The government has been ordered by the high court to reconsider its decision to allow the sale of the Crafar farms to a subsidiary of Chinese company Shanghai Pengxin.
In a judgment released this afternoon by the Wellington High Court, Justice Forrie Miller has set aside the consent for the sale that was granted by Land Information Minister Maurice Williamson and Associate Finance Minister Jonathan Coleman.
The ministers announced on January 27 that they had accepted the recommendation of the Overseas Investment Office (OIO) to grant consent to Milk New Zealand Holding, a subsidiary of Shanghai Pengxin Group, to acquire the 16 farms. NZ government-owned Landcorp was to manage the farms.
Mr Williamson said then that it was clear the bid met the relevant sections of the Overseas Investment Act.
In Parliament’s question time, Prime Minister John Key this afternoon faced a barrage of questions from opposition MPs over the ruling.
Mr Key said the Crown was unlikely to appeal the decision but that Justice Miller’s ruling had defined a different interpretation of the Overseas Investment Act than had previously been used.
“We now have new jurisprudence,” the PM said.
The test of whether a purchase would bring economic benefit to the country was now required to show a foreign owner brought addition benefits over and above those that could be provider by a domestic owner, he added.
“That is the opinion of the Judge. The OIO will have to go back and reconsider the application."
The Prime Minister said the OIO could well come back with the same recommendation to approve the sale to Shanghai Pengxin.
The Crafar Farms Purchase Group - a Sir Michael Fay-led consortium that submitted an unsuccessful lower bid to buy the farms – claims the court decision confirms its view that Shanghai Pengxin’s purchase brings no additional economic benefit to New Zealand.
“It was not in the best interests of New Zealanders. It is reassuring that a High Court judge has come to a similar conclusion and set aside the Ministers approval,” group spokesman Alan McDonald said.
He said the Purchase Group and its legal team would now take some time to "fully consider" the details of the court decision.
The group cited its Bell Gully lawyer David Cooper as saying the judgment “confirms that the Ministers and the OIO misapplied the Overseas Investment Act and materially overstated the benefits to New Zealand arising from the transaction."
Cedric Allan, spokesman for Chinese Crafar farms bidder Shanghai Pengxin, said the High Court ruling was unexpected.
"We're really surprised. We did not read the requirement of the OIO as meaning we had to compare that benefits we could bring to New Zealand with the benefits a New Zealand farmer buying the farms would bring," he said.
Mr Allan said he was "hopeful" of a swift resolution to the matter - by the OIO reconsidering its recommending and Ministers making a decision on it - given it is more than a year since Shanghai Pengxin announced it was interested in buying the properties.
"We're required to bring benefits - to lift productivity and improve the quality of farms - there's no guarantee, or requirement, that a New Zealand farmer would do that," Mr Allan said.
Comments and questions
Common sense finally prevails. We done Justice Forrie Miller.
Now what about the other recent phoney OIO approvals of sales. Should they be over turned?
If the outcome is the foreign bid is out then the liquidators should split up the farms and sell individually. This should not give Fay's group and green light to "steal" these properties. We really a banana republic are we not?
No sure if the Justice has made the right call, but it's a bold call. Lower bid from a Kiwi is a better bid to buy assets from another fellow Kiwi - doesn't make sense though could a new business paradigm.
Agree.
Wonder what will happen if the $210 million foreign Chinese offer is disallowed....perhaps the consortium of mortgagee banks will have no choice but to "bite the bullet and accept $30 - $40 million lower". Wonder what will also happen to any local Chinese (legal NZ citizens) offer of say, exactly same amount....perhaps more alternate legal cases will happen as well, and all their solicitors will be laughing on their way to their banks.
Crazy. If I was a foreigner I'd be turning my eyes away from New Zealand. We will be the poorer for this, and not just in monetary terms.
You guys do not seem to get what is a productive versus a speculative investment is. A productive one adds to the value of production, it increases GDP over time. This is what the act calls for. Someone that can add value to the farm more than us locals can. That is good investment for NZ.
