Home | Databases | WorldLII | Search | Feedback Court of Appeal of New Zealand

Schaeffer v Murren [2018] NZCA 420 (10 October 2018)

Last Updated: 18 October 2018

JUDGMENT OF THE COURT

1. The appeal is dismissed.
2. The appellant must pay the respondents costs for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Kós P)

[1] Trial of Messrs Murren and Lee’s several claims against Mr Schaeffer is to take place in the High Court at Nelson, beginning 29 October 2018. The claims were filed in June 2015 and an unsuccessful mediation occurred in August 2017. Mr Schaeffer says that in the course of that mediation Mr Lee made threats that unless he was paid he would kill Mr Schaeffer and do violence or other harm to members of Mr Schaeffer’s family and his three show dogs.
[2] In August 2018 Mr Schaeffer applied for orders striking out or staying permanently the proceedings. He asserts the alleged threats have impinged on his ability to call witnesses in defence of the proceedings. He says such threats require judicial denunciation to deter civil litigants from acting this way and thereby prejudicing the ability of a defendant to present a defence because of fears of violence.
[3] On 4 September 2018 Churchman J dismissed that application.^[1] This appeal is from that judgment. Separately Mr Schaeffer applied for an adjournment of trial on the basis that he and “possibly two witnesses” are too fearful to properly assist the preparation of the defence, and because focus was now required to be given to the present appeal rather than trial. On 17 September 2018 Collins J dismissed that application.^[2] Formally, there is no appeal from that decision.
[4] But the present appeal is in effect a further attempt to obtain adjournment. Mr Schaeffer does not say this Court should strike out or stay the proceedings on the material before us. Rather he says that the course identified by Churchman J should be pursued to its logical end.^[3] That process was to assume the threats had been made and then determine whether the threats were such that the proceeding should be stayed or struck out. Only if such remedy was thought appropriate would the Court set down a separate fixture for the examination and crossexamination of witnesses to make the relevant findings of fact. Mr Schaeffer says there is sufficient prima facie evidence of threats and their adverse effect on the trial process for the High Court to enquire further and make formal findings of fact after such cross-examination of witnesses. And that having done so, the High Court should then determine the application to strike out or stay. In short Mr Schaeffer says the strike-out and stay applications should not have been determined summarily against him, and that the matter should be remitted to the High Court. Necessarily that would dislodge the trial fixture.
[5] Following hearing this Court dismissed the appeal, with reasons to follow.^[4] These are the Court’s reasons.

Background

[6] We traverse briefly and by way of background the claims, the alleged threats and their aftermath.

The claims

[7] The three parties are American citizens. Formerly friends, they are or were active in the American casino industry. In 2000 Mr Schaeffer acquired an interest in a vineyard and winery near Nelson. In 2001 and 2002 he approached Messrs Murren and Lee to invest in the enterprise. It is alleged that between 2002 and 2008 Mr Murren paid around USD 1.6 million into the enterprise, and Mr Lee around USD 700,000. After disputes arose a claim was mounted by Messrs Murren and Lee against Mr Schaeffer alleging breach of the Fair Trading Act 1986, negligent misstatement, deceit, fraudulent misrepresentation and violation of the Nevada Deceptive Trade Practices Act.^[5] Each seeks to recover the sums they invested together with interest and costs.

The alleged threats

[8] In August 2017 the parties and their solicitors attended a mediation. Mr Schaeffer says that during the course of the mediation:

... Mr Lee told me he knew where I lived, knew where my family lived and where my dogs lived. He said if I did not give him back his money that he would bury me in the desert like in the old days, he would destroy my children’s lives and bankrupt my exwife and travel to Omaha to kill my three show dogs. He ended his threats with the words “give me my fucking money”.

Mr Schaeffer’s evidence is confirmed by two solicitors who were present, though one in less emphatic terms than the other.

