Murren & James J Murren Spendthrift Trust v Schaeffer

JurisdictionNew Zealand
CourtHigh Court
JudgeMatthews
Judgment Date06 November 2015
Neutral Citation[2015] NZHC 2759
Docket NumberCIV-2015-442-000028

[2015] NZHC 2759

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

CIV-2015-442-000028

BETWEEN
James Joseph Murren and James J Murren Spendthrift Trust
First Plaintiffs)
Daniel Leet
Second Plaintiff
and
Glenn Schaeffer
Defendant
Appearances:

A Horne for Plaintiffs

J Maslin-Caradus Defendant

Application by plaintiffs to set aside the defendant's appearance by objection to jurisdiction — application by defendant to dismiss or stay the proceeding — parties were all US citizens — plaintiffs resided in Nevada but defendant lived in NZ — plaintiffs had invested in a limited partnership — they said that the defendant had represented that the investment was to be in a vineyard and winery and that the representations made to them were false, as they had no interest in the vineyard — they also said that an arbitration clause in the two agreements they had signed did not operate as they were not suing on the agreements but were suing on the representations — further said that the agreements had never commenced as the first agreement was never signed in the same form by the persons who were intended to be partners — whether there was a binding agreement in place; whether the claim was in reality based on the agreement and subject to arbitration; and, whether New Zealand was the forum conveniens.

The issues were: whether there was a binding agreement in place; whether the claim was in reality based on the agreement and subject to arbitration; and, whether New Zealand was the forum conveniens.

Held: Article 8(1) AA did not provide any guidance on how far a court should go, on an application for a stay, in determining whether there was an agreement to arbitrate and, if so, whether the dispute or disputes in the court proceeding were matters which the parties had agreed to refer to arbitration. In a case of this kind it was appropriate to adopt the “prima facie review” approach to the issue before the Court (Ursem vChung).

However, there was no prima facie case that a valid agreement to arbitrate existed. First, it was clear on the evidence that the 2002 draft partnership agreement had not been executed by the partners, nor even by M and L in the same form. There was no evidence of an oral partnership. The 2002 draft agreement was never properly executed.

Even if the existence of a partnership were established, clause 1.5 expressly set out the event on which the partnership would commence. The evidence was that a certificate of a limited partnership had not at any point been filed with the Nevada Secretary of State. Therefore, the partnership would not, in any event, have actually commenced.

Secondly, although the 2006 limited partnership agreement was signed by all partners, and was registered, S was not a party to that agreement and so was not bound by the arbitration clause. There was therefore no partnership agreement to enforce in this case.

Thirdly, the claims made by M and L were not within the terms of the arbitration clause in either agreement, even if either of those agreements were binding on S. Disputes which were referred to arbitration were “as to interpretation, application or enforcement of this agreement …”. The claims made by M and L were quite outside that phrase. They were not made under either agreement, but rather were expressly based on representations said to have been made at various times by S to M and L. It was for M and L to decide the basis on which they claim S was liable to them. It was not for the Court to, in effect, recast their claims in order to fit them within the terms of the arbitration clauses in the documents.

Even if the 2006 agreement were to apply to S, it contained, in addition to the arbitration clause, a provision at clause 13.5 that it was to be construed and enforced in accordance with, and governed by, Nevada law. An expert had concluded that under Nevada law the claims by M and L were not encompassed within the arbitration clause in question. No evidence was presented to dispute this opinion. There was no binding agreement to arbitrate the claims made by M and L and, therefore, Article 8.1 AA did not apply. The Court had jurisdiction to hear and determine the proceeding, and the appearance had to be set aside.

In deciding whether the forum conveniens was the HC, or a court in Nevada, the court would take into account all relevant factors. Initial discussions between S, M and L took place when all of them were in New Zealand. All of the representations and statements which were relied upon by M and L for their causes of action against S were made in Nevada. All the capital payments made by M and L were made in Nevada in US dollars, and banked by S in Nevada. The 2002 draft agreement was circulated in Nevada, and the 2006 agreement was circulated, executed and registered in Nevada. All parties were United States citizens, and M and L still resided there. The remedy sought was a payment of money, and S had funds in both the United States and New Zealand.