A speculative investment just drives the price of assets up. That money can come and go. This be extremely damaging to the economy. If young people who want to be farmers, cannot afford to buy a farm, many will leave the country. We'll lose our up and coming talent. This will drive down our GDP over time (apart from being totally morally wrong for us to be doing).
I can't agree with anyone blaming the Judge here. The OIO's interpretaion was the issue and they effectively now have to go back and'cross a t' that they didn't know was there. Be interesting to see what they come up with. Anyone tied up with Fay however, must, by association have questionable and hidden motives and it remains to be seen that any sale to him or his interests can also be described as being any more beneficial to NZ than a sale to Chinese investors.
The decision does not mean the Chinese offer is out.
Split the the farms up ,then see if newzealanders will buy.
"I can't agree with anyone blaming the Judge here'.
Hard to see how you arrive at that, when all comments critical of the judge, are summarily deleted by the ed.
first dotcom now this - interesting times afoot in NZ with our judges, courts and govt
When Mr Fay and his colleagues want to sell these farms (at some time in the future) who will they sell them to? Mr Fay made a fortune selling strategic assets to foreigners in the 80's. Has he now changed his view on this?
Excellant review required by the Judge.
Chinese bring nothing to the party other than cash.
Local knowledge to sell into China in regard to selling milk products is not required.
I could set up a desk and chair outside any international airport in China with s small sale notice saying "selling NZ milk products".
I would have no problem selling ship loads.
Every time I visit China now I am asked if I can get hold of this product.
Yes, excellent decision by the judge.
well i rekin it a real coolie decizion by da judge - keep new zealand for new zealandas i say man
As I understand it, Shanghai Pengxin were offering access to a national distribution chain for a miriad of new chinese centric products. This wasn't fixed as the deal here has yet to be signed, but the principal of SP has the connections to make it happen. Besides the Crafar farms are in such a state that they will be 2 years away from full production anyway, time enough to get things in place.
Yes, mr Newman, you can sell willy-nilly in China, FOR NOW, but soon you will need connections and access, IF you want value added volume sales ie 150,000MT+ per year.
What a "village" mentality. This smacks of the days when supermarkets were pilloried back in the 1960's, no wonder our domestic food costs are so high.
When we no longer have access to overseas capital to fund the purchase of "our" assets, because such lenders (i.e. all NZ trading banks) are so nervous that their security cannot be realised for its true (i.e. global) market value, but rather only some fraction of that value which other NZ'ers think they can steal it for, then we will have come full circle on this saga. We seem to be happy to rely on foreign capital to fund our lifestyles but unwilling to share these lifestyles with those same capital providers. Are we so arrogant as to not to expect there to be consequences from this ??
just a shame your english is so poor
what would u no man - u go to kings or something?
Interesting decision - the before and after test has always been used in the past, but now will the OIO have to apply the with or without test as the judge would like? That's tough to assess. This will lead to a law change to clarify.
Helpful advice from New York?????
The receivers will not mind the delay. More money in their pocket. I wonder how much they have "milked" them for so far?
The farms should have been sold individually long ago. If Fay, or whoever wants them, just need to turn up at the auctions and buy, buy buy!!
What part of that is hard to understand.
could well be - looks like a 2004 appointment....
H2 OH--You are on to it. But are the others ?? Sooooo obvious !!
Why do people keep whining on that the farms were not offered individually !!
Go check the offer document from Bayleys - it is quite clear that they could be bought one by one if the prices offered were good enough.
As to the judges decision and comments about Penxiuns expertise - how many cows havs Fay ever milked? He has only ever milked the taxpayer and other poor sods!!
Now key says selling the farms would further open up trade routes to china.
What we have to sell to china is premium products, they will buy them come what may.
Yours comments say it all about your name..
Owner occupiers, in general, make a much better job of running their own assets than absentee owners.
New Zealand has a net deficit in investment income, which means there is less money circulating around the economy than it produces. This deficit is hugh at $14 billion and growing larger daily. The net effect of this is we as a country have less money than the year before to run on. Government borrowings are the only thing thats keeping us afloat. This can not continue forever, otherwise we turn into a Greece; if we are not there already.