[9] Mr Lee says he said something very different, which has been misconstrued by Mr Schaeffer:

I said that if a dispute such as the present one had arisen between Las Vegas gaming executives in the “old days”, Mr Schaeffer might have ended up buried in the Nevada desert. However, I then said that things were done differently now and that I had come to the mediation to settle this lawsuit. I said that if it was not settled, I would get judgment against Mr Schaeffer and I would not rest at that point, but I would keep pursuing him even if it meant he would need to petition for bankruptcy in New Zealand and the United States. I did not make any statements about Mr Schaeffer’s family or his show dogs and I certainly did not make any threats to harm them.

Mr Lee’s account is supported by an affidavit given by the other plaintiff, Mr Murren.

[10] We will assume for present purposes that threats were made in the terms deposed to by Mr Schaeffer. Formally, we make no finding to that effect: the affidavit accounts are irreconcilable and require cross-examination before a finding could be made. The real question that now confronts us is what consequence the assumed threats have for conduct of trial of the claims in October. The claims, it may be noted, also involve the determination of the several rights of Mr Murren. There is no suggestion he had threatened Mr Schaeffer. Nor is there any suggestion that Mr Lee threatened other witnesses who might give evidence at trial.

Aftermath

[11] The mediation continued after the alleged threats were made, but without resolution. Mr Schaeffer has not laid a complaint with the police. He says his legal advisers at the time said he had no redress. We are bound to observe that if a serious death threat had been made, witnessed by others, it is self-evident that a complaint could be laid with, and would be investigated by, the police.
[12] In February 2018 Messrs Murren and Lee applied for freezing orders over Mr Scaeffer’s assets because of fears he was shifting assets from this jurisdiction. Mr Schaeffer says that, based on legal advice, he then placed the threats “front and centre before the Court”. In his February 2018 affidavit he said that if the parties’ investment vehicle fails, he would be financially ruined — but Messrs Murren and Lee would not be, due to their vastly superior financial position. He went on to refer to the alleged threats as an example of Messrs Murren and Lee’s “desire to ruin me”. Freezing orders were granted in the High Court on an interim basis, discharged after a full merits hearing,^[6] but then reinstated by this Court in August 2018.^[7]
[13] Six days after this Court’s decision imposing freezing orders, Mr Schaeffer filed the present permanent stay and strike-out application, the background to which we have already described.^[8]

Submissions

[14] Mr Butler on behalf of Mr Schaeffer submits that the alleged threats amount to an abuse of the Court’s process. Mr Schaeffer is in consequence significantly and unfairly constrained in fully defending the civil proceedings “for fear of repercussions to himself, his family, his pets and witnesses which he may wish to call to support his defence”. Mr Butler prays in aid the inherent power of the Court to stay proceedings in circumstances where a party has sought to intimidate or threaten another by threats of violence. Mr Butler submits that the decision of Churchman J should be overruled. The consequence would be that the application would have to be remitted to the High Court to make findings of fact as to whether the alleged threats were made, and then to determine whether the claims should be struck out or permanently stayed. The fixture beginning 29 October 2018 necessarily would have to be vacated.

Analysis

[15] It is undisputed that the High Court has an inherent power to stay or strike out a pleading to prevent an abuse of process. In Reid v New Zealand Trotting Conference Richardson P described it in these terms:^[9]

In exercising [the jurisdiction to respond to abuse of process] the Court is protecting its ability to function as a Court of law in the future as in the case before it. The public interest in the due administration of justice necessarily extends to ensuring that the Courts’ processes are fairly used and that they do not lend themselves to oppression and injustice. The justification for the extreme step of staying a prosecution or striking out a statement of claim is that the Court is obliged to do so in order to prevent the abuse of its processes.

