High Court blocks Crafar deal

The High Court has effectively overturned the Government's decision to grant Chinese company Shanghai Pengxin permission to buy the Crafar dairy farms.

Land Information Minister Maurice Williamson and Associate Finance Minister Jonathan Coleman two weeks ago signed off on the Overseas Investment Office's recommendation that the application to buy the farms by Shanghai Pengxin's subsidiary Milk NZ be accepted.

A consortium of rival bidders led by merchant banker Sir Michael Fay lodged an application for a judicial review of that decision.

In his decision released this afternoon Justice Forrie Miller said the application for a review was granted.

"The ministers' consent to overseas investment to be made by Milk NZ in the Crafar farms is set aside. I direct that the ministers reconsider Milk NZ's application."

Justice Miller's decision appears based on his view that the economic benefits to New Zealand of Shanghai Pengxin's purchase were overstated in the Overseas Investment Office's recommendation.

Relevant legislation was intended to allow overseas investment in farm land only where that investment was likely to benefit New Zealand.

However he observed that the benefits of Shanghai Pengxin's ownership of the land were likely to accrue no matter who owned it.

"If a given benefit will happen anyway, it cannot easily be described as a substantial consequence of the overseas investment," he said.

While Shanghai Pengxin's applications highlighted its intention to invest further in the farms in order to improve them, Justice Miller said any purchaser with cash was likely to do so anyway.

"That being so, the economic benefits caused by the overseas investment were materially overstated in the OIO's recommendation."

Shanghai Pengxin Group bought the 16 farms for a reported price of $210 million, following advice from the Overseas Investment Office (OIO), in late January.

Government ministers Maurice Williamson and Jonathan Coleman said they could not oppose the Chinese Government-backed bid.

Strict conditions were applied to the sale, including that the company only invest in milk processing facilities that are at least 50 per cent New Zealand-owned.

Alan Galbraith QC, who acted on behalf of the Crafar Farms Purchase Group, told the court Milk New Zealand Holdings company did not fulfil the legislative requirements for relevant business experience, because it did not have dairy farming experience.

Mr Galbraith told APNZ that if the sale went ahead it would set a precedent for future land sales, as it would change the way the OIO approached similar applications.

"It's possible that any well-resourced overseas conglomerate could come and buy dairy farms in New Zealand provided it had a contract with Landcorp.''