A query that crossed my desk recently involved the owner of a mare on lease that was due to foal within a few weeks. The owner was unaware of the pregnancy until informed of it by someone other than the lessee! The owner had leased the mare as an interschool mount only.  She was not leased as a broodmare. The mare was bred without the approval or consent of the owner.  According to the lessee, the pregnancy occurred by accident.  The owner was also aggrieved by 2 other things: firstly, the mare was jumped competitively a week prior, raising concerns for the welfare of the pregnant mare and, second, the mare participated in a cutting clinic which was not an interschool event.

From the owner’s version of events, the lessee had clearly not observed the terms of the lease with the owner.

The key concern of the owner was to know who owned the future foal.  Doubt about the owner’s legal position arose because, alas, the lease of the mare was not documented as is too often the case.  A written lease would have provided the answers if foreseeable contingencies, like accidental pregnancy and use of the mare for any purpose other than as agreed, had been recorded upfront.

Perhaps surprisingly to some readers, the general legal rule is that, absent agreement otherwise, a lessee owns any progeny born during the term of the lease. The issues then are whether there was any agreement about breeding the mare and who would own a resultant foal and if the lease was for a fixed period.

If the owner and lessee did not address the intentional breeding of the mare, it cannot of course be said that any agreement existed between them relating to breeding the mare and ownership of progeny. No consideration was understandably given to breeding the mare in this instance because the sole agreed purpose of the mare under lease was for use in interschool sport.

If the lessee had bred the mare intentionally, the law would not allow the lessee to claim any rights to the foal as the breeding occurred outside of the express agreed purpose for leasing the mare.  The law does not allow a wrongdoer to retain the benefit of his or her wrongdoing.

But if, as in this instance, the lessee was apparently innocent of any wrongdoing, would that make any difference in the eyes of the law?  Not only had the owner and lessee not contemplated intentional breeding of the mare, they did not foresee the possibility that the mare might conceive by accident through no fault of the lessee.  This was the situation facing the owner.

Although it is true that a lessee in these circumstances bears an onus of proving (under the law of bailment) that the mare was not bred due to any negligence of the lessee, it is difficult for the owner to refute the lessee’s claim that it was all an accident because the surrounding circumstances will be entirely unknown to the owner.  They may also be unclear to the lessee, who in this instance was unable to shed light on the mare’s covering but claimed reasonable care of the mare was exercised at all times.  How could the owner prove otherwise in the absence of any evidence?

What is critical is the fact that the mare was leased for a specific non-breeding purpose ie interschool sport.  It is reasonable to argue that it was therefore implied that the mare was not to be bred in any circumstances, intentionally or accidentally, given this expressly agreed purpose.  But contending that it was implicit that the mare not be bred might be disputed by the lessee.  If the lease was for a term, say 2 years, and the lessee took the view that the mare’s accidental breeding did not justify early termination of the lease, a dispute would arise over the owner’s right to repossess the mare and assert ownership over the foal.

All things considered, the best course of action for the owner in this instance was to terminate the lease on the ground that the lessee had misused the mare under the terms of the lease and retake possession of the mare in foal.  But as there was no documented lease agreement, the owner’s right to terminate the lease for this reason and repossess the mare were dependent on proving the terms of the lease on the balance of the probabilities, and argument over the legal rights that flowed. If the lessee put in issue the terms of the lease, the dispute would have to be resolved by a Court.

The complexities highlighted, not to mention the health risks of pregnancy and liability for the costs of medical attention if required, lead inexorably to one conclusion: every lease of a mare must be sufficiently documented to put the owner’s rights and the lessee’s responsibilities, beyond doubt.  A well prepared lease will set out events of default entitling the owner to recover the mare, such as pregnancy, the lessee’s failure even to notify the owner of it, and activities with the mare that are disallowed.  The term of the lease will be terminable at the will of the owner, with or without prior notice to the lessee. The lease will also set out the right of the owner to enter any property where the mare is kept, forcibly if necessary, without being liable for trespass or damage, and to remove the mare.  Above all it will make perfectly clear that any foal bred by accident belongs to the owner and that the lessee will be responsible for all pre and post natal medical costs.

The oral arrangement for the lease of the mare meant proving that it was a term of the lease that the mare be used for interschool sport only and not otherwise somewhat uncertain.  Uncertainty afflicts all agreements that are made casually, by word of mouth.  If the lessee disputed that the mare was leased for a sole purpose or if the owner disputed the lease was for a fixed duration, the lessee would have a case to argue that the mare was breedable during the term of the lease and the lessee was entitled to a foal born before the end of the lease.

Finally, it is important for the owner to register his or her interest as the owner of the mare on the Personal Property Securities Register. The lease must be registered if the term of the lease is longer than 2 years; or the term of the lease is an indefinite period or a term less than 2 years and, with the consent of the owner, the lessee retains possession of the mare longer than 2 years; or the term of the lease is up to 2 years and the term is automatically renewable, or renewable at the option of either the lessee or the owner, for 1 or more terms if the total of all the terms might be more than 2 years. Registration is important to warn anyone who might deal with the lessee, like a prospective buyer, that the owner, not the lessee, owns the mare.

A written lease combined with registration of the owner’s title on the Personal Property Securities Register are steps every owner must take for the safety and welfare of the mare and protection of the owner’s ownership of her.

12 September 2018

© 2018 Michael Mackinnon, Solicitor & Independent Counsel