[16] The issuing of threats to a person or party to influence the conduct of a case may be both contempt and an abuse of process.^[10] Such conduct may properly found an application for permanent stay or strike-out of a proceeding. But the burden on the applicant for such orders will be a heavy one.^[11] That is because the effect of granting such an application is to preclude altogether the determination of the asserted rights of a party to proceedings before the courts. A court will do so only where it is demonstrated that there was no other available means that would permit a fair trial to take place.^[12] In most cases this will be a proper matter for the trial judge to address. It will be a rare case indeed where a pre-trial application for stay based on abusive conduct by one party will be granted. That is because in most cases the effect of the abusive conduct, and whether fair trial is possible despite it, will only be able to be assessed at the trial, rather than ex ante, after: (1) determination of the actuality of the alleged abusive conduct; (2) consideration of appropriate trial directions to neutralise or mitigate the proven conduct; and (3) the efficacy of those directions has been assessed in operation at trial.
[17] We are not persuaded that Churchman J erred in not pre-empting the trial judge and denying summary stay and strike out.
[18] First, there has been no suggestion that Mr Murren, who advances his own several claims in the proceeding, is responsible for any of the alleged threats to Mr Schaeffer. Yet what is sought is the summary suppression of his claim. His claim is substantially larger than Mr Lee’s.
[19] Secondly, no threats are alleged to have been made to witnesses other than Mr Schaeffer. There is no cogent evidence before us of other witnesses unable to attend and give evidence for him because of the alleged threats. As to Mr Schaeffer, his evidence has evolved from relative initial indifference (evidenced by his conduct in March 2018 in relation to the freezing orders application) to now significant agitation as the date of trial approaches.
[20] Thirdly, Mr Schaeffer has failed to take reasonable steps to mitigate the nowclaimed effects upon him of the alleged threats. He has laid no complaint with the police. And he has not sought appropriate, mitigating trial directions from the trial Judge, other than seeking to bring the claims (including Mr Murren’s) to a complete halt via the instant application. We are quite unable to say whether such directions — including as to mode of trial and the manner in which evidence is taken — would be sufficient to ensure fair trial.^[13] They have neither been sought nor tested.
[21] Fourthly, we consider Mr Schaeffer has delayed unreasonably in bringing this application. The alleged threats were made over a year before the application for stay was made. In that time he acted inconsistently with the concerns now expressed by him. And in that time the respondents apparently have been preparing conscientiously for trial.
[22] In all these circumstances it would be entirely unjust for trial to be pre-empted by summarily disposing altogether of the asserted rights of Messrs Murren and Lee, however inappropriately Mr Lee may or may not be shown to have acted.

Result

[23] The appeal is dismissed.
[24] The appellant must pay the respondents costs for a standard appeal on a band A basis and usual disbursements.

Solicitors:
C & F Legal Ltd, Nelson for Appellant
MinterEllisonRuddWatts, Auckland for Respondents

^[1] Murren v Schaeffer [2018] NZHC 2320 [Churchman J’s judgment].

^[2] Murren v Schaeffer [2018] NZHC 2442.

^[3] Churchman J’s judgment, above n 1, at [37].

^[4] Schaeffer v Murren [2018] NZCA 395.

^[5] Nevada Deceptive Trade Practices Act Nev Rev Stat, title 52 §41.600.

^[6] Murren v Schaeffer [2018] NZHC 1517.

^[7] Murren v Schaeffer [2018] NZCA 318. It may be noted that this Court was critical of the disclosure by Mr Schaeffer of his movement of personal and business assets: at [29]–[31].

^[8] See above at [2]–[3].

^[9] Reid v New Zealand Trotting Conference [1984] 1 NZLR 8 (CA) at 9.

^[10] See the authorities discussed in Patricia Londono, David Eady and ATH Smith Arlidge, Eady & Smith on Contempt (5th ed, Sweet & Maxwell, London, 2017) at [11294].

^[11] Jago v District Court of New South Wales [1989] HCA 46; (1989) 168 CLR 23 at 47.

^[12] Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509 at 519.

^[13] We are informed that at least one witness will be giving evidence by remote audiovisual link.