Wednesday 15th February 2012 1 Comment
|Text too small?|
The Crafar farms saga continues, with the High Court ordering permission given to Chinese investor Shanghai Pengxin to buy the farms be set aside and reconsidered because the Overseas Investment Office had “materially overstated” the economic benefits for New Zealand.
While the judicial review issued today by Judge Forrest Miller does not kill the widely unpopular sale of the 16 farms, in receivership, he conceded it does place it “at some risk”. The farms’ receivers, Korda Mentha, were already operating beyond their own Jan. 31 deadline for concluding the sale, while they waited for today’s outcome.
“The parties to the transaction have agreed to delay pending my decision, but based on what I have been told about the agreement sale and purchase, either of them could respond to this judgment by cancelling it,” the judge said. “But there is no evidence that the transaction will fail if the decision is returned to ministers for reconsideration.
If the bid from Pengxin’s New Zealand entity, Milk New Zealand, “is much better than any competitor’s…then the receivers face an incentive to wait so long as they think Milk NZ enjoys reasonable prospects of success.”
“No one suggested that reconsideration need take long,” said Judge Forrest. “On the face of it, the OIO may simply recalibrate its existing recommendation. The error matters enough on the fact to justify taking such risk as there is.”
The OIO spent nine months assessing the Pengxin bid, which is reported to have valued the farms at $210 million, some $40 million higher than the bid by a consortium of New Zealand bidders led by merchant banker Michael Fay.
The Fay-led consortium sought the first ever judicial review of an OIO decision after the office recommended the Pengxin purchase, which involved a share-milking joint venture with state-owned Landcorp and investment of a further $14 million in the farms.
Judge Miller said the OIO had only discounted “an unquantified but plainly modest amount” to cover the cost of repair and maintenance of the farms which it acknowledged in its recommendation to ministers was substandard.
His judgment finds that any investor in the Crafar farms could be expected to return them to normal levels of production, and that Pengxin needs to show its investment would benefit the New Zealand economy beyond that.
“The ministers could scarcely serve the legislative objective if when assessing a given economic benefit they were to ignore clear evidence that the benefit will accrue anyway, should the land remain in … New Zealand ownership.”
“The benefits of overseas investment must be identifiable and substantial. If a given benefit will happen anyway, it cannot easily be described as a substantial consequence of the overseas investment,” said Judge Miller.
While it had been argued that such analysis would require complex second-guessing by the OIO, the judge said he did not believe such a test was unworkable “in a case such as this.”
“The weighing of economic benefits among themselves and against non-economic benefits requires not calculation but ministerial judgment.”
He found that the two ministers who recommended the deal proceed, Land Information Minister Maurice Williamson and Associate Finance Minister Jonathan Coleman had “misdirected themselves” by relying on the OIO’s “before and after” approach to assessing economic benefit from the Pengxin bid.
Judge Miller said the error was “not a mere technicality.”
“No one suggested that the farms are likely to remain in their present unsatisfactory state, whoever purchases them.”
Prime Minister John Key gave initial government reaction, saying it was “not unusual for a judge to see it a different way to internal counsel.”
“The Overseas Investment Office will have to go back and reconsider the application in light of the new ruling of the judge, and it’s eminently possible the Overseas Investment Office will come up with exactly the same recommendations and ministers will accept it,” Key said in the House today.
The Crown is “extremely unlikely” to appeal the judicial review, Key said.
Williamson said he expected to make a statement later today after receiving advice from the Crown Law Office and the OIO.
A spokesman for the Crafar Farms Purchase Group welcomed the decision.
“Our view was that Shanghai Pengxin’s offer brought no real economic benefit to New Zealand and 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.”
Steel & Tube Fy20 Trading Update
Further Contract Win Strengthens Scott Technology’s Position In Mining Sector
China’s Assertiveness Is Becoming a Problem for Its Friends, Too
New Talisman - Chairman’s Address to AGM 2020 August 6, 2020
T&G reports its 2020 Interim Results
Gold price hits $2,000 for first time on Covid
TruScreen strengthens its market presence in central and eastern Europe
Refining NZ announces non-cash impairment
Ryman Healthcare COVID-19 update Victoria
Talisman Quarterly Activities Report to 30 June 2020