to private sales is that the sale occurs “in trade or commerce”.  So it is important to understand the significance of these words in their legal sense to work out if a particular private sale is subject to the ACL or not.

The legal test of whether a private sale occurred “in trade or commerce” in the context of the ACL is to look at the sale and to ask if it had commercial or trading characteristics sufficient to classify the sale as occurring in trade or commerce.

Such characteristics are present in the circumstances of 2 private sale situations which are not uncommon in the horse world.

Firstly, where a horse owner engages a horse professional, like a rider or trainer, to market and sell the horse. The professional charges a fee for training and showing the horse in the sales campaign and a percentage commission upon making a sale. Sales achieved through such an intermediary acquire trading or commercial characteristics by virtue of what the professional does for a living.  Their trading and commercial activities encompass dealings with horses including sales. So, even though the owner might not trade horses or conduct any commercial activities involving horses, the guarantees are attracted because of the horse professional’s role as the owner’s agent in the sales process.

Second, a horse professional who coaches pupils might evaluate the suitability of a horse for sale by making enquiries of the seller and inspecting the horse as agent of the buyer.  In this situation, it becomes apparent that a sale occurred in “trade or commerce” by virtue of the professional’s engagement in the sales process. It is legally significant that the professional intermediary was engaged, as part of his or her commercial coaching activities, to assist a pupil to source a horse for lessons that remunerate the professional.

These 2 examples demonstrate that the required commercial or trading characteristics arise from the overall context of the sale: They might be supplied from consideration of the seller’s conduct and background but equally from the buyer’s.

Even if a horse professional plays no part in the sale for either party, it is still possible for a private sale to occur in trade or commerce depending on factors related to the sale. If present, the following factors would point to the sale having occurred in trade or commerce: the sale was not a one-off but one of many made by the seller in the past; the buyer was a professional looking to develop the horse for sale in the future on his own account; the horse belonged to a company or trust or was purchased in the name of one; the horse was acquired for commercial breeding; or the horse was acquired for activities associated with a business of trail riding, riding establishment or carriage transport.  A particular sale might turn up other factors illustrative of the commercial or trading nature of the sale.

Whether or not the buyer sensibly used a written contract of sale to protect his or her interests, the ACL guarantees potentially offer a significant platform for redress if the buyer’s valid expectations are not met. Legal advice is necessary, however, to evaluate relevant factors of the transaction to decide if a particular private sale is, as a matter of law, subject to the guarantees.

14 March 2017

© 2017 Michael Mackinnon, Solicitor & Independent Counsel