SCHAEFFER v MURREN & ANOR [2018] NZCA 420

SCHAEFFER v MURREN & ANOR [2018] NZCA 420 [27 September 2018]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA551/2018[2018] NZCA 420BETWEEN GLENN WILLIAM SCHAEFFERAppellantAND JAMES JOSEPH MURREN AS TRUSTEEOF THE JAMES J MURRENSPENDTHRIFT TRUST ANDDANIEL LEERespondentsHearing: 27 September 2018Court: Kós P, Miller and Clifford JJCounsel: A S Butler and A R Shaw for AppellantA J Horne and A E Simkiss for RespondentsJudgment: 27 September 2018 at 3 pmReasons: 10 October 2018JUDGMENT OF THE COURTA The appeal is dismissed.B The appellant must pay the respondents costs for a standard appeal on aband 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 takeplace in the High Court at Nelson, beginning 29 October 2018. The claims were filedin June 2015 and an unsuccessful mediation occurred in August 2017. Mr Schaeffersays that in the course of that mediation Mr Lee made threats that unless he was paidhe would kill Mr Schaeffer and do violence or other harm to members ofMr Schaeffer's family and his three show dogs.[2] In August 2018 Mr Schaeffer applied for orders striking out or stayingpermanently the proceedings. He asserts the alleged threats have impinged on hisability to call witnesses in defence of the proceedings. He says such threats requirejudicial denunciation to deter civil litigants from acting this way and therebyprejudicing 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 appealis from that judgment. Separately Mr Schaeffer applied for an adjournment of trial onthe basis that he and "possibly two witnesses" are too fearful to properly assist thepreparation of the defence, and because focus was now required to be given to thepresent appeal rather than trial. On 17 September 2018 Collins J dismissed thatapplication.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 thematerial before us. Rather he says that the course identified by Churchman J shouldbe pursued to its logical end.3 That process was to assume the threats had been madeand then determine whether the threats were such that the proceeding should be stayedor struck out. Only if such remedy was thought appropriate would the Court set downa separate fixture for the examination and cross-examination of witnesses to make therelevant findings of fact. Mr Schaeffer says there is sufficient prima facie evidence ofthreats and their adverse effect on the trial process for the High Court to enquire furtherand make formal findings of fact after such cross-examination of witnesses. And thathaving done so, the High Court should then determine the application to strike out or1 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].stay. In short Mr Schaeffer says the strike-out and stay applications should not havebeen determined summarily against him, and that the matter should be remitted to theHigh Court. Necessarily that would dislodge the trial fixture.[5] Following hearing this Court dismissed the appeal, with reasons to follow.4These are the Court's reasons.Background[6] We traverse briefly and by way of background the claims, the alleged threatsand their aftermath.The claims[7] The three parties are American citizens. Formerly friends, they are or wereactive in the American casino industry. In 2000 Mr Schaeffer acquired an interest ina vineyard and winery near Nelson. In 2001 and 2002 he approached Messrs Murrenand Lee to invest in the enterprise. It is alleged that between 2002 and 2008 Mr Murrenpaid 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 againstMr Schaeffer alleging breach of the Fair Trading Act 1986, negligent misstatement,deceit, fraudulent misrepresentation and violation of the Nevada Deceptive TradePractices Act.5 Each seeks to recover the sums they invested together with interestand 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 andwhere my dogs lived. He said if I did not give him back his money that hewould bury me in the desert like in the old days, he would destroy mychildren's lives and bankrupt my ex-wife and travel to Omaha to kill my threeshow dogs. He ended his threats with the words "give me my fucking money".4 Schaeffer v Murren [2018] NZCA 395.5 Nevada Deceptive Trade Practices Act Nev Rev Stat, title 52 §41.600.Mr Schaeffer's evidence is confirmed by two solicitors who were present, though onein less emphatic terms than the other.[9] Mr Lee says he said something very different, which has been misconstrued byMr Schaeffer:I said that if a dispute such as the present one had arisen between Las Vegasgaming executives in the "old days", Mr Schaeffer might have ended up buriedin the Nevada desert. However, I then said that things were done differentlynow and that I had come to the mediation to settle this lawsuit. I said that if itwas not settled, I would get judgment against Mr Schaeffer and I would notrest at that point, but I would keep pursuing him even if it meant he wouldneed to petition for bankruptcy in New Zealand and the United States. I didnot make any statements about Mr Schaeffer's family or his show dogs and Icertainly 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 termsdeposed to by Mr Schaeffer. Formally, we make no finding to that effect: the affidavitaccounts are irreconcilable and require cross-examination before a finding could bemade. The real question that now confronts us is what consequence the assumedthreats 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 nosuggestion he had threatened Mr Schaeffer. Nor is there any suggestion that Mr Leethreatened other witnesses who might give evidence at trial.Aftermath[11] The mediation continued after the alleged threats were made, but withoutresolution. Mr Schaeffer has not laid a complaint with the police. He says his legaladvisers at the time said he had no redress. We are bound to observe that if a seriousdeath threat had been made, witnessed by others, it is self-evident that a complaintcould be laid with, and would be investigated by, the police.