Murren & James J Murren Spendthrift Trust v Schaeffer
| Jurisdiction | New Zealand |
| Judge | Matthews |
| Judgment Date | 06 November 2015 |
| Neutral Citation | [2015] NZHC 2759 |
| Docket Number | CIV-2015-442-000028 |
| Court | High Court |
| Date | 06 November 2015 |
[2015] NZHC 2759
CIV-2015-442-000028
IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY
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.
A Horne for Plaintiffs
J Maslin-Caradus Defendant
JUDGMENT OF ASSOCIATE JUDGE Matthews
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.
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.
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.
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 these payments Mr Schaeffer is said to have made various representations either stating or implying that they were part-owners of the Woollaston Estates Vineyard. Mr Murren and Mr Lee made substantial payments of capital in accordance with the requests made to them.
In October 2003 Mr Schaeffer incorporated Constellation Partners LLC as a limited liability company in the State of Nevada. Mr Schaeffer and his ex-wife, Renee Schaeffer, are the shareholders of that company. Renee Schaeffer lived at the time, and continues to live, in the United States.
In 2006 Mr Schaeffer sent out another draft Limited Partnership agreement to Mr Murren, Mr Lee and a group of investors, none of whom, apart from Mr Lee, is cited as an investor in the draft 2002 agreement, though one investor is the James J Murren Spendthrift Trust of which Mr Murren is the trustee. Clause 1.3 of this agreement (the 2006 agreement) is to invest in, own, develop and commercially exploit interests in a New Zealand entity which, in turn, owns 80 per cent of the Phillip Woollaston Estates vineyard and winery in or near Nelson, New Zealand …”.
Constellation partners, LLC, is cited as the general partner. Mr Lee was to hold a five per cent interest, and Mr Murren's Trust was to hold a 10 per cent interest. The agreement was signed by all parties and registered in accordance with the requirements of Nevada law.
In 2008 a further call of capital was made, and Mr Murren's Trust and Mr Lee duly made payments. As I have said, WEHL then acquired further land. It is alleged that Mr Schaeffer went on to make further representations to Mr Murren and to Mr Lee to the effect that they were part owners of a vineyard and winery in New Zealand.
In all, Mr Murren says that he and his Trust have paid US$1,600,813.92 to Mr Schaeffer personally, and that Mr Lee has paid US$700,406.96 to Mr Schaeffer personally.
Mr Murren and Mr Lee say that all the representations made to them were false, as they have no interest in Woollaston Estates Vineyard and Winery. They say the payments they made were not used to make the investments promised in the representations made to them, but were instead used by Mr Schaeffer to acquire the assets he now holds in his capacity as a shareholder of WEHL.
As a result, they have brought four causes of action against Mr Schaeffer. First, they seek a declaration that Mr Schaeffer's representations constituted breaches of s 9 of the Fair Trading Act 1986, and they seek a direction that Mr Schaeffer repay to them their capital contributions plus interest.
Secondly, they plead that when Mr Schaeffer made the representations which they relied on when making their capital payments, he owed to them a duty of care to ensure that the representations were true and correct. He breached this duty as the representations were false. He either knew this to be the case, or he was reckless in relation to their truth or otherwise. They seek judgment against Mr Schaeffer for their capital contributions plus interest.
Thirdly, Mr Murren and Mr Lee plead that Mr Schaeffer made the alleged representations knowing they were false and with the intention that they would be relied on. They sue in the tort of deceit for return of their capital contributions plus interest.
Fourthly, Mr Murren and Mr Lee allege fraudulent misrepresentation on the basis that Mr Schaeffer made the alleged representations without belief in their truth, or recklessly without caring whether they were true or false, with the intention that Mr Murren and Mr Lee would act on those representations. They did so, in making their payments to Mr Schaeffer. Again, they seek judgment for their capital contributions and interest.
Fifthly, Mr Murren and Mr Lee plead a cause of action under the Nevada Deceptive Trade Practices Act. After citing the relevant terms of this statute, they say they are victims of consumer fraud, based on the representations I have referred to. After pleading actions by Mr Schaeffer which tie in with the provisions of the Nevada statute, they allege loss of their capital contributions and seek judgment for them.
Mr Schaeffer has filed an appearance under protest to jurisdiction. Mr Murren and Mr Lee apply under r 5.49(5) of the High Court Rules to set aside this appearance. The Court must decide whether it is satisfied that it has jurisdiction to hear and determine the proceeding, and either set aside the appearance, or dismiss both the application and the proceeding, depending on that decision.
As well, Mr Schaeffer applies for an order dismissing or staying the proceeding under r 15.1, on the basis that this Court is not the most suitable and appropriate forum to hear the plaintiffs' claims. He says the claims have a more real and substantial connection with the United States, that he has not agreed to submit to the jurisdiction of this court, that the relief sought by Mr Murren and Mr Lee is repayment of sums of money, not any relief related to the vineyard and winery, that Mr Schaeffer has assets in the United States, and that any judgment obtained in Nevada against Mr Schaeffer can be enforced against him either there or in New Zealand by way of a separate proceeding.
In the 2002 draft and the 2006 agreement, clauses 13.18 and 13.17 respectively provide:
Arbitration
If a dispute arises between the Partners as to interpretation, application or enforcement of this Agreement, and that dispute cannot be resolved by good faith negotiation, the parties agree to submit all such disputes to binding arbitration in Las Vegas, Nevada, …
Article 8(1) in Schedule 1 of the Arbitration Act 1996 provides:
A court before which proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting that party's first statement on the substance of the dispute, stay those proceedings and refer the parties to arbitration unless it finds that the agreement is null and void, inoperative, or incapable of being performed, or that there is not in fact any dispute between the parties with regard to the matters agreed to be referred.
Ms Maslin-Caradus, for Mr Schaeffer, says the issues raised in this case are the subject of the arbitration agreement in the documents so the Court should order a stay. She says that courts should uphold arbitration by striving to give effect to the intention of the parties to submit disputes to arbitration, and by not allowing any inconsistencies or uncertainties in the wording or operation of the arbitration clause to thwart...
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