Two US investors thought their $US 2.3 million was ploughed into a productive Moutere vineyard. They found instead their money was used for the personal benefit of a fellow American promoting the investment. James Murren and Daniel Lee successfully sued Glenn Schaeffer in the High Court seeking to recover their lost $US 2.3 million.
The three Americans go back a long way. They worked as analysts on Wall Street in the 1980s. Paths again crossed when they all moved to senior positions with various companies in the Las Vegas gaming industry: Mr Murren with MGM Grand Casino: Mr Lee with Mirage Resorts; Mr Schaeffer with Circus Circus.
The High Court was told Mr Schaeffer encouraged his friends to invest in the New Zealand wine industry. Local costs in New Zealand and exchange rate differentials meant it was cheaper to produce wine in New Zealand and export to the US than it was to produce in the US. He offered them a deal, investing through a limited partnership. This created a partnership structure with investors having the benefit of limited liability. Mr Murren put in $US 1.6 million; Mr Lee $US 700,400.
Justice Collins ruled Mr Schaeffer was personally liable to repay their investments. He was in breach of both the New Zealand Fair Trading Act and the Nevada Deceptive Trade Practices Act by making misleading and deceptive statements about the nature of their investment. He was also liable in negligence, having been less than forthcoming when detailing the nature of the investment to his fellow investment partners. This was in breach of a partner’s obligations to act in good faith towards fellow partners.
Mr Murren and Mr Lee were led to believe their money would be used to acquire part of a company now called Wollaston Estates Holdings Ltd which at its peak owned vineyards covering about one hundred hectares in and around Moutere and Hope. The High Court was told their money was used primarily to purchase some significant sculptures on display in the vineyard and to build a private dwelling for Mr Schaeffer. Mr Schaeffer merged his personal assets with vineyard assets and failed to properly record investments made by Mr Murren and Mr Lee, Justice Collins said.
Murren v. Schaeffer – High Court (5.12.18)
19.019