Selling the farms to overseas investors; who take their returns offshore, can only worsen our economic position. Follow the money!!
Why should we care at more overseas investment, when it is the local economy that should be NZ's first priority. As far as I can see, foreign investment in NZ has hardly added value, rather more costs. Foreigners can and do live overseas, where the vast majority of NZ's can not live anywhere other than locally.
Have you ever wondered why we are now one of the most expensive countries to live in? Its become foreign investors are exploit us. Dont look to the government for answers. Successive governments have been lobbied out of existence. Free market doesnt exist.
Time to come out of the fog, and work it out for yourself.
Bizarre decision ! Is the judge on some
'medication' ? Any Fay connections in the distant past, present ? Look hard !! If the call does stick then best we re-write/robust-up the act. Laughing stock otherwise ! The Chineses won't litigate/appeal.. isn't their style. They do have long, long, long memories ! NZ will ultimately pay.
It is not clear to me what the relevance of the OIOs recommendtion is. The decision was made by the two Ministers (not the OIO) who merely advise the Ministers.
blankets and beads
Quite right.
Just SELL the farms and stop wasting more TAX dollars, its been two years what a JOKE, people are sick and tired of this fiasco.
Milk powder is rationed in most supermarkets because there was such a huge amount of it being bought up and shipped to China. NZ milk is very sought after there. We do not need the Shanghai Pengxin group to sell it for us. If NZers where to be engaged to run the Crafar farms, then why not own them as well and keep the profits in NZ. If Fay gets hold of them, god help him if he just rapes and pillages them. After doing that with NZ Rail, surely his conscience will be saying that he owes NZ a few favours. And anyway some Maori tribes are involved with him and i am sure they will act honourably as many of their people could reap the benefit of work on those farms.
This is a sound and careful judgment. The approach that the OIO adopted in analysing benefits was far too simplistic. Hopefully, the next decision will be more robust. This said, it would be a great shame if this transaction does not proceed - not least, because NZ risks a reputation as a foreign investment xenophobe if it does not. The folks opposed to this deal really need to think about the consequences of opposing this deal. With such poor domestic savings capital formation needs to come from somewhere. Either stop investing in houses or accept that you need Chinese to invest in productive assets!
Do business in New Zealand ? Why????
I could not have put it better. Well posted Sir.
1) The farms will still be in NZ forever no matter who owns them.
2) The running and maintenance costs will be in NZ$.
3) Yes some of any profits land offshore but so will some of any losses.
4) Many NZ'ers have off shore investments! Do you racist whingers oppose Kiwis having investments overseas?
Richard S: I normally ignore anyone who writes 'follow the money' because use of that phrase invariably means they're going to be wrong on every level.
That said, people who use that phrase are also, for reasons I do not know, usually mercantilists. Please look that term up, study how wrong it is.
It's always a question of philosophy for me: we either live in a free market, or not, which is the same as saying, we either have free lives, or not. There's no middle ground, as Mark Hotchin has found cut off from his assets for over one year now without even a charge, and Mr Dotcom also, sitting in a cell, his assets taken from him, before a trial.
You mention Greece: its failure is one of Keynesian socialism: following the welfare state dream which economically was always an illusion. Big Government borrowing and bailing out, propping up every malinvestment in the crony economy, trying to run everything and every life, and so going broke as the necessary consequence. The answer to Greece, which is the way to freedom and prosperity, is limited government, laissez faire markets, and open borders.
In the case of the sale of a business, including a farm to foreigners, that is net good to our economy. The price paid for a business is the net present value of its future cash flows, so the Chinese here have simply paid all the future profits of these farms into New Zealand today, to be spent here, while employing Kiwis, and buying inputs in the local economy. That's good. And you answer me how is that 'worse', in your terms, than a New Zealand farmer borrowing $200 million from an overseas bank to buy these farms, and then paying their interest to a foreign country?
