Did Justice Forrest Miller’s ruling on the Crafar Farm sale reflect parliament’s intention when it passed legislation governing overseas purchases of farm land?
Sally Peart, a partner in Marks and Worth Lawyers doesn’t think so:
In order for consent to be granted, the ministers must be satisfied the benefit to New Zealand from the acquisition is likely to be “substantial and identifiable”. Justice Miller’s decision turns on the way in which this assessment is made.
The wording of the Act lists the factors to be considered and requires a determination of whether the overseas investment will, or is likely to, result in certain benefits, for example, the introduction into New Zealand of additional investment for development purposes.
What it does not state is what the starting point for that assessment is.
Logic and the wording of the legislation suggests the current state of affairs (in this case, the run-down condition of the Crafar farms) must be the starting point. Justice Miller describes this as “a before and after approach”. In other words, compared with the current position, will the overseas investment result in increased benefit to New Zealand?
Justice Miller states this approach is incorrect and ministers ought to have taken a different approach, a “with or without” approach.
This approach looks at what would happen if the investment did not proceed. In other words, would the benefits arise anyway even if the investment did not go ahead?
In the Crafar farms case, he concluded the benefits would arise anyway on the basis someone would buy the farms and upgrade them.
This may well be the case, but is that an approach that flows from the wording of the legislation?
In my view, it is not. More to the point, in my view it is a considerable stretch to say the OIO’s approach is one which is misdirected as to the law.
A New Zealand buyer could do the same upgrading and make similar other investments as a foreigner would, but there is no requirement to do so nor comeback if it’s not done.
However, if foreigners buy New Zealand farmland the OIO can impose conditions on them which they must meet.
The fact this decision by the minister has taken nine months in itself is embarrassing for us on the international stage, let alone the fact it has now been sent back to be made again. This is ironic considering one of the relevant factors is “whether refusing the application is likely to adversely affect New Zealand’s image overseas”. Even the “with or without” approach of Justice Miller would struggle to refute that one. . .
It is not a simple matter and the government is seeking advice on seeking a declaratory ruling on Justice Miller’s ruling:
Prime Minister John Key said at his post-Cabinet press conference he would be“uncomfortable” if his Ministers made a decision on the bid to buy the 16 Crafar family farms without having a firm grasp on the judgment, which found the Office Investment Office “materially overstated” the benefits to the New Zealand economy of the bid.
The government is “keen to make sure that the Overseas Investment Office fully understands the judgement from Justice Miller,” he said, especially given the Michael Fay-led consortium of rival bidders has taken the matter to the Court of Appeal.
Given the lack of certainty, Key said he would be surprised if the OIO made an early recommendation.
It is a very serious matter which will seriously limit foreign purchases of farm land.
That might please the xenophobes who don’t understand the positive impacts from foreign investment but it is almost certainly not what parliament intended when the legislation was enacted.