Schaeffer v Murren - [2020] NZCA 224

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA21/2019
[2020] NZCA 224

BETWEEN	GLENN WILLIAM SCHAEFFER Appellant
AND	JAMES JOSEPH MURREN AS TRUSTEE OF THE JAMES J MURREN SPENDTHRIFT TRUST AND DANIEL LEE Respondents

Hearing:	18 February 2020
Court:	French, Cooper and Clifford JJ
Counsel:	G D Pearson for Appellant A J Horne and A E Simkiss for Respondents
Judgment:	10 June 2020 at 4 pm

JUDGMENT OF THE COURT

AThe appeal is dismissed.
BMr Schaeffer will pay costs to the respondents for a standard appeal on a band A basis for one counsel with usual disbursements.

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REASONS OF THE COURT

(Given by Clifford J)

Introduction

In late 2000 the appellant, Glenn Schaeffer — then a resident of Las Vegas, Nevada, and the chief executive of one of that city’s large casino companies — acquired an 80 per cent interest in a Nelson vineyard and winemaking business (the Business).
In subsequent years Mr Schaeffer invited his friends, including the respondents Mr Murren and Mr Lee, to invest in the Business via a Nevada limited partnership which would also own his interest. Mr Murren and Mr Lee were also Las Vegas residents and very senior executives of another two of that city’s large casinos. The terms of the friends’ agreement were recorded in Nevada limited partnership agreements in 2002 and 2006. The first of those agreements was never registered, as is required under Nevada law to establish such a partnership. The second was. Over time, Mr Murren invested a total of some US$1.6 million, Mr Lee some US$700,000.
The Business subsequently failed. Messrs Murren and Lee each lost all their investment.
It transpired that Mr Schaeffer had never transferred his 80 per cent interest in the Business to the limited partnership and that, subsequently, he had dealt with the assets intended to be owned by the limited partnership as if they were his own.
In 2015 Messrs Murren and Lee commenced proceedings in the High Court at Nelson against Mr Schaeffer. They focused on a range of statements Mr Schaeffer had made to them over time consistent with the investment in the Business being owned by them through the limited partnership, when that had not been the case. They sought the return of their investments. They based their claims on five causes of action:
(a)breach of the Fair Trading Act 1986;
(b)negligent misstatement;
(c)deceit;
(d)fraudulent misrepresentation; and
(e)violation of the Nevada Deceptive Trade Practices Act.
The case was heard by Collins J in the High Court at Nelson in October and November 2018. The Judge delivered his judgment on 5 December 2018.[1] The Judge found Mr Schaeffer liable in the tort of negligent misstatement and under the causes of action brought under the Fair Trading Act and the Nevada Deceptive Trade Practices Act. He dismissed the claims in deceit and for fraudulent misrepresentation. In doing so, the Judge applied New Zealand law, save as regarded the claim under the Nevada legislation. As regards aspects…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Schaeffer v Murren

Details

AGLC: Schaeffer v Murren [2020] NZCA 224
Case: [2020] NZCA 224
Decision Date: 10 June 2020 at 4 pm

CaseChat Overview and Summary

The appeal in Schaeffer v Murren was brought by Glenn Schaeffer against James Joseph Murren and Daniel Lee, who were represented by the trustee of the James J Murren Spendthrift Trust. Schaeffer, a Nevada resident and former CEO of a casino company, had acquired an 80% interest in a Nelson vineyard and winemaking business. Schaeffer invited Murren and Lee, both Las Vegas residents and senior executives of another casino, to invest in the business via a Nevada limited partnership. The terms were recorded in limited partnership agreements in 2002 and 2006, with Murren and Lee each investing millions of dollars. The business subsequently failed, and Murren and Lee lost their investments. Schaeffer had not transferred his interest in the business to the partnership and had dealt with the assets as if they were his own.

The High Court found Schaeffer liable for negligent misstatement, breach of the Fair Trading Act, and violation of the Nevada Deceptive Trade Practices Act, but dismissed claims for deceit and fraudulent misrepresentation. Schaeffer appealed on the basis that the court should have applied Nevada law rather than New Zealand law. The Court of Appeal held that Schaeffer's argument was not supported by relevant authorities and dismissed the appeal. Schaeffer was ordered to pay costs to the respondents for a standard appeal on a band A basis for one counsel with usual disbursements.

The Court of Appeal held that, given the choice of a particular law in a contract, that law must be applied even if it is not pleaded and proved by the plaintiff. If foreign law is not proved, the court will apply domestic law. In this case, the choice of Nevada law was not pleaded and the court applied New Zealand law. The Court of Appeal found no support for Schaeffer's argument that the court was required to apply Nevada law regardless of the pleadings. The appeal was dismissed and Schaeffer was ordered to pay costs to the respondents.

Orders