Anyway, this is rambly because it's such a big topic, so I will end by saying that also answer for me who pays to the vendor what they have lost, and vendors will lose in the future, due to the regime uncertainty this decision now puts into every future farm sale? This decision destroys value. At the very least, I guess you will be happy paying a higher interest rate to your bank, because this decision, by possibly denying the best price for these farms, meaning a bank may take a scalping, and must factor this, and regime uncertainty into its future financing, into its rates?
What a fantastic opportunity for a second round of facilitation payments
This judgement is the same sort of ideological re interpretation of legislation that occurred in the 1980's, a Justice Cooke I believe, which has subsequently lead to the present 'Treaty' envy and greed problems for the country. We can expect a similiar outcome for the economic future of NZ, as a result of this ideological mis-interpretation. Judges would do well to look to the shortcomings of their collegues judgements in justice, before they start telling a government how to make decisions.
Who runs this country!, the elected government, or politicaly appointed Judges?
That is excellent 10/10 but please do not blame the Judge, I read his rulings and I believe they were very intelligently arrived at and delivered. I can not seriously challenge his reasoning.
But I can and do criticise those that drafted the dopey muddled headed overseas investment rules. And as for the peeps in our parliament that passed it into law? Well! what can one say?
John, yes, after cooling down a bit I have no disagreement that this Judge was correct on the matter of law involved, and yes, what dumb law making (as usual).
My comment above is not against the ruling so much, as all the air-headed mercantilist bleating that has arisen from it, such as from Richard S.
For all that it matters, I've cleaned up the last two paragraphs, especially the last paragraph, in my blog post here .
So-do the above meaages about stupid muddleheaded ,etc., law making suggest or even confirm that guidance from N.Y. has been sent to the"big people" here?? Methinks?/ How about YOU ??
No, I do not believe Barack Obama gives a fat rats arse about a Chinese corporation buying the Crafar farms. Me thinks he has more important things to worry about. 1)Election, and 2)have you asked google how much the Yanks are in debt to China? I think you'll find it is just a wee bit more than the value of the Crafar farms:)
Scribe,
Mr Newman is dead right. What he said is not "village mentality" as you have labelled it.
Because of the ongoing Chinese dairy industry scandals one after the other, even as recent as a couple of months ago you CAN sell any foreign brand dairy products in China. New Zealand dairy products, particularly infant formula are very much in demand there.
As for long term and bulk sale, you can make "strategic alliances" with a well-connected government entity in China, the same way as Microsoft and others did. Trust me on that, as been there, done that, mate!
What part is difficult to understand?
Your barking, John.
What's the problem? Too simple? No money in it for the shiney arsed reef fish more politely referred to as, "lawyers" and "receivers"?
Hehe! You are the most Misinformed PR, mate. Did you hae your medications today?
LOAD OF RUBBISH
Why should we worry about who loses money through the transaction of speculating, because this is largely what has been happening; drivenly largely by the bankers bonus schemes.
The little guy always pay for the banks losses. Its what a lack of competition does. I personally would let the banks fail; just like Iceland has. And I would add a country which is now experiencing real growth.
Not letting them fail is hadnt freemarket, and does not teach them to curve their behaviour. The result is a prolonged recession, while the bank investors claw back their losses at the expense of the rest. Nothing sure!!
Wondering who the bank investors are? Switzerland would be my first stop, followed by the tax havens around the world. The elite who find ways to avoid taxes. The mentality of them is hard to get your head round, when you couldnt hope to spend in a lifetime what they earn in a year.
As for Greece, ask yourself who corrupted their politicians on lending them the vast amount of money in the first place, and you find half there problem. While theres no disputing they are a lazy people, the rich there dont seem to pay there fair share of taxes either.
If you havent worked out a common theme in my commentary, the fact of the matter is the greed of the few is ruining life for the rest of us.
Money should go back to being a means of exchange, rather than a weapon of mass destruction that it has turned out to be. Time to make the speculation of it illegal, and having a common world currency.
China has 5000 years of history, NZ ? If the Maori should leased NZ to the European "settlers" 200 years ago.... NZ today will be a truly sovereign country! At the least the Chinese is paying market value, how much the European 'settlers" paid the Maori 200 years ago?
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