[12] In February 2018 Messrs Murren and Lee applied for freezing orders overMr 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 andcentre 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 Leewould not be, due to their vastly superior financial position. He went on to refer tothe 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 afull 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 Schaefferfiled the present permanent stay and strike-out application, the background to whichwe have already described.8Submissions[14] Mr Butler on behalf of Mr Schaeffer submits that the alleged threats amount toan abuse of the Court's process. Mr Schaeffer is in consequence significantly andunfairly constrained in fully defending the civil proceedings "for fear of repercussionsto himself, his family, his pets and witnesses which he may wish to call to support hisdefence". Mr Butler prays in aid the inherent power of the Court to stay proceedingsin circumstances where a party has sought to intimidate or threaten another by threatsof 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 HighCourt to make findings of fact as to whether the alleged threats were made, and thento determine whether the claims should be struck out or permanently stayed. Thefixture 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 outa pleading to prevent an abuse of process. In Reid v New Zealand Trotting ConferenceRichardson P described it in these terms:9In exercising [the jurisdiction to respond to abuse of process] the Court isprotecting its ability to function as a Court of law in the future as in the casebefore it. The public interest in the due administration of justice necessarily6 Murren v Schaeffer [2018] NZHC 1517.7 Murren v Schaeffer [2018] NZCA 318. It may be noted that this Court was critical of the disclosureby 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.extends to ensuring that the Courts' processes are fairly used and that they donot lend themselves to oppression and injustice. The justification for theextreme step of staying a prosecution or striking out a statement of claim isthat 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 casemay be both contempt and an abuse of process.10 Such conduct may properly foundan application for permanent stay or strike-out of a proceeding. But the burden on theapplicant for such orders will be a heavy one.11 That is because the effect of grantingsuch an application is to preclude altogether the determination of the asserted rights ofa party to proceedings before the courts. A court will do so only where it isdemonstrated that there was no other available means that would permit a fair trial totake 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 abusiveconduct by one party will be granted. That is because in most cases the effect of theabusive conduct, and whether fair trial is possible despite it, will only be able to beassessed at the trial, rather than ex ante, after: (1) determination of the actuality of thealleged abusive conduct; (2) consideration of appropriate trial directions to neutraliseor mitigate the proven conduct; and (3) the efficacy of those directions has beenassessed in operation at trial.[17] We are not persuaded that Churchman J erred in not pre-empting the trial judgeand denying summary stay and strike out.[18] First, there has been no suggestion that Mr Murren, who advances his ownseveral claims in the proceeding, is responsible for any of the alleged threats toMr Schaeffer. Yet what is sought is the summary suppression of his claim. His claimis substantially larger than Mr Lee's.[19] Secondly, no threats are alleged to have been made to witnesses other thanMr Schaeffer. There is no cogent evidence before us of other witnesses unable toattend and give evidence for him because of the alleged threats. As to Mr Schaeffer,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 [11-294].11 Jago v District Court of New South Wales (1989) 168 CLR 23 at 47.12 Williams v Spautz (1992) 174 CLR 509 at 519.his evidence has evolved from relative initial indifference (evidenced by his conductin March 2018 in relation to the freezing orders application) to now significantagitation as the date of trial approaches.[20] Thirdly, Mr Schaeffer has failed to take reasonable steps to mitigate thenow-claimed effects upon him of the alleged threats. He has laid no complaint withthe police. And he has not sought appropriate, mitigating trial directions from the trialJudge, other than seeking to bring the claims (including Mr Murren's) to a completehalt 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 besufficient to ensure fair trial.13 They have neither been sought nor tested.[21] Fourthly, we consider Mr Schaeffer has delayed unreasonably in bringing thisapplication. The alleged threats were made over a year before the application for staywas made. In that time he acted inconsistently with the concerns now expressed byhim. And in that time the respondents apparently have been preparing conscientiouslyfor trial.[22] In all these circumstances it would be entirely unjust for trial to be pre-emptedby 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 Abasis and usual disbursements.Solicitors:C & F Legal Ltd, Nelson for AppellantMinterEllisonRuddWatts, Auckland for Respondents13 We are informed that at least one witness will be giving evidence by remote audio-visual link.