On the other hand, S lived permanently in New Zealand, was served with the proceeding here, and since 2001 had been the majority shareholder in WEHL. That company owned all the land in which M and L alleged they were to be investing. Thus the subject-matter of all the alleged misrepresentations was located in New Zealand.

The connections this case had with New Zealand and Nevada were finely balanced. The balance lay slightly in favour of Nevada because the actions sued on were a series of representations, almost all of which took place there. M and L took all steps in Nevada. On the other hand, S's failure to deliver the asset M and L said they were entitled to amounted to a failure to take steps which they expected him to take in New Zealand.

There were other factors to consider. The first was that S was now a permanent resident of this country, and would need to be present in Nevada if proceedings were to be filed there. Secondly, four of the five causes of action were based on principles of New Zealand law, while one was based on a Nevada statute. It was more convenient for a court in New Zealand to hear evidence in relation to, and apply, Nevada law on a single cause of action than it was for a court in Nevada to engage in the inverse process in relation to four separate and different causes of action.

Thirdly, there was no reason on the evidence before the Court to find that there was any manifest weakness in the claims brought by M and L. There was nothing implausible in the claims M and L made, nor was there any documentary evidence to contradict their evidence in relation to the representations made. M and L had a good arguable case in relation to the four causes of action based on principles of New Zealand law.

S relied on the fact that the parties had agreed that their disputes should be governed by Nevada law. However, this proposition was based on the 2002 draft agreement, and the 2006 agreement, neither of which applied. There was no other agreement to the effect that Nevada law would apply to any claim or dispute arising out of the business relationship between the parties.

Issues relating to discovery of documents and the location of witnesses were evenly balanced. As to the giving of evidence, S was in New Zealand and would need to travel to Nevada if the proceeding were heard there. Convenience and cost to the parties and witnesses appear to be evenly balanced.

S contended that hearing the claim in New Zealand would result in publicity, whereas there would be less publicity if the case was heard in Nevada. his point did not weigh materially in favour of Nevada. This was a commercial dispute but without any identified issues of sensitivity such as, for example, competition issues. It would be decided in court wherever it was heard. Publicity may ensue, but that was ordinarily the case and no specific prejudice was identified.

On balance, the forum conveniens for the claims brought by M and L was New Zealand.

Appearance by S objecting to jurisdiction was set aside under r 5.49(6)(a)

JUDGMENT OF ASSOCIATE JUDGE Matthews

Introduction
1

Mr Murren and Mr Lee are United States citizens resident in Nevada. Mr Schaeffer is also a United States citizen. Although he now resides in New Zealand, he too lived in Nevada until early 2013.

2

Late in 2000 Mr Schaeffer and two other persons incorporated Woollaston Estates Holdings Limited (WEHL). Mr Schaeffer held 4,000,000 of the 5,000,000 shares and was one of the two directors. In 2001 and 2002 WEHL acquired various titles to land in the Upper Moutere District near Nelson and took various steps to combine the titles and then resubdivide the land into different blocks. In 2009 WEHL acquired further land and carried out further amalgamations and re-subdivisions of the land. All these steps resulted in there ultimately being six blocks of land, of which WEHL now owns three.

3

Mr Murren and Mr Lee maintain that in 2001 and 2002 Mr Schaeffer discussed with them the prospect of their investing in the land I have described, which comprises a vineyard and a winery. Mr Schaeffer circulated to Mr Murren and Mr Lee, and a group of other investors, a draft Limited Partnership agreement. Mr Murren and Mr Lee say that in about September 2002 Mr Schaeffer represented to them that this partnership would be an investment vehicle which would own the vineyard and winery in issue. The draft partnership agreement provided for capital contributions to be made by the partners, and for Mr Schaeffer to be the general partner. It was signed by Mr Murren in September 2002, and revised by Mr Lee before he signed it in February 2003. It was not, however, ever signed by all the proposed partners. I will refer to this document as the draft 2002 agreement.

4

From September 2002 onwards Mr Schaeffer sought capital contributions for the intended partnership from Mr Murren, Mr Lee and the other intended partners. In the course of seeking...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT