A recent case ruled on by the Paris Court of Appeals (Paris Court of Appeals January 13, 2022) ruling on the Armitages Boy co-ownership case confirms the importance of getting legal and asset management advice when investing in sport horses.
In the beginning of 2014, a private investor wishing to diversify her portfolio invested in the stallion Armitages Boy along with several other private and professional investors by purchasing 14.83 shares for 500 000 euros.
An ownership agreement was drawn-up by a French law firm and entered into between the different owners.
Shortly after making the investment in Armitages Boy, this private investor encountered difficulties in the management of her investment. After a meeting with the other investors in July 2015, it was decided to sell the horse at auction. The co-owners thought they would be able to capitalise on the up-coming 2016 Rio Olympics.
In August 2015, the horse failed to sell at auction despite reaching a final proposition of 2.8 million euros showing the inability of the French Federation to keep high level horses in France for big equestrian events.
In 2016, the co-owners of Armitage Boy entered into an agreement with Stephex Stables with a public minimum sales price set at only 1 500 000 euros. In the end, the private investor sold her 14.83 shares in Armitages Boy for 70 000 euros, i.e. 430 000 euros less than the initial purchase price in 2014.
The private investor took her asset manger to court in order to recover damages to compensate her loss on investment. She claimed that her asset manager had not provided sufficient contractual advise on the risks of such an atypical investment.
In the end, the Paris Court of Appeal denied the private investors’s claims, considering that she provided no evidence of a specific asset management agreement which included investing in the stallion Armitages Boy.
This case and ruling shows the importance of receiving the correct tax and commercial legal advice when investing in sport horses. Investing in any type of horse is always a risky investment and sport horses are no exception, especially due to the high level risk of injury and loss of performance. In this case, the private investor suffered a loss of 430 000 euros in less than two years and seems to have received no specific pre-contractual advice, even by the law firm who drafted the co-ownership agreement.
INSCIO AVOCATS has significant experience in providing legal and tax advice when investing in racing and